The Dynamics of Business Economics

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1 The Magazine for The Institute of Certified Public Accountants of Uganda (ICPAU) July-September 2012 The Dynamics of Business Economics INTEGRATED REPORTING - A New Path to Sustainability Awareness IMPLEMENTING HEALTH SAFETY ENVIRONMENT & QUALITY AS A BASIC REQUIREMENT Details inside ICPAU 14TH BUDGET BREAKFAST: MINISTER EXPLAINS THE 2012/13 GOU BUDGET ALLOCATIONS OBJECTION TO TAX ASSESSMENT IS YOUR RIGHT...

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4 July- September UNDERSTANDING LEADERSHIP 8 CROSSING THE NILE AT PACKWACH 24 ACCOUNTING OF INSURANCE COMPANIES 42 Inside IMPLEMENTING HEALTH SAFETY ENVIRONMENT & QUALITY, AS A BASIC REQUIREMENT 26 ICPAU ELECTED MEMBER OF PAFA COMMITTEE 46 ROLE OF INTERNAL AUDIT IN PUBLIC SECTOR GOVERNANCE 53 WHERE IS THE SOLUTION TO THE LAND PROBLEMS IN UGANDA? 28 ICPAU TO CREATE RESEARCH FUND FOR ACCOUNTANCY 46 RESOLVING TAX DISPUTES 57 FINANCIAL DISCIPLINE A PREREQUISITE FOR ACHIEVING BUDGET OBJECTIVES 11 INSOLVENCY PRACTICE IN UGANDA 19 MY LEEDS EXPERIENCE 47 A WOMAN OF ASPIRATION AND DRIVE- CPA MARGARET NALWOGA ATUGONZA WHERE ARE WE GOING? PASS CARD TO BUSINESS POLICY TAX AGENT REGISTRATION 60 ICPAU 14TH BUDGET BREAKFAST: MINISTER EXPLAINS THE 2012/13 GOU BUDGET ALLOCATIONS 31 REVENUE ASSURANCE: BEYOND TELECOMS EFFECTIVE TRAINING EMOTIONAL COMPETENCE AND EMPLOYEE PERFORMANCE 68 INTEGRATED REPORTING - A NEW PATH TO SUSTAINABILITY AWARENESS UNDERSTANDING ACCOUNTING FOR LEASES PICTORIAL 34 WITHHOLDING TAX: TAX PLANNING MEASURES FROM A UGANDA PERSPECTIVE ARE YOU CUSTOMER RESPONSIVE? 40 THE AUDIT & ASSURANCE WORK DILEMMA FOR AUDITORS IN UGANDA 52 TAX PLANNING MEASURES FOR WITHHOLDING TAX 64 IAM A UGANDAN, JUST, PRODUCTIVE AND ORDERLY Today s Accountant Magazine is published by Golf100 Magazines on behalf of The Institute of Certified Public Accountants of Uganda ( ICPAU) The information contained in this publication is given in good faith and has been derived from sources believed to be reliable and accurate. However, neither Golf100 Magazine Ltd, nor ICPAU accept any form of liability whatsoever for its contents including advertisements, editorials, opinions, advice or information or for any consequences from its use. No part of this publication may be reproduced, stored in any retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or inkjet printing without prior written permission of the relevant parties. 2 Today s Accountant July - September 2012

5 READERS COMMENTS Well done ICPAU! Dear editor, I must congratulate you and your team on the re-branding of ICPAU magazine. Well done and keep the fire burning... The magazine really is professionally done and a pleasure to read because of the organisation of articles and the relevant content as well. Lilian Bagambe, Flexi Consult Limited Big improvement Dear editor, I love the magazine. It is a big improvement from the earlier publications. The magazine is indeed propelling the Institute s profile. CPA Fabian Kasi, Centenary Bank We need more student-centred articles Dear editor, The layout of the magazine is much better than that of previous issues, and the educative articles definitely add value to the readers. However, I wish we could have more articles for students, especially regarding preparing for ICPAU examinations. Solomon Kivumbi, Student-Zenith Business School Articles are comprehensive Dear editor, The magazine is professional. The stories cut across various aspects of the economy and give insight into developing trends in the profession. Beatrice Ochuna, Student-CPD Nebbi Cloud Computing should progress Dear editor, I love the article on Cloud Computing. The article offers readers a chance to delve into a new yet essential aspect of technology. I only wish the writer could continue to write more articles on the topic, kind of a series. The quality of the paper too is fantastic! I suggest that ICPAU creates a page for opportunities for students; internship, jobs, etc. Hassan Mbazira, Makerere University Magazine paper is professional Dear editor, There is a tremendous improvement in the quality of the magazine. The articles cover most of the relevant topics in the profession. The paper is also professional. CPA Tom Otim Otile, All Saints University THE DASHBOARD: PERFORMANCE AT A GLANCE A SURVEY ON USER SATISFACTION WITH URA s E-TAX SYSTEM UNPROFESSIONAL BEHAVIOUR 76 We need more hard-hitting articles Dear editor, I love the April-June issue although the January-March had more hard-hitting articles like the article, European debt crisis. The soft copy, however, is difficult to navigate through. CPA David Sserebe, Bisase, Sserebe & Company CPD avails Opportunities, an eye opener Dear editor, I find the stories in the magazine very educative. I particularly like the story on Financial Planning for Your Family. I found it interesting, factual and very informative. I also liked CPD avails Opportunities. The article opened my eyes to the relevance of CPD programmes. After reading this article, I will definitely attend the first Western region CPD in Mbarara this July. CPA Willy E. Katusiime Maani, Mbarara Choosing a Career Path-fantastic diction! Dear editor, I love the accountants magazine. I particularly enjoyed Choosing a Career Path. I love the topic and the graphics, plus, the diction is fantastic! Aaron Ssemakula, Student Role of SACCOs, Environmental Accounting, relevant to accountancy Dear editor, The layout the magazine is okay. 2 stories caught my eye, Role of SACCOS and Environmental Accounting, due to their relevance to the profession. However, the colour on the front page is too deep. The front page is also too crowded. I suggest that we should have more career articles. CPA Bosco Asega Arua INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF UGANDA (ICPAU) Plot 42 Bukoto Street -Kololo P.O Box 12464, Kampala Uganda Tel: , / Fax: President Naru Thakkar Vice President Patrick B Kagoro CEO/Secretary Derick Nkajja HOW TO REACH US CONSULTING PUBLISHERS GOLF100 MAGAZINE LTD Address: Plot 4 Pilkington Road, 1st Floor, Suite 31, Fami House P.O.Box 70204, Kampala - Uganda Tel: ADVERTISING Lynn Eiyo Mobile: CONSULTING DIRECTOR John Mwalimu Mobile: DESIGN & GRAPHICS Stephen Segawa Mobile: Today s Accountant July - September

6 July- September CONTRIBUTOR S PROFILE CPA Obed Bampe Tindyebwa Obed is an accomplished accountant and consultant, with more than 13 years experience in the profession. He is a partner at Grand & Noble. Obed holds a Bachelor s Degree in Economics. He is a member of the Planning and Development Committee, and the Taxation and Economy Sub Committee of ICPAU. He is also a member of the Panel of experts, at the Daily Monitor. CPA Benerd Obel Benerd is the assistant Director of Operations at the Insurance Regulatory Authority of Uganda. He is a chartered insurance practitioner and a member of Institute of Certified Public Accountants of Uganda. Benerd has over 15 years experience in the insurance Industry. CPA Dr. Fixon Akonya Okonye Fixon is the Commissioner, Inspectorate and Internal Audit in the Ministry of Finance, Planning and Economic Development. He is also a partner at Pal and Lisa. Fixon is a member of Institute of Certified Public Accountants of Uganda (ICPAU), the Association of Certified Fraud Examiners (CFE), the Institute of Internal Auditors (IIA), the Institute of Certified Forensic Accountants, the American Biographical Institute (ABI). He is also an FCCA. Fixon is a member of the Education Committee and Public Sector Sub Committee of ICPAU. CPA Joseph Murabula Joseph is in charge of Corporate Recoveries at the East African Development Bank. He has over 10 years experience in insolvency matters having started off his career with Deloitte East Africa where he executed numerous insolvency assignments. Joseph is also a Certified Public Secretary. CPA Ronald Mutumba Ronald is a Revenue Assurance Manager at Smile Communications Uganda Ltd. He has worked with Warid Telecom and MTN Uganda. Ronald started his career in the Telecommunications industry in He has held positions in; business support, accounting, roaming and interconnect, carrier relations, revenue recognition and reporting, and revenue assurance. Ronald is a Certified Global Revenue Assurance professional (GRAPA). CPA Ulrich. C. Johnson Ulrich graduated with a BSc. in Economics from Fourah Bay College in affiliation with University of Durham. He obtained Graduate Conversion to Accountancy at Gwent School of Accountancy, University of Wales UK. He trained and worked with Ernst & Young and later KPMG. Later, he worked with the United Nations and World Bank on Project implementation and advisory in the South Pacific & Australasia, South America and finally New York and Nairobi before returning to active practice. Ulrich is a partner, Audit, Assurance & Business Advisory, at Johnson & Johnson. Johnson is a member of ICPAU and an FCCA. CPA Frederick Kibbedi Frederick is a partner at AA & L Associates. Frederick is a Senior Lecturer at the MAT and CPD. He lecturers financial reporting for CPA, ACCA & MBA programmes. He is a member of the Technical Committee of ICPAU and the Chairman of the Financial Reporting Awards Committee. CPA Joel Byaruhanga Joseph Kibuuka Joseph is the founder and Executive Director of Top Performance Ltd, a business consulting firm. Joseph is a tutor at the Management and Accountancy Training Company (MAT) and at the Edinburgh Business school. He is also a senior consultant at the Africa Institute of Management, and the Trans Africa Management Institute, and an associate consultant at ESAMI. Joseph Kibuuka studied Economics, majoring in Resource Economics and Public Finance. He is an ACCA and his area of specialty is performance management and business analysis. Joseph is a member of the World Bank Institute. Garry. D. Kizito Garry is a supervisor, Business Process Analysis, Domestic Taxes Modernization Project, at the Uganda Revenue Authority. He is also a Facilitator at East African School of Taxation. Joel is a practitioner with Quest Co. He holds an MBA and a Bachelors Degree in Commerce. He has over 20 years experience in Financial Management, with a keen interest in developments affecting professional accountants in industry and business. Joel is a member of ICPAU s Sub Committee for Accountants in Industry and Business. CPA Pius Bahemuka Pius is a past Secretary/Chief Executive Officer of ICPAU. He was among the 7 members of the first ICPAU Council which was formed in He is a member of the Tax Appeals Tribunal and a member of the Marketing committee of ICPAU. He previously run P. K. Bahemuka, an Audit firm. Albert Beine Albert is the Senior Tax Manager at PKF Taxation Services Limited. Albert has over 11 years experience in tax compliance and tax advisory services. He previously worked with KPMG Uganda as a Tax Manager. He has also worked with KPMG Kenya as a Tax Consultant, and with the Uganda Revenue Authority, as a Revenue Officer. Diana Naisuna Nambi Diana Naisuna Nambi works with the Institute of Certified Public Accountants of Uganda (ICPAU). She is currently pursuing a Masters Degree in Corporate Communications and Public Relations, at the University of Leads in the United Kingdom. Cephas Birungyi Cephas is a partner at Birungyi, Barata & Associates. He is an advocate of the High Court of Uganda and a Legal and Tax consultant. Cephas has worked with the Uganda Revenue Authority (URA), in various capacities. He headed the Quality Assurance Section of the Income Tax Department for 6 years. He has been counsel for URA on several matters before the Tax Appeals Tribunal. Cephas is a graduate of Makerere University and holds postgraduate qualifications from various institutions in the U.K., Sri-Lanka and South Africa. He is a member of the Uganda Law Society, the East African Law Society and the International Bar Association. He is recognized in the Industry as a leading tax advisor in Uganda. CPA Patrick Kakooza Patrick Kakooza is an accounts assistant at NUSAF2, Office of the Prime Minister. Patrick has previously worked as an auditor, with Joksaw Associates, Certified Public Accountants. He also worked with Emesco Development Foundation Microfinance between 2001 and Patrick is a member of ICPAU. Nancy Akullo Nancy Akullo is the Public Relations Officer at ICPAU. She holds a Bachelors Degree in Mass Communication from Makerere University. CPA Nicholas Ogola Nicholas Ogola, currently works as an independent private consultant with Primehouse Consulting. Prior to this he worked at Engen Petroleum Ltd as a Regional Business Process Improvement (BPI) Project Manager (covering Uganda, Kenya, Tanzania, Botswana and Namibia), where he excelled and was voted BPI Performer of the Year Nicholas also worked extensively as a Human Resource (HR) Consultant, Health, Safety and Environment (HSE) Manager and Finance Manager with Engen Uganda Ltd, Oxfam GB and PricewaterhouseCoopers (PwC). Nicholas is a Certified Public Accountant of both Uganda and Kenya. He is a strong advocate for Health and Safety best practices in all of his consulting and project work. Since he joined Engen he has been awarded Most Admired HSE Individual, Divisional Supporter of the Year and HSEQ Performer of the Year for 2009 and CPA Susannie Teega Susannie Teega is a Technical Officer at ICPAU. Susannie has several years of experience in tax collecting and auditing. She previously worked with the Uganda Revenue Authority and PKF Uganda. CPA Charles Lutimba Charles Lutimba is a Technical Officer at ICPAU. Charles has worked with the St. Lawrence Schools and with Kazibwe Kenneth & Steven. He has several years of experience as an auditor and instructor. Charles has a passion for corporate governance and sustainability reporting. 4 Today s Accountant July - September 2012

7 LETTER FROM THE PRESIDENT Welcome to yet another issue of Today s Accountant! Some readers have commented that the magazine has transformed drastically into one befitting of the Institute s profile. It certainly does not take slothful endeavour to achieve milestones and neither does it take a single hand to accomplish goals. I therefore commend all stakeholders involved in the production of this publication for a job well done! The Accountants Bill is now in Parliament. The Council has been actively engaged in the amendment process and has submitted its comments on the Bill to the responsible Parliamentary Committee. We look forward to the enactment of a law that will enable the Institute to appropriately regulate the conduct and set standards for all members of the accountancy profession, not just for the public practitioners, as the current state of the Bill indicates, but for both the private and public sector. We held our 14th Budget Breakfast on 15 June 2012, to discuss the implications of the 2012/13 Government of Uganda (G.O.U) Budget. With the PAYE threshold raised from Shs 130,000 to Shs 235,000 and an additional 10% tax imposed on individuals with annual chargeable income of Shs 120 million, we are optimistic that income distribution will be fairer. The increase of VAT on gambling and lottery services, spirits made from locally made raw materials, undenatured spirits, and cosmetics will definitely increase revenue generation. Save for the re-instatement of 18% VAT on water, which may yield adverse consequences, especially pertaining to household health, the 2012/13 budget offers reassurance of the revitalization of Uganda s economy. In her speech, Honourable Maria Kiwanuka, the Minister of Finance, implored accountants, as the representatives of accountability and the guardians of record keeping, to help Uganda widen her tax base. I therefore urge all accountants to heed the Minister s call and forward suggestions to the Secretariat, for onward submission to the Minister, as accountants contribution to national development. The East African Community Institutes of Accountants (EACIAs) held their first joint meeting in April 2012, in Dar es Salaam, Tanzania, to develop a roadmap for the implementation of the EACIAs Mutual Recognition Agreement (MRA). The Institutes agreed to develop a common framework for professional accountancy training, a harmonized regulatory framework for the profession in the EACIAs, and build strong sustainable accountancy institutes. In May 2012, we held our first Practitioners Forum, to provide a platform for practitioners and the Secretariat to exchange views regarding crucial issues pertaining to the accountancy profession. The practitioners, who turned up in large numbers, appreciated the forum and resolved to contribute towards an accountancy research fund. They also resolved to create partnerships and provide internship opportunities for ICPAU students and graduates. It was also agreed that the Secretariat embarks on a system to profile audit firms. In November this year, we will hold our second Financial Reporting (FiRe) awards. Invitations have already been sent out for submission of financial reports. I urge all organizations to submit entries early enough to allow the evaluators ample time to effectively analyse the reports. All organizations that submitted entries last year benefitted tremendously from their participation. The Awards, therefore, present an opportunity for the participating organisations to benchmark their financial reports against the conventional financial reporting standards, and address loopholes. This year we expect to attract even more participation than we did last year. The excellence of the awards again calls for collective action. All stakeholders need to pool their energies and resources to guarantee the success of this year s awards. As accountants from your respective places of work, please encourage submission of financial reports. We will hold our 4th Graduation ceremony on 31 August As we revel in the achievement of our students, we must applaud ourselves upon the realization of a milestone in the history of the ICPAU examinations. This year, we successfully conducted the June 2012 examinations both in Kampala and in the newly established Gulu regional examinations centre. A total of 146 students wrote their examinations at the Gulu centre. I am glad to inform you that Secretariat is certainly not resting on its laurels. Come December 2012, we shall open Eastern and Western regional examinations centres, in Mbale and in Mbarara, respectively. As Uganda commemorates 50 years of independence, we are reminded of the transitions that our country has undergone to attain the current level of development. The golden jubilee is an indicator of how much we can accomplish when we put our minds to task. As CPA Uganda strives for excellence, members should embrace the volatile changes in the economy and work to sharpen their skills, in order to remain the most trusted Business advisers for our clients. CPA Naru Thakkar ICPAU President Today s Accountant July - September

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9 CEO S COMMENTS I do appreciate that such strategic debates are associated with differences in opinion that lead to disagreements and yet it does not need to be that way. But, assuming it goes that route then it is important that all parties acknowledge that they are operating for the common good of the organisation and thus avoid counter-productive forces of winner takes it all. The year 2012 is half way gone and a number of organisational planners have started to evaluate the year s targets with a view of re-aligning focus to the most important aspects of an organisation s existence. This is an expected activity for most of you accountants. However, as you pursue those lines of performance appraisals you must bear in mind that many times some organisational supreme organs forget the critical activities of the organisation s strategic thrusts, thus threatening the long term survival of the organisation and go on to blame management for not executing activities as directed by the board. Let s take a minute to examine the affairs of an organisation, especially on how such an organisation is steered towards its strategic objectives. We observe a fact that management is always in constant exposure of the risks associated with, not only the daily running of the organisation but also the threats that are likely to impact negatively on the long term survival of the organisation. When faced with such revelation, a forwardlooking and level-headed management team will always pick the best option or course of action that maximises all returns for the organisation, not only in the long run but also the short and medium terms, to act as the stepping stone to greater heights. As members and students review the Institute s accomplishments, it is important to remember that the year plan is premised on five objectives which include, enhancing the scope and quality of services, developing and maintaining beneficial partnerships, promoting social responsibility, widening the financial base as well as strengthening organizational systems and structures to improve performance. As a way of attaining our objectives, ICPAU increased feedback mechanisms/ channels; one of them being the introduction of a Practitioners Forum - an interactive, informative and educative gathering to strengthen the works of the Institute. Memoranda of Understanding with several higher institutions of learning have been signed so that we can work closely with such Higher Institutions of learning to train the required manpower for the country. We have taken services nearer to the people by way of conducting/holding regional CPD seminars and operating for the first time in the history of our beloved Institute a regional examinations centre in Gulu. Two more examinations centres are to be opened in Mbarara and Mbale for the November-December 2012 examinations. All this is being done to reduce both the cost and the inconveniences to students as they train to become professional accountants. We have noticed, during audit monitoring visits by the Institute s technical staff, marked improvements in the quality of work done by the practitioners. We believe that with more professional guidance from our side and commitment on the part of the practitioners, many practices will be able to match international standards expected of audit firms. As I conclude, it is good to note that Council and its Committees are continuously interested in developing a world class professional accountancy institute and the Secretariat is very grateful for the policy guidance in our operations. It is, however, important to note that it will take the entire membership to realize the urgent need for widening the financial base of the Institute in order to effectively match the growing demands of the Institute in particular and the profession in general, in the role of developing our country, Uganda. In our endeavours to sustain the profession, we commit ourselves to do the best we can for the profession, members, students, Uganda and beyond. CPA Derick Nkajja Secretary/ CEO, ICPAU Today s Accountant July - September

10 July- September Understanding Leadership By CPA Patrick Kakooza, Accounts assistant at NUSAF2 Leadership can be defined as the ability to influence others to behave in a certain manner. It is a process of directing and inspiring workers to perform group tasks. Leadership involves inspiring people to perform their tasks willingly in order to achieve goals. An effective leader is one who is able to successfully exert influence over subordinates and steward subordinates Leadership Styles towards achievement of organizational Goals. While it is true that some people are born leaders, some leaders are born amidst adversity. People often take the lead when situations dictate the urgency for a leader. A simple example is parenting. When a child arrives, many parents discover leadership abilities they never knew existed, in order to guide and protect their offspring. Autocratic/ Authoritarian Leadership: Democratic/ Participative Leadership Laissez Faire Leadership Task oriented leadership Employee Oriented Leadership Consultative leadership Paternalistic Leadership Situational Leadership 8 Today s Accountant July - September 2012

11 Autocratic/Authoritarian Leadership: Autocratic/ Authoritarian Leadership: The leader alone determines the policy and makes plans. He relies on fear, threats, suspicion and authority. He tells others what to do and how to do it. This means that he commands and expects compliance and leads by the ability to give rewards or punishment. He demands strict obedience and relies on his power to reward and punish others. His subordinates must act as he directs and does not allow them to influence his decision and plans. Task oriented leadership: Leaders are more concerned with the job at hand than with the development and growth of subordinates. They supervise subordinates very closely to ensure that the task is completed to their satisfaction. Paternalistic Leadership: The leader assumes a paternal approach to his function. His objective is to help, guide, protect and keep his followers happily working together as members of a family. Leadership Styles Laissez Faire Leadership: A leader delegates the responsibility of decision making to the group. The laissez faire leader uses very little of his or her power, giving subordinates high degree of independence in their operations. He prefers to give little or no direction to a group and leads his group with very loose rein, allowing subordinates a great deal of freedom. The leader therefore relies on subordinates to set and achieve their own goals. Situational Leadership: Different situations need different approaches or leadership styles. In order to discipline employees, it would be suitable to use the task oriented leadership rather than participative leadership. It is argued that according to the situations, leaders should not use one style but use an appropriate style according to situation. Situational leadership is also influenced by leaders personality, past experiences and expectations. Democratic/Participative Leadership: In this leadership, the entire group is involved. Members accept responsibility for goal setting and achievement and subordinates have considerable freedom of action. This means that the leader consults with subordinates on proposed actions and decisions and encourages participation from them. The leader shows great concern for his people and does not take action without the subordinates concurring with him. Employee Oriented Leadership: Leaders motivate rather than control subordinates. They encourage group members to participate in decisions that affect them and build friendly relationships with group members. Members are motivated to perform their tasks through encouragement from leaders rather than direction. Consultative leadership: In this leadership style, followers are constantly consulted by the leader before taking major decisions. Participative leaders consult with their employees regarding problems and decisions so that they work together as a team. This refers to behavior which indicates mutual trust, respect, and rapport between the supervisor and his group. Today s Accountant July - September

12 July- September Effective Leadership Tips: Learn more about your Leadership Style: Understanding your current leadership style is essential; what are your strengths? Which areas need improvement? Read about the major characteristics of your dominant style. Are these qualities helping or hindering your leadership? Once you have determined which areas need work, you can begin looking for ways to improve your leadership abilities. Be a Role Model: Transformational leaders exemplify the behaviors and characteristics that they encourage in their followers. They walk the walk and talk the talk. As a result, group members admire these leaders and work to emulate their behavior. If you want to become a better leader, work on modeling the qualities that you would like to see in your team members. Listen and Communicate Effectively: Focus on providing one-onone communication with group members. Good leaders should express sincerity, care, and concern for the members of their group, both verbally and through action. By keeping the lines of communication open, leaders ensure that group members are able to make contributions and receive recognition for their achievement. Encourage Contributions: Let your team members know that you welcome their ideas. Leaders who encourage involvement from group members are often referred to as democratic or participative leaders. While they retain the final say over all decisions, they encourage team members to take an active role indecision making. Research has shown that using a democratic leadership style leads to greater commitment, creative problem-solving and productivity. Encourage Creativity: Followers need to be encouraged to express creativity. One way to foster creativity is to offer challenges to group members, making sure that the goals are within the grasp of their abilities. The purpose of this exercise is to get people to stretch their limits, but not become discouraged by barriers to success. Be Passionate about the Job: Would you look to someone for guidance and leadership if they did not truly care about the goals of the group? Of course not! Great leaders are not just focused on getting group members to finish tasks; they have a genuine passion and enthusiasm for the projects they work on. Start by thinking of different ways that you can express your zeal. Let people know that you care about their progress. When one person shares something with the rest of the group, be sure to tell them how much you appreciate such contributions! Have a Positive Attitude: Transformational leaders have an upbeat optimistic attitude that serves as a source of inspiration for followers. If leaders seem discouraged members of the group are likely to become uninspired. Even when things look bleak and your followers start to feel disheartened, try to stay positive. This does not mean viewing things through rose-colored glasses. It simply means maintaining a sense of optimism and hope in the face of challenges. Offer Rewards and Recognition: A good leader knows that offering effective recognition and rewards is one of the best ways to help followers feel appreciated and happy. It may also come as no surprise that happy people tend to perform at work. According to researchers, Teresa Amabile and Steven Kramer, leaders can help members to feel happier by offering help, removing barriers to success and rewarding strong efforts. Keep Trying New Ideas: Who says leadership is one-way dimensional? As you work towards improving your leadership skills, do not forget to turn to your followers for feedback and inspiration. Pay attention to the things that have been effective in the past and always be on the lookout for new ways to inspire, motivate and reward group members. Therefore, as accountants, leaders or subordinates, we are challenged to be aware of different leadership styles that are practiced in organizations where we work and in our homes. 10 Today s Accountant July April -- September June

13 Financial Discipline a Prerequisite for Achieving Budget Objectives By CPA Obed Bampe Tindyebwa On 14 June 2012, the Minister for Finance, Maria Kiwanuka, presented the 2012/13 budget before Parliament with the theme, Priorities for Renewed Economic Growth and Development. The minister noted that 2011/12 had many economic challenges. The economy experienced high inflation rates that peaked at 30.5%, high interest rates with the Central Bank Rate reaching 23% and a depreciating shilling which saw the US Dollar almost exchanging for Ushs 3,000. The economy, as a result, experienced a noticeable decline in Real GDP expected to be 3.2% for the financial year 2011/12. The government s target in the financial year 2012/13 is to achieve the recovery of economic growth to at least 7% per annum in the medium term; the return to single digit inflation rates and the return to a stable and more competitive exchange rate. A budget is a statement of the financial plan of a government, an information document that lays down all possible sources of funds/revenue that can be generated to meet the expenditure needs, to be able to meet the broader objectives of socio-economic development. Due to the importance of the budget, many people are eager to know about budget pronouncements; the financial performance of the government over the past one year, policies and programs for the next one year and how their standard of living will be affected by the financial policies of the government in the next one year. In the past when government controlled prices, many Ugandans would eagerly listen to the budget speech, mainly to keep track of commodity prices. Prior to the budget day, there would be a lot of speculation and even hoarding of some commodities by traders in anticipation of benefits from any price increase. Thus, the finance minister would pronounce those items with price changes effective midnight to tonight. Nowadays, budgets have become complicated, and are no longer midnight to tonight pronouncements but policy loaded documents that even the elite find hard to digest. The 2012/13 budget, in view of the past and prevailing economic conditions in Uganda, was quite promising. The Today s Accountant July - September

14 July- September budget is projected at 11,157 billion and Uganda is expected to finance 75% of the budget from domestic revenues indicating a rise in domestic funding. Revenue collections are projected at Ushs 7,251 billion which might give tax collectors sleepless nights given the registered trend of revenue short falls. The minister also presented some new ideas which we hope may help to jump-start the economy. However, the main challenge of budgeting in Uganda has been poor budget implementation characterized mainly by financial indiscipline. Whereas the budget might have some good proposals, if its implementation is not according to the laid down plans, nothing much will be achieved. Ugandans must remember that during last financial year, despite the harsh economic conditions, some government departments went ahead to spend well beyond their budgetary allocations and had to seek for controversial supplementary budgets. If a budget is to be of any value, it must be well implemented whereby financial discipline is paramount. Energy Sector Having fully commissioned the 250MW Bujagali Hydro Power Project government will start construction of 600MW Karuma Hydro Power Project, complete preliminary designs for the 600MW Ayago and 140MW Isimba Hydro Power Projects, provide financial support in the construction of 125 MW of renewable Mini Hydro Projects, expand the Rural Electrification Programme to increase access to power, and ensure aggressive power loss reduction by rolling out prepaid meters and investing in the distribution network. Regarding Oil and Gas, government has presented legislation to Parliament for establishing a sound legal and regulatory framework, as well as the institutional arrangements for prudent management of oil. The Bills before Parliament are: The Petroleum (Exploration and Production) Bill 2012, The Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012, and The Public Finance Bill 2012, which contains the petroleum revenue management framework. The increased power supply by Bujagali Hydro Power has brought some relief in the past months with reduced load shedding and power outages. With more power projects, the problem of inadequate power supply will be addressed. However, electricity charges are still very high and affordable by few hence government needs a strategy of addressing this issue. Rural electrification will for instance not yield any positive results when power costs are still high as very few low income earners will afford the cost of the supplied electricity. Agriculture Agriculture sector was allocated Ushs billion, a Ushs 150 billion increment up from Ushs billion last financial year. This represents 5.2% of the total budget. Agriculture is the back bone of Uganda s economy but it has been neglected in the past years. If agriculture is to be revamped, there is need for a framework to address land tenure systems, labour productivity and increase agro processing. Also budget allocations should be increased to at least 10%. Government has more or less left the sector in the hands of the private sector yet it needs more direct interventions, where necessary with subsidies and other incentives. Whereas, the increased allocation is good, the budget strategy is not good enough and more needs to be done. Education Sector Education sector took the largest share of the budget with an allocation of Ushs 1,669 billion in the next financial year, increasing from Ushs 1,418 billion in the last financial year. This translates to about 15% of the total budget. Ushs 290 billion was allocated to cater for salary increase for primary school teachers and science teachers in post O-Level institutions and other civil servants. Whereas primary school teachers have in the past agitated for salary increase of 100%, it remains to be seen how much they will get out of this budget allocation. Important to note is that there have been increased concerns over the quality of education especially under UPE yet government seems not to have plans of addressing these issues which will affect the quality of graduates from our education system. In an effort to address youth unemployment which is currently a serious socio-economic problem in Uganda, government came up with the Youth Venture Capital Fund for which Ushs. 25 billion is being lent out to youth, with the help of participating financial institutions. It has reportedly made remarkable progress in the first few months of its implementation, with Ushs 8 billion having been disbursed to 3,000 youth. An additional allocation of Ushs 3.25 billion was proposed towards the scheme. A related imitative, the Graduate Venture Capital Fund with an allocation Ushs 16 billion will be established to cater for needs of graduates who have bankable project proposals but lack the requisite funding. This is a good move only if properly implemented as many previous schemes like the entandikwa scheme never registered any tangible results. 12 Today s Accountant July - September 2012

15 Health Sector The minister announced several initiatives meant to address poor child and maternal health, weaknesses in the drug management system, inadequate health infrastructure and personnel constraints, without a clear budget allocation. Among other items, the following specific actions will be implemented, motivation and retention of health workers through gradual salary increases and construction of staff houses, rehabilitation of Mulago National Referral Hospital and construction of referral hospitals in Kirudu and Kawempe zones of Kampala, including finalisation of negotiations to construct a modern women s hospital at Mulago, refurbishment of Kabale, Hoima and Fort Portal Regional Referral Hospitals, and rehabilitation of Kawolo Hospital in Lugazi and Itojo Hospital in Ntungamo. Water and Environment Sector Allocation to the water sector in increased from Ushs 271 billion to Ushs 355 billion. This will cover construction of gravity flow schemes supplying Nabweya, Lirima and Kanyampaga and small piped water systems for Luanda, Kabumba and Ongino, for improved rural water supply. Piped water systems will also be built in Lamwo, Agago and Nwoya, among many others. Piped water systems in Paidha, Patongo, Opit, Omugo and Agweg townships will also be completed and construction of new systems in Moyo, Ibuye, Kalongo, Purongo and Akujo will commence. Further investments in urban water supply will include: completion of Nakaseke town water supply system and restoration of existing systems in Kakiri, Bukomansimbi and Wakiso towns; drilling of boreholes and construction of water supply systems in the towns of Ntwetwe (Kyankwanzi), Kasenje (Wakiso) and Zirobwe (Luwero), and expansion of existing and rehabilitation of water supply systems in Kaabong, Abim, Karenga, Namalu, Bukedea, Busia, Kapchorwa, Katakwi, Matany, Serere, Kachumbala, Namutumba, Kaliro and Bombo Towns and Alwi Dry Water Project. Government, through the National Water and Sewerage Corporation, will also undertake the following projects; construction of Lubigi Water Treatment Plant; rehabilitation of Bugolobi Sewage Treatment Plant, and the construction of the Nakivubo and Kinawataka waste water management plant; emergency rehabilitation and upgrading of Gaba I and II intake to increase water production capacity to 300 million litres per day and construction of a 4 million litres reservoir at Namasuba hill. In order to address constraints in water for production, the following projects will be undertaken during the year; construction of Andibo dam in Nebbi district, Kajodi, Valley Dam in Mityana District, Nakabala and Nyamiringa (Kiboga) rehabilitation of windmills in Karamoja Region; construction of Kitasi-Sanga- Kanyaryeru bulk water scheme in Kiruhura district; design of Rwengaaju irrigation scheme in Kabarole and Kulwodong dam in Abim District. Given the importance government attaches to increased water supply, it is not clear why it reinstated the 18% VAT on water supply having instituted a waiver on the tax just last financial year. Governments should therefore reconsider the issue of VAT on water. Other sectors and proposals No clear allocation was made for the tourism sector which is one of our top foreign exchange earners. Government intends to improve accessibility to tourist sites by upgrading road infrastructure, supporting enactment of hospitality standards through upgrading hotels and improving hospitality training, and promoting eco-tourism and the implementation of cost effective tourism promotion using tourist companies. The minister proposed initiatives to be implemented in the next financial year to improve Uganda s private sector competitiveness by reducing physical costs in transport and electricity, among others and providing the necessary policy, legal and regulatory framework. In this regard, she announced that a comprehensive review of business licenses has been completed, and recommendations made to simplify requirements, reduce discretionary powers, and eliminate redundant procedures. As a result of the review, about 27 licenses found to be either obsolete or redundant will be eliminated. An electronic licenses registry that will serve as a repository for all approved business licensing in Uganda will be established which will lead to savings in excess of Ushs 78.3 billion for the private sector. Government will also establish a One-Stop Centre to provide online registration services for the various licenses required to start a business. In addition, a Small and Medium Enterprises (SMEs) Business Guide has been developed to provide SMEs with information on available financial, Business Development Services (BDSs), and business licensing information. Bills aimed at improving further private sector competitiveness are before Parliament as follows; Counterfeit Bill, Anti-Money Laundering bill, Industrial Property Bill, Accountants Bill and Uganda National Bureau of Standards Bill. Today s Accountant July - September

16 July- September Tax proposals The proposal to increase the PAYE threshold from Ushs 130,000 to Ushs 235,000 per month and the tax bands by a similar amount is a welcome move. Workers have for a long time agitated for such an increment which will improve the wellbeing of low income earners. Government will even collect more revenue given the new initiative of levying an additional 10% on high income individuals, with chargeable income of Ushs 120 million per year. Whereas this will have serious implications on highly paid staff especially top executives, it has a re-distribution component, which is commendable. Government proposed to increase withholding tax (WHT) on income derived from Treasury Bills (TBs) and Bonds from 15% to 20% as a final tax, a measure expected to generate Ushs16.3bn. These instruments are generally risk free and have been attracting high returns luring banks to engage in the trade of the instruments instead of lending, considered more risky. Increased WHT will increase tax revenue and also encourage bank to engage in their core business. The increase of Excise Duty (ED) on spirits made from locally made raw materials from 45% to 60% and the introduction of a specific rate and an ad valorem duty rate on undenatured spirits of Ushs.2, 000 per litre or 80 per cent, respectively, whichever is higher, are all good measures. EDs on non essential, luxurious items can be a good revenue source and one would expect increased ED on tobacco as well given its undesirable effects. The 10% ED on cosmetics and perfumes is perceived on the above basis. However, it must be noted that the increased taxes on these items may result into increased smuggling. VAT exemption on gambling and lottery services has been reinstated as its introduction was ill-conceived, in the first place. The reinstatement is timely as is the proposal to increase the Gaming and Pool Betting Tax from 15% to 20%, a measure expected to generate Ushs.4.3bn. Whereas, the above measures are positive, reinstatement of VAT on water at 18% meant to generate Ushs.21.7bn is quite disturbing. The exemption has been in place for just one year and with the benefits attached to clean, safe water, the proposal should be revisited. Likewise, reinstatement of VAT on the supply of biodegradable packaging materials should be revisited. Biodegradable packaging materials must be encouraged by zero rating in a bid to have a clean environment. The minister announced decisions made at EAC pre-budget consultations including; the need to take stock and an analysis of the existing duty remission schemes within the region to ensure equity and uniform implementation of intra EAC trade regime, reduction of import duty on Set Top Boxes from 25 percent to 0 percent for a period of one year, to facilitate smooth transition from analogue to digital terrestrial transmission, reduction of the import duty from 25 percent to 0 percent for food supplements and mineral premix, and reduction of import duty from 25 percent to 10 percent on vacuum packing bags for one year to ease packaging by the manufacturers. The minister announced a move to vary various fees and charges for the provision of Government services, though it is not clear whether these will not increase the cost of doing business which is very high in Uganda. Overall, the tax proposals are generally good with the capacity to increase revenue collections with minimum welfare distortions as they are mainly targeting high income individuals and luxurious items. However, more still needs to be done regarding the issue of granting tax incentives and the property sector, for purposes of widening the tax base. The budget allocations coupled with the tax proposals that saw an increase in PAYE threshold and introduction of an additional 10% tax rate for high income earners, increased Gaming and Pool Betting Tax from 15% to 20%, increased excise duty on spirits made from locally made raw materials from 45% to 60%, 10% ED on cosmetics and perfumes, and increased withholding tax (WHT) on income derived from Treasury Bills (TBs) and Bonds from 15% to 20%, seem a good package meant to drive the economy back on track. Our concern now should be the implementation of the budget which will determine what is in for all Ugandans. 14 Today s Accountant July - September 2012

17 ICPAU 14 th Budget Breakfast: Minister Explains the 2012/13 GOU Budget Allocations Following the presentation of the 2012/13 Government of Uganda (GOU) budget before Parliament on 14 June 2012, the Institute of Certified Public Accountants of Uganda (ICPAU) held a post-budget meeting on 15 June 2012, to deliberate on the issues and tax implications of the budget. The 2012/13 GOU budget registers an increase in the funding of education and infrastructure from Shs1.4 trillion and Shs 1,651 billion in the 2011/12 financial year to Shs1.669 trillion and 1,291 billion, respectively, in the 2012/13 financial year. Hon. Maria Kiwanuka, the Minister for Finance, Planning and Economic Development, and the Chief Guest at the ICPAU 14th Budget Breakfast meeting emphasized the Government s increasing involvement in financing social service sectors due to the dwindling assistance from development partners. We are looking ahead to the day when we will assume 100% responsibility for our education, health and water sectors, which means we must grow those productive areas like infrastructure, industry, power and agriculture, which foster growth in the social sectors, Hon. Kiwanuka said. The Minister emphasized that a flexible budget such as the one currently in place is a fundamental solution to the rising inflation and depreciating shilling, currently hampering Uganda s economic development. This year we have had to put a lot of emphasis on infrastructure and power development. Our priority is to ensure that infrastructure is provided, transport costs are reduced by rebuilding and expanding road networks, and access to electricity is boosted, the Minister said. I am happy to inform you that next week we will sign an agreement with the World Bank and KFW to ensure that 500,000 households become connected to the national grid in the next year, she added. The Minister also emphasized the need to improve the country s export performance to ensure increased export revenue through building the country s agriculture potential. Hon. Kiwanuka highlighted the role of agricultural development in enhancing the country s Balance of Payments position. She affirmed that if we can build our agricultural potential we will be able to see our Balance of Payments position improved. According to the Minister, the contribution of the private sector towards Uganda s economic growth and development is of great significance. The private sector is the engine of growth and we in government have to make sure that the engine can run properly, the Minister said. Hon. Kiwanuka hailed partnerships between government and professional institutions such as ICPAU, as crucial steps towards revitalizing economic growth and development, and the transformation of our society. She also implored ICPAU members to continue to agents of accountability and to be guardians of good record keeping, which will help Uganda widen her tax base. The rising demand for accountability in Uganda is being addressed by the government. The Minister for Finance assured the accountants that a new system, where quarterly sectoral reports will be submitted to cabinet for evaluation will soon be instituted. The Minister also assured the accountants that a report on the 2011/12 economic performance will be presented to Parliament at the end of the financial year. It was resolved at the Breakfast meeting that the Ministry would look into the controversial clause in the Accountants Bill, which if not addressed could result into splitting of the accountancy profession. The clause aims at restricting ICPAU membership to only accountants in public practice. Accountants in employment (including those in audit firms) would not be eligible for ICPAU membership. This clause is not in line with the operation of the accountancy institutes in the other EAC countries. Today s Accountant July - September

18 July- September Integrated Reporting - A New Path to Sustainability Awareness By CPA Charles Lutimba, Technical Officer, ICPAU The International Federation of Accountants (IFAC), the Global Reporting Initiative (GRI), and The Prince s Accounting for Sustainability Project formed the International Integrated Reporting Council (IIRC). The IIRC is chaired by Professor Mervyn King. The IIRC oversees the development of global integrated reporting standards and guidelines. Countries all over the world have embraced integrated reporting. Denmark was the first country to embrace the trend. In Africa, South Africa adopted the King III Code on Governance, released on 1 September 2009, which recommends that organizations produce an integrated report. As of March 2010, approximately 450 companies listed on the Johannesburg Stock Exchange had to file an integrated report or explain why they were not doing so. Integrated Reporting refers to the integrated representation of a company s performance in terms of both financial and non-financial results. Integrated Reporting provides greater context for performance data, clarifies how sustainability fits into operations or business, and may help embed sustainability into company decision making. It demonstrates the linkages between an organization s strategy, governance and financial performance and the social, environmental and economic context within which it operates. Integrated Reporting represents a significant change in corporate behaviour since it requires a more holistic view regarding financial, natural, and human resource allocation decisions, and the interdependencies between them. It also means taking a longer-term view since improved financial performance from better use of natural and human resources may not be reflected in any company s earnings. Thus Integrated Reporting requires a change in the behaviour of investors. They must take a longer-term view and more explicitly incorporate environmental, social, and governance (ESG) metrics into their financial models, thereby transforming them into business models. This increases the visibility of these disclosures and brings them up to the same level with financial disclosures. Moreover, it forces companies to explain the relationship between financial and nonfinancial measures and how these nonfinancial issues contribute to the long-term profitability of the company. This is an area where much more work needs to be done. Practicing Integrated Reporting brings four major benefits to the company as discussed below. 16 Today s Accountant July - September 2012

19 Reduced Reputational Risk REDUCED DEEPER Deeper Involvement with All Stakeholders GREATER BETTER Greater Clarity about Relationships and Commitments Better Management Decisions Greater Clarity about Relationships and Commitments Many companies tend to make misguiding statements; they say, Sustainability is paramount for our shareholders. We care for our employees and mind about the environment. Commitments to ensure a company s environmental protection can have a positive return on investment but hurt earnings and cash flow in the short term. Some commitments may actually result in transfer of wealth from shareholders to another stakeholder group. As a result of the conflicting needs of stakeholders, sustainable strategy with a multistakeholder perspective will be needed but with unavoidable trade-offs. Organisations should begin by identifying their most important financial and ESG metrics and the strategy they will pursue to achieve those goals. In some cases revenue growth may be critical while in others, earnings growth is more important. In some cases, reducing water pollution may be the most important environmental objective, and in others it may be going green or even preserving the world s species of fauna and flora, facing extinction. Racial and gender diversity can be a priority but so too is ensuring some minimal amount of training for all employees every year. This leaves management in a paradox, wondering which stakeholder to satisfy at a time. As management develops a better understanding of the relationships between financial and nonfinancial performance through modelling and analysis, strengthening internal systems and measurement methodologies as necessary, it can re-evaluate what is included in its categories of strength, weaknesses, opportunities and threats. Integrated Reporting tasks management to be much more granular about how they are doing well (for shareholders) by doing good (for stakeholders). It tasks them to be as explicit as possible in a cause-effect sense of how ideal outcomes on a particular aspect of ESG lead to ideal outcomes on a particular financial metric. Today s Accountant July - September

20 July- September Better Management Decisions As management attempts to be as explicit as possible about the relationships between financial and nonfinancial outcomes, it inevitably finds that for some, good metrics do not exist, and for others, they are very hard to develop. The better response is to uphold to the company s strong areas, improve on the weaknesses, invent or exploit opportunities and avoid any threats. The result will be better information for better management decisions. The Balanced Scorecard provides compelling arguments and evidence on how better measurement leads to better management decisions. When information is reported externally, the standards for its reliability are especially high. The higher quality metrics required for external reporting provide higher-quality internal information which results in informed decisions. The external transparency of the results of these decisions adds an additional incentive for making them satisfactory. Developing clear communication about the relationships between financial and nonfinancial information, developing the supporting metrics to test and validate these relationships, and finally gathering all performance information together in an Integrated Report, requires a high level of internal collaboration across functions, departments and business units. As each unit sees its role in a broader context and begins to better understand the consequences of its decisions on other units, better decisions that re-mould and rejuvenate a sustainable strategy will be made for the company as a whole. Deeper Involvement with All Stakeholders As companies realize the benefits of better decisions from higher levels of internal collaboration, they will naturally seek to obtain these same benefits from higher levels of external collaboration through stakeholder involvement in order to better understand their expectations, obviously useful for internal decision making. Having annual reports that focus on financial performance and separate CSR reports that focus on nonfinancial performance in order to meet each reader s information needs, is really a misplaced concept in this current trend. In our world, where companies are facing the demands of many stakeholders, it is essential that every stakeholder understands how its interests are related to those of others and to the factors that contribute to the level of performance that is being met. A single-issue focus by a stakeholder is as irresponsible as a company s singular focus on short-term profits for shareholders. Just as companies must take a more integrated approach to their external reporting, stakeholders must take a more integrated view about how their interests are related to others interests. Putting all performance information into an Integrated Report challenges all stakeholders to take a more holistic perspective. Shareholders cannot just focus on short-term profits, they need to understand that a company s ability to earn profits over the long term will require investments that come at a short-term cost, or even value transfers that preserve its legitimacy and continued existence in order to earn profits in the future. Conversely, other stakeholders need to understand that companies need to make a profit in order to survive and grow. Failure to do so means that, eventually, they will not be able to fulfill the needs of other stakeholders or may even fail to survive. Additionally, an Integrated Report ensures that a coherent and consistent message is going out to all stakeholders. It creates a forum for one conversation in which all stakeholders can and must participate. It is through involvement that companies remain aware of the interests of their different stakeholders and how these interests are in alignment or conflict with each other. Otherwise, failure to involve the different stakeholders may result into stakeholder segmentation that often results into mixed messages to external parties and internal confusion about priorities. Reduced Reputational Risk As CSR and sustainability have increased in importance, so has managing reputational risk, which is now seen as one of the most important and difficult risks to manage. A survey of senior executives by The Economist Intelligence Unit found that, as a priority, reputational risk ranked first and distinctly ahead of regulatory risk and human capital risks, which tied for second. It also found that the key reasons cited for difficulties in managing reputational risk were the lack of established tools and techniques, no identified person with responsibility for the issue, poor coordination between the board, risk management and corporate communications, and poor communications with external stakeholders. All of these difficulties can be overcome by the process and communication that necessarily go hand-in-hand with CSR reporting. In conclusion, an Integrated Report is not a panacea or silver bullet solution to making sustainability more than a public relations campaign. We all have a responsibility for making integrated reporting the dominant practice. Of course, some simple and pragmatic guidelines can be used to make the company s reporting as useful as possible to all stakeholders. By simplifying the language and avoiding the use of jargon, the narratives in an Integrated Report are made more accessible to a broad spectrum of readers. Quantitative information in tables and graphs that stand out and use of colors ensure that the key points of the data are clear and also helpful. Easily navigable corporate Web sites make it easy to find information online, as do internal and external links to related information. 18 Today s Accountant July - September 2012

21 Insolvency Practice in Uganda By CPA Joseph Murabula Head-Corporate Recoveries, East African Development Bank Background A free market economy ordinarily has three types of laws underpinning the operations of the business environment: Laws on market access; define the rules of entry into the market. Laws on market operation; define the rules of conduct in the market. Laws on market exit; provide a viable channel for market players to exit the market or survive with the least economic side-effects when players encounter failure. Insolvency structures and regimes belong to the latter group of laws. Insolvency is a financial state experienced when an entity s liabilities exceed its assets or when an entity can no longer meet its debt obligations, when they become due. There are two forms of insolvency: Balance sheet or technical insolvency, where liabilities are in excess of assets, and cashflow; and Classical insolvency the inability to meet financial obligations as they fall due. Closely related, but different, is the concept of bankruptcy. Bankruptcy is a legally declared inability to honour financial obligations as they fall due. For clarity, bankruptcy results from a successful application by a person to a court of law to have him declared bankrupt or a successful application by a creditor to a court of law to have another person declared bankrupt. Therefore, insolvency does not necessarily lead to bankruptcy as it may be temporary and fixable without resorting to legal/ judicial processes. On the other hand all bankrupt persons are by definition insolvent. In Uganda, insolvency is generally used with reference to corporations while bankruptcy is used with reference to individuals. Insolvency as a professional practice area in Uganda mostly deals with corporate insolvency rather than individual bankruptcy. The development of a corporate insolvency regime is closely tied to the development of the private sector. The relatively infant nature of the private sector in Uganda would therefore explain the underdeveloped nature of insolvency practices in the country and the concentration of insolvency practitioners in the main urban and business centres of the country. Effective handling of corporate insolvency requires an understanding of the reasons for business failure. While these reasons may be specific to a particular entity, the generic ones include; strategy - profitability misalignment such as over expansion or a focus on market share/size rather than profitability, inadequate /weak Institutional controls, organisation inertia (slow response to environmental changes), high cost structure, poor liquidity management (mismatches between asset and liability cycles), unfavourable legislation or regulation and poor/weak management. Regardless of the cause, whenever business failure occurs, focus shifts, and rightly so, to the protection of interests of those who may have extended funds to the company or what are generally referred to as creditors and contributories. The crafting of schemes to balance the interests of various parties in a situation of business failure is the work of Insolvency Practitioners (IPs). Assessing the economic value of a corporation, especially one in distress, is a complex affair involving both legal and business judgment. Insolvency practice is therefore as much a business as it is a legal discipline. To be effective, IPs must have a more than average understanding of both legal and business issues that underpin corporations. Today s Accountant July - September

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32 July- September Whereas there is need for implementation of a comprehensive land policy with appropriate amendments to the current land law and regulatory framework, improvements in the operations of the land registry are urgently required. What is disturbing is that many polices have been put in place and laws enacted yet their implementation remains a nightmare. Therefore the proposed land policy reforms and any amendments to the land act may also achieve no tangible results to the common man, if government is not committed to such reforms. At the centre of many land problems, governments, whether past or current, have played a significant role. Whereas previous governments were blamed for violation of owners rights, citing the example of the Land Reform Decree, 1975, that introduced occupation of large chunks of other people s land without regard to ownership rights, we are currently witnessing a very disturbing phenomena of disposal of prime public land at an alarming rate without due regard to the public interest. What is even more worrying is that land tenure insecurity has been on the rise due to fraudulent land transactions. In the early 1990 s and in earlier periods, Uganda s land market was not well developed. With the advent of property companies, a new era of titled and secure land was ushered in, that gave life to the land market. However, uncertainties are now creeping in with rampant cases of forgery of land titles being reported. A piece of land may have as many as three owners, all with titles and it becomes cumbersome to determine the rightful owner especially in cases where all the titles are allegedly coming from the Lands office. Of great importance are other areas that need to be urgently addressed: 1. The landlord-tenant relationship as enacted under the Land Act, Cap 227 has become controversial around three issues; the definition of bonafide occupant, the rights conferred on the tenants and the rent payable. This is believed to be the leading cause of land conflicts and evictions in central Uganda. 2. The issue of communal land and public land Who has the mandate on this land and in whose interest is the mandate held? The Amuru scenario rotates around this perspective. 3. What is the government s position on land fragmentation visà-vis land consolidation? Small holding seems to be the norm in many parts of the country yet the government seems to advocate for land consolidation, which would deprive many families of their source of livelihood without an easy alternative. Such a policy could be easily likened to the practice of colonialists allocating land to White settlers whereas inhabitants, mainly peasants were left with no land. 4. Increased trend of speculation It is believed that a good number of the current land holders are actually speculators. Speculation has artificially increased land values and led to underutilization of land. 5. Land value taxation This is one initiative that can ensure proper utilization of land as it penalizes land underutilization and discourages speculation, on top of other benefits. The concept has not been fully embraced by government. The above issues remain contentious and will need to be handled with a lot of care and sobriety. The proposed land policy touches on the above issues in one way or another, but what is necessary is the urgent implementation of such policy objectives. Just like the colonialist s land policies whose effects we are still experiencing almost fifty years after independence, whatever government does will have long term effects on our people now and in the many years to come. The solution to our land problems squarely lies with our government. Unfortunately, there are no signs of our government acting with the necessary urgency and resolve in addressing the land problems, as in most cases it has either been caught on the wrong side or it has adopted a silent mode, East Kololo Primary School being a case in point. 30 Today s Accountant July - September 2012

33 By CPA Pius Bahemuka, Past Secretary, ICPAU WHERE ARE WE GOING? Coming from down town recently, I slowed down to manoeuvre my way around the roundabout at the 6th/7th Street convergence. All of a sudden I heard a bang and saw a boy on a motor bike looking at the right hand side of my car s bonnet. Flashes in my mind were; he has broken the lamp, hit the side of the car or damaged the bumper. What was commendable about this rough cyclist was that he stopped and actually waited for me to react. He said to me, I am sorry. Sorry doesn t mend, I retorted. I saw that he had hit the bumper but only the mark of scraped paint was visible. Perhaps he had caused some damage which might surface later, I thought. As it was a rush hour I drove away to ease the traffic flow but the rest of the day I kept asking myself, Where are we going? What can be done to put some sense of orderly road use into the minds of boda boda cyclists and taxi drivers in particular? I remembered a time before the Commonwealth Heads of Government Meeting (Chogm) when I approached my friend Hon. Matia Kasaija (then State Minister of Internal Affairs) and offered to restore order on the roads in Kampala and eventually in the whole of Uganda. The honourable seemed to appreciate my concern although his approach was incompatible with mine. He told me that Government was training a special police breed that would provide a solution to the indiscipline on the roads. Could this be the S.P men and women who appeared briefly and later seem to have fizzled out? I hope my friend Hon. Matia Kasaija reads this article and can tell us where we are going. As I continued to ponder over our unavoidable boda bodas, UBC started broadcasting the President s presentation to Parliament. I was eager to listen. In retrospect I find it miraculous that Umeme did not interrupt our power throughout the full length of the presentation. I must say I was pleasantly impressed by His Excellency s presentation. Of course the President always excels but this was particularly insightful. If there were any opposition members away from their home at the time they missed an educative lesson. The President s disclosure of his clear understanding of economic and financial analysis and project appraisal was a good lesson to those who wish to know something about the economics of Oil. His reference to Parliament as a hindrance to government plans reminded me of a pertinent issue which we need to debate and resolve as a country. I have heard parliamentarians say that parliament has oversight over government activities. The Oxford Advanced Learners dictionary defines oversight as, the state of being in charge of somebody or something. If modern democracy provides for three arms of government, namely; the Executive, the Legislature and the Judiciary one cannot have oversight over the other in the strict sense of the word. Under any management theory that cannot work. If the Executive must get authority from Parliament to execute its responsibilities the Executive may not always work. Recently, I heard the Speaker of Parliament refer to that oversight role of Parliament. This is an area I would recommend that those concerned discuss and sort out or else the President or the government will continue having plans thwarted. The question, where are we going? keeps coming up. After the President concluded his presentation I quickly recalled my remarks to the young motor bike cyclist, sorry doesn t mend. Had the President s presentation been made to Parliament before the Oil agreements were signed I believe Parliament would have found a way of endorsing the President s plans. For things to be done in an orderly manner conformance is paramount. I don t remember who said it but I have heard it being said that one should hurry slowly. That is what boda bodas cyclists and taxi drivers ought to do. Today s Accountant July - September

34 July- September Understanding Accounting for Leases By CPA Frederick Kibbedi Partner, AA & L Associates INTERVIEW Q - Quite often the preparers and reviewers of financial statements get it wrong when classifying let alone valuing leases as presented in financial statements. Is this because there is inadequate guidance or the matter is too complex? A - It would be better to start with the definition of a lease under International Financial Reporting Standards. Q - Please go ahead. A-A lease is a contract between the owner of an asset [the leasor] and the user, also known as the leasee, in which the leasor conveys the rights to use the asset for a period of time, in return for payments. Titles may or may not transfer at the end of the lease period. The lease can be classified as an operating lease or a finance lease. Q - Back to my original question. Is it too complex or is the matter inadequately guided? A - Leases are currently classified under IAS 17 as either Finance Leases or Operating Leases. This depends on whether substantially all the risks and rewards of ownership transfer to the leasee. Under a finance lease, the leasee has substantially all the risks and rewards synonymous with ownership. Q - How does one assess whether the substantial transfer has occurred or not? A - The standard states circumstances in which the substantial transfer occurs, as a combination of the following and in the event of which, a Finance Lease is deemed to exist: 1. The leasor transfers ownership of the asset to the leasee by the end of the lease term. 2. The lease term is for the major part of the economic life of the asset, even if the title is not transferred. 3. At the inception of the lease, the present value of the minimum payments amounts to at least substantially all of the fair value of the leased asset. 4. The leased assets are of a specialized nature such that only the leasee can use them without major modifications being made. 5. If the leasee is unathorised to cancel the lease, the leasor s losses associated with the cancellation are borne by the leasee. 6. Gains or losses from fluctuations in the fair value of the residual asset fall to the leasee. 7. The leasee has the ability to continue to lease for a future second period at a rate that is substantially lower than market rent. Q - When those conditions are absent, what happens? A - When those conditions are absent, then the lease is an Operating Lease. 32 Today s Accountant July - September 2012 Q - Must the conditions for classification as a Finance Lease exist throughout the lease term? When does one choose the class? A - The lease classification is done at the start of the lease but the leasee and the leasor may agree to change the provisions. However, changes in estimates for example, in the residual value of a leased property or in circumstances such as default by the leasee do not give rise to a new classification. Q - What happens if the changes would have fundamentally changed the classification at the start of the lease period? A - If the changes would have resulted in a different classification had they been applied originally, then the revised agreement is treated as a new lease over the remaining term. The original accounting entries are not retrospectively restated. Q - I thought Accounting is really about consistency. Doesn t the prospective amendment here contravene that very principle? A - There is guidance given in IAS 8 which rectifies any tendencies towards inconsistency and in this case we have to distinguish between a change in policy [for which retrospective application is allowed] and a change in estimate [as is the case here] where prospective treatment is accepted. Q - We seem to be close to the problem It is about how the indicators are read at the start of the lease Is it not? A - Often, lease indicators may not always point in the same direction causing, classification to be difficult. Leases of specialized assets will usually be structured as Finance Leases. If an asset is specialized, the leasor will only achieve his/her return on investment through the lease payments. The leasor will structure the lease as a Finance Lease accordingly. However, if a leasor can sell or lease non-specialized assets to other parties at the end of the lease period and is willing to accept the financial risk then this could be an indicator of an Operating Lease. Assets of a non-specialized nature may become specialized. For example, leased plant and equipment may be permanently installed in a building and their removal at the end of the lease period may not be possible or too costly for the leasor. Sometimes specialized assets may have a significant remaining life at the end of the lease period, and frequently, this may be the major part of the economic life of the asset and therefore this indicates that it is an Operating Lease. Q - So does it mean that for specialized assets we ignore the indicators and just classify as Finance Leases? A - Not Exactly, it may be appropriate to disregard this indicator. Normally, for there to be an Operating Lease with a significant part of the asset s life remaining,

35 there needs to be some realization of funds through sale or further rentals. In the case of a specialized asset, however, this will not normally occur because it is of value only to the leasee. In these cases, the asset will normally transfer to the leasee at the end of the lease for a nil or nominal payment and will be treated as a Finance Lease. Q - What happens when there is repeated renewal before the economic life comes to an end? A -Where an asset has been leased several times during its economic life and the lease is the last one to take the asset to the end then the indicators may point towards a Finance Lease. For example, the present value of the minimum lease payments may be equal to the fair value of the asset at the inception of the final lease and there is unlikely to be an option to purchase the asset at fair value or to extend the lease at a market rent because the asset has reached the end of its life. Q - Can we then conclude that assets of such kinds are acquired under a Finance Lease because their useful life and the lease terms are more or less the same? A -I am afraid not. The final lease will not be for the major part of the economic life of the asset. The lease will be for the entire remaining useful life of the asset but IAS 17 focuses on the economic life rather than the remaining useful life, as an indicator of a Finance Lease. The leasor recovers the investment through a number of leases and the substance of each of those will normally be an Operating Lease. Therefore, if the final lease were to be classified as a Finance Lease simply because of its position in the chain, this would not be acceptable. Q - Would it be right for me to state that I have a lease where I am paying nominal rent over an agreed uninterrupted period? A -I hope in your case nominal means that the rents fall below the fair value of the asset. The agreement is still an Operating Lease under IAS 17. Where rents are low and no premium is paid, the lease does not have a commercial basis and it would appear that the leasor cares less about the risks and rewards of ownership. In this case, classification is better judged by looking at the substance of the arrangement and the intentions of the leasor in granting a lease on such terms. Q What about in the event of an option to extend the lease? A - The presence of an option to extend the lease at substantially less than a market rent implies that the leasor expects to achieve his/her return on investment solely through the lease payments and therefore is contented with the continuation of the lease for a future period at a nominal rental. This is an indicator of a Finance Lease. It is reasonable to assume that the leasee will extend the lease in these same circumstances. In some cases, changes in the fair value of the residual interest in the leased asset are passed back to the leasee. This indicates that the leasee is bearing the residual value risk, and the leasor s return on investment is effectively fixed hence a Finance Lease. Alternatively, where the leasor retains the proceeds of the eventual sale of the asset, the leasor bears the residual value risk and if the sale proceeds are significant it could be evidence of an Operating Lease. Q - Sometimes the leasee also sublets the asset. Is this permitted by the Standard? A - I should be very candid here. The Standards guide accounting treatments and not the behavioral characteristics of the business or their policies. When an asset is acquired under a Finance Lease and then it is sublet, wholly or partially, to another party on similar terms and conditions, we determine whether the lead entity should recognize the Finance Leases on a gross basis in its accounts or net off the transactions. Q - What if it chooses to net off? A -In this case the entity should look at the derecognition requirements of IFRS 9, Financial Instruments. The treatment will depend on the terms of the individual transaction. If the two transactions are separate to the extent that the lead entity is liable to pay its rentals under the head-lease regardless of whether it actually receives its sub-lease rentals or not, then the derecognition requirements will not be met and it will need to account for the two leases on a gross basis. Q - I have seen instances where the agreement permits the leasee to walk away without penalty. What provision is in the standard for this? A -If a lease contains a break clause earlier, without a fine, then the lease term for accounting purposes will normally be the period between the commencement of the lease and the earliest point at which the break option is exercisable by the leasee. If a lease contains an early termination clause that requires the leasee to make a termination payment to compensate the leasor such that the recovery of the leasor s remaining investment in the lease was assured, then the termination clause would normally be disregarded in determining the lease term. The same principle applies if the lease agreement states that the lease can only be terminated in remote circumstances, with the permission of the leasor or on entering a new lease agreement for the same asset. Q - Surely Fred these are complicated matters. Is this the reality? A -Incidentally the International Accounting Standards Board is preparing a Standard that may clarify and change some of the aspects of lease accounting we have discussed to reflect the right of use. The current models lead to a lack of comparability and undue complexity because of the distinction between Finance and Operating leases. As a result, many users of financial statements adjust the amounts presented in the statement of financial position to reflect the assets and liabilities arising from Operating Leases, which makes the deliberations of companies regarding classification of leases a somewhat a complicated matter. Today s Accountant July - September

36 Budget Breakfast WHAT: 2012 Budget Breakfast WHEN: 15 th June 2012 WHERE: Imperial Royale Hotel, Kampala CPA Patrick Kagoro, ICPAU s Vice President (R) handing over a gift to Hon. Maria Kiwanuka (L). 6 1.Hon. Maria Kiwanuka, the Minister for Finance delivering a speech on the 2012/13 GOU Budget proposals, at the Budget Breakfast meeting. 2. CPA Derick Nkajja, ICPAU s CEO making introductory remarks at the Breakfast meeting. 3. CPA David Baliraine making a contribution at the Breakfast meeting. 4. Participants swearing an oath. 5. Hon. Maria Kiwanuka (L) and CPA Dalal Murtuza, a Council member (R) exchange greetings as Fulgensius Mungereza, ICPAU s past President looks on. 6. CPA Hajji Twaha Kaawaase (L) handing over a prize to a raffle draw winner. 34 Today s Accountant July - September 2012

37 Annual General Meeting WHAT: 2012 AGM WHEN: 29th June WHERE: Imperial Royale Hotel, Kampala CPA Naru Thakkar (R) handing over some documents to CPA Derick Nkajja (L). 4. CPA Patrick Byabakama making a contribution at the AGM Some participants at the 2012 AGM. 2. CPA Dalal Murtuza (L), a Council member emphasizing a point at the AGM. Right is CPA Henry Lwetabe, also a Council member. 3. ICPAU s first President, CPA George Egaddu (L), Hon. Nandala Mafabi (2nd Left), and other participants at the AGM. 5. Some participants registering before the AGM. 6. L-R, Some ICPAU Council members, CPAs, Ass. Prof. Simeon Wanyama, a Council member, Derick Nkajja, the Secretary of Council, Naru Thakkar, the ICPAU President, Dalal Murtuza, a Council member, and Henry Lwetabe, a Council Member. Today s Accountant July - September

38 2012 Accountants Dinner WHAT: 2011 Accountants Dinner WHEN: 29th June 2012 WHERE: Imperial Royale Hotel, Kampala 2 CPA John Mpalampa, ICPAU s past auditor receiving a reward for his service, from CPA Joseph Baliddawa, a past President of ICPAU. 1 1.CPAs, Fawn Cousens (L) and Pius Bahemuka, ICPAU s past CEO (R) engaged in a discussion, before the dinner. 2. CPAs, Samuel Bisase (L), David Sserebe (C) and John Mpalampa, (R) share a light moment during the dinner. 3. Rev. Dr. John Ssenyonyi, the Vice Chancellor, Uganda Christian University and the Guest Speaker at the Accountants Dinner (2nd right) together with his wife, Dr. Ruth Ssenyonyi (Extreme right), and other participants serving their meal at the dinner. 4. Some participants at the Accountants Dinner Mrs. Ssenyonyi (L), CPA John Mpalampa (C) and Rev. Dr. John Ssenyonyi share a conversation before the dinner. 36 Today s Accountant July - September 2012

39 1 2 3rd ICPAU Junior Woodball Championship 3 Contestants registering before the tournament. Displayed are winners trophies. 4 5 WHAT: 3rd ICPAU Junior Woodball Championship WHEN: 2012 WHERE: Buddo S.S The Woodball gate. 2. A contestant hits the ball towards the gate. 3. A contestant prepares to attack the gate. 4. The contestant stops the glass after successfully attacking the gate. 5. Some ICPAU staff present at the function, Godrey Neema, the Senior Administrative Officer (L), CPA Mark Omona, the Technical Manager (C), and Generous Niragire, the Examinations Administrative Assistant (R). 6. CPA Mark Omona preparing to tee off the tournament as contestants look on. 7. Vincent Kisenyi, the Vice President, Uganda Woodball Federation (L) issuing certificates to the Games Master of Buddo S.S. 8. Some students of Ndejje Day Vocational School show off their trophy after they were announced the overall winners of the tournament. 9. Some students showing off their trophe. 8 9 A contestant prepares to attack the gate. Today s Accountant July - September

40 1 2 ICPAU Students activities WHAT: June 2012 examinations and career talks session WHEN: June 2012 and 28th May 2012 WHERE: Gulu regional examinations centre (Bomah Hotel), Namboole examinations centre, Makerere University Some students writing their examinations at the Gulu regional examinations centre. 2. Students writing examinations in Gulu. 3. Susannie Teega, a Technical Officer at ICPAU (L) and other invigilators counting scripts at the Namboole examinations centre.. 4. Some students writing their examinations at the Namboole examinations centre. 5. Godfrey Neema, ICPAU s Senior Administrative Officer delivering a presentation to students of Makerere University, during a career talks session. 6. Some students listening attentively during the session. 7. Simon Oola, ICPAU s Governance and Relations Manager (L) and some officials of Makerere University, during the career talks session. 38 Today s Accountant July - September 2012

41 1 Practitioners Forum WHAT: 2012 Practitioners Forum WHEN: 11 th May WHERE: Hotel Africana CPA Mark Omona making a presentation during the Forum CPA s, Naru Thakkar, ICPAU s President (1st row, right), Fulgensius Mungereza, a past president of ICPAU (1st row, Centre), Mark Omona, ICPAU s Technical Manager (1st row, Left), and some participants at the Practitioners Forum. 3. Some practitioners chatting after the Forum. 4. CPA Mark Omona shares a light moment with some practitioners. 2. CPA Naru Thakkar making opening remarks at the Forum. Today s Accountant July - September

42 July- September By Nancy Akullo Public Relations Officer, ICPAU I recently walked into an office at 2.30 pm to pick my academic testimonial. When I entered the office I asked to speak with the person in charge of issuing the testimonials. The lady, who was then having her lunch pointed at an empty chair, signaling that the person in charge was not in. I then inquired if I could check again at 3.00 pm, to which she nodded her head. As soon I left the room, her colleague, who was also having lunch walked to the door and shut it after me. I then heard the door nob click, an indication that it had been locked. ARE YOU CUSTOMER RESPONSIVE? I returned at 3.00 pm, knocked at the door but to my dismay it was still locked. By this time a few students had gathered outside the office and we could hear murmurs and giggles emanating from the room. We kept knocking at the door to no avail. After about thirty minutes of incessant loud knocking amid bickering a lecturer came by, motioned for us to leave way for him to go through, knocked once, called out the name of one of the ladies in the room and was ushered into the room. No sooner had the lecturer entered the room than the door was once again bolted. By this time raging tempers among the students, who had been waiting for over an hour were in full gear. The exasperated students knocked louder and hurled insults at the officers who only responded with indifference as the murmurs and giggles became louder. The door was eventually opened at 4.00 pm. No apology or pathetic excuse, however, was given to us. This is just one example of the countless instances of discourteous behaviour directed to customers and clients. Front desk officers, a number of them ladies, are known to be the biggest culprits of this professional misconduct. The instances of insolent behaviour directed to customers are countless. If you have not been faced with a similar encounter, then probably you are a very high profile personality. Whether you are a high profile person, a Miss Uganda of sorts or the king s only heir, everybody deserves to be treated courteously. Whatever the reason, there is no excuse for insolence. Whether your boss is rude, or you are having a bad day, or whether your spouse did not notice your new hair style, the rule still stands, we must be nice to customers at all times. 40 Today s Accountant July - September 2012

43 Customer care is not rocket science or algebra. It is a fundamental civility without which business cannot flourish. Every CEO, Manager, Director, ED, or administrator needs to aggressively ensure that customer care is an integral component of the organizational culture. One fact that is unknown to many heads of organization is that customer care in not just external. It starts from within because; you cannot give what you do not have. You cannot for instance treat staff indifferently and expect them in turn to treat customers politely. Philemon Nganda, a Customer Care consultant describes this process as internal relations. The satisfaction of an organisation s internal publics is central to the success of any business. Philemon gives the example of the treatment accorded to our company drivers/chauffeurs. When drivers drop off the bosses at luncheons, parties or other social gatherings, they are often left to bask in the heat of the vehicle while their dignified superior lavishly savours the sumptuous delicacies prepared only for the high and mighty. Upon returning to the vehicle, if the boss is a kind one, he might sheepishly ask, sebo, ofunye yo ak okulya (sir, have you had something to eat)? To this the driver, startled by his boss voice replies amid yawns, nina wano muwogo wange gwembadde ndeese (I brought along some cassava). How on earth is a man who has only had a miserable meal of cassava for lunch supposed to work efficiently? Supposing the driver doses off on the steering wheel due to inappropriate feeding and causes an accident? Whose fault would it be? This is something for all of us to ponder on. We are all human beings irrespective of our job titles. The rule is simple treat your staff with utmost politeness. A Customer Care Checklist Do you keep the gatekeeper/guard informed about activities at the organization such that when a guest arrives and asks for the venue for the Board meeting, the gatekeeper does not retort back, which meeting? Do you have a notice that reads, vehicles parked at owners risk when your premises are enclosed in a wall fence with electric Sekanyolya razor wires fixed on the rails and fully armed Saracen guards on standby? Is the reception easily identified by a first time guest? Does your organization have provisions for disabled/vulnerable people or are such people left to fend for themselves? Do you have reading material or publications at the reception, to keep guests occupied as they wait to be attended to? Are your washrooms accessible by guests? Are directions to different offices/departments within the organization clearly marked out? Do you have an open platform through which customers/clients can express themselves or must customers hide their grievances in the suggestion box? How effective is your communication to clients and customers? Are customers informed in advance, about changes affecting them or do they figure out the changes later on, amid flaring tempers? Do you explain to your customers and clients why certain changes are effected within the organization? How fast are clients attended to? Are your staff professional in the way that they handle clients? When a client/customer leaves your offices, what story will they tell about the organisation? We need to continuously evaluate ourselves in order to ascertain our level of responsiveness to customers. The customer care checklist is inexhaustible. There are, however, simple courtesies that should be extended to customers without compulsion on the part of management. It does not for instance cost anything for you to smile at a customer and greet them cordially. It does not take anything from you, to politely offer a seat to a customer or to postpone a personal phone call to attend to a client with an urgent need. Similarly it costs you nothing to accompany a client lost along the corridors of your offices, to their destination. Customer care is the engine that drives every business. Customers are the bread on which every business thrives. Challenge yourselves to implement a well defined and workable customer care strategy. Let us be courteous to our customers. Today s Accountant July - September

44 July- September ACCOUNTS OF INSURANCE COMPANIES By CPA Benerd Obel, Assistant Director-Operations, Insurance Regulatory Authority Background Although, increasingly, legislation is becoming more prescriptive about items in accounts and the way they are to be accounted for, there are still many areas which it does not cover, or, if it does, where its coverage is in general terms only. Nevertheless there is a general wish amongst users of accounts for some sort of standardisation. In an effort to meet this wish, the accountancy profession has been involved in establishing standards which are seen as having advantages over legislation, in that they can be more detailed. Compliance can then be required in accordance with the spirit rather than the letter (of the standard). As you are already aware, accountants cannot just put figures together and call them a set of accounts, there are very many rules to be followed. This is all very much in the interests of stakeholder protection. Insurance Insurance is a form of a contract under which one party agrees, in return for a consideration, to pay an agreed amount of money to another party to make good for a loss, damage, injury to something of value, in which the insured has a pecuniary interest, as a result of some uncertain event. This contract, when put in writing is known as policy. The person whose risk is covered is the insured or assured while the company or corporation which pays the claim is known as insurer, assurer or the underwriter. The consideration, in return for which the insurer agrees to make good the loss, is known as premium. From the insurance point of view, insurance may be divided into two types: Life insurance Under this type of insurance, the insurance company guarantees to pay a certain sum of money to the policy holder on reaching a certain age, or on his death, whichever is earlier. Life insurance has an element both of protection and investment. General insurance This type includes all other types of insurance except life insurance; i.e. fire insurance, marine insurance, accident insurance, burglary, fidelity guarantee, third party, consequential loss, etc. 42 Today s Accountant July - September 2012

45 Accounts of Life Insurance Business The following books are to be maintained by all insurance entities; 1. Register of policies: The register will contain particulars in respect of each policy issued by the insurer such as: the name and address of the policy holder; the date when the policy was effected; and record of the assignment of the policy (if any). 2. Register of Claims: Contains the particulars of each claim, such as: the date of claim; the name and address of the claimant; the date on which the claim was discharged; and the date and ground for rejection, in case the claim is rejected. 3. Subsidiary books: For proper maintenance of accounts important subsidiary books are kept according to the convenience of the concern. These are: register of proposals and proposed advance cash book; first years premium cash book; renewal premium cash book; agency and branch cash book; petty cash book; claims cash book; general cash book containing the summary of all previous books; bank cash book; commission register; lapsed and cancelled policies book; journal; agency ledger policy loan ledger; general loan ledger; and the investment ledger. Annual Accounts Basically, Annual Accounts of a life insurance business involve preparation of a revenue account and a balance sheet. Revenue Accounts Debit Side Claims: Any amount payable by the insurance company is called a claim. Claims may arise due to two reasons in the life insurance business; death or maturity. While calculating the figure for claims, all claims intimated and accepted or not accepted at the end and at the beginning of the year, and re-insurance recoveries are to be deducted. The amount of re-insurance recoveries is recorded under the re-insurance contract and it reduces the total claims to be paid by the business. Annuity: An annual payment which a life insurance company guarantees to pay for lump sum money received in the beginning. It is an expense shown on the debit side of the revenue account, Surrender values: If the insured is unable to pay the future premium, he can get his policy paid by the Life Company. It is the present cash value of the policy which a holder gets from the Company on surrendering all the rights of the policy. Bonus in cash: If the insurer has a with profit policy, he will get bonus from the company. If the bonus is paid in cash, it is shown on the debit side of the revenue account as an expense. Bonus in reduction of premium: Instead of paying bonus in cash, the company may deduct the bonus from the premium due from the insured. This is known as bonus in reduction of premium. It is shown both on the debit side (as an expense) and on the credit side (by adding to the premium) of the revenue account. Expenses of management: These are to be shown in combined form and the details constituting such expenses can be given either in the revenue account or in the form of an attached schedule of working note. Bad Debts, Taxes and Other Expenditure: These are to be shown separately on the debit side of the revenue account. Life Insurance Fund: The difference between the credit and debit side of revenue account is not profit but Life Insurance Fund. Credit Items Life insurance fund This fund at the beginning of the period is to be shown on the credit side of the revenue account. 1. Premium. The premium received during the accounting period, premium outstanding at the end of the period, plus the bonus in reduction of the premium, minus outstanding premium at the beginning of the period, minus reinsurance premium is to be shown under this heading. 2. Consideration for Annuities Granted Any lump sum payment received by the insurance company in lieu of granting annuity is a consideration for annuity granted and will be shown as an income on the credit side of the revenue account. 3. Re-insurance When a company accepts a business of more value and in order to reduce the risk, passes on some business to the other company it is called re-insurance. Today s Accountant July - September

46 July- September Determination of Profit in Life Insurance A life policy is generally taken for a number of years. The premium received for such longterm contracts cannot be treated as income for ascertaining the profits of that year. For example, under a contract of annuity, only one premium (initial payment) is received whereas the annuitant is required to be paid annuity until he dies. In life insurance, the claim must arise either on death or on expiry of the period of the policy. That the future premium may or may not be received, depends on the existence of the insured. Thus, on a particular date, the liability of the Life Company calculated as the premiums to be received in future will generally be less than the amount payable on claims. There is a gap between claims which are expected to arise and premiums which are expected to be received. This gap is known as net liability. Thus, it becomes desirable to create a reserve equal to its net liability in order to ascertain the profit made by the life company. Life insurance companies are now required to make the valuations of their net liabilities every year in order to ascertain the profits. This is done by an Actuary. The process by which net liability is ascertained by an actuary is known as Actuarial Valuation. 44 Today s Accountant July - September 2012

47 Procedure for ascertaining profit or loss Net liability is compared with Life Assurance Fund on a particular date in order to calculate the surplus or deficiency. Accounts of General Insurance Companies General Business Technical Account Accounts are usually prepared annually with the revenue and profit and loss accounts covering the results of a twelve month period. It is, however, very rare that events fit nicely inside a twelve month period and it is only possible to assess them in annual terms by making estimates and assumptions at the end of each year, to cover unfinished business. This is not always satisfactory and the industry has developed, as alternatives to annual accounting, deferred annual accounting (insurance contracts are accounted for, over a period greater than one year). Items unique to the Insurance industry, which feature on the balance sheet of a general insurance company 1. Unearned Premiums This item forms part of the insurance fund and is essentially a provision. It represents the portion of premiums already entered in the accounts as due but which relates to a period of risk subsequent to the balance sheet date. Thus, if a premium were due on 1st September under an annual policy, at the balance sheet date of 31st December, only four months premiums will have been earned -1/3 of the total. Thus only 1/3 should appear as earned in the revenue account for the year with the remaining 2/3 being held over to the next year as a balance carried forward, appearing on the balance sheet. Time apportionment of the premium is normally appropriate unless there is a marked unevenness of the risk over the period of cover, in which case a basis which reflects the profile of the risk should be used. Section 47 (2) of the Insurance Act, Cap 213, Laws of Uganda, 2000 (Insurance Act) requires an insurer to maintain reserves for unexpired risks, which should not be less than 40% of the total net premiums or such other amount as the regulator may decide. 2. Outstanding Claims The provision of gross outstanding claims should be disclosed within technical provisions in the balance sheet and amounts expected to be recoverable under re-insurance arrangements in respect of claims incurred should be recognized separately in the balance sheet as an asset. Section 47(2) b of the Insurance Act requires that a sum equal to the total estimated amount of all outstanding reported claims, and an additional amount of not less than 15% of the total amount of outstanding reported claims, in respect of claims incurred but not reported at the end of the last preceding year, is reserved in the accounts. 3. Equalisation Provisions This is mainly in the UK market where the law requires insurers to establish and maintain such a provision in addition to known claims and claims incurred but not reported in certain classes of business, to even out fluctuations in claims and overall loss experience in addition to the provisions for known claims and claims incurred but not reported. 4. Unexpired Risk Provision An unexpired risk provision should be established if the estimated value of claims and expenses attributed to the unexpired periods of policies in force at the balance sheet date is considerably greater than the related unearned premiums. An assessment of whether an unexpired risk provision is necessary should be made for each grouping of business managed together with any unexpired risk surplus and deficits, offset within that grouping. In determining the amount of provision for unexpired risk, the future income expected to be earned (until claims are settled) on investments supporting the unearned premium provision and the unexpired risk provision should be taken into consideration. 5. Deposits received from reinsurers This balance is, in effect, a credit. It relates to either amounts deposited by or amounts withheld from other insurance undertakings due to the fact that the company has ceded insurance. 6. Contingency reserves Section 47(2)(c) of the Insurance Act of Uganda requires an insurer to maintain a contingency reserve which shall not be less than 2 percent of the gross premium income or 15 percent of the net profits, whichever is the greater, or such other amount as the Insurance Regulatory Authority may decide. The reserve shall accumulate until it reaches the minimum paid up capital or 50 percent of the net premiums, whichever is greater. The contingency reserves are used to cover fluctuations in securities and variations in statistical estimates. Today s Accountant July - September

48 July- September ICPAU Elected Member of PAFA Committee The Institute of Certified Public Accountants of Uganda (ICPAU) was elected member of the Pan African Federation of Accountants (PAFA) newly formed Planning, Human Capital and Finance Committee (PHCFC). The appointment was made at the PAFA General Assembly in Tunisia, in May The Committee is chaired by Dr. Mussa J. Assad, the PAFA vice president. The other members of the Committee are; The South African Institute of Chartered Accountants (SAICA), The Institute of Chartered Accountants of Nigeria (ICAN), and L Ordre des Experts Comptables de Tunisie (OECT). ICPAU s appointment to the committee will give the Institute a chance to be at the forefront of setting policies and therefore significantly influence the decision making process at PAFA, Derick Nkajja, ICPAU s Chief Executive Officer said. The PHCFC is an advisory committee of the Board of PAFA. The committee was formed to oversee the development and implementation of the PAFA strategic plan. At the General Assembly, PAFA adopted international standards for Professional Accounting Organisations (PAOs) in the continent. These include; International Financial Reporting Standards (IFRSs), International Financial Reporting Standards for Small and Medium Enterprises (IFRS for SMEs), International Standards on Auditing (ISAs), International Public Sector Accounting Standards (IPSASs), and International Education Standards (IESs). PAFA also adopted the Code of Ethics for Professional Accountants developed by the International Ethics Standards Board for Accountants (IESBA). The International Federation of Accountants (IFAC) hailed PAFA for adopting the standards, as a fundamental step towards fulfilling IFAC s Statement of Membership Obligations (SMOs) which form the basis of the IFAC member body compliance programme. A sound financial infrastructure in the form of high-quality, recognized standards in auditing, ethics, public sector accounting, and related regulation is the only way that sustainable economic development is truly achievable as Africa seeks a larger role in the global economy, Ian Ball, IFAC s Chief Executive Officer. PAFA was inaugurated in May 2011 as the regional body for professional accountants in Africa. The federation boasts a membership of 39 professional accountancy organizations and 34 countries in North, Eastern, West and Southern Africa. ICPAU represents the Eastern Africa Regional members on the PAFA Board. These include; Tanzania, Comoros, Seychelles, Kenya, Burundi, Rwanda, Ethiopia, Somalia, Djibouti, South Sudan and Eritrea. ICPAU TO CREATE RESEARCH FUND FOR ACCOUNTANCY The Institute of Certified Public Accountants of Uganda (ICPAU) will create a research fund to support and enhance the development of the accountancy profession. Practitioners were informed about the fund, at the recently held Practitioners Forum organised by ICPAU to avail a platform for Practitioners and the Secretariat to freely exchange ideas pertaining to the profession. It was resolved at the Forum that Secretariat embarks on a process of profiling Audit Firms, to facilitate better understanding of the Firms, in a bid to market them better. We are interested in knowing you better so we can serve you better, Mr. Derick Nkajja, ICPAU s Chief Executive Officer said. Profiling will also facilitate the Institute s Audit Monitoring programme. In a bid to provide ICPAU students and graduates with handson experience, the Practitioners resolved to avail internship opportunities for ICPAU students to train and acquire handson experience in accountancy. The Practitioners also agreed to provide employment opportunities for ICPAU graduates. Practitioners were encouraged to create partnerships in order to build capacity and become more competitive. The days of sole practice are coming to an end, said Mr. Nkajja. You are not competitors. You are collaborators. Transfer your skills to one another to create better partnerships, he added. The practitioners appreciated the need for collaboration and resolved to build stronger audit firms, by merging sole practices into partnerships. 46 Today s Accountant July - September 2012

49 MY LEEDS EXPERIENCE Exploring The University s Path to a Place in the World s Top 50 Universities By Diana Naisuna Nambi, CCPR Student, University of Leeds Following the visit to the City of Manchester in the previous issue of Today s Accountant, we return to the University of Leeds. I was thinking about one of my four module assignments, when I received an invitation to a meeting with the University s Vice-Chancellor, Professor Michael Arthur. The meeting was due in two weeks time but I confirmed my attendance right away because interacting with Professor Arthur had been top of my wish-list for long. Missing this opportunity was not an option and as fate had it, the meeting was scheduled outside my group discussions, lectures and assignment deadlines. The two weeks of waiting were rather long as I imagined where the meeting would take place; how long it would last; what I would wear; where I would sit; and what I would say to the Professor, among other considerations. On the day the meeting took place, Professor Arthur was kind enough to leave the comfort of his office on the 13 th floor of the Marjorie and Arnold Ziff Building, as he dedicated this Wednesday morning to the Business school. He met with different stakeholder groups, including administrative staff, faculty and students. Each of these groups seemed pretty excited as they chatted outside the boardroom, waiting for their scheduled time. I believe it was a matter of saving the best for last as we, the students, met with Professor Arthur last. We discussed issues of strategic importance to the University of Leeds, as it strives to be among the world s top 50 universities by Throughout the meeting, Professor Arthur was so relaxed and jovial that it felt as though we were chatting with a fellow student. He gave us, the same advice I give my children your age, to always embrace change and diversity. I did not want the meeting to end but it had to, as the Dean of the Business School, Professor Peter Moizer, soon reminded Professor Arthur of his next commitment. This day is one of my best at the University, so far. While working to attain a place in the world s top 50 universities, the University of Leeds has deliberately taken on a sustainability approach, which involves both students and staff. The integration of sustainability into the University s way of life is evident in various activities, most notably; the development of curricula, preparation of study materials, disposal of waste and general maintenance. Today s Accountant July - September

50 July- September In October 2011, the University rolled out the It All Adds Up campaign, with an aim of changing attitudes to and behaviour on energy consumption, on campus and in halls of residence. The campaign that heavily relied on local media effectively drew the attention of students, staff and visitors to the University. It started out with the message It All Adds Up being displayed at prominent spots, such as the University Square, the Business School, the Rupert Beckett lecture theatre quadrangle and the Health Sciences Building. These spots register heavy traffic on any given day It All Adds Up was crafted in large font size and its display took on varied creative forms; white paint on floors, straw bales on the compound, framed posters on doors and large wooden boards over grass. The displays were ubiquitous, giving everybody on campus several opportunities to see the message It All Adds Up became a part of us, as we tried to do the mathematics. In my case, the figures added up to 21, my birth date. Dr. Constantinos N. Leonidou, Associate Professor of Marketing at the Business School, reveals that It All Adds Up caused quite a stir and was a prominent topic in lectures, seminars and across social media. The students studying Corporate Social Responsibility and Sustainability, a module delivered by Dr. Leonidou, quickly realised that the mysterious numbers were linked to sustainability so they asked him for his opinion. As we later learnt, is the total number of students and staff at the University of Leeds. The idea was that some seemingly insignificant individual actions can have a significant environmental impact if added up, says Dr. Leonidou. Away from the large figures and words on campus, the campaign engaged students and staff through the ac.uk/ website. The University Director of Facilities Management, Dennis Hopper, reveals that students and staff actively use the website to show support and contribute ideas for the sustainability initiatives. According to the University s Sustainable Development Officer, James Dixon-Gough, the University of Leeds has pledged to reduce its carbon emissions by 35% by The media, James says, has been very effective in raising general awareness using limited resources. It All Adds Up is an on-going campaign, which, as James reveals, the sustainability team has worked at integrating with existing programmes such as Green Impact and Sustainable development working groups. The team is now looking at how to engage students and staff in areas of high impact, for example, reducing energy use in the University laboratories. Some of the University s sustainability milestones were showcased during the Climate Week The week run under daily themes, namely: Buy Local, Sustainable Transport, It All Adds Up, Get Involved and Biodiversity. At the University Square, it was a free show for anyone interested in the sustainability agenda. The Sustainable Transport theme on Tuesday, which advocated the use of bicycles over vehicles, attracted several students who took turns at pedalling the bicycles exhibited. The University s path to a place in the world s top 50 universities was smoothened by the opening of the Michael Marks Building at the Western end of campus. The building will house the Marks & Spencer (M&S) Company archive and special items from the University s library. Its facilities include an exhibition area, conference rooms and reading rooms. Commenting on the M&S University of Leeds partnership, the Vice-Chancellor, Professor Michael Arthur, said, Our partnership with Marks & Spencer represents a new model of how a worldleading University and an iconic FTSE 100 company can work together. The partnership provides a solid platform for the future and has already delivered successes for both organizations. The new Michael Marks Building will be a fantastic resource for staff and students, the company and the community. Having a golden and cream exterior, the glittery three storey building is an attraction for those headed for the Western Lecture Theatre, the Charles Thackrah Building and surrounding areas. On a warm sunny day, some students will be seen taking photos at the building before or after their lectures. Michael Marks not only increases the number of resplendent buildings on campus but also brings the M&S brand closer to its loyal customers at the University. 48 Today s Accountant July - September 2012

51 Pass Card to Business Policy Part 12 This may seem simple, but you need to give customers what they want, not what you think they want. And, if you do this, people will keep coming back, John Ilhan, Crazy John s Mobile Distribution Chain- Australia. It is from this understanding that the phrase customer is king arose. Some companies have even gone philosophical stating that: Rule No.1 - The customer is always right, Rule No.2 - If the customer is ever wrong, then rule 1 refers. This is where marketing research fits in. In the last article of the Pass card to Business Policy, we saw the key philosophies in the marketing of goods and services. From the production concept, through the product and selling concepts, to the marketing concept. Each of the philosophies is appropriate under specific conditions. We, however, noted that the most popular one is the marketing concept, whose key pillar is focus on the needs of the customer. This means that the customers are formally recognized as the reason for the firm s existence. A deliberate effort is therefore taken to identify their needs, which then form the basis of goods and services produced. Marketing research is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company, (Kotler, 2009). It covers areas such as research into specific markets, new products, means of promotion or modes of distribution. The information is then used to identify and define marketing opportunities and challenges, generate, refine, and evaluate marketing actions, monitor marketing performance, and improve understanding of marketing as a process. Marketing research is the function that links the consumer, customer, and public to the marketer, through information sharing. It is broader than just market research which according to Wikipedia is any organized effort to gather information about markets or customers. Market research therefore is a component of marketing research, although the two are often erroneously used interchangeably. The Marketing research Process Marketing research is carried out using a systematic approach. Below is a quick description of the marketing research process: 1. Definition of the problem. A research effort without a defined problem is a waste of resources. It is like heading to a destination that one has no idea about. Surely one cannot get there! This underlines the importance of the research problem. It could for example be declining sales in a region, inspite of continued commitment of resources. 2. Development of the research plan. The research plan defines the methodology that shall be followed if the problem is to be addressed. At this stage: The data sources will be clarified: It is important that both primary and secondary sources are considered. Primary sources give the researcher first hand information, while secondary sources enable the researcher to validate the primary data. The research instruments will be designed: Often, these will be questionnaires or interview guides. In the case of questionnaires, Phillip Kotler notes that questions should be simple and specific, and that jargon or ambiguous words should be avoided. A sampling plan must be developed: This will show how the sample will be selected. The techniques can be statistical (giving every potential respondent an equal chance of selection) or non statistical (involving use of judgment to select the respondents based on the perceived knowledge of the subject matter). The contact methods will be defined: These can take the form of interviews, telephone surveys, observation or even focus group discussions. A data analysis framework will be developed: What data analysis tools will be used, and the desired degree of accuracy Decide upon a budget and a timeframe. 3. Collect the data. 4. Analyze the data. Today, advanced data analysis tools such as Statistical Package for Social Scientists (SPSS) or basic spreadsheets can be used to analyze data. 5. Write your research report. In a recent exam the candidates were asked to recommend a methodology for collecting information about markets and customer preferences before a decision on the distribution channel could be made. This question was simply asking for the marketing research process in the context of the case study. Candidates were expected to go through the marketing research process clearly indicating the potential sources of data, and evaluating the various techniques that could be used in gathering the data. The evaluation could be based on issues of cost, time, and confidentiality among others. In the next article, we shall briefly look at potential ethical concerns in marketing. References: Phillip Kotler & Kevin Kotler (2009), Marketing Management 3rd Ed. Pearson Inc. Publishing as Prentice Hall. Today s Accountant July - September

52 July- September Revenue Assurance: Beyond Telecoms By CPA Ronald Mutumba Revenue Assurance Manager, Smile Communications Uganda Ltd Is this a Separate Function from Fraud Management? Who should manage the Function? The key issues that keep coming up for discussion among revenue assurance (RA) professionals are: how different is revenue assurance is from fraud management? Are the two different functions that need to be managed differently? Who should be given the role of managing an organisation s revenue assurance function? For purposes of our discussion, Revenue Assurance defined as that business function charged with the responsibility to confirm that business processes and controls ensure the accurate, timely and efficient capture and processing of revenue information. This should be in a way that makes this information accessible, meaningful and useful to top management. On the other hand, fraud is a general issue, which includes fraud prevention; the enforcement of strict access and usage controls to prevent fraud, and fraud detection; the observation of indicators and determination of fraud. In dealing with fraud management, there might be a definition problem. An example is in the telecommunications industry, where the term may be used in reference to telecoms-specific fraud which mainly has to do with management of loss of telecom call detail records, as opposed to all the fraud that the telecommunication company has to deal with. Revenue assurance and fraud management can thus be quite separate and distinct, and should not be combined together within any business, as a single function. Segregation of duties relating to both functions would therefore be key. We also need to appreciate that there are several different ways revenue assurance is implemented. In most organisations where revenue assurance has been rolled out, the function is a critical part of the organisation s governance model, compliance requirements, management style, national culture and line of business. The degree to which revenue assurance is a separate function from fraud management is dependent upon management s expectations from the revenue assurance function, and the team sponsors. A single sponsor, such as finance/risk management is more likely to be sympathetic towards a single organisation, whereas if revenue assurance is sponsored by a different sponsor, neither would want to 50 Today s Accountant July - September 2012

53 lose control over their own teams. While the role of a fraud team is generally well understood and is seen as an operational function, there is a wide range of views about the actual role of a revenue assurance team. The telecom experience is that in some organisations, although the function is called assurance, the tasks revenue assurance performs are operational and inspection based, for example; checking the switch, monitoring the mediation between the switch components and the billing applications, and rating errors through on-going and live monitoring of the systems, using automated tools. However, if the RA function is utilised as an audit role or in pro-active billing, as an accuracy prevention role, then these tasks will be more difficult to automate and improve. In these instances, there is little synergy between the two areas. The approach here is that Switch Engineering should be monitoring completeness and accuracy of CDR production as they manage the switch. The information technology function should be managing the successful processing of the records as they manage the platforms. The revenue assurance role would thus be to ensure that the various departments have the tools and Key Performance Indicators to measure and monitor their activities. The telecom experience also shows that different operators have different organisational cultures and working styles which dictate that in certain cases, revenue assurance works with fraud management while in others, this may not be workable. If revenue assurance and fraud management perform together, the synergy may be high. The primary job for revenue assurance is to prevent revenue leakage. For fraud management, the primary responsibility is to prevent fraud that may lead to leakage. Revenue assurance and fraud management share the same data sources but the analysis may lead to different consequences. The decision to combine the two functions is determined by the organisational requirements and internal politics. Whichever structure is introduced, there is a need for close co-operation between the two areas. Who should you employ as your revenue assurance guru? Revenue assurance simply requires someone able to think out of the box and on his feet all the time. The RA guru should have the ability to always hit the ground, running. RA is still a young profession without a defined career path, for now. However, there a number of critical components to consider when recruiting the RA guru. Experience in either RA operations or in projects management is essential. The experience should include aspects of the CSP universe (networks, IT, billing, finance, marketing), and RA tasks (design of controls, monitoring controls, reporting). The key is gaining the experience while working with top professionals from whom you can learn good practices. General education and specific RA training; RA professionals join the profession from various backgrounds-finance, marketing, network engineering and IT, among others. Formal education in one or more of these disciplines is a benefit. One has to get the knowledge and skills of every aspect of RA, to become an RA expert (guru). The real key to being the RA expert is to be able to ask the right questions, understand the answers and interpret them within the right context. This is crucial, considering that RA does not include the responsibility for key revenue generation and management functions. RA expertise requires one to be a renaissance man. It requires proficiency in at least one of the following fields; information systems, billing, operations, finance and data analysis. RA also requires knowledge of the different business functions, interpersonal skills, capabilities of project and change management, and risk management.. In any business, we will probably find an IT expert who knows more about an individual information system than the RA person does, simply because the IT function is their daily role. What confirms RA expertise is being able to ask the IT expert the right questions, in the language he understands, to enable him recognise the issue and propose a solution, which you can then translate into words that other departments understand. It is the mindset that makes the Revenue Assurance expert what he is. This mainly includes; willingness to learn, the ability to adapt to the many changes that take place, and the willingness to accept that even though it may seemingly be against revenue assurance principles, if the Business at the highest level has made a decision, the RA expert s role is to support that decision. It is a mindset issue given that there have been many a finance expert who could not fit into the RA team just like there have been information system gurus whose technical knowledge could not fit them into RA teams. But when people come on board with the ability ask the right questions, RA can easily accommodate them. Today s Accountant July - September

54 July- September The Audit & Assurance Work Dilemma for Auditors in Uganda By CPA Ulrich Johnson Partner-Audit, Assurance & Business Advisory, Johnson & Johnson There is a thoughtful balance between the risk exposures of auditors being constrained to perform the audit to its full scope versus the fees/cost the client is willing to pay. Accounting in Uganda has experienced a pronounced development since the establishment of the Institute of Certified Public Accountants of Uganda (ICPAU) as the regulatory authority of the profession in Uganda. However, reflecting on the accounting environment in Uganda, we still experience obstacles and problems in financial reporting in all but a few sectors which are somewhat regulated. Even then, there is room for improvement in the regulated sectors. Although the accounting profession in Uganda has grown over the last 20 years, the level of accounting, financial management and financial reporting is still poor in many institutions. This is due to a combination of issues; poor corporate governance; incompetent Boards of Directors; inadequate structures within the institutions; hiring of staff without the right skills, and lack of understanding of business analysis. The control environment of many institutions is weak. Charts of accounts, where they exist, are unhelpful in organising financial data as these are not linked to the business processes (A chart of accounts enables conceptualization of cost centres and responsibility accounting). In addition, control activities in the business and accounting processes are most times not adequately streamlined and linked to give maximum benefits or results. Against this background, it is predictable that most institutions are unable to produce sound and reliable financial statements that enhance corporate reporting, that would give auditors comfort to perform their work without worrying about their reputational risk. With modern day systems-based approaches and IFAC s requirements in the auditing standards and guidelines, the auditors are expected to take a reasoned approach to the auditing process and reach sound conclusions backed by actual evidence. The opinion of the auditors must be arrived at after taking into account their conclusions on every aspect of the institution, with sound documentary evidence. The reality on the ground in Uganda is, from experience, most preliminary analytical reviews and evaluation of the business and accounting environment result in the auditors skepticism of the client s progress. By the time a thorough risk assessment and evaluation is done, the conclusion is that more work has to be done to produce an audited corporate report that is IFRS compliant. This invariably impacts on the scope of the audit and modifies the cost of the assignment. However, most institutions do not appreciate or understand the role of an independent audit; they perceive it as a compliance issue but it is much more than that! It is the report card of the performance of management as custodians of the resources they are entrusted with. If the management of these institutions were held to performance-based contracts, stakeholders would look closely at the corporate report as an avenue to judge their performance and ability to manage resources. Therefore an audit looks behind the numbers, interprets what they mean and acts as a pointer to strategies and interventions for better performance. The audit rationale is clear, it is about accountability, transparency and sound management for growth of the entity. 52 Today s Accountant July - September 2012

55 Role of Internal Audit in Public Sector Governance Overview of the Public Sector Ministry of Finance, Planning and Economic Development By CPA Dr. Fixon Akonya Okonye, Commissioner- Internal Audit and Inspectorate Defining the public in the public sector has long been a complex problem because of the complex-structured concept of publicness and privateness in society and these concepts have occupied debate among scholars and practitioners of organizational administration and management. What is considered public has varied with different societies overtime (Rainey, 2003). For instance MTN, a private company and one of the mobile service providers in Uganda today could be providing more private services to the public than the Public service providers to the extent that distinguishing service provision on the basis of publicness or privateness may not be the critical issue. However Publicness has been defined as a characteristic of an organization which reflects the extent the organization is influenced by political authority (Bozeman, 1984). Henry Nicholas (2007) asserts that Publicness and Privateness in society are comprised of three dimensions: agency, interest and access. Privateness basically relates to privateness in almost all aspects as far as agency, interest and access are concerned. For purposes of simplification, the Public Sector can be understood as the part of the economy of a country that is owned or controlled by the government and is expected to provide basic government services. The composition of the public sector varies from country to country, but generally consists of the central government, the local government, the state enterprises (Government Business Enterprises - GBEs) and other agencies like constitutional commissions or bodies. Services provided by the Public Sector include security, law and order services by the police, military; infrastructural services like provision of public roads; primary education and healthcare. The Public Sector might provide services that non-tax payer cannot be excluded from (such as street lighting) and services which benefit all of society. Public Sector Governance The term governance refers to how an organization makes and implements decisions the processes by which organizations are directed, controlled, and held to account. Because governments throughout the world are structured differently with different and possibly overlapping mandates and jurisdictions no single governance model applies to public sector organizations. Common principles of corporate governance encompass the policies, processes, and structures used by an organization to direct and control its activities, to achieve its objectives, and to protect the interests of its diverse stakeholder groups in an ethical manner. THE CORNERSTONE OF GOVERNANCE Enlightened Audit Committee Effective Management Functioning Internal Audit Empowered External Audit Today s Accountant July - September

56 July- September Governance Principles Critical to the Public Sector Good public governance requires fair and impartially enforced legal frameworks. The absence of good governance structures and lack of adherence to basic governance principles increases the risk of public corruption, which is defined as the misuse of entrusted power for private gain. Therefore, in addition to the basic governance principles described earlier, the principles of accountability, transparency, probity, and equity are essential in the public sector. Accountability Accountability is the process whereby public sector entities, and the individuals within them, are responsible for their decisions and actions, including their stewardship of public funds and all aspects of performance, and submit themselves to appropriate external scrutiny. It is achieved by all parties having a clear understanding of those responsibilities, and having clearly defined roles through a robust structure. In effect, accountability is the obligation to answer for responsibility conferred. (IFAC, Governance in the Public Sector: A Governing Body Perspective, 2001). Transparency Transparency relates to the openness of government to its citizens. This may be the spirit of Access to Information Act in Uganda. Good governance includes appropriate disclosure of key information to stakeholders so that they have the necessary facts about the government s performance and operations. Accordingly, the government s decisions, actions, and transactions are conducted in the open. Many governments require public documents to be disseminated or made available upon request or mandate that meetings of elected officials be publicized, with information on the decisions to be made. Although the public s interest is sometimes served by protecting information from disclosure such as instances where national security, criminal investigations, or the proprietary information of a private company would be compromised the transparency of government actions and information plays a significant role in public oversight. Auditors can provide a direct link between transparency and the credibility of the government. Lawmakers and the public look to audits for assurance that government actions are ethical and legal, and that financial and performance reporting accurately reflects the true measure of operations. Probity The principle of probity calls for public officials to act with integrity and honesty. The erosion of public trust if public information and actions are not reliable undermines a government s legitimacy and ability to govern. The political, social, economic, and environmental costs to society can be extensive. The principle of probity also applies when information is disseminated to lending authorities or other principals who have an interest other than an ownership share. The consequences of violating the expectation for probity can be swift and shattering when the people s trust in the government, its institutions, and leadership is undermined. Equity The principle of equity relates to how fairly government officials exercise the power entrusted to them. Citizens grant their agents government officials both money and power to carry out their responsibilities. However, citizens are concerned with the misuse of government power, waste of government resources, and any other issues involving corruption or poor management that could negatively impact the government s obligations and service delivery to its citizens Today s Today s Accountant July - July September - September

57 Auditing and Governance The need for financial accountability has existed ever since it became necessary for one individual to entrust the care of his possessions or business to another. Committee to Review the Functioning of Financial Institutions ( Wilson Committee ), The public sector represents a principal-agent relationship. The officials acting as the principal s agent must periodically account to the principal for their use and stewardship of resources and the extent to which the public s objectives have been accomplished. An effective audit activity reduces the risks inherent in a principalagent relationship. The principal relies upon the auditor to provide an independent, objective evaluation of the accuracy of the agent s accounting and to report on whether the agent uses the resources in accordance with the principal s wishes. The need for a third party to attest to the believability (credibility) of the financial reporting, performance results, compliance, and other measures arises from several factors inherent in the relationship between the principal and its agent: 1. Moral hazards conflicts of interest: Agents may use their resources and authority to benefit their own interests, rather than the principal s interests. 2. Remoteness: Operations may be physically removed from the principal s direct oversight. 3. Complexity: The principal may not possess the technical expertise needed to oversee the activity. 4. Consequence of error: Errors may be costly when agents are stewards of large amounts of resources and are responsible for programs affecting citizens lives and health. Although public sector auditing has broadened focus from individual transactions to control systems and program operations, government auditing should retain the defining characteristics that are the basis of its credibility the value it provides to the governance process including: Unbiased orientation toward the subject under audit. Use of systematic processes to collect and analyze information. Comparison to criteria for formulating conclusions. Examples of criteria include standards, goals/targets, benchmarks, and laws. Use of widely accepted professional audit standards. The credibility of the audit activity strengthens public governance by providing for accountability and protecting the core values of government, which it does by assessing whether managers and officials conduct the public s business transparently, fairly, honestly, and in accordance with laws and regulations. Today s Accountant July - September

58 July- September Factors That May Enhance Internal Audit Effectiveness Audit Committees in the Public Sector Audit Committee Best Practices These are many but a better practice for internal audit function may be distinguished by the following key characteristics: 1. It s operationally independence: that is, internal audit is independent from the activities to audit. 2. It s appropriate positioning in the entity s governance framework to ensure the work of internal audit complements the work of other internal and external assurance and review providers. 3. It s business strategy that clearly articulates internal audit s future role and responsibilities. 4. The confidence of key stakeholders including the Permanent Secretaries, Chief Administration Officers, Town Clerks, Chief Executive, the Board (if applicable), the Audit Committee and senior management. 5. Undertaking of all audits in accordance with specified auditing standards. 6. Sufficiency of financial resources and access to internal audit staff with the necessary skills, experience and personal attributes to achieve what is expected of internal audit. 7. Provision of internal audit reports and other services, based on efficient and effective work practices that are valued by stakeholders. 8. Presence of effective Audit Committees. 9. Facilitation of communication between external audit and entity management. 10. Periodic assessments and reviews as part of a continuous improvement process. A significant recent corporate governance development in the private sector has been the use of audit committees to provide strengthened oversight of the financial and ethical integrity of publicly held companies. Because this oversight role is essential to effective governance, public sector entities may also look to the audit committee to provide a similar role in the government. The audit committee can greatly strengthen the independence, integrity, and effectiveness of government audit activities by providing independent oversight of the internal and external audit work plans and results, assessing audit resource needs, and mediating the auditors relationship with the organization. Audit committees also ensure that audit results are aired and any recommended improvements or corrective actions are addressed or resolved. Where an audit committee is established, depending on the characteristics of the jurisdiction, it should strive to: 1. Operate under a formal mandate, preferably legislation, with sufficient authority to complete its mandate. 2. Include independent members who collectively possess sufficient knowledge of audit, finance, risk, and control. 3. Be chaired by a member who is not the individual to whom a head of audit reports administratively. 4. Assess the effectiveness of the organization s governance, risk management, and control frameworks and legislative and regulatory compliance. 5. Provide oversight to the organization s internal and/or external audit activity, including ensuring adequate coverage and resources, approving internal audit plans, and approving the appointment or termination of internal and/or external auditors. 6. Oversee the organization s financial reporting and accounting standards. 7. Provide a direct link and regular reporting to the organization s governing board, council, or other governing authority. Effective Public Sector Governance could have led to the avoidance of the following suspected or actual scandals as reported by the media in Uganda from 1998 to Uganda Commercial Bank Shares Junk Helicopter Procurement Valley Dam Development Funds Ghost Soldiers Payroll 2005 Grants from the Global Fund for AIDS, Tuberculosis and Malaria 2007 Fuel Supply Contract Global Alliance for Vaccine and Immunization (GAVI) Funds 2007 Commonwealth Heads of Government Meeting (CHOGM) funds 2008 Temangalo Land Purchase 2010 Uganda National Social Security Fund (NSSF) finances National Forestry Authority Case 2011 Bribery Allegations involving Several Senior Government Officials and Oil Exploration Companies 2011 UBC Mast Theft Allegations Involving a Senior Government Official 2012 Inflating of Compensation allegations involving several senior government officials Conclusion Good financial management and accountability are essential to effective service delivery. There is a role for us all to play as Auditors. Because Government Auditing is key to good public governance, it is crucial to maintain an appropriate configuration with an appropriately broad mandate to achieve the organization s governance objectives. The government audit activity s mandate should be as broad as possible to enable it to respond to the full scope of the government s or governmental unit s activities. Full audit coverage is frequently provided by complementary external and internal audit entities. Ultimately, government auditing strengthens public governance by providing for accountability and protecting the core values of government ensuring managers and officials conduct the public s business transparently, fairly, and honestly, and with equity and probity. Audit Committees on the other hand will not only assist on accountability issues but will in the long run contribute too, to improved corporate governance and service delivery in the Government of Uganda. I encourage elected and appointed officials at all levels of government to support effective audit and audit committee activities by establishing independent audit functions that meet all of the key elements. 56 Today s Accountant July - September 2012

59 RESOLVING TAX DISPUTES In Duke of Westminster V CIR 1, Lord Tomlin s judgment includes the celebrated dictum that, every man is entitled to order his affairs so that the tax attaching under the appropriate Acts is less than it would otherwise be By Cephas Birungi Advocate/Partner, Birungyi, Barata & Associates In the 1997 case of CIR V Mc Guckian, Lord Steyn observed that, while Lord Tomlin s words still point to a material consideration, namely the general liberty of the citizen to arrange his financial affairs as he thinks fit, they have ceased to be canonical as to the consequences of a tax avoidance scheme , 19TC 490 Article 152 (1) of the Constitution of the Republic of Uganda provides that, No tax shall be imposed except under the authority of an Act of Parliament. The Acts define tax differently: The Income Tax Act Cap. 340 defines tax to as, any tax imposed under this Act. The Tax Appeals Tribunal Act Cap. 345 defines tax as including duty, rate, levy or other imposition. It should be noted that the various Acts under which a tax is imposed will usually define the type of tax being imposed. What are tax disputes? These are either objections or appeals against decisions of the tax authority regarding the application and effect of the tax laws on affairs of the taxpayer. In other words, where there is no objection to the decision of the authority or an appeal against any of its decisions then there is no dispute. Resolution of Tax Disputes Tax disputes may be resolved in any of the following ways: Internally, by the Uganda Revenue Authority (URA) Through Litigation Objections processes Civil Procedure; through Alternative Dispute Resolution (ADR) e.g. Arbitration and Mediation or the usual adversarial litigation. Criminal Procedure. OBJECTIONS Income Tax Act A taxpayer who is dissatisfied with an assessment may lodge an objection to the assessment, with the Commissioner, within 45 days after service of the notice of assessment 1. The objection should be in writing and should state precisely the grounds upon which it is made. 2 A taxpayer may apply to the Commissioner in writing to extend the time for lodging an objection. The grounds of extension of time include; absence from Uganda, sickness and any other reasonable causes. 3 The Commissioner may allow or disallow the objection and as soon as the objection decision is made the same should be communicated to the taxpayer as soon as practicable. 4 Where an objection decision has not been lodged within 90 days, the taxpayer may elect to treat the commissioner as having made a decision to allow the objection. 5 Value Added Tax (VAT) A person dissatisfied with an assessment may within 45 days after receipt of notice of the assessment decision, lodge an objection to the Commissioner General.6 The objection should be in writing and should state in details the grounds of objection. The time within which to object may be extended if the taxpayer has grounds for doing so. Such grounds include; absence from Uganda, sickness and any other reasonable cause. 7 The Commissioner General is required to serve the taxpayer with an objection decision within 30 days after receiving the objection. The taxpayer may after the expiry of the 30 days elect to treat the Commissioner General as having made the decision to allow the objection. 1 Section 99 (1) of the Income Tax Act Cap Section 99 (2) of the Income Tax Act Cap Section 99(3) of the Income Tax Act 4 Section 99 (6) 5 Section 99 (7) 6 Section 33B (1) of the VAT Act Cap Section 33B (3) of the VAT Act Cap 349 Today s Accountant July - September

60 East African Customs Management Act (EACMA) Under the East African Customs Management Act 1, a person directly affected by the decision of the Commissioner or any other officer on matters relating to Customs shall within 30 days from the date of the decision or omission lodge an application for review of that decision or omission. The Commissioner may accept an application lodged after 30 days upon proof that the taxpayer was absent from the partner State, was sick or has a reasonable explanation for failing to lodge his/her objection within the specified 30 days. The Commissioner is given 30 days to communicate his/her decision regarding the objection. Where the Commissioner has not communicated his her decision within 30 days, the Commissioner shall be deemed to have allowed the application. It should be noted that at the request of the taxpayer, the Commissioner can release the goods in respect of the dispute, upon payment of the duty or provision of sufficient security for the duty. Differences in the Objection Procedure Under the Income Tax Act and the VAT Act the objection should be made within 45 days after the assessment yet under the EACMA the objection should be made within 30 days. 1 Section 299 of the East African Customs Management Act Under the Income Tax Act the Commissioner should respond within 90 days after receipt of the objection while under the VAT Act and EACMA the Commissioner must respond within 30 days. Under the Income Tax Act the taxpayer can elect to treat his objection as allowed if, after 90 days no objection decision has been made by the Commissioner General while under VAT Act the taxpayer can elect after 30 days. There is no requirement for election under the East African Customs Management Act. However, where the Commissioner does not respond within 30 days, the law deems the objection to have been allowed. Statutory Notice to Uganda Revenue Authority In The Commissioner General Vs Meera Investments Ltd 2 the Supreme Court laid out the following principles: The High Court has original jurisdiction and can hear tax disputes. Uganda Revenue Authority may sue or be sued in its corporate name. In this respect and as a scheduled corporation, it would be entitled to the right of receiving a statutory notice under the Civil Procedure and Limitation (Miscellaneous Provisions Act, Cap 72). However, the rights, powers and obligations prescribed under the Uganda Revenue Authority Act are not exclusive to the Authority. The Commissioner General is a competent party to a suit under these Acts and if he or she can sue to recover tax, he or she can be sued by a party unhappy with the tax assessments made by the Commissioner General or officers under him or her and in this case, a statutory notice is NOT required. Appeals Under the Income Tax Act 3 ; a taxpayer who is dissatisfied with an objection decision may either: Appeal the decision to the High Court OR Apply for review of the decision to the Tax Appeals Tribunal An appeal to the High Court is made after lodging a notice of appeal within 45 days after service of the objection decision 4. A notice of appeal should be served to URA within 5 days 5. Appeals to the High Court are made on questions of law only and the notice of appeal must state the questions of law that will be raised on the appeal 6. It is provided under the Income Tax Act 7 that any objection to an assessment, any appeal of an 2 SCCA No 22 of Section 100 of the Income Tax Act 4 Section 100 (2) of the Income Tax Act 5 Section 100 (3) of the Income Tax Act 6 Section 100(4) of the Income Tax Act 7 Section 102 of the Income Tax Act objection decision to the High court, any reviews of an objection decision by a tax tribunal, or any appeal from the decision of the High court or tax tribunal in relation to an objection decision, the onus is on the taxpayer to prove, on the balance of probabilities the extent to which the assessment made by the Commissioner is excessive or erroneous. Under the VAT Act, the taxpayer must first appeal to the Tax Appeals Tribunal before lodging an appeal to the High Court. Under the VAT Act 8, a person dissatisfied with an objection decision may within 30 days after notice of the objection decision lodge an application to the Tax Appeals Tribunal for review of the decision. It should be noted that a taxpayer, before lodging the application with the Tribunal must pay 30% of the tax in dispute or that part of the tax assessed not in dispute, whichever is greater 9. A party who is dissatisfied with the decision of the Tax Appeals Tribunal may within 30 days after being notified of the decision, lodge a notice of appeal with the High Court 10. The party so appealing is required to serve the other party with a copy of the notice of appeal before the Tribunal. An Appeal to the High Court shall be made on a question of law only and notice of appeal shall state the questions of law that are to be raised on appeal. The onus is on the person objecting, to prove that an assessment is excessive. Under the East African Customs Act 11, a person dissatisfied with the decision of the Commissioner may appeal to the Tax Appeals Tribunal. A person intending to lodge an appeal shall lodge the appeal within 45 days after being served with the decision, and shall serve the commissioner with a copy of the appeal 12. Alternative Dispute Resolution (ADR) Alternative Dispute Resolution (ADR) is divided into; arbitration, mediation and conciliation. Arbitration Arbitration is provided for under the Arbitration and Conciliation Act Parties are required to appoint an independent party (expert) to preside over the matter. Arbitration normally arises from an arbitration clause in the agreement. Arbitration clauses are normally found in Oil Agreements (Production Sharing Agreement) but other commercial contracts have arbitration clauses too. It is important to note that the court does not intervene in matters handled under the Arbitration and Conciliation Act. 8 Section 33C (1) of the VAT Act 9 Section 33C(3) of the VAT Act 10 Section 33D(1) of the VAT Act 11 Section 230 of the East African Customs Management Act 12 Section 230(2) of the East African Customs Management Act 58 Today s Accountant July - September 2012

61 Advantages of Arbitration Arbitration is faster compared to court proceedings. The matter is presided over by experts in the field. The conflicting parties have an opportunity to appoint the judge in the dispute. It is cheaper than litigation. Corporate relations are preserved. Disadvantages of Arbitration You can only apply to set aside the arbitration award. It can be costly (Heritage Oils vs URA Advocates-fees are in the region of USD.4M). Mediation or authority. A taxpayer who has lodged an application to the Tax Appeals Tribunal is required to deposit 30% of the tax assessed or that part of the tax assessed not in dispute, whichever is greater. 13 Applications to the Tribunal Applications to the Tax Appeals Tribunal should; Be in writing Include a statement of the reasons for the application Be lodged with the tribunal within 30 days after the person making the application has been served with notice of the decision. Upon application in writing by the taxpayer, the Tribunal may extend the time for a review of a taxation decision. The taxpayer must pay the prescribed fee to TAT. The taxpayer is required to serve the decision maker (URA) with a copy of the application within 5 days after lodging the application with the tribunal. Grounds for review by the Tribunal Where the application for review relates to a taxation decision that is an objection decision. The applicant is unless the tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates. Mediation involves parties in a dispute appearing before a third party appointed by court, to resolve the dispute. The proceedings are informal and confidential therefore any submission made during mediation cannot be relied on in court. It is now mandatory that all matters filed at the High Court Commercial Division are first referred to mediation before being heard by a judge. The main reason for mediation is to give parties a chance to resolve the disputes before they escalate into litigation. Advantages of Mediation Involves less costs It is time saving Fosters improved working relations between the parties invovled Creates a better understanding of the other party s position There is no award of costs Proceedings are informal Litigation Litigation may fall under civil and criminal law. Criminal procedure generally involves prosecuting a taxpayer who has contravened the sections of the various tax Acts e.g. the Income Tax Act, VAT and East African Customs Management Act. The usual procedure will apply as in the courts. Issues of criminal jurisdiction apply to determine which court is to hear the case. A taxpayer may appeal the decision of URA in the Civil Courts or before the Tax Appeals Tribunal. The normal process of hearing a case applies in the Courts of Record subject to any qualifications that may have been imposed by the Tax Acts. The process in the Tax Appeals Tribunal is less formal. The Tax Appeals Tribunal (TAT) The Tax Appeals Tribunal is established by law, i.e. the Tax Appeals Tribunal Act Cap. 345 in fulfillment of Article 152(3) of the Constitution of the Republic of Uganda. The mandate of the Tribunal as laid in the Act is to expeditiously hear and resolve taxation disputes between taxpayer and Uganda Revenue Authority. The Tribunal is required to be independent and should not be subject to the direction or control of any person After service of the application, URA is required to lodge the following documents within 30 days: The notice of the decision A statement of reasons giving the reasons for the decision(s) Any other relevant documents Burden of Proof In proceedings before the Tribunal, the applicant has the burden of proving that; Where the taxation is an objection decision in relation to an assessment, the assessment is excessive; or In any other case, the taxation decision should not have been made or should have been made differently. Powers of the Tribunal The Tribunal has permission from the High court to summon witnesses and take evidence on oath. The Tribunal also has powers to: Proceed in the absence of a party who has had reasonable notice of the proceedings. Adjourn the hearing of the proceedings from time to time. Receive affidavit evidence. Make orders as to costs. Procedure at the Tax Appeals Tribunal Proceedings before the Tribunal are conducted with as little formality and technicality as possible. The Tribunal should not be bound by the rules of evidence. The applicant may appear in person or may be represented at the Tribunal. 13 Focus Telecom Vs URA Today s Accountant July - September

62 July- September Tax Agent Registration Garry D. Kizito Supervisor, Business Process Analysis, Domestic Taxes Modernization Project, Uganda Revenue Authority Q. How does a taxpayer nominate a Tax Agent? A. When applying for a Taxpayer Identification Number (TIN), a taxpayer is required to nominate a tax agent under Section H of the TIN application form. The applicant is expected to nominate one tax agent for each tax type applicable to him. This means that the applicant may nominate different tax agents for different tax types or may also nominate the same tax agent for more than one tax type. The applicant may nominate tax agents for the following tax types, where applicable; Value Added Tax (VAT), Local Excise Duty (LED), Income Tax (IT), Customs Duties, Pay As You Earn (PAYE), Withholding Tax (WHT), Gaming & Pool Betting Tax (GPBT), and Stamp duty, as illustrated below: Illustration 1 Tax Type* Agent Legal Name* Agent TIN* Value Added Tax ABC Ltd Income Tax XYZ Ltd PAYE LMZ Ltd Today s Accountant July - September 2012

63 Q. If I am already registered, how do I amend my TIN registration details, to nominate a tax agent? A. An already registered taxpayer may amend his TIN registration details to nominate tax agents, by logging onto his web portal account and using the E-Amendment functionality. On page 1, the of the web portal account, the taxpayer will select the option, Tax agent details. This selection will activate Section I on page 4. The taxpayer then enters the tax agents details in the table provided, as illustrated above. Upon submission of the request to amend the tax agent details, the taxpayer will receive an acknowledgement receipt. A copy of the receipt is sent to the taxpayer s . Q. What kind of person can a taxpayer nominate as a tax agent? A. The taxpayer can only nominate a person registered with the Uganda Revenue Authority (URA), as a tax agent. Note that a TIN does not mean a tax agent is automatically registered with URA. Q. What is the criterion for registration with URA, as a tax agent? A. Before a person registers with URA, as a tax agent, he/she must first register with URA, for tax purposes; the person must have a TIN. Q. What is the procedure for registration as a Tax Agent? A. i. Login to your web portal account. ii. From the e-services on the left menu, select Tax Agent > Registration iii. In the application form, select all the tax types for which you require to be registered as a tax agent. The tax types for which a tax agent may be registered include those listed in question 1 above. iv. For each tax type selected, enter a proposed date of registration. v. Upon submission of the application form, you will immediately receive an acknowledgement receipt. A copy of the receipt will be sent to your registered , as confirmation that URA has received your application form. Q. How do I confirm whether my application has been approved or rejected? A. i If URA is satisfied that the applicant is fit and proper to be registered as a tax agent, an approval notification will be sent to the applicant s , or by SMS. ii. Where an application is rejected, a rejection notification, with reasons, will also be sent to the applicant s , or by SMS. iii. The applicant may also track the status on his application using the Track status service provided on the URA web portal home page. Q. After registering as a Tax Agent, how do I start transacting on behalf of my clients? A. The approval notification sent to the applicant shall contain a login Id and a password to enable you login to the Tax Agent Account on the URA web portal. After logging in as a tax agent, you will be able to transact on behalf of your clients. Q. How does a Taxpayer benefit from nominating a registered tax Agent? A. i. Nominating a registered tax agent minimizes the risk of dealing with fraudulent persons. ii. The tax agent will transact on your behalf, in only tax types for which you nominated him. iii. You will be the sole manager of your taxpayer s web portal account since you will no longer share your password with your various tax agents. iv. As the taxpayer, you will be able to track every transaction carried out by the taxagent since a copy of all transactions will be sent to your . v. The tax agent will be able to transact on your behalf, at any time. This includes attending to urgent transactions like objections, refunds, and audit processes, since the URA web operates 24 hours a day. vi. Through an amendment, you will be able to add or decline any tax agent as and when the need arises. A declined agent will no longer transact on your behalf. Q. What does one benefit by registering as a tax Agent? A. i. You will no longer have to memorize or keep a list of all your clients passwords, to be able to transact on their behalf. ii. You will only be required to change your tax agent s password upon expiry. iii. A list of registered tax agents will be published on the URA web portal. iv. You will be able to transact on behalf of your clients, any time. v. Within your tax agent s account you will be able to: a. Submit tax declarations/returns, including amended returns on behalf of all your clients. b. View your clients tax ledger balances. c. View and download copies of all returns that your clients have submitted to URA. d. Register payment on behalf of your clients. e. Track the status of all your clients transactions for the specific tax type. However, the Tax Agent will not be able amend the registration details of their clients.this will only be done from the taxpayer s account. f. Register or deactivate any tax type as and when the need arises. Today s Accountant July - September

64 July- September By Albert Beine Senior Tax Manager, PKF Uganda Withholding Tax: Tax Planning Measures from a Uganda perspective Withholding tax (WHT) is a tax deducted at source, by one person, upon effecting payment to another person. The person effecting the payment and hence withholding the tax is referred to as the Withholding Agent while the recipient of the payment after tax is the Payee. In Uganda, the law specifies the persons required to withhold the tax as well as those on whom the tax should be imposed. Forms of Withholding Tax in Uganda Withholding tax is discussed in three broad categories: Withholding Tax on Employment Income. Withholding Tax on Gross Payments/Earnings (Other than Employment Earnings). Withholding Tax on Supplies and Imports. Withholding Tax on Employment Income This tax is deducted by the employer, from the employment earnings of every liable employee, on a monthly basis, under the Pay As You Earn (PAYE) scheme. Withholding Tax on Gross Payments to Nonresidents Withholding Tax on International Payments: Tax is imposed on every non-resident who derives any dividend, interest, royalty, natural resource payment or management charge, from sources within Uganda. The tax is withheld by the Payer at 15% of the gross amount before payment/remittance of the amount is effected. Withholding Tax on Payments to Entertainers and Athletes: Tax is imposed on every non-resident entertainer or athlete who derives income from any performance in Uganda. The tax is charged on 15% of the gross amount of the remuneration derived by the public entertainer/athlete or receipts derived by any theatrical, musical or other group of entertainers/athletes. The tax is levied on the group but every member of the group is severally liable for payment of the tax. The obligation to withhold the tax lies with the person making the payment-the promoter, agent, or such similar person. 62 Today s Accountant July - September 2012 Withholding Tax on Payments to Contractors or Professionals: Tax is imposed on every non-resident deriving income under a Ugandansourced service contract. This is a contract in which the primary

65 purpose is to perform services which give rise to income sourced in Uganda. Any goods supplied under the contract are only incidental to the purpose. For purposes of this tax, the Ugandansourced service contract does not include an employment contract. The tax is charged on 15% of the gross amount of payment. The person making the payment should withhold the relevant tax before effecting payment. Any person who enters into a service contract with a nonresident is required to notify the Commissioner General of the nature and duration of the service contract, and disclose the particulars of the nonresident to whom the payment is to be made, as well as the full contract value. Subject to this, the Commissioner General may require the payer to withhold the relevant tax at a rate specified in the Commissioner General s notice. Withholding Tax on Gross Payments to Residents Withholding Tax on Interest Payments: A resident who pays interest to another resident is required to withhold tax at 15% of the gross amount of the interest paid. However, Withholding Tax is not applicable where interest is paid by a natural person (individual) to a Financial institution, or paid by a Company to an associated Company. Where applicable, the tax is charged on 15% of the gross amount. It is a final tax where it is withheld by a Financial Institution (e.g. a Bank) on interest paid to a resident. Withholding Tax on Dividends: A resident Company which pays a dividend to a resident shareholder is required to withhold tax at 15% of the gross amount of the dividend paid, except where the dividend income is exempt from tax in the hands of the shareholder. Where the shareholder is a natural person (resident), the tax withheld on such dividend income is final and not refundable. Withholding Tax on Supplies and Imports Withholding Tax on Goods and Services: Where the Government of Uganda, a Government Institution, a local Authority, a Company in which Government has interest or any person designated in a notice issued by the Ministry of Finance, pays amounts exceeding one million shillings, to any person in Uganda for the supply of goods, materials or services, the payer is required to withhold 6% of the gross amount. The threshold of one million shillings is in respect of the total contract value, implying that separate supplies which constitute one contract, are subject to the 6% withholding tax, regardless of the amount paid per supply or transaction. Withholding Tax on Professional Fees: With effect from 1 July 2001, a resident who pays management or professional fees to a professional is required to withhold tax at 6% of the gross amount of payment. Excluded from this provision are professionals whom the Commissioner General is satisfied have regularly complied with the obligations imposed by the Income Tax Act, and professionals on payrolls. Withholding Tax on Imports: Whoever imports goods into Uganda is liable to pay Withholding Tax, at the time of importation, at 6%, based on Customs Value in Uganda. This provision, however, does not apply to categories of imports like petroleum or petroleum products; furnace oil, lubricants other than cosmetics, and fabrics or yarn manufactured from petroleum products, plant and machinery, drugs, scholastic material, imports of exempt organizations/persons, raw materials imported by a manufacturer solely for generating finished products, and imports who are exempted from WHT. Today s Accountant July - August

66 July- September Tax Planning Measures for Withholding Tax Tax planning is a process of putting in place tax strategies to exclude, defer or reduce the amount of taxes paid, with a view of ensuring tax compliance with the tax laws and regulations of the land. For withholding tax purposes, a number of tax planning measures can be implemented to ensure full compliance. Below, we highlight on TEN measures that could help a taxpayer to comply with WHT laws and regulations; 01 Get a Withholding Tax exemption from URA: The Act provides that WHT under Sect 119 and Sect 119(A) shall not apply to a taxpayer who has been exempted from WHT. Since the introduction of e-tax by URA, the Authority has analysed the compliance status of all taxpayers. Any taxpayer who is fully compliant is included on the list of taxpayers exempted from WHT. The list is issued twice a year (1 July to 31 December and 1 January to 30 June). 02 Keep Track of all Tax Credit Certificates (TCC s): As earlier indicated, where WHT is an advance tax, it is a credit to the payee. It is used to reduce your tax payable at the end of the financial year. It is therefore important to ensure that you keep all your TCC s, issued alongside remittances/tax paid to URA, as they are proof that tax was withheld from you. 03 Use of lower rates of Withholding Tax under DTA s: Currently, Uganda has Double Taxation Agreememnts (DTA s) with eight countries namely; The United Kingdom (UK), India, Mauritius, Italy, 64 Today s Accountant July - September 2012 South Africa, Netherlands, Denmark, and Norway. As a tax payer, there is need to know the rates applicable whenever you are making a payment to any of the above countries. Save for The UK, the rates applicable to the other countries is 10%. 04 Split Foreign Invoices between Payments subject to WHT and Payments not subject to WHT: When making an international payment for services, WHT is applicable. It is therefore important to ensure that foreign invoices received by taxpayers can clearly distinguish between a payment relating to goods and a payment relating services. As a planning measure, such invoices can be split between payments subject to WHT and payments not subject to WHT. 05 Inform the Commissioner whenever you enter into an Agreement with a non-resident, for provision of services which give rise to income sourced in Uganda: In accordance with Sect 121 of the Act, whoever enters into agreement with a non-resident, for the provision of services which give rise to income sourced in Uganda shall, within thirty days of the date of entering into such agreement, notify the Commissioner in writing, about the nature of such an agreement; the likely duration of the agreement, the name and postal address of the non-resident to whom payments are to be made, and the total amount estimated to be payable, under the agreement, to the non-resident. 06 Pay the Amount Withheld at the right time: It has been noted that a number of Withholding Tax Agents withhold tax but do not remit it by the due date. Tax payers need to know that like all tax heads, Withholding Tax deducted has a due date for payment. The tax deducted must be remitted to URA by the 15th day of the month after the month in which the tax was deducted. 07 Keep track of exemption status of your suppliers: If you are a Withholding Tax Agent, you need to keep track of the exemption status of your suppliers, to avoid deducting WHT from a supplier who is already exempted from WHT. The updated list of taxpayers who are exempted from WHT can be easily accessed from URA webportal.

67 08 Know when WHT is Final Tax and when it is an Advance Tax: WHT is final where it has been withheld under Section 117 or 118. Where this is the case, WHT is a final tax. (a) No further tax liability is imposed upon the taxpayer in respect of the income to which the tax relates. (b) Income is not combined with the other income of the taxpayer for the purposes of ascertaining chargeable income. (c) No deduction is allowed for any expenditure or losses incurred in deriving the income. (d) No refund of tax shall be made in respect of the income. 10 Maintain and keep available for inspection by the Commissioner, records in relation to each year of Income: 09 Make adjustments to Income Tax self- assessment: When preparing your final Income tax self assessment return, always add up all the Withholding Tax that was deducted from you at source. This will enable you to utilize the WHT to reduce your balance of tax payable. Proof of tax withheld in form of TCC s is paramount. In case of an individual whose only source of income is employment, Section 128(5) of the Act stipulates that the individual is entitled to a refund of WHT, suffered at importation. The Revenue Authority has powers to inspect your records with a view of ascertaining your compliance status. It is therefore important that all taxpayers keep a record of all Withholding Tax transactions. This should be done by both the WHT agents and the payees. Today s Accountant July - September

68 July- September Accountancy Profile Women too are taking up a sizeable portion of the workplace especially in the quintessential professions like medicine, law and engineering and no longer relegated to departments of secretarial, communication, psychology, social works and administration. 66 Today s Accountant July - September 2012

69 A woman of aspiration and drive- CPA Margaret Nalwoga Atugonza It s a man s world, as the ageless adage goes but that isn t entirely true lately; women too are taking up a sizeable portion of the workplace especially in the quintessential professions like medicine, law and engineering and no longer relegated to departments of secretarial, communication, psychology, social works and administration. More and more women are climbing the corporate ladder just as fast as the males. Take for example, Margaret Nalwoga Atugonza, the audit manager at World Vision Uganda. From her poise and directness as she sits for this interview, stares around to accustom self with the surroundings- it goes without saying that she is an astute and focused lady with a mission to leave an undisputed footprint of exemplariness. Her laptop continuously beeps with incoming mail and her phone (which she forcefully redirected to vibrate) because it would go on for forever; clear indicators of being used to multitasking with people and gadgets alike. Seeing all this, one wouldn t believe that Nalwoga comes from a very basic background, one that was punctuated with hardships and toil but one she acknowledges shaped her into the person she is today. Born 2nd November 1980 to Mr. and Mrs. Paul and Katherine Mwanga and the 2nd last child amongst a family of 7, work has always been a virtue imparted to us at an early stage. From home chores to neighborhood activities to watching our parents diligently execute their every duties, we always had something to do, Nalwoga remarks in hindsight. Nalwoga attended Mityana Modern SS (O Level) and Namirembe Hillside for (A Level), but with 14 points at S6, she didn t have the grades to attain a government sponsorship. I later enrolled for a private sponsorship for B Com and was admitted but my brothers who had already struggled to pay for my (O and A levels) advised me to opt for ACCA. Fred Lwanga (formerly UCB now Stanbic) cautioned me about the advantages of ACCA or CPA like the ease to get a job after completion of Level 1 and thus the ability to pay for the rest of levels individually. I took it on instantly. For money, I did all kinds of odd jobs here and there like packaging in export companies, cleaning people s homes and taking care of their kids. Nalwoga adds that because CPA was more expensive then, she applied at ATCU at Team Business College Bombo road in 2002 on a weekend program and by then she had a permanent employer- Sonya Mwadime, operations manager AMFRI that handled exportation of fruits. In Sept 2002, Mrs. Edrida Bampata introduced me to Mr. Fulgence Mungereza of Mungereza & Karisa audit firm and even though I hadn t sat my exams was offered a job in October as a receptionist. By June 2004, she had finished ATCU (Accounting Technician Certificate Uganda) and left the reception for the accounts department and also enrolled for CPA. In December, she got exempted from 7 papers because of ATC because she had already done ATCU and only required 3 papers to finish CPA 2 and started working in audit at Mungereza & Karisa as an audit assistant in January She finished CPA 3 in June 2005 but failed 3 papers in CPA 4 which she redid and passed in By June 2006, I left Mungereza & Karisa for Uganda Finance Trust MDI as an internal audit officer. From then on, I started getting head hunting jobs until I joined Ernst and Young as an auditor 1 but was auditor 3 by end of As any accountant will testify, joining any of the Big 4 auditing firms was a blessing- Ernst & Young, PriceWaterHouseCoopers, KPMG or Deloitte&Touche till I later left for UGAFODE as chief internal auditor and it was here that I met the likes of Dr Suruma who harnessed my skills at board presentation, confidence and dealing with high level management, she elaborated. By 2010, Nalwoga took up the mantle of audit manager at World Vision Uganda and some of her key achievements include enabling her department pass the Quality Assurance Review for 3 years now and because World Vision has international partnerships, she has led her department to have best reports on overall throughout all the respective branches. Accounting has and will forever be my first love especially because my father was an accountant in Makerere University in the late 80s. My first pay check was 120,000 which is worlds apart from the more than 5m pay check I hold right now. I wedded in 2008 to a fellow CPA- Julius Atugonza who is the finance manager Grants at Mbarara University and we have a beautiful daughter. In the next 3 years, I would like to be regional audit manager covering 3-5 countries and in 8 years time I would like to open my own audit firm with my husband, she said. Nalwoga adds that she is now a role model for many young girls and has already enrolled 2 nieces straight from S6 to ATCU and CPA. Today s Accountant July - September

70 July- September Emotional Competence and Employee Performance Self-Awareness By CPA Susannie Teega, Technical Officer, ICPAU Motivation Self-Confidence Self-Regulation Empathy Emotional competence enhances our personal, relational and professional performance and ultimately helps us attain an overall increase in our quality of life. Emotional competence determines how we manage ourselves. Emotional competencies are broadly categorized into two namely; personal competence and social competence. Personal competence determines how one manages him/herself while social competence determines how one handles relationships. Emotional intelligence The higher one rises in an organizational hierarchy, the more essential emotional intelligence becomes, for critical for job performance. Emotional intelligence refers to an assortment of emotional, personal, and interpersonal abilities and skills that influence one s overall capability to effectively cope with environmental pressures and demands. Unlike intelligent quotient (IQ) which develops from childhood, emotional intelligence increases throughout adulthood; it s learned as one matures. Emotional intelligence is just as important as technical skills for one to succeed in today s customer-focused, team-centred, and ever-changing organisational climate. Employees need emotional intelligence in order to optimize their performance and maintain their competitive edge. Emotional competence is a learned capability based on emotional intelligence that results in outstanding performance at work. Emotions All human beings hold the following emotions at any one time; empathy, self confidence, achievement drive, to mention but a few. Each of the mentioned emotions is central to performance and is beneficial to all human beings if they cultivate them in themselves. Emotions at workplaces generally fall into the category of positive (good) and negative (bad) emotions. Positive emotions are those feelings of an individual that are favourable to the attainment of organisational goals while negative emotions are perceived to be destructive for the organisation. Negative feelings have adverse effects on job performances. Anger often leads to aggression towards colleagues while sadness leads to dissatisfaction with the job. On the other hand, positive emotions increase creativity, encourage helping behaviour and cooperation, and reduces aggression both against the organisation and colleagues at work. Mental ability, personality and emotional intelligence are associated with job performance rating. While exploring the role of personality, certain variables like extraversion, agreeableness, conscientiousness, emotional stability and openness to experience are associated with job performance. The dimensions through which Emotional Intelligence is applied in practice by employees include: Self-Awareness, Self-Regulation, Empathy, Self-Confidence, and Motivation. 68 Today s Accountant July January - September - March 2012

71 Self Awareness Self Awareness is being aware of how your emotions affect your performance. This will help you respond intelligently to emotional triggers. When self-awareness is lacking, managers easily miss the main event when appraising their staff and focus on performance issues that are secondary, off the mark, or simply meaningless. To carry out excellent performance appraisals, you need to address your self-awareness and, if necessary, do some building in this area. One of the best ways to build your self-awareness is to carefully consider the feedback that you receive from the credible sources in your life. This doesn t mean that you have to roll over every time someone says something about you that doesn t sit well, but it does mean that you should truly listen to what others are saying and then try to make an honest judgment. Empathy Self Regulation Self Regulation is an important aspect that determines performance. Unlike other competencies, time management, self regulation cuts across all levels of employment i.e. from top management to the sweeper. Time management is a must competence that has to be possessed by everybody of an organisation. This is because when one manages his/her time well, he/she in turn helps others manage their time. This means that employees ought to have self-discipline as they go by their work in such way that they have fewer interruptions so as to manage their time efficiently. For instance, if the Front Desk Officer arrived late for work, it means the rest of the employees will equally be late because they will have to wait until the main entrance is open hence having access to their various work stations. Empathy as one of the key elements of emotional intelligence is central to good management. It is difficult to have a positive impact on others without first sensing how they feel and understanding their position. People who are poor at reading emotional cues and inept at social interactions are very poor at influencing others in the workplace. Empathy is an essential emotional guidance system which pilots us in getting done. It is beyond mere survival because it is critical for superior performance wherever the job focus is on people. However, some people may seem to lack empathy by hard lining and resisting the urge to help, this is not necessarily a bad thing in the workplace. For instance, managers who go overboard in focusing on relationships or catering to employees emotional needs at the expense of organizational requirements tend to perform poorly. Some managers even tune out the feelings of those they work with simply to avoid having to take those feelings into account, a tactic that can make them seem cold. Today s Accountant July - September

72 July- September Self-Confidence Self-confidence is extremely important in almost every aspect of our lives, yet so many people struggle to find it. Self-confidence can reveal itself in a strong self-presentation. Highly self-confident people seem to exude charisma, inspiring confidence in those around them. Thus, high levels of self-confidence set apart the best performers from average ones. People with self-confidence typically see themselves as those who are able to take on challenges and to master new jobs or skills. They believe themselves to be catalysts, movers, and initiators, and feel that their abilities stack up favourably in comparison to others. For people who lack self-confidence, every failure confirms a sense of incompetence. Absence of self-confidence can manifest itself in feelings of helplessness, powerless, and self-doubt. Self-confident people inspire confidence in others: their audience, their peers, their bosses, their customers and their friends. Gaining the confidence of others is one of the key ways in which a self-confident person finds success. Motivation In today s competitive business environment, there are key factors in the employee s workplace environment that impact greatly on their level of motivation and performance. Many variables influence people s desire to do something in the work environment. The variables may include; their own needs, factors present or absent in the environment itself, the behaviour of their immediate managers. Therefore, managers and team leaders have a responsibility for motivating their juniors in the workplace, since well motivated employees work so much better and are so much productive and creative when they approach their work with interest. Developing Emotional Intelligence Organisations should look at developing their employees emotional intelligence in areas where they are weak, particularly, for those who could become leaders. Management of different organisations can create a culture that is emotionally intelligent by having a management model which gives an organisation a competitive advantage over others, e.g. by appreciating and rewarding (through study opportunities, certificate of recognition, promotions) employees who display desired attributes, or by helping employees to develop their emotional intelligence. Without leadership support, people who possess Emotional Intelligence won t display their competences. If you create a culture where Emotional Intelligence is not appreciated, people will go underground and take their talent with them. Organisations should develop Emotional Intelligence by mentoring and coaching, and also supporting Emotional Intelligence initiatives. To encourage superior workplace performance that is required in today s competitive business environment, managers and supervisors have to develop a range of factors that influence employee motivation and performance including, ability to engage employees in mutual goal setting, clarifying role expectations and providing regular performance feedback. Performance evaluation of employees should be based on setting clear and attainable goals that encourage emotionally intelligent behaviour. Conclusion Emotions are not only a deep-seated part of work life but play an important role in one s job performance. An employee s emotions and overall temperament has a significant impact on his/her job performance, decision-making skills, team spirit, leadership and turnover. This is because employees bring their feelings of anger, fear, love and respect with them when they come to work. Emotions matter because they drive one s performance. Emotions are a man s most reliable indicators of how things are going on in his/her life. Therefore, today s managers ought to put in place an emotionally competent workforce to match with the competitive business environment. 70 Today s Accountant July - September 2012

73 By CPA Frederick Kibbedi, Partner, AA & L Associates O n 22nd December 1952 my mother was born and by 1962 when we got our independence, she was 10 years old. I was born in 1972, 10 years after independence. Uganda will be 50 years this October. Think about it My mother will be 60 this year, when Uganda is 50 and I, 40. But more interesting is the fact that my first born will be 10 this October hmmmn... At the time of our independence, a virtuous country was handed down to us. My father had just turned 20 and his father my grandfather had just retired as school headmaster, into politics. It is said that while rushing to a Busoga District Council meeting one day, the bus [the only one plying that route] nearly left him so he abandoned his slow bicycle to catch the bus. An important resolution to lend money to the suffering people of China was to be passed and he wanted to be part of that history. 50 years later China is the second largest economy in the world. And Uganda? 50 years from now, the population of this country will hit 130 million. At independence there were just 6.5 million people. Today there are 34 million people with over 56% below 18 years. This generation has not seen war and we predict that they will not spread it either. But they have been birthed corruptly and lazily. Shall that form part of the heritage they pass on to the next generation? The more disturbing fact is that in 2062, I will be 90 and my daughter will be 60, probably with a grandchild [my great grandchild]. I have the DNA that will be in those people in 2062 the 130 million people. Whose responsibility is it then to shape their history? Which generation is setting their benchmark? In 1966, when my mother was 14, she saw an elder Amin having been sent by another [Milton] to banish Edward. They too had learnt from the colonial masters who deported Mwanga, Kabalega and Mutesa II yes even him. Many of mother s peers learned the trick and 20 years later they too banished others by the same means. 25 years later, the same has presided over a country whose problems are blamed on those that they saw 20 years earlier than they took the mantle. Generations mentoring generations!!! What mentoring is your generation passing on? And the blame game continues But who will stop it? When will Ugandans stop being branded as dirty, irresponsible, lazy, and corrupt? When will Ugandans stop blaming others? It is time to rise up and be counted as a Ugandan just, productive and orderly. As for me, I am a Ugandan who are you? Today s Accountant July - September

74 July- September The Dashboard: Performance at a Glance Background CPA Joel Byaruhanga Practitioner, Quest Co The average Small and Medium Enterprise (SME) business owner is constrained by time and may not have the patience to comprehend the traditional accounting reports such as a trial balance, balance sheet, income statement, cash flow statement, ratio and an age analysis report. Despite the above limitations, the business owner still needs information on business performance in a format that can easily be processed to identify business features, areas for improvement, trends and risks. A dashboard can provide an alternative presentation format that is graphic, visually appealing and sufficiently robust to inform decision making. It is impossible to eliminate figures from a dashboard report, however, they should not be entirely kept out. The dashboard report should provide key information on the business in a summary of at most, 2 pages that do not require detailed explanations. The report should allow the decision maker to raise questions for additional clarification. Key Metrics Business performance reports should include both financial and operational metrics. The report can be tailored to each business and may be produced for different business segments. The report requires identification of Critical Success Factors (CSFs) and their corresponding Key Performance Indicators (KPIs). There is a logical link between mission and KPIs as indicated below: Mission Determines our Ojectives realised through CSFs Assessed using KPIs CSFs are the elements that are essential for an organisation to achieve its mission. These are the few things that must go well to ensure success of an organisation. KPIs are measures that quantify management objectives to enable measurement of performance. The right KPIs depend on good understanding of what is important to the organisation. They should ordinarily not exceed five. KPIs may be; input, process or output KPIs. Input KPIs include; research and development employee training costs, quality of raw materials, and other resources used to generate business results. Process KPIs include; delivery time, time to fill vacant positions and other efficiency-related measures. Output KPIs include; revenues, return on investment, number of new customers, etc. 72 Today s Accountant July - September 2012

75 Types of Information Business Area Information Sales Sales for period Budget vs. actual Cumulative sales Top selling items Slow moving items Sales growth rate New customers Customer retention Work in progress Orders received Orders in progress Production Business efficiency Stock turnover Inventory days Sales Work in progress Business efficiency Cash flow/ liquidity Business planning Dashboard Formats The layout will usually present the key strategic issues first. The report may also distinguish between historical, current and forecast information. The presentation can take the form of charts, colours and symbols. Aged debtors Aged creditors Capacity utilisation Cash flow/ liquidity Cash balances Working capital Cashflow forecast Business planning Market share Growth rate Typical Components of a Financial Dashboard Sales Performance 000 Ushs. Total Revenue 56,500 Cost of Sales 21,200 Gross Profit 35,300 Expenses 8,900 Net Profit 26,400 Top 5 Debtors(000 Ushs) Today s Accountant July - September

76 July- September Top 5 Expenses: Budget Vs. Actual (000 Ushs) Net Monthly Cash position Data Collection The data collection exercise should be automated. The exercise should be straightforward once the reporting is aligned to the nature of the business operations. Most software allow export of data to excel. This may involve some additional formatting to produce appealing reports. The level of creativity depends on the user s knowledge of excel features such as pivot tables, conditional formatting(directional arrows, traffic lights, etc.) and basic graphing. Full automation can be achieved with software that has inbuilt business intelligence functionality. This allows the reports to change as the underlying data changes. In such cases the input data is centred on the data captured in the various accounting modules such as dates, supplier names, customer names, prices, quantities, items, etc. The automation will also allow drill-down to the underlying details when needed. Limitations The dashboards can only be as good as the underlying data. The use of spreadsheets may involve risks through errors in capturing data or formulae used. There is a limit to the number of key business drivers that can be used. They may not be suitable where a compliance regime is mandatory. 74 Today s Accountant July - September 2012

77 Institute of Certified Public Accountants of Uganda A SURVEY ON USER SATISFACTION WITH URA s E-TAX SYSTEM An online survey was administered to the members of ICPAU, a total of 317 responses were received. Most respondents considered the e-tax system to be moderately friendly or very friendly. Respondents who had not used the e-tax system, did not complete the rest of the survey. Majority of the respondents found the URA customer service to be helpful. Overall, the respondents agreed that e-tax successfully meets its intended objectives. The following are some of the recommendations made by the respondents: 1. Improve on the network stability and system speed. System management and response should be improved. URA should increase its capacity to handle many persons filing on or before 15th day of the month. 2. The level of detail required is onerous. Some should be dropped to ease the submission process. The form should be designed to reject wrong information and the process be shortened. 3. Response time at registration time should be improved on. The TIN processing time should be adjusted to 3 days as opposed to the current duration. 4. URA should communicate when updated versions of the e-tax return form are posted. 5. Assumed assessments should not be forwarded to tax payers before getting confirmation from their side. The staff analysing returns should give room to tax payers to explain errors especially commission and omission. 6. URA should provide a complete list of all taxpayers for ease of reference when identifying our clients. All companies TINs should be accessible by registered taxpayers. 7. Improve the speed of response to queries and late filling should be accepted when the system has a problem. The system should allow a tax payer to file a return for a previous month. 8. URA officials should emphasise that all financial statements must be audited and certified by auditors before there re filed. 9. E-tax should be linked to all telecom mobile money services. 10. Verification of tax payer status should be done before sending reminders of non-payment compliance are sent out. Today s Accountant July - September

78 Institute of Certified Public Accountants of Uganda Members admitted between March May 2012 No. NAME MEMBERSHIP REG. NO. ADMISSION DATE 1 TABITHA NANDERA FM MARCH SAMSON SOWATE FM MARCH ANDREW AZABO FM MARCH K. ADOLF BAGUMA FM MARCH YUNUSU KAKUNGULU FM MARCH AMOS LUBEGA FM MARCH ELINORAH TUMUSHIME FM MARCH NOAH MATOVU FM MARCH PATRICK AKONYET FM MARCH JULIET DOREEN ASINGWIRE FM MARCH JOHN BERNARD WINYI FM MAY RONARD HANGUJJA MUTEGO FM MAY NICHOLAS NABENDE FM MAY SIIMA DAN JOB KYALISIIMA FM MAY SIMON OYOGOH BWIRE FM MAY JUSTINE ODORA MWAKA FM MAY CHARLES LUTIMBA FM MAY GRACE MUKISA FM MAY JOSEPH BUWEMBO FM MAY DAVID NG ANG A KIGURU FM MAY CHARLES MUTUKU MAINGI FM MAY HUDSON SEKIMPI FM MAY AFRICANUS BYARUHANGA FM MAY 2012 Unprofessional Behaviour The Council of the Institute of received a complaint against a practitioner, from the practitioner s client. The client alleged that the practitioner had: deliberately delayed to conduct an audit which he had been contracted to handle; refused to correct the financial statements of the client and solicited for a bribe to pay off the audit team of URA so as to reduce the client s tax liability. The Council referred the complaint to the Disciplinary Committee for a hearing. Following the disciplinary hearing, the Committee cautioned and fined the practitioner for carrying out both accounting and auditing work for his client, without appropriate safeguards. The Committee separately fined the practitioner for being a party to the solicitation of a bribe to Uganda Revenue Authority (URA) officials. The Committee referred the matter to the URA for their follow up. Section (q) of the ICPAU Code of Ethics explains that In all cases in which a practice is concerned in the preparation of accounting records of an audit client particular care must be taken to ensure that the client accepts full responsibility for such records and that objectivity in carrying out the audit is not impaired. Section of the ICPAU Code of Ethics states that A member should conduct himself or herself in a manner that portrays a positive image of the profession. Section (e) of the IFAC Code of Ethics also requires every professional accountant to demonstrate professional behavior by complying with relevant laws and regulations and avoiding any action that discredits the profession. 76 Today s Accountant July - September 2012

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