THE REPUBLIC OF UGANDA

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF INFORMATION AND COMMUNICATIONS TECHNOLOGY FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACROYNMS...iii DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF INFORMATION AND COMMUNICATIONS TECHNOLOGY FOR THE YEAR ENDED 30 TH JUNE, INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING OBJECTIVES OF THE MINISTRY OF INFORMATION COMMUNICATIONS AND TECHNOLOGY AUDIT OBJECTIVES PROCEDURES PERFORMED FINDINGS Payables Mischarge of Expenditure Un-approved Corporate Strategic Plan Staffing Gaps Budget Performance Action on prior year s recommendations... 6 ii

3 LIST OF ACROYNMS MICT Ministry of Information and Communications Technology ICT Information Communication Technology MoFPED Ministry of Finance Planning and Economic Development UGX Uganda Shillings BOU Bank of Uganda LC Letter of Credit NSSF National Social Security Fund TAI Treasury Accounting Instruction VAT Value Added Tax iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF INFORMATION AND COMMUNICATIONS TECHNOLOGY FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of Ministry of Information and Communications Technology for the year ended 30 th June These financial statements comprise of the Statement of Financial Position, the Statement of Financial Performance, and Cash flow Statement together with other accompanying statements, notes and accounting policies. Management Responsibility Under Article 164 of the Constitution of the Republic of Uganda (as amended) and Section 8 of the Public Finance and Accountability Act, 2003, the Accounting Officer is accountable to Parliament for the funds and resources of the Commission. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance and Accountability Act 2003, and 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. 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 control 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 opinion on the effectiveness of the entity s internal control. An iv

5 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 qualified opinion. Part A of this report sets out my qualified 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 Basis for Qualified Opinion Mischarge of expenditure A review of the Ministry s expenditures revealed that the entity charged wrong expenditure codes to a tune of Shs.193,053,197. This constituted 4% of total expenditure for the year of Shs.4,960,480,667. Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and lead to misreporting. Qualified Opinion In my opinion, except for the effects of the matter referred to in the basis for qualified opinion paragraph, the financial statements of Ministry of Information and Communications Technology for the year ended 30 th June 2014 are prepared, in all material respects in accordance with the Financial Reporting Guide, 2008 and Section 31(6) of the Public Finance and Accountability Act, John F.S. Muwanga AUDITOR GENERAL KAMPALA 16 th March, 2015 v

6 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION

7 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF INFORMATION AND COMMUNICATIONS TECHNOLOGY FOR THE YEAR ENDED 30 TH JUNE, 2014 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 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 Ministry of Information Communications and Technology (MICT) to enable me report to Parliament. 2.0 BACKGROUND INFORMATION MICT is responsible for coordination of all Information Communication Technology (ICT) related activities in the country. It is responsible for Government agencies like; the National Information Technology Authority, Uganda Communications Commission, Uganda Telecom and Posta Uganda. The Ministry is located at Plot 10/12 Parliamentary Avenue, Kampala. MICT Vision is A knowledge-based Uganda where National Development and good governance, are sustainably enhanced and accelerated by timely and secure access to information and efficient application of ICT and its mission is To promote the development of Information and Communications Technology infrastructure and services throughout the country. 3.0 ENTITY FINANCING The Ministry of Information and Communications Technology was financed by Grants from Central Government. Grants of Shs.4,919,794,855 from Central Government were received. Non-tax revenue of Shs.17,066,000 was also received, bringing total revenue to Shs.4,936,860,855. The total grants revenue of Shs.4,919,794,855 constituted 99% of its approved budget estimates of Shs.4,960,480,667. 1

8 4.0 OBJECTIVES OF THE MINISTRY OF INFORMATION COMMUNICATIONS AND TECHNOLOGY The objective of the Ministry is to provide strategic and technical leadership, overall coordination, support and advocacy on all matters of policy, laws, regulations and strategy for the ICT sector. 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:- a. Whether the financial statements have been 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. Whether all funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Whether goods and services financed have been 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 organization, assess control risk and identify reportable conditions, including material internal control weaknesses. e. Whether the management was in compliance with the Government of Uganda financial regulations. f. Whether all necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented. 6.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- (a) Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements. (b) Expenditure The payment vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. 2

9 (c) (d) (e) (f) Internal Control system Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period audited. Procurement Reviewed the procurement of goods and services by the Ministry during the period under review and reconciled with the approved procurement plan. Fixed Asset Management Reviewed the use and management of the Ministry assets during the period under audit 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. 7.0 FINDINGS 7.1 Mischarge of Expenditure The Parliament appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Ministry s expenditures revealed that the entity charged wrong expenditure codes to a tune of Shs.193,053,197. This constituted 4% of total expenditure for the year of Shs.4,960,480,667. Mischarges undermine the importance of the budgeting process as well as the intentions of the appropriating authority and lead to misreporting. Management explained that the mischarge of expenditure was a result of insufficient budgetary allocations and severe cuts in respect of items referred to as consumptive items by the MOFPED. I advised the Accounting Officer to streamline the budgeting process to ensure that sufficient funds are allocated to each account. Furthermore, authority should be sought for any reallocations. 3

10 7.2 Outstanding Payables A comparison of the payables balances for the financial year 2012/13 and 2013/14 revealed a significant increase in domestic arrears of Shs.356,261,608 (39.6%) from Shs.900,856,821 in the financial year 2012/13 to Shs.1,257,118,429 during the year under review. I explained to management that the entity risks litigation and payment of nugatory expenditure arising out of litigation costs. Management responded that the increase in payables was as a result of rent arrears of Shs.350,732,722 which remained unpaid for the period ending 30 th June, The Ministry had budgeted Shs.516,000,000 exclusive of Value Added Tax (VAT) for rent for the period because the Landlord M/s NSSF had not earlier indicated that they are VAT registered. Management further explained that, later in the year, the Landlord submitted a claim for VAT which increased the rent amount beyond the budgeted funds. I advised management to liaise with Ministry of Finance Planning and Economic development and ensure that the rental arrears are cleared. 7.3 Un-approved Corporate Strategic Plan The strategic plan is an important tool in steering any organization towards its vision, mission and its overall mandate. Annual activities undertaken by any organization should be derived from the strategic plan. However, it was noted that the Ministry does not have an approved strategic plan in place. Delays in having a strategic plan approved may adversely impact on the Ministry in the achievement of its objectives. Management explained that the Ministry s draft Strategic and Investment Plan (ICT- SIP) was submitted to the Ministry of Finance Planning and Economic Development for a certificate of financial implications so as to enable the Minister of ICT submit it to Cabinet for approval. I await the outcome of management s efforts in having an approved strategic plan in place. 7.4 Staffing Gaps A review of the Ministry s organizational structure revealed that out of the available 93 posts, 76 posts were filled leaving 17 positions vacant. Some of the vacant positions include vital positions below; 4

11 Vacant Position Vacancies Scale Principal Information Scientist 01 U2U Principal Communications Officer Senior Systems Analyst Senior Information Technology Officer Information Technology Officer 01 U2 U 01 U3SC 01 U3SC 01 U4SC Information Scientist 01 U4SC Staffing gaps affect the performance and overall achievement of organizational goals and objectives. Management explained that the recruitment of staff is constrained by the budget ceiling. Management further explained that the Ministry is faced with the challenge of uncompetitive salaries in the labour market thus there is a high staff turnover in technical ICT positions yet the Ministry may not be able to attract suitable applicants due to lack of competitive wage offers. I advised management to continue liaising with Ministry of Public service with a view of ensuring that the vacant posts are filled and possibilities of staff retention. 7.5 Budget Performance Review of the budget performance for the year revealed that one targeted key activity was not undertaken despite release of funds worth Shs.32,162,000 to the entity to perform. The activity was in respect of start up activities for construction of the Ministry of ICT. Management explained that the Ministry budgeted for Shs.32,162,000 for surveying the land for the Technology Park. However because the land had not yet been fully secured from the Uganda Investment Authority this activity could not be undertaken. I advised management to follow up the matter with UIA to secure the land. 5

12 7.6 Action on prior year s recommendations A review of the prior audit recommendations was done, and the status is as below: Issue Summary Status Mischarge Domestic arrears Nugatory Expenditure Unaccounted funds A total of Shs.232,267,708 was charged on budget lines other than those under which funds were appropriated. The practice undermines the intentions of the appropriating authority and implies that the financial statements were misrepresented to the extent of the mischarge. Comparison of the payables balances for 2011/12 and 2012/13 revealed that the Ministry has continued to report domestic arrears at UGX.900,856,821 without any movement thereof. Long outstanding payables may expose the Ministry to the risk of litigation. The ministry incurred costs of Shs.16,538,890 following cancellation of an irrevocable letter of credit on purchase of a vehicle. This expenditure is considered nugatory since it would have been avoided had proper procurement planning been undertaken. Contrary to TAI 217 which requires accountability for official advances within sixty days, it was noted that a sum of Shs.43,979,000 paid to various staff to carry out official activities remained outstanding. In the circumstances, it was not possible to confirm that the money was used for the intended purposes. Partially addressed. The mischarged expenditure has reduced from Shs.232,267,708 to Shs.193,053,197 (17%). Partially addressed Addressed Addressed I have advised Management to fully address the audit matters raised in the previous audit reports, as they were intended to enhance efficiency of operations and accuracy of financial reporting. 6

13 APPENDIX 1 FINANCIAL STATEMENTS 7