THE REPUBLIC OF UGANDA

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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 2016 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACROYNMS... iii 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING OBJECTIVES AUDIT OBJECTIVES PROCEDURES PERFORMED CATEGORIZATION AND SUMMARY OF FINDINSG Categorization Summary of findings DETAILED FINDINGS Payables Mischarge of Expenditure Non Functional Studio for local content production E- Waste Management Project Staffing Gaps Revenue shortfall Budget Performance unimplemented activities... 7 ii

3 LIST OF ACROYNMS Acronym MICT ICT MoFPED UGX BOU LC NSSF TAI VAT Ministry Detail Ministry of Information and Communications Technology Information Communication Technology Ministry of Finance Planning and Economic Development Uganda Shillings Bank of Uganda Letter of Credit National Social Security Fund Treasury Accounting Instruction 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, 2016 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 45 and Schedule 5 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of the Ministry. 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 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 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 and form part of my Annual Report to Parliament. PART A Opinion In my opinion, the financial statements of Ministry of Information and Communications Technology for the year ended 30 th June 2016 are prepared, in all material respects in accordance with Section 51 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 described in note 24 of the financial statements, and also in paragraph 8.1 my report: Domestic Arrears - UGX.4,151,855,208: The Ministry had domestic arrears amounting to UGX.4,151,855,208 arising from goods and services consumed. Out of this amount, UGX.1,926,849,617 relates to prior year domestic arrears which remained outstanding at the year end. Accruing domestic arears is contrary to the commitment control system. John F.S. Muwanga AUDITOR GENERAL 19 th December, 2016 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, 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 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 and Appropriation in Aid (AIA) from Uganda Communication Commission (UCC). During the year, Grants of UGX.7,478,869,438 from Central Government and AIA of UGX.1,000,000,000 from UCC were received. Non-tax revenue of UGX.1,420,000 was also received, bringing total revenue to UGX.8,480,289,438. Out of the total revenue received, UGX.10,620,591,998 was 1

8 spent resulting in to deficit of UGX.2,140,302,560. The expenditure constituted 86% approved budget estimates of UGX.12,319,522, OBJECTIVES 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. 2

9 (b) (c) (d) (e) (f) Expenditure The payment vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. 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 assets of the Ministry 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 CATEGORIZATION AND SUMMARY OF FINDINSG 7.1 Categorization The following system of profiling of the audit findings is used to better prioritize 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. 3

10 7.2 Summary of findings No Finding Significance 8.1 Payables High 8.2 Mischarge of expenditure High 8.3 Non Functional Studio for local content production High 8.4 E waste Management Project High 8.5 Staffing Gap Moderate 8.6 Lack of Risk management policy Low 8.0 DETAILED FINDINGS 8.1 Payables Section 21 (2) of the Public Finance and Accountability Act states that a vote shall not take any credit from any local company or body unless it has no unpaid domestic arrears from a debt in a previous financial year and has capacity to pay for the expenditure from the approved estimates as appropriated by Parliament for that financial year. The Ministry had payables amounting to UGX.4,151,855,208 arising from goods and services consumed. Out of this amount, UGX.2,004,957,760 relates to Prior year domestic arrears which remained outstanding at the year end. Accumulation of payables could lead to litigation costs from creditors due to non-payment. Management explained that reasonable effort has been undertaken by the Ministry to comply with the commitment control System, and also to reduce the arrears for previous periods by using the available resources as advised in the PS/ST s circulars However, the payable position is persistently being compounded by factors that are beyond the Ministry control such as; Loss of poundage as a result of fluctuation of the exchange rate, insufficient releases and Inadequate budget provision I advised the Accounting Officer to ensure that it does not accrue domestic arrears on items or commit Government prior to obtaining funds. 8.2 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 4

11 the Ministry s expenditure revealed that the entity charged wrong expenditure codes to a tune of UGX.68,693,022. This constituted 1.7% of total expenditure for the year of UGX.12,319,522,062. 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 arose out of need to execute emergency activities for the Ministry such as electricity bills to avoid power disconnections. 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. 8.3 Non Functional Studio for local content production The Government of Korea donated a studio to the Ministry to help in production of local content which was received on 9 th January However, it was noted that the studio has not been put to use since its launch and yet funds are spent in maintenance of the studio. Management explained that the Ministry received a partial studio as a donation from the Government of Korea during FY 15/16. The studio is yet to be fitted with two professional studio cameras, two outdoor field cameras and an editing suite in order to be fully operational. Those components were supposed to be fitted by the Government of Uganda as its contribution. However, owing to budgetary constraints, the Ministry has started negotiations with the Government of Korea that will lead to acquisition of the required equipment. I advised the Accounting Officer to ensure that the studio is put to use to help with the production of local content. 8.4 E-Waste Management Project The Ministry of ICT signed a Memorandum of Understanding (MoU) with the Ministry of Water and Environment to collaborate in implementation of UNDP/GOU project Improving policies and strategies for sustainable environment and natural resources 5

12 and climate risk management which expired on 31 st December However despite the expiry of the MoU, the Ministry still receives funds through the project Account from Ministry of Water and Environment. The Project received UGX.163million during the year. Receipt of project funds without proper guideline or MOU may lead to implementation of unplanned activities or/ loss of funds. Management explained that the Board of Directors sat with representatives of both Ministries and requested the funders to extend the project life time to address the pending issues. I advised Accounting Officer to engage Ministry of water and Environment to explore the possibility of having documented agreement for extension of the binding MOU. 8.5 Staffing Gaps A review of the organizational approved structure revealed that out of the available 109 posts, 70 posts are filled leaving 39 posts vacant representing a 36% vacancy level. Inadequate staffing affect service delivery. Management explained that the Ministry still remains with the staffing gap issue because the wage Bill allocation cannot accommodate filling the vacant positions. Recruitment currently can only be done on replacement basis as directed by the PS/ST in the budget execution circular. Secondly, retention of technical cadres in the Ministry is compounded by brain drain. I advised management to expedite recruitment of the required number of staff as per approved establishment structure in order to support the expected service delivery and continue engaging Ministry of Finance, Planning and Economic Development to increase the wage bill. 8.6 Lack of Risk Management Policy Risk management and fraud control policies should be documented and disseminated to all staff. However, during an interview with management it was noted that the Ministry has not formulated Risk management and fraud control policies. 6

13 Lack of documented Risk management and fraud control policies could result in failure to prevent occurrence, detect fraudulent acts, and control fraud when it occurs in the entity. Management explained that the Ministry has embarked on preparation of this policy. I advised the Accounting Officer to formulate Risk management and fraud control policies which should be submitted to the top management for approval and have it disseminated to staff. 8.7 Revenue shortfall TAI part I finance (15) requires an accounting officer to be responsible for all aspects of the collection and bringing to account of the revenues related to the services under the control of his or her Ministry, Agency or Department. He or she is responsible for ensuring that adequate arrangements exist for the collection of the revenue and for seeing that all sums due are collected and brought to account. During the year, it was noted that the Ministry budgeted for UGX.12,319,522,062 (expected from GOU- UGX.8,680,722,062 and AIA - UGX.3,638,800,000). However only UGX.8,478,869,438 was received. This led to a shortfall of UGX.3,840,652,624 which represents 31.1% of the total budget. Revenue shortfall grossly affects implementation of the Ministry s activities as indicated under Paragraph 8.3. Management explained that the shortfall of 31.1 % arose from non-remittance of full budgeted AIA by UCC. Despite continuous reminders and communications UCC has not heeded. I advised Accounting Officer to continue liaising with Uganda Communications Commission with a view of meeting the approved budget commitments to enable undertake planned activities. 8.8 Budget Performance unimplemented activities A review of the budget performance for the year under review revealed that some targets were partially or not achieved despite release of funds to the vote functions. 7

14 Vote function output Programme 02- Information Technology Programme 03- Information Management Services Project 0990 strengthening Ministry of ICT Item description Hardware and Software development industry promoted Human Resource Base for IT developed E- government services provided Government Buildings and Administrative Infrastructure Planned outputs/ Quantity Framework for establishment of National Innovations Centre developed Building institutional capacities to ensure development and implementation of ICT policies Capacity of ICT officers in Government conducted Monitoring and review implementation of the ICT training curriculum at all levels of the education system. Catalogue of national e- Government service developed Technical guidance provided to 12 MDAs and 12 LGs Startup activities for construction of Ministry of ICT offices (acquisition of land, surveying and Architectural designs developed Amount (Shs) Amount released Actual output/ budgeted (Shs) Quantity 47,000,000 21,000,0000 Frame work not established 61,000,000 40,000,000 Capacity building on institution IT policy development to 9 LGs and 4 MDAs. Assessment of integration of ICT in school curriculum was undertaken in 7 sampled schools. 21,000,000 21,000,000 Provided technical guidance to only 7 MDAs and 12 LGs 500,000, ,000,000 Startup activities were conducted Remarks The process is at initiation stage Less than half of the planned activities were done Despite receiving all the funds other activities were not performed. No architectural design was done despite receipt of funds from NTR Purchase of 2 Double cabin pickups and 2 Station wagons procured 790,000, ,000,000 Procured 1 station wagon and one Only 2 vehicles were procured

15 Motor Vehicles and Other Transport Equipment Purchase of Office and ICT Equipment including Software Internet Band with procured 1 Heavy duty Photocopiers procured Computer software procured and installed Smart access control system procured and installed. pickup 449,498, ,498,000 One heavy duty copier procured using NTR Despite receipt of NTR one heavy duty copier were procured. 9

16 Management explained that the issue of non-implementation of some activities due to funding constraints. I advised management to follow up the funding with relevant stakeholders.

17 APPENDIX 1 FINANCIAL STATEMENTS 11

THE REPUBLIC OF UGANDA

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