OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA

Transcription

1 OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE FUEL MARKING AND QUALITY MONITORING PROGRAM (FMQP) FOR THE YEAR ENDED 30 TH JUNE, 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS List of Acronyms... ii Report of the Auditor General on the Financial Statements of the Fuel Marking and Quality Monitoring Program (FMQP) for the Year ended 30 th June, Detailed Report of the Auditor General on the Financial Statements of Fuel Marking and Quality Monitoring Program for the Year ended 30 th June, Introduction Background information Objectives of the FMQP Operations of the FMQP Financing of the FMQP Audit objectives Procedures performed Audit Findings... 7 i

3 LIST OF ACRONYMS FMQP Fuel Marking and Quality Monitoring Program GFI Global Fluids International IFRS International Financial Reporting Standards ISAs International Standards on Auditing MEMD Ministry of Energy and Mineral Development OMC Oil Marketing Companies UGX Uganda Shillings UNBS Uganda National Bureau of Standards XRF X-Ray fluorescence ii

4 REPORT OF THE AUDITOR GENERALON THE FINANCIAL STATEMENTS OF THE FUEL MARKING AND QUALITY MONITORING PROGRAM (FMQP) FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Fuel Marking and Quality Monitoring Program (FMQP) for the year ended 30 th June These financial statements comprise of the Statement of Financial Position as at 30 th June, 2014, Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows together with other accompanying statements, notes and accounting policies. Directors responsibility for the financial statements Under the provisions of the Memorandum of Understanding between the Ministry of Energy and Mineral Development (MEMD) and the Uganda National Bureau of Standards (UNBS) on cooperation in the field of petroleum quality control monitoring program entered into on 1 st November, 2012 (MoU), the Directors are responsible for the preparation of the financial statements in accordance with the International Financial Reporting Standards (IFRS) and other regulatory framework governing the Program and for maintenance of such internal controls that are necessary for the fair presentation of financial statements that are free from material misstatements, whether due to fraud or error. Auditors responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda 1995 (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 the International Standards on Auditing (ISAs). The standards require that I comply with the ethical requirements, plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement. I also conducted the audit in accordance with Section 4.13 of the MoU. 1

5 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor s judgment, including the assessment of the risk of material misstatement of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the program s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the program s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence 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. PART "A" Opinion In my opinion, the financial statements present fairly in all material respects, the financial position of the Fuel Marking and Quality Monitoring Program as at 30 th June 2014 and its operating results and cash flows for the year then ended in accordance with the International Financial Reporting Standards and Section 4.10 of the Memorandum of Understanding between the Ministry of Energy and Mineral Development and the Uganda National Bureau of Standards. Emphasis of Matter Without qualifying my opinion, I draw your attention to the matter described under Note 2 and 4 of the financial statements. 2

6 Accounts Receivables At the close of the financial year 2013/2014,receivables of UGX.320,712,123 were noted. Some of the receivables have been outstanding since Delayed recovery of the debts may result into loss of Public funds. Outstanding Payables The program had outstanding payables totalling to UGX.178,820,944 at the year-end. Included in the outstanding balance is UGX.122,289,796 due to a private firm in respect of supply of fuel marking Services that has been outstanding since the financial year 2012/2013. Failure to settle outstanding obligations as they fall due exposes the program to the risk of litigation and associated costs. John F.S. Muwanga AUDITOR GENERAL 17 th March,

7 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE FUEL MARKING AND QUALITY MONITORING PROGRAM 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 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. In addition, Section 4.13 of the MoU also requires me to audit the Program on an annual basis. Accordingly, I carried out the audit of the Fuel Marking and Quality Monitoring Program to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The Fuel Marking and Quality Monitoring Program was established in 1999 by the Ministry of Energy and Mineral Development (MEMD) in collaboration with the Fuel Marketing Companies and the Uganda National Bureau of Standards (UNBS). Under the Petromark Technology supplied by Global Fluids International (GFI) two types of markers are used: Petromark T1 for marking PMS (petrol) and AGO (diesel) and Petromark T2 for marking BIK (paraffin). Both markers are used to control and monitor product adulteration, smuggling and dumping of transit fuel. It is a legal requirement that all importers of petroleum products are licensed by MEMD and adhere to the provisions of the Fuel Marking Program. Marking is currently done at customs entry points of Malaba, Busia and Mutukula. Arrangements can also be made to mark the fuel in Kampala with clearance from Uganda Revenue Authority. A fee of UGX.10 per litre marked is payable by all importers for the operation of the program. Non-compliance attracts a penalty under the applicable law. 4

8 3.0 OBJECTIVES OF THE FMQP The main objectives of objectives of the program are: Monitoring the quality of imports of petroleum products; Capacity building in the areas of petroleum standards and quality monitoring; Sensitisation of the general public, government and petroleum industry on matters regarding petroleum quality; Monitoring of petroleum products for compliance to national standards,and; Marking of petroleum products to prevent product adulteration, contamination, dilution and smuggling. 4.0 OPERATIONS OF THE FMQP The operations carried out under this Program include: Import Inspection Petroleum products are inspected for conformity to national standards while importation documents are verified on a per shipment/truck basis. Preliminary tests are carried out on the fuel and these include temperature, density and colour. Substandard products are handled as per provisions of the Petroleum Supply Act, 2003, and the Petroleum (Fuel Marking and Quality Control) Regulations, Fuel Marking and Marker Level Monitoring This involves doping of a marker into the product at customs entry points. The marker concentration is used to monitor the product using X-Ray Fluorescence (XRF) detectors after entering Uganda. The amount of marker doped is determined by the measured volume. 5

9 Laboratory Testing The Laboratory is situated at UNBS headquarters at Nakawa and combines with a mobile laboratory unit capable of carrying out comprehensive tests. The laboratories act as a support to the monitoring activities. Quality monitoring is done both at retail outlets and depots. 5.0 FINANCING OF THE FMQP The Program was financed by GFI remittances totalling UGX.1,275,628,868, marker upgrade and penalty fees collected totalling UGX.153,505,125 and UGX.76,177,941 from petroleum labaratory analysis fees. The total revenue of UGX.1,505,311,934 constituted 106% of its approved budget estimates of UGX.1,422,000, AUDIT OBJECTIVES The audit was carried out in accordance with the 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 whether: a. 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. All Program funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided; c. Goods and services financed have been procured in accordance with the Government of Uganda Procurement Regulations. d. Sufficient internal controls have been applied consistently throughout the year to safeguard the assets of the Program and mitigate the risk of misstatement of the financial statements; e. The Program Management was in compliance with the Government of Uganda Financial Regulations,and; f. All necessary supporting documents, records and accounts have been kept in respect of all Program activities, and are in agreement with the financial statements presented. 6

10 7.0 PROCEDURES PERFORMED a. Revenue/Receipts Obtained all schedules of receipts and reconciled the amounts to the Program s cashbooks and bank statements; b. Expenditure Vouched transactions during the period to establish whether documentation in support of expenditure agreed with the amount and description on the vouchers and bank statements, and was properly controlled and accounted for. c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period. d. Procurement Reviewed the procurement of goods and services under the Program during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the Program 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 and evaluated the overall financial statement presentation. 8.0 AUDIT FINDINGS 8.1 Accounts Receivables One of the revenue sources of the Fuel Marking and Quality Control Program is marking of fuel at customs entry points. At the close of the financial year 2013/2014 receivables of UGX.320,712,123 were noted and included UGX.96,545,560 arising from trucks seized at the border, UGX.44,304,662 from companies that had closed 7

11 operations in Uganda, as well as UGX.36,305,812 from old debts associated with wrong declarations of intended destinations of the imported fuel at the entry point by fuel importing companies. Some of the receivables have been outstanding since Delayed recovery of the debts may result into loss of public funds. Besides, the receivables represent idle assets that constrain the cash flow position of the program. Accumulation of the receivables is due to failure to implement the Debt Management Policy which required settlement of debts within 180 days. Management in response indicated that it had collected UGX.114,450,258 out of the outstanding receivables of UGX.320,712,123, and was pursuing the balance of UGX.206,261,865. In the meantime the service has been out sourced to GFI. I advised Management to institute further measures to ensure collection of the outstanding sum. 8.2 Outstanding Payables The program had outstanding payables totalling to UGX.178,820,944 at the year-end. Included in the outstanding balance is UGX.122,289,796 due to a private firm in respect of supply of fuel marking services that has been outstanding since the financial year 2012/2013. Failure to settle outstanding obligations as they fall due exposes the program to the risk of litigation and associated costs. Management explained that UGX.51,960,636 had been settled leaving a balance of UGX.126,860,308 and that this arose mainly from variations in marker inventory volumes supplied by the private firm. I advised Management to reconcile the volume figures with the service providers and settle the obligations in a timely manner to avoid litigation. 8

12 FINANCIAL STATEMENTS 9