REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA INVESTMENT AUTHORITY (UIA) FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA INVESTMENT AUTHORITY (UIA) FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA INVESTMENT AUTHORITY (UIA) FOR THE FINANCIAL YEAR ENDED 30 TH JUNE, iv 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING OBJECTIVES OF THE AUTHORITY AUDIT OBJECTIVES AUDIT PROCEDURES PERFORMED FINDINGS Un-collected Outstanding Revenues Un-Accounted for Expenditure Un-Vouched Payments Procurements Lacking Contract Committee Approval - Shs.24,246, Human Resource issues Industrial Parks Kabarole Industrial Park Un-achieved planned activities... 9 ii

3 LIST OF ACRONYMS Acronym RT HON. UIA ISA ISSAIs EIA NSSF MDAs PAYE PPDA SME UNBS MoFPED URA ULC MAAIF Meaning Right Honourable Uganda Investment Authority International Standards on Auditing International Standards of Supreme Audit Institutions Environmental Impact Assessment National Social Security Fund Ministries, Departments and Agencies Pay As You Earn Public Procurement & Disposal of Assets Small and Medium Enterprises Uganda National Bureau of Standards Ministry of Finance, Planning and Economic Development Uganda Revenue Authority Uganda Land Commission Ministry of Agriculture Animal Industry & Fisheries iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA INVESTMENT AUTHORITY (UIA) FOR THE FINANCIAL YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of Uganda Investment Authority for the year ended 30th June, 2014 as set out on pages 8 to 46. These financial statements comprise of the Statement of Financial Position as at 30th June, 2014, the Statement of Financial Performance, Statement of Changes in Equity, Cash flow Statement together with other accompanying statements, notes and accounting policies. Management s Responsibility for the Financial Statements The Board of Directors are responsible for the preparation of financial statements in accordance with the requirements of the Financial Reporting Guide, 2008 and for such internal controls 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 express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA)/International Standards of Supreme Audit Institutions (ISSAIs). 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 misstatement. An audit involves performing audit procedures to obtain audit 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 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 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 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 iv

5 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 financial statements of Uganda Investment Authority for the period 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, Emphasis of Matter Without qualifying my opinion, I draw your attention to the following matter which is also included in the Statement of Financial Position. Un-collected Outstanding Revenues-Shs.7,431,253,446 Shs.7,431,253,446 remained un-collected by the year end. This debt relates to the investors who were reluctant to settle their obligations because Government had not provided fully serviced land as agreed. John F.S Muwanga AUDITOR GENERAL KAMPALA 12 th March, 2015 v

6 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION 0

7 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA INVESTMENT AUTHORITY FOR THE YEAR ENDED 20 TH JUNE, 2014 This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION In accordance with Article 163(3) of the Constitution of the Republic of Uganda (as amended), I am required to audit and report on the Public Accounts of Uganda that is to say, all Public Offices including the Courts, the Central and the 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 Uganda Investment Authority to enable me report to Parliament. 2.0 BACKGROUND INFORMATION Uganda Investment Authority (UIA) was established by the Investment Code Act of The Authority is an agency of the Government and is under the general supervision of the Minister of Finance, Planning and Economic Development. The entity does not have a separate vote of its own but rather obtains subvention from the mother Ministry. UIA s vision is to Lead Uganda in identifying and promoting investment opportunities that bring sustainable economic growth and its mission is to advocate and promote a competitive business environment, provide serviced land and facilitate investment projects. 3.0 ENTITY FINANCING The Authority was financed by grants from Central Government, Grants from International Organizations, transfers from other Government Units, Non Tax Revenues and miscellaneous revenue. Revenue totaling to Shs.11,088,678,705 from all revenue sources was received. The total revenue of shs.11,088,678,705 constitutes 82.54% of its approved budget estimates of Shs.13,433,740,000. 1

8 4.0 OBJECTIVES OF THE AUTHORITY Attract value adding investment that brings technology, skills and jobs to Uganda. Promote Uganda as a leading African Investment destination. Provide serviced sites, buildings and competitive infrastructure to meet the needs of growing Ugandan based businesses. Stimulate and lead key stakeholders in creating a competitive business environment. 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 presents the revenues and expenditures for the period and of the financial position as at the end of the period. b. Whether all Authority 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 AUDIT 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) Expenditure The payments 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 by the Authority during the period under review and reconciled with the approved procurement plan. (e) Fixed Assets Management Reviewed the use and management of the Authority assets during the period audited. (f) Authority s 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 evaluated the overall financial statement presentation. 7.0 FINDINGS 7.1 Un-collected Outstanding Revenues Section 44(1) (a-c) of the Public Finance and Accountability Regulations 2003, places the responsibility for revenue collection directly with the Accounting Officer. However, revenue due to the tune of Shs.7,431,253,446 remained un-collected by the year end. Management explained that investors were reluctant to pay because Government had not provided fully serviced land as stated in the signed agreements. UIA has now embarked on stringent measures to recover outstanding amounts for infrastructure development. Non-compliant debtors have been passed on to lawyers for prosecution. I await the outcomes of prosecutions and other management efforts to have the outstanding revenues collected. 3

10 7.2 Un-Accounted for Expenditure Payment worth Shs.40,520,251 remained un-accounted at the year end due to lack of appropriate and relevant supporting documents. The expenditure related to fuel, hotels & workshops, travel inland, travel abroad, allowances and diaspora related costs. Funds may not have been put to the intended purpose. I urge the Accounting Officer to ensure that appropriate and relevant supporting documents are obtained or consider recovering funds from the respective payees. 7.3 Un-Vouched Payments During the year, payments vouchers worth Shs.79,859,192 were not provided for audit examination. These were in respect of Shs.17,766,590 for staff emoluments and Shs.62,092,602 for payments for supply of goods and services. I was therefore unable to confirm the authenticity of this expenditure. I advised the Accounting Officer to trace the missing payment vouchers and enhance the documentation and record keeping system. 7.4 Procurements Lacking Contract Committee Approval - Shs.24,246,017 Section 48(d) of the PPDA regulations 2003 requires that; in executing its powers under section 29 of the act, a contracts committee shall approve contract documents in line with the award decision. However, it was noted that contracts worth Shs.24,246,017 were performed without the approval of contracts committee. There is a risk that the entity may not have obtained value for money from the procurements due to lack of competition in the process. I advised the Accounting Officer to institute measures to ensure compliance with PPDA regulations. 7.5 Human Resource issues High staff turnover Best practice requires an organization to endeavor to attract, engage and retain high quality staff and optimally use their services. This can be achieved by putting in place attractive staff benefit schemes like, retirement benefits, bonus payments, innovations (Trainings), medical scheme, employee of the year and long service award to encourage retention of staff. 4

11 During the year, five (5) senior level staff left the authority. Details in the table below: Unit Designation Employment Date Lands Development Senior Investment Executive 02/03/2009 Inspector of works Industrial Parks development Contracts Specialist 01/03/2011 Small Medium Enterprise Director SME Division 18/05/2014 Lands Development CDM technical Advisor 01/11/2013 Office of the Executive Director Investment Executive Legal 17/02/2014 High staff turnover of mostly senior and technical staff may portray negatively on the corporate image of the authority. It also affects negatively on service delivery and increases the costs of recruitment and training of new staff. Management explained that the staff left due to low salaries. I advised management to explore ways of improving the current staff retention and motivation Staff establishment gaps As reported in my prior year report, the Authority s approved staff structure provides for 78 approved posts. However, only 52 (67%) were filled leaving 26 (33%) vacant. Details in the schedule below: Departments/ Divisions Approved Posts Filled Posts Vacant Posts Executive Director s office Investment Promotion Division Investment Facilitation & Aftercare Division Land Development Division/KIBP Finance & Administration Division SME Division

12 It was noted that the Investment Promotions division was the most affected with 14 approved posts, but only 5 were filled leaving 9 posts vacant. The land development division was equally affected with 18 approved post but with only 11 filled leaving (7) vacant. Management cited inadequate funding as the major reason for not filling the vacant posts and that a new structure was developed and submitted to relevant authorities for consideration. I advise management to continue liaising with the responsible authorities with a view of filling the most vital vacant posts to improve service delivery. 7.6 Industrial Parks Government through the MoFPED conducts annual performance assessments leading to the production of budget monitoring reports to provide accurate and timely information on the status of programme implementation. During the year under review, Industrial Parks under UIA was one of the activities monitored and reported upon. According to the annual budget Monitoring Report, it was reported that the approved budget for the development of industrial parks for the year was Shs.2.69 billion and all the funds were released (100%). Shs billion of the released funds were spent and the balance at the year-end was committed since running contracts were still being executed and others were under defects liability period. The following were noted: Bweyogerere Industrial Park This park has a total of nine (9) plots and all had been allocated. The planned activities for the year included settlement of investors, maintenance of the road, installation of boarder makers, deployment of security and provision of water and electricity. The progress of these activities by the year end is explained below: a) Failure to fully settle the Investors Although all the nine (9) plots were successfully allocated, only seven (7) were being developed as of 25 th July,

13 Management explained that there was a contest over the boundaries of one of the plots which is yet to be resolved but the investor was ready to develop the plot excluding the contested part. The other beneficiary has been formally encouraged to commence development. I advised the Accounting Officer to continue encouraging development and facilitate dispute resolution to avoid delays. b) Vandalization of Boarder Markers and Deployment of Security The boarder markers were installed in the financial year 2012; however, it was noted that these makers had been tampered with. Management explained that the border markers initially installed in 2012 were tampered with by the local encroachers and many were vandalized by Management has therefore budgeted to install heavy duty makers which weigh over 400kgs each and are more difficult to remove. Security in terms of Police deployments has also been budgeted for in the F/Y 2014/2015. I urge management to step up physical security in the park to avoid any distortions on the planned areas. c) Non-Provision of Utilities to the Park During the year, UIA had planned to service the allocated plots with electricity and water to encourage beneficiary investors to make timely developments. However, it was noted that the utility facilities had not yet been extended to the park by the year end. Instead, some investors had utilized their own funds to extend water and electricity to their respective plots. It should be noted that UIA had promised these services as an incentive to investors to stimulate investments. Non-provision of promised services may discourage investor response to expected investments. There is a possibility that these investors may requisition for refunds of the costs invested in utility extension which might be more costly. Management explained that due to limited budget, utilities were extended to those investors that achieved substantial level of development in a phased manner. I advised the Accounting Officer to continue sourcing for funds to provide the utilities to the remaining plots as mandated. 7

14 7.6.2 Development of a Master Plan and Compensation of Squatters in Mbale Industrial Park This 619 acre industrial park is located in Mutoto, Mbale Municipality along Tirinyi road. The planned outputs for the year under review were compensation of squatters, development of a master plan and conducting of an Environmental Impact Assessment (EIA). It was however noted that these activities had not been achieved by the year end reportedly due to inadequate funding. The compensation had been agreed at Shs.4.5 billion however, management had only budgeted for Shs.2.6 billion for the year. Compensations appear to remain an unfunded priority of UIA and this may result into loss of land and high legal costs. Management explained that they have made several requests for funding but the funds have not been received I advised the Accounting Officer to continue liaising with MoFPED for funding and have the planned activities undertaken. 7.7 Kabarole Industrial Park This land measures 100 acres which formerly belonged to the District Agricultural Training Institute in Kyembogo but was identified as an industrial park. The major outputs for the year included installation of border markers, preparation of a master plan and conducting an Environmental Impact Assessment (EIA). However, it was noted that these activities were not achieved during the year. The letter of offer of the land from Ministry of Agriculture Animal Industry and Fisheries (MAAIF) to UIA has not been received. I explained to management that without possession of the land, the process of demarcation of land and EIA cannot take place. It was explained that management is still waiting for a response following written communication to MAAIF for a no objection to facilitate the land title process. Without a land title in place, there is a risk of encroachments which may result into costly compensations. I advised the Accounting Officer to continue liaising with MAAIF and ULC with a view of securing a land title in the names of UIA to enable performance of the planned activities. 8

15 7.8 Un-achieved planned activities The Authority work plan and approved budget were reviewed to establish the budget performance levels during the year. It was noted that although most of planned activities were achieved, some activities were not completed as listed below; Push for adaption of the MSMEs policy by Cabinet and craft the implementation, monitoring and evaluation strategy for the policy. It was explained that this was at draft level. Opening of a 4 km road in the Soroti Industrial Business Park. It was explained that it was still under procurement process. Review internal financial control system to provide fairly risk free working environment. It was explained that the process has been initiated. I advised management to liaise with the stakeholders and ensure that the planned activities are undertaken. 9

16 APPENDIX I FINANCIAL STATEMENTS 10