REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE OFFICE OF THE PRIME MINISTER FOR THE FINANCIAL YEAR ENDED 3OTH JUNE 2014

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE OFFICE OF THE PRIME MINISTER FOR THE FINANCIAL YEAR ENDED 3OTH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE OFFICE OF THE PRIME MINISTER FOR THE YEAR ENDED 30 TH JUNE, iv 1.0 INTRODUCTION BACKGROUND INFORMATION FINANCING FUNCTIONS OF THE OFFICE OF THE PRIME MINISTER AUDIT OBJECTIVES AUDIT PROCEDURES PERFORMED FINDINGS... 3 ii

3 LIST OF ACRONYMS Acronym Meaning EFT Electronic Fund Transfer ICT Information Communication Technology IFMS Integrated Financial Management System LRDP Luwero Rwenzori Development Programme MDA Ministries, Departments and Agencies MoU Memorandum of Understanding MTEF Medium term expenditure framework MoFPED Ministry of Finance Planning and Economic Development NGO Non-Government Organization NUSAF Northern Uganda Social Action Fund OPM Office of the Prime Minister PAC Public Accounts Committee PFAA Public Finance and Accountability Act, 2003 PAYE Pay as you earn PPDA Public Procurement and Disposal of Public Assets Authority PRDP Peace and Recovery Development Programme PS/ST Permanent Secretary/Secretary to treasury TAI Treasury accounting instructions TGA Treasury General Account UGX Uganda Shillings URA Uganda Revenue Authority WHT Withholding Tax iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE OFFICE OF THE PRIME MINISTER FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Office of the Prime Minister 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 for the Financial Statements 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 Office of the Prime Minister. 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 Shs.5,564,282,629 The Office of the Prime Minister charged wrong expenditure codes to a tune of Shs.5,564,282,629. The practice undermines the intentions of the appropriating authority and leads to incorrect financial reporting. Qualified Opinion In my opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the financial statements of the Office of the Prime Minister 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 OFFICE OF THE PRIME MINISTER 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 Office of the Prime Minister to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The Office of the Prime Minister is mandated to lead Government Business in Parliament; be responsible for the coordination and implementation of Government Policies across Ministries, Departments and other Public Institutions including Policy and Management issues on Disaster and Refugees, Information and National Guidance, and Special Programmes on Pacification and Development of Northern Uganda, Luwero Triangle and Karamoja region 3.0 FINANCING The Office of the Prime Minister was financed by Grants from Central Government. Grants totaling to Shs.111,096,377,342 from Central Government were received. The Ministry also received Shs.35,700,000 in non-tax revenue. The grants revenue of Shs.111,096,377,342 constituted 91% of its approved budget estimates of Shs.122,634,746,705. Out of the released amount, Shs.96,521,602,817 was spent leaving a balance of Shs.14,574,774,525 due to the consolidated fund. 4.0 FUNCTIONS OF THE OFFICE OF THE PRIME MINISTER The Office of the Prime Minister has the following objectives:- Effective leadership of Government Business in Parliament Efficient and effective implementation of Government Policies, Programmes and projects. Harmony, consistence and synergy in implementation of Government policies. 1

8 Regulate, provide and coordinate information about implementation of Government policies, programmes and projects. Propagate the National Vision and define the ideal National character, National values and Common Good for development. Enhance the country s capacity to contain and minimize the effects of disasters Address disaster vulnerabilities of the society and alleviate human suffering from disasters Prevent, mitigate and prepare the country against disasters Guide Government and other stakeholders in matters of disaster management and refugees Receive, protect and promote repatriation of refugees To initiate, design and coordinate special programmes and projects for troubled and disadvantaged areas To provide adequate and effective Human resource and logistical support in terms of equipment and material to ensure proper management. 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 the following:- a. Whether the financial statements have been prepared in accordance with the requirements of the Public Finance and Accountability Act 2003 and the regulations, and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b) Whether all the Ministry s 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 PPDA Act. d) To evaluate and obtain a sufficient understanding of the internal control structure of the Ministry, assess control risk and identify reportable conditions, including material internal control weaknesses e) Whether management was in compliance with the Government of Uganda financial regulations. 2

9 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 all schedules of all revenues collected and reconciled the amounts to the Ministry s cashbooks and bank statements. b) Expenditure The Ministry 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. d) Procurement Reviewed the procurement of goods and services under the Ministry during the period under review and reconciled with the approved procurement plan. e) Fixed Assets Management Reviewed the use and management of the Ministry s assets during the period under review. 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. 7.0 FINDINGS 7.1 Mischarge of Expenditure The Parliament of Uganda 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 Office of the Prime Minister s expenditures revealed that the entity charged wrong expenditure codes to a tune of Shs.5,564,282,629. This constituted 6% 3

10 of total expenditure for the Office of the Prime Minister. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to misreporting. Management explained that the Ministry of Finance Planning and Economic Development (MoFPED) advised them to utilize funds that had been released and were not performing to cater for emerging priorities that included refugee influx and drought emergencies. I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account and budget line codes. Authority should always be sought before any reallocations are made. 7.2 Advances to Individual Personal Accounts Non Compliance with Treasury Accounting Instructions Sections 227, 228 and 229 of the Treasury Accounting Instructions (TAIs), provides that all payments should be made by the Accounting Officer directly to the beneficiaries. Where this is not convenient, an imprest holder should be appointed by the Accounting Officer with the approval of the Accountant General. Shs.3.6 billion was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities. Although the funds were accounted for, such a practice of depositing huge funds on personal accounts exposes Government funds to risk of loss, since the entity does not have any control over such funds deposited on personal accounts. Management explained that most of the activities undertaken by the office are field based and involve working with other stakeholders in the Districts who are not usually known at the time the requisitions for funds are made, necessitating it to advance funds to individuals to execute field based activities. In the meantime, management has engaged the Permanent Secretary/Secretary to the Treasury, who has authorized OPM to process an impest warrant through the Accountant General which decision will hopefully go a long way in addressing the problem. I advised management to ensure strict adherence with the requirements of the Treasury Accounting Instructions. Meanwhile management effort to resolve the issue is awaited. 4

11 7.3 Refund to NUSAF 2 for PRDP expenditure A review of the Ministry s expenditures revealed that the entity irregularly paid funds to a tune of Shs.271,193,000 to NUSAF 2 project account as refunds to the project for ineligible expenditure under the World Bank portfolio. The funds were for start up activities and fuel paid to PRDP in The accounting officer charged subprogramme item (Medical and Agricultural Supplies) for the refund. These funds were not appropriated in the Appropriation Act. It was also noted that neither virements warrant nor supplementary funding was requisitioned and approved for the expenditure. This practice undermines the importance of the budgeting process, suffocates the approved programmes and also hampers service delivery. Further, the practice leads to misreporting. Management explained that at the time, there was no budget provision for preparatory activities for the design of NUSAF2 (counterpart funding). World Bank insisted that there should be a commitment on part of Government to meet the initial preparatory costs. I advised the Accounting officer to ensure adherence to the financial regulations and apply for supplementary provisions where unforeseen circumstances arise which may not be postponed without detriment to public interest. 7.4 Quarterly Staff allowances The Ministry paid quarterly allowances to Ministers, staff, police officers, home guards and political assistants for the year under review to a tune of Shs.1,269,305,000. The payments were not provided for in the standing instructions. Payment of irregular allowances affects the entity cash flows and results into diversions of government funds. Management promised to streamline payment of these allowances. I await management s efforts in streamlining the payment process. 7.5 Gross payment tax Budgeting Budget estimates provide a basis for the Ministry commitment and represents the Ministry s understanding of the scope and expense of what needs to be done, and the amount required to settle in taxes. The Ministry budgeted for a total of 5

12 Shs.16,413,653,190 to cater for gross tax payments and only Shs.5,100,000,000 was released by Treasury. Out of the release only Shs.3,539,828,278 was spent reflecting 31% budget release and 69% release utilization. Allocating funds for activities/expenses whose likelihood of occurrence is remote provides avenues for diversions as well as large budgetary slacks which provide for future unfair budgetary variations. Management explained that the gross tax budget was a non-resource item and not tied to the ceiling of Vote 003. Due to the withdraw of donor support to OPM, a lot of anticipated procurements which would have consumed much of the gross tax were not procured creating a huge variance between the budgeted and the actual outturn. Management further explained that the gross tax component is also used to pay taxes on imports donated by Non-Governmental Organizations (NGOs) to the Sector which in most cases are not known at the time of budgeting. I advised Management to always ensure that reasonable budgetary estimates are made Tax obligations by the Ministry The Office of the Prime Minister entered into several Memoranda of Understanding with Non-Governmental Organizations and provided for tax settlement on their behalf within these MoUs for goods acquired by them. As such, the Ministry had to meet tax obligations on behalf of these NGOs arising out of the agreements made. The following were observed: Article 7 of the MOU s signed before 2013/14 financial year regarding taxes and duties was open ended as it did not limit the type of imports, e.g. vehicle capacities, luxurious goods etc. It should be noted that upon paying, the Ministry has no control in regard to the final destination of the goods implying that there is a risk that such goods may end up in the open market. This practice exposes the Ministry to the risk of payment for non-beneficial commodities which may end up on the open market and undermine the tax planning efforts of Government. 6

13 Management explained that the MOU with all NGOs partnering with OPM and those intending to do so has been reviewed to address the gaps identified. These include among others the kind of imports that are eligible for tax clearance, verification of imports in the presence of OPM internal auditors and the NGO before goods are distributed to intended beneficiaries. In addition it is now a requirement that the Head of Department or a senior officer appointed by the Head of Department monitors the utilization of donated items by the beneficiaries in accordance with the provisions of the MOU. The officer will be required to make a report to the accounting officer at the end of the distribution detailing the items received and how they were finally utilized. I urged management to implement the action points in the process of streamlining the tax payment process. 7.6 Lack of verifiable database for Kasiimo Project The Ministry through the department of Luwero Affairs is charged with the mandate of paying gratuity to non-combatant War (civil) veterans. To expedite the process, the Ministry transfers funds to Centenary Bank equivalent to moneys due to the veterans verified by the Luwero triangle war debt verification committee. The Bank then pays individual veterans by crediting bank accounts opened with them. During the year, Shs.6,140,000,000 was transferred to the bank for onward transfer to the beneficiaries. However as mentioned in my previous years report, neither the committee responsible nor the Office of the Prime Minister has a comprehensive verifiable database of the combatants who have been paid and those who are pending six (6) years after the onset of the scheme. The Ministry has schedules that have been remitted to Centenary bank for payment since inception of the programme but not all the beneficiaries in the schedules were paid as reconciliations have proved because of the manual environment. The Ministry may lose funds given that under the circumstances, cases of duplication and inclusion of non-entitled beneficiaries cannot be ruled out. Management explained that the Verification Committee is compiling a complete data base on those who have not been paid and those who did not get the verification forms during the first verification exercise. To streamline the process further, a consultant to develop a computerized web based database has been procured. This will resolve the manually managed payment process. 7

14 I advised management to ensure that a comprehensive database is developed that should be able to capture all payments to individuals and be reconciled to total remittances to the bank since project inception. In the meantime, management is urged to expedite the implementation of the computerized web data base. 7.7 Execution of Unenforceable performance securities on Procurement for Construction of Education Infrastructure in Karamoja The Office of the Prime Minister signed contracts with several firms for the construction of Education Infrastructure in Karamoja District under three lots with lot 3 being awarded to a Construction company at a contract sum of Shs.1,073,713,920 to construct semi- detached houses at Moroto High School. Special Conditions of contract 52.1 and 52.3 required the contractor to execute a performance security of ten percent (10%) contract price in form of a bank Guarantee. Contrary to the above requirement, no performance security in form of a bank guarantee was availed by the contractor. The firm provided a performance security from Mercantile Credit Bank Ltd which is a credit institution and licensed to conduct credit institution business (Tier II) and as such is not a Commercial Bank. Absence of performance security puts the entity at a risk of losing funds in the event of noncompliance. Management explained that they had communicated to the contractor to provide the Performance Security that is consistent with the provision of the contract. I advised management to always carry out due diligence on securities prior to contract commitment. 7.8 Dormant Accounts Guidance from the Accountant General provides that all Government accounts held with Bank of Uganda are automatically blocked if they are inactive for a period of six months. Accountant General should advise of any alternative action on these accounts. It was noted that three project bank accounts held in local currency were found to be dormant for a period of twenty four (24) month with a total credit balance of Shs.375,662,268 as at 30 th November 2014 as indicated below: ACCOUNT NUMBER ACCOUNT TITTLE AMOUNT (Shs.) DFID SUPPORT TO THE NATIONAL 326,397,167 8

15 INEGRATED MONITORING AND EVALUATION STRATEGY NORTHERN UGANDA DATA CENTRE-GIZ 46,710,876 COMPONENT PEACE RECOVERY AND DEVELOPMENT 2,554,225 PLAN (PRDP) NORTHERN UG&A TOTAL 375,662,268 Dormant accounts are risky as they provide an avenue for perpetuating illegal activities through concealment. Management explained that these accounts were for donor funded programmes and projects which were suspended following the financial impropriety that occurred in OPM and other MDAs. Negotiations are on-going between Government and the Development partners to have these accounts unfrozen and release the monies to complete the outstanding activities. In the meantime, management has written to Accountant General to justify the continued existence of these Accounts. I advised management to continue liaising with the Accountant General to ensure that the Accounts are maintained in line with financial regulations. 7.9 Budget performance Public Finance and Accountability Regulations 2.10(b) entrusts the Accounting Officer with ensuring that all total controls such as those contained in the approved estimates, warrants and others are strictly observed. Budget estimates are based on outputs to be achieved for the financial year and during implementation, effort is required to be made to achieve the agreed objectives or targets of the entity within the availed resources. Review of the budget performance for the year under review revealed that some targets were partially or not undertaken despite release of funds to the vote functions as below; Vote function output Project ressetlement of landless persons and disaster victims Item descript ion purchase of motor vehicle Planned outputs/ Qty -Purchase of one trailer -Purchase of two (2) tonne tipper trucks Amount (Shs) budgete d in billions Amount release d (Shs) in billions Actual output/ Quantity Three pickups were procured instead of trailer and 2 tippers Remarks 100% of funding was got but no budgeted activity/outp uts procured instead were Mgt response Procurement for trailer and trucks not done yet there was increased demand for emergency 9

16 Programme 18- Disaster preparedness and management Programme 06 Luwero Rwenzori Triangle Project 0932 Post war recovery and presidential pledges IDPS returned and resettled major bridges Output payment of gratuity and coordinat ion of war debts clearance pacificati on and develop ment - Construction of 100 more permanent houses for landslide victims -Finishes on 50 of the first 101 houses - Construction of major bridges to be paid -Purchase of vehicles (3) procured for Gulu office -Purchase of two tipper trucks -purchase of vehicle for coordinator Finishes on 50 of the first NO bridges constructed civilian veterans paid Three double cabins for Gulu office procured managemen t procured pickups rather than tippers and one trailer -100% of the funds were released but 100 more permanent houses were not built -Bridges were not built despite release 50% of the funds Despite full release, 70% of planned veterans were paid -one vehicle and tippers were not procured response As a result of global warming and climate change, disaster challenges have increased and this led to increased demand for relief. The funds were nonresource which were managed and controlled by MOFPED and earmarked for imports. - Procurement for vehicles was not finalised and instead ten (10) hydra foam machines were procured Service delivery is hampered and the appropriating authority s objectives are not met. Management explained that the underperformance on the specified areas was attributed to other emerging pressures and priorities that cropped up in the course of the financial year necessitating reallocations and Virement for which authority was sought from PS/ST. I advised management to always undertake activities as planned. 10

17 7.10 Review of previous year Issues A review of the prior audit observations and recommendations was done, and below is the status of implementation: Audit Findings Prior Recommendation Status on implementation of recommendations Mischarge of Expenditure The entity charged wrong expenditure codes to a tune of Shs.27, 629,053,148. Advances to Individual Personal Accounts a) Non Compliance with Treasury Accounting Instructions Shs.9.29 billion was advanced to Ministry staff through their personal bank accounts to undertake direct procurements and other activities. Advances to personal accounts not accounted for a) Un-presented accountabilities Accountability worth Shs.417,639,932 could not be traced and therefore remained outstanding at the end of the audit. b) Doubtful expenditure A review of accountabilities presented revealed that a sum of Shs.55,869,932 was doubted because of overpaid per-diems, uncertified photocopies and field reports filed before activities were undertaken. streamline the budget process to ensure that sufficient funds are allocated to each account. Authority should be sought for any reallocations. ensure strict adherence with the requirements of the Treasury Accounting Instructions. undertake an extensive review of the expenditure and where misuse is observed, recovery measures be instituted accordingly. Repeated with a decline. Repeated with a decline. Repeated. Cash Withdrawals - Unaccounted for Cash Withdrawals Out of the Shs.3,755,374,923 withdrawn in cash by the OPM during the period, Shs.613,325,500 was unaccounted for Doubtful purchase delivery and issuance of stationery items It was noted that stationery supplies worth Shs.701,721,893 ensure that all funds are accounted for within the statutory period. ensure that procedures regarding receipt and issuance of stores are followed. In the meantime the funds should be accounted for or 11

18 were contracted out to various suppliers, however delivery of the stationery items was not recorded in the stores ledgers to acknowledge receipt. Unsupported travel abroad Shs.137,707,383 paid out for purposes of facilitating officers to travel to various destinations outside Uganda was not adequately supported by accountability documents. Non-deduction of Withholding Tax Shs.992,570,770 was paid to two foreign based companies for the supply of Hydra foam brick making machines and running an advert in the Queen and Common Wealth 2012 magazine. It was noted that Shs.148,885,615 was not deducted as 15% withholding tax contrary to section 121 of the Income Tax Act. Payments for hotel services Shs.162,889,129 lacked attendance lists and Included in the above amount is Shs.43,678,130 paid to one of the hotels with uncertified photocopied accountabilities. Irregular Inter-Account transfer Shs.3,306,100,000 was irregularly transferred from the Treasury General Account in the last week of the financial year 2011/2012 (29 th June 2012) to account no National policy on disaster management Unauthorized expenditure refunds to Donors The entity irregularly paid funds to a tune of Shs.4,314,211,646 to three Donor project accounts as refunds erroneously charged in the previous financial year. Non-deduction of withholding tax Entity failed to withhold taxes to a tune of Shs.161,821,594 during the year under review from several companies supplying goods and services at the prescribed 6% rate contrary to section 121 of the Income Tax Act. recovery measures be instituted. ensure that all funds are accounted for within the statutory period. Otherwise recovery measures should be enforced in event of non-accountability. Management advised to recover funds ensure that all funds are accounted for within the statutory period. Recovery measures should be enforced in event of nonaccountability. cease operations on the account pending finalization of the investigation. Recovery measures should be enforced for the unaccounted for funds. adhere to the financial regulations by applying for supplementary provisions where unforeseen circumstances arise. I await the recovery of taxes from the affected suppliers. Not Repeated 12

19 Payments for domestic arrears Shs.2,363,144,295 was paid to several companies for settlement of arrears incurred in the previous financial years. Farm Engineering Industries Ltd Surcharge on ploughing and harrowing non-virgin land All payments made to the firm during the year totalling to Shs.8,534,645,970 were surcharged, implying that all land was virgin land. Gap in contract Negotiation It was noted that the negotiation team did not give OPM value by specifying how to charge 30% given the inconsistence by the firm in billing. Lack of central database and land utilisation mechanism It was noted that OPM does not keep a central database of ploughed land specifying total acreage ploughed to-date, acreage ploughed per district, acreage ploughed per sub-county and beneficiaries. Nugatory expenditure on clearing and handling charges Entity failed to utilize the grace period despite availability of funds on the Gross payment tax account to expeditiously clear the items and held onto the containers for 72 extra days which led to wasteful expenditure of Shs.28,052,860 (US$.8,640 in rental charges and Shs.5,070,460 in storage charges). Irregular consolidated allowances It was noted that Shs.1,172,325,000 was paid to staff, police and body guards as quarterly consolidated allowance in form of night subsistence days. Luwero-Rwenzori Development Programme (LRDP) adhere to the commitment control system and ensure that domestic arrears are appropriately disclosed in the financial statements, verified, budgeted for and paid in line with TAIs. review the contract and implementing modalities. Management was also advised to maintain a central data base capturing the status of land ploughed. always clear imported items expeditiously to avoid losses. I await management s adherence to the regulations. Management promised to improve on the issues and I await management s progress in 13 Issues on transfer of funds from MOFPED repeated

20 Whereas OPM was to advise MoFPED on the allocation to each Local Government by availing a disbursement schedule and thereafter disburse funds to Chief Administrative Officers (60%), this was not done. 16 (sixteen) micro support projects were supposed to have been appraised before being given funds worth Shs.273,000,000 but only 4 (four) micro support projects were appraised before receiving Shs.57,000,000. The Ministry did not have an up to date status report on the performance of the grants to community SACCOs and thus I was unable to adequately review the programme to ascertain its efficiency and effectiveness at the grassroots. Kasiimo Project i. Neither the Committee nor the Office of the Prime Minister has a full data base of the combatants who have been paid and those who are pending five (5) years after the onset of the scheme. ii. While Government had earmarked Shs.30 billion to be released over a period of three consecutive years for 30,000 civilian veterans, it is now estimated that the beneficiaries are 60,000 and an extra Shs.60 billion is the estimate by OPM required to pay off the veterans. iii. Whereas civilians are paid varying amounts ranging from 1.5 million, 5 million and 10 million, the verification policy of veteran leaders in a sub-county or operation zone recommending veterans to be paid is open to abuse as some un-entitled people may be recommended by the required three veterans for financial gain. iv. Whereas the payments are purportedly for civilian veterans, it was noted that there were incidences of retired soldiers also being paid. undertaking the above measures. ensure that the Committee comes up with a detailed database of the civilian veterans paid and those pending payment. Furthermore, all data for payments so far made on the various disbursement schedules in soft copies should be availed for audit verification given that partial payments have been made in different financial years in order to reconcile payments made to individuals and rule out double or overpayments. Issue of database repeated 14

21 Gross tax budgeting The Ministry budgeted for a total of Shs.20,913,653,190 for gross tax but only Shs.2,100,000,000 was released by Treasury. Although Shs.2,100,000,000 was released, actual expenditure was only Shs.1,724,325,729 reflecting about 10% of the budget and 82% of the actual release Tax payments by the Ministry The Ministry paid a total of Shs.665,244,817 on behalf of some organizations. A review of the MOUs revealed the following: Article 7 in the MOU s signed regarding taxes and duties was open ended as it did not limit the type of imports, that is; vehicle capacities, luxurious goods and others. Upon paying, the Ministry has no control in regard to the final destination of the goods and there is a risk that such goods may end up in the open market. Without procurement work plans of the NGOs, OPM risks incurring domestic arrears on NGO imports since it has no control over their imports. Payments for NGOs without MOU It was noted that the Office paid taxes to the tune of Shs.95,214,821 on behalf of five (5) NGOs without any MOUs in place. In one instance Medicines San Frontiers, the MOU was with Ministry of health. The basis for the payments was not availed rendering them irregular. Duplication could not be ruled out. Vacant posts in the establishment It was noted that 29 posts had not yet been filled as per the approved establishment. Service delivery is hampered by the delays in filling the vacancies especially at senior management level. I await the outcome of the committee. Management reforms awaited. Management explained that the NGO Committee will be advised adequately to take note of the observation. I await the outcome. liaise follow-up the matter with the relevant authorities and have all staffing gaps filled. Repeated Repeated Not Repeated Not Repeated 15

22 Audit committee performance During the year ended 30 th June 2013 the Office of the Prime Minister had an Audit Committee composed of five members. However, the committee did not carry out its functions draw the attention of the Audit Committee to its statutory responsibility so that OPM can improve its financial management and accountability. 16

23 APPENDIX 1 FINANCIAL STATEMENTS 17