REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA BROADCASTING CORPORATION FOR THE YEAR ENDED 30 TH JUNE 2014

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA BROADCASTING CORPORATION FOR THE YEAR ENDED 30 TH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS TABLE OF CONTENTS... ii LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA BROADCASTING CORPORATION... iv FOR THE YEAR ENDED 30 TH JUNE, iv 1.0 INTRODUCTION BACKGROUND INFORMATION ENTITY FINANCING OBJECTIVES OF THE UBC AUDIT SCOPE AUDIT PROCEDURES PERFORMED FINDINGS Valuation of Property, Plant and Equipment Trade and other payables Provision for bad and doubtful debts Liabilities (Lease obligations) Wasteful payment Statutory Deductions Legal expenses Procurement Governance and strategic issues Sale of Television and Radio airtime Road Transport Fleet Fuel issues and motor vehicle maintenance Field inspections Follow-up of prior year audit recommendations ii

3 LIST OF ACRONYMS Acronym BOD FY IFRS IAS LG LST MOU NSSF PAYE PDE PPDA UBC UGX URA UTV VAT WHT Meaning Board of Directors Financial year International financial reporting standards International accounting standard Local Government Local Service Tax Memorandum of Understanding National Social Security Fund Pay as you earn Procurement and disposal entity Public Procurement and Disposal of Public Assets Authority Uganda Broadcasting Corporation Uganda Shillings Uganda Revenue Authority Uganda Television Value Added Tax Withholding tax iii

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA BROADCASTING CORPORATION FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I am mandated by Article 163 of the Constitution of the Republic of Uganda (as amended), Section 19 of Uganda Broadcasting Act 2005 and Sections 13 and 19 of the National Audit Act, to audit the financial statements of Uganda Broadcasting Corporation for the year ended 30 th June These financial statements comprise of the Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, and Cash Flow Statement together with other accompanying statements, notes and accounting policies. Responsibility of the Directors The Directors are responsible for the preparation and fair presentation of the financial statements of Uganda Broadcasting Corporation in accordance with the Uganda Broadcasting Corporation Act and International Financial Reporting Standards for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor s Responsibility My responsibility as the Auditor is to audit and express an opinion on these statements based on my audit in accordance with International Standards on Auditing. Because of the matters described in the Basis for Disclaimer of Opinion paragraph, I was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Part A of my report sets out my disclaimer opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management and forms part of my Annual Report to Parliament. PART A Basis for disclaimer of opinion Valuation of Property, Plant and Equipment The Corporation did not maintain the fixed asset register, besides no valuation of fixed assets was done and no documents relating to ownership of some of the Corporations iv

5 assets were availed. I was unable to confirm whether the value of property, plant and equipment of Shs.44,148,448,508 appearing in the financial statements is fairly stated. Unsupported trade creditors The Corporation owes Shs.13,901,624,619 to trade creditors. However, the trade creditors worth Shs.9,305,968,078 were not adequately supported with source documents like invoices, contracts completion certificates, Local purchase orders, agreements etc. I was therefore unable to confirm the existence, completeness and valuation of trade creditors in the financial statements as they could be misstated and misleading. Disclaimer of Opinion Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph above, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, I do not express an opinion on the financial statements. Report on other legal requirements Contrary to the requirements of the Uganda Broadcasting Corporation Act and the National Audit Act; I did not obtain all the information and explanations, which I required for the purpose of my audit. Accordingly, I am unable to confirm whether proper books of account have been kept by the Corporation, and whether the statement of financial position and statement of financial performance are in agreement with the books of account. John F.S. Muwanga AUDITOR GENERAL KAMPALA 24 th March, 2015 v

6 REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION

7 PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENT OF UGANDA BROADCASTING CORPORATION FOR THE YEAR ENDED 30 TH JUNE, 2014 This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended) requires me to audit and report on the public accounts of Uganda and all public offices including the courts, the central and local government administrations, universities, and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of Uganda Broadcasting Corporation to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The Uganda Broadcasting Corporation (UBC) was established by an act of Parliament, the Uganda Broadcasting Corporation Act 2005 and the UBC vesting order The Uganda Broadcasting Corporation is located in Broadcast House, Plot Nile Avenue-Kampala Capital City. The Corporation s vision is Broadcasting quality programmes for national development and the mission is To educate, inform, guide and entertain the public through maintaining a sustainable national coverage. 3.0 ENTITY FINANCING The corporation was financed by grants from Central Government and locally generated revenues. Grants totaling to Shs.3,449,882,548 from Central Government were received, while a total of Shs.13,973,824,621 was received from locally generated revenue. The total revenue of Shs.17,423,707,169 constituted 9% of its approved budget estimates of Shs.198,771,000,000. The entity was underfunded during the year under review. 4.0 OBJECTIVES OF THE UBC The objectives of UBC are:- 1

8 a) To develop the Corporation into a public national broadcasting centre of excellence, for a purpose of providing electronic media and consultancy services that educate and guide the public. b) To achieve and sustain comprehensive national radio and television and coverage. c) To achieve and sustain a common carrier status. 5.0 AUDIT SCOPE The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish:- a. Whether the financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. Whether all funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Whether goods and services financed have been procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the organization, assess control risk and identify reportable conditions, including material internal control weaknesses. e. Whether all necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented. 6.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- (a) Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements. (b) Expenditure The Corporation payments vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. 2

9 (c) (d) (e) (f) Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period audited. Procurement Reviewed the procurement of goods and services by the Corporation during the period under review and reconciled with the approved procurement plan. Fixed Assets Management Reviewed the use and management of the Corporation assets during the period audited. Corporation s Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluating the overall financial statement presentation. 7.0 FINDINGS 7.1 Valuation of Property, Plant and Equipment The Corporation s fixed assets (property, Plant and equipment) are reflected as Shs.44,148,448,508 in the statement of financial position. A review of the supporting schedules in accordance with International Accounting Standards (IAS) revealed the following: No revaluation of Property and Equipment was undertaken contrary to IAS 16 which requires regular revaluation of assets. Furthermore, it was also noted that impairment reviews were not undertaken by management on the assets during the year contrary to IAS 36 which requires that assets should not be carried at more than their recoverable amount. The Corporation did not maintain a fixed assets register during the year contrary to chapter 16.5 of UBC Finance and Accounting Manual to enable me track the Corporation s assets. In place was a listing of assets without date of acquisition, values/costs. The Corporation had no proof of ownership of some non-current assets like title deeds to enable verification and confirmation of ownership contrary to Paragraph (1) of the Corporation s Finance and Accounting Regulations manual that requires the entity to have proof of ownership. 3

10 Other fixed assets of Shs.17,378,814 were not adequately disclosed in the notes and Schedules to the Financial Statements since no detailed costing was provided for each disclosing acquisition cost, additions, disposals, depreciation etc. Furthermore, contrary to IAS 1 (revised) on presentation of financial statements, other fixed assets were presented on the face of the statement of financial position instead of being amalgamated under property, plant and equipment. I was therefore unable to determine whether Assets of the Corporation are fairly reflected in the statement of financial position, and whether the assets are owned as stated. Management explained that a revaluation process was in advanced stages and would be undertaken in the FY 2015/16 after Ministry of Lands recommendation of a consultant to undertake the exercise. Management further explained that lack of a fixed asset register was due to the fact that most of the assets are not valued and others are not yet transferred in the names of UBC. I advised management to expedite the revaluation process and have an adequate asset register in place. 7.2 Trade and other payables It was observed that the Corporation owes Shs.28,621,243,416 to trade creditors (Shs.13,901,624,619) and other creditors (Shs.14,719,618,798). However, the trade creditors were not adequately supported with source documents like invoices, contracts completion certificates and agreements. It was noted that only three suppliers to the tune of Shs.4,595,656,545 had supporting documentation and the others worth Shs.9,305,968,074 were not supported. I was therefore unable to confirm the existence, completeness and valuation of trade creditors in the financial statements as they could be misstated and misleading. There is a risk of inclusion of non-existent creditors who may be irregularly paid leading to loss of funds by the Corporation. I advised Management to ensure that all documents relating to payables are properly kept, filed and corroborative evidence should be obtained before payments to creditors without supporting documentation. Furthermore, an invoice register should be put in place. 4

11 7.3 Provision for bad and doubtful debts The Corporation s provisions for the year revealed that Management provided Shs.1,049,288,232 for bad and doubtful debts based on their opinion at 5% of total receivables. IAS 37 that requires the estimate of provisions to be determined by judgment of the entity s management supplemented by the experience of similar transactions. Section 8.17 of the UBC Finance and Accounting Regulations Manual also requires any due debt to be subjected to debt recovery procedures as stipulated in the bad debt management manual. The following were observed; This provision should have been well documented in the debt management manual specifying rates for the various categories of debtors instead of the blanket provision for all debtors including cash and salary advances. The provision rate of 5% set by management was not backed with experience of similar transactions as required by IAS 37 given that some transactions have very minimal chances of recovery i.e. Parliamentary Commission (Shs.10 billionwithout a contract). M & B bought UBC lands but failed to honour the contract and the land was reclaimed. Provision of bad debt (15% of 400m) on this debtor was not called for. Bad debts should be written off when all reasonable steps to recover them have been taken without success. The blanket provision is inadequate without a proper review and analysis of the Corporation debtors and as a result the provision may be misleading to the users of the financial statements. Management explained that all policies are in draft form and being scrutinized by the BOD pending approval. Management further explained that the rate used was based on management experience on debtors that default and do not have powers to provide fully for obviously doubtful debts. I advised management to expeditiously review and submit for approval to the BOD the debt management manual with comprehensive provisions for the different classes of receivables. 5

12 7.4 Liabilities (Lease obligations) Review of the financial statements revealed that the Corporation acquired two motor vehicles and six UHF transmitters on lease terms from Stanbic Bank in the year 2008 and 2010 respectively at a total leased amount of US$.544,946. A verification of the outstanding balances from the statement of financial position revealed that the Corporation had made a repayment of Shs.544,247,081 during the current year. However the disclosures made in the notes to the financial statements were inadequate given the requirements prescribed by IAS 17 that is apportionment of rental payments under interest payable and capital cost of the asset, the carrying amount of each class of leased asset (Vehicles and UHF transmitters) at the reporting date and a general description of the lessee s material leasing arrangements. I advised management to provide adequate disclosures in accordance with IAS Wasteful payment A sum of Shs.50,800,000 equivalent to US$.20,000 was paid to an International Company for rights to broadcast 10 licensed films from Hong Kong. I was not availed with a copy of the contract for review. An interview with the Programme manager revealed that the films have not been aired for viewers consumption two years after purchase due to inadequacy of the film content which is in Chinese and thus not understandable by the target audience of UBC TV. I therefore could not ascertain the rationale of paying this amount for films that are not aired. Under the circumstances, the payment appears wasteful. I advised Management to ensure that procurement of films is done in accordance with the PPDA Act and in the language understandable by UBC viewers. 7.6 Statutory Deductions Non remittance of URA taxes Section 124(1) of the Income Tax Act requires a withholding agent to pay the Commissioner any tax that has been withheld or that should have been withheld within fifteen days after the end of the month in which the payment subject to withholding tax was made by the withholding agent. 6

13 As at the close of financial year, a sum of shs.3,506,895,157 had not been remitted to the statutory agency as indicated in the table below. Included in the outstanding amount is a sum of Shs.865,402,297 relating to interest as a result of failure to remit the statutory deductions on time. Failure to remit statutory deductions will expose the Corporation to more penalties and fines. S/N Tax Head Principal (Shs) Interest (Shs) Total Due (Shs) 1 PAYE 1,010,050, ,964,152 1,534,014,889 3 Withholding tax 97,353,594 56,550, ,904,593 3 VAT 1,534,088, ,887,146 1,818,975,675 2,641,492, ,402,297 3,506,895,157 Management explained that these arrears date back to 2009 FY and an MOU with URA to settle the obligations in installments was entered into. I advised management to adhere to the payment modalities provided in the MOU so as not to incur extra penalties and fines Outstanding obligation for 15% NSSF deductions During the year, the Corporation did not remit Shs.512,346,357 due to the National Social Security Fund (NSSF) for staff statutory contributions of 15% gross salary. By 30 th June 2014, the total indebtedness of the Corporation to NSSF stood at Shs.7,845,819,527 inclusive of penalties of Shs.5,007,304,606. Failure to remit Employees NSSF contributions will result into extra penalties. It also deprives employees of their retirement benefits when they retire. Delayed remittance denies the employees interest earnings on their savings. Management explained that these amounts date back from 2006 and have accumulated a huge interest I advised Management to engage NSSF with a view of entering an MOU in which regular payments will be remitted and a substantial waiver be made or discussed on the penalties imposed Non-deduction of Local Service Tax from employees During the year, Uganda Broadcasting Corporation did not withhold LST from its employees contrary to the local Government Act as amended. Non-remittance of LST 7

14 hampers service delivery in the local authorities where Corporation staffs reside and can also attract penalties and related costs. Management explained that they had challenges in determination of where to remit the LST as staff had not registered their preferred LGs. I advised Management to promptly register all staff preferred LG s and enforce deductions and remittances of funds to the respective Local Governments as required by the relevant legislation. 7.7 Legal expenses Shs.168,299,434 was spent on legal fees and costs to various legal firms during the year for handling the Corporation s legal disputes and providing legal advisory services. It was noted that there were no prequalified firms for legal services and neither were there any procurement files provided by the PDU on the procurement of the firms hired to handle Corporation business. The corporation was directly sourcing for the firms without the due procurement process. I advised management to follow the due process under the PPDA act to ensure value for money on services provided. 7.8 Procurement Huge variances between contract estimates and final contract sum Review of the procurement files revealed that several procurements had big variances ranging from 20% to 67% between the estimated value and actual contract value which was not in conformity to Regulation 3 of the PPDA regulations that requires a PDE to ensure that the estimate is realistic and based on the market price while estimating the value of works, services or supplies required and confirming the availability of funds. The anomaly was caused by lack of adequate market survey for the procurements undertaken which adversely affects Corporation planned activities as cash flows are limited. Further, substantial contract price variance is an indicator of poor planning. I advised management to ensure User departments conduct adequate surveys at the planning phase to ensure procurement estimates are based on up to date information in accordance with PPDA Regulations. 8

15 7.8.2 Emergency Procurement Review of four procurement files revealed that the entity procured corporate shirts, blouses and promotional materials as emergencies to the tune of Shs.61,155,580 contrary to section 60 of the PPDA Regulations 2003 that requires user Departments to prepare annual work plans based on the approved budgets which should be submitted to the Procurement and Disposal Unit to facilitate orderly execution of annual procurement activities. Details are as below: Procurement Reference Subject Contract Value (Shs) UBC/SUPPLS/13-14/00052 Corporate Shirts & blouses 25,000,000 UBC/SUPPLS/13-14/00136 Supply of branded promotional 5,900,000 materials for UBC West Ekitumbure UBC/SUPPLS/13-14/00148 Supply of branded promotional 3,959,580 materials for UBC West Ekitumbure UBC/SUPPLS/13-14/00149 Supply of branded promotional 26,296,000 materials for UBC West Ekitumbure TOTAL 61,155,580 The following issues were noted; The procurements were not planned for in the UBC procurement plan contrary to section 60 of the PPDA regulations. These procurements should have been foreseen by the user department because 50 years celebration of TV in Uganda and the launch of UBC West Ekitumbure which took place on 25 th October 2013 and 22 nd March 2014 respectively did not qualify as emergencies in line with PPDA Regulations 2003 section 100 (1) (2) which specifies an emergency situation to include circumstances which are urgent, unforeseeable or a situation not caused by dilatory conduct. There was also no fair competition as the bidding period for Request for quotations was shortened to 2 days for bidding and 1 day for display for Corporate Shirts & blouses, and 24 hours for bidding period of promotional materials. Unplanned procurement activities adversely affect implementation of Corporation activities and hamper budget performance. The Corporation risks procurement 9

16 administrative reviews by bidders incase potential service providers are dissatisfied about the process. Management explained that emergence procurements in the media industry frequently occur and this was one of them. I advised management to ensure that the entity plans and includes all procurement requirements in the procurement plan and limits use of emergency situation as the criterion for determining the choice of a procurement method without being backed up by a comprehensive justification. 7.9 Governance and strategic issues Human Resource (i) Absence of Senior Management and Staff without valid contracts It was observed that 247 members of staff were working at the Corporation without valid contracts, some having expired as far back as 2009 contrary to Paragraph of Uganda Broadcasting Corporation Human Resource regulations-2006 that requires contract employment to be renewable subject to good health and satisfactory performance. Further, the current Managing Director, Manager Finance and Administration, Marketing Manager, Radio manager, Risk and Internal audit and TV manager and a number of other staff are in acting capacity. Staffs in acting positions are overworked as they have to juggle more than one responsibility and may also not have the required competencies for the job. Failure to renew employment contracts violates the rights of employees which may attract of litigation. Management explained that the contracts of staff are a function of the BOD and since no board was in place at the time, it was not possible to have the contracts renewed. Management further explained that the new BOD had taken a step to recruit senior managers of the Corporation as well as the accounting officer who would in turn help them handle the entire staff through a complete restructuring of UBC. I advised management to ensure that the process is expeditiously handled by drawing it to the BOD s attention. 10

17 7.9.2 Lack of Credit and Debt Management Policies Its best practice in corporate entities that Debt and Credit management policies are formulated and documented to help the organizations to manage and control debt and credit. During the audit, it was noted that the Corporation did not have both the credit and debt management policies documented for proper management of credit offered to its clients and debts owed to the suppliers. This has resulted into major weaknesses as noted below; (i) Debtors The Corporation disclosed a receivables balance of Shs.20,113,712,511. However analysis of this balance revealed that of this, debtors to the tune of Shs.16,245,336,513 had not been collected beyond four months representing 80.6%. There was no approved credit period for debtors and consequently many debts are never collected. The debts had also increased by 498% from the previous year s balance of Shs.3,333,052,000 implying that Paragraph 8.23 of the Corporation financial manual that requires preparation of weekly and monthly revenue reports to the Finance and Administration Manager with Monthly debtors ageing schedule and amounts outstanding for management decision making was not being implemented. I did not obtain evidence that management put in the required effort to collect the debts. Ageing analysis is as below; 120+Days 90 Days 60 Days 30 Days Current Balance (Shs.) (Shs.) (Shs.) (Shs.) (Shs.) 16,245,336,513 (621,375,504) 4,137,168, ,095,643 (175,512,445) 20,113,712,511 (ii) Creditors: It was observed that the Corporation owes Shs.28,621,243,416 to trade creditors (Shs.13,901,624,619) and other creditors (Shs.14,719,618,798) an increase of 152% from the previous financial years position of Shs.11,331,111,000. It was further noted that the payables have been increasing for the last consecutive years and this could be attributed to lack of a credit management policy in place. The ageing analysis of the Trade payables revealed that 92% were beyond four (4) months (Shs.12,842,771,346) while other payables were composed of mainly statutory deductions (Shs.11,352,714,684). Ageing analysis is as below; 11

18 120+ Days 90 Days 60 Days 30 Days Current Balance (Shs.) (Shs.) (Shs.) (Shs.) (Shs.) 12,842,771, ,717, ,748, ,702, ,138,698 13,766,361,104 Failure on the part of management to formulate Credit and Debt management policies may lead to accumulation of receivables which may eventually be written off as losses to the company. Likewise, accumulation of creditors may lead to cash flow problems for the Corporation which negatively affect the operations and lead to financial distress and legal claims for recovery. Management explained that most policies are in draft form and cannot be implemented before BOD approval. Furthermore, management attributed the increase in debts to Parliament of Uganda invoice worth Shs billion and stated serious steps to collect this amount had been taken though efforts had not yet yielded anything. I advised management to raise the issue with the BOD to expeditiously approve the policies in order to have adequate controls for proper management of the corporations Debtors and creditors Absence of Corporate Strategic Plan and Policies A strategic plan provides an organization with purpose and direction and it is a key requirement for organization survival, however audit observed that the Corporation does not have a Corporate Strategy with the old one ( ) having expired in It was noted further that the Corporation has several draft policies developed for the efficient functioning of the Corporation business however, it was noted that many of them are in draft form and cannot be put to application without board approval. The critical ones are the IT /Security policy and the risk and fraud control policies. Implementing projects without a strategic plan and vital policies may lead to uncoordinated implementation of activities as the budget/work plans and the vital work done are not linked to developments. Management explained that it was not possible to come up with a strategic plan without a functioning Board at the time; however an external consultant had been engaged to have a strategic plan in place by the end of FY 2014/

19 I advised management to expedite the process and come up with a strategic plan that appropriately spells out new strategies and Priorities for greater efficiency and effectiveness in achieving the corporations Mission, Vision and Objectives Sale of Television and Radio airtime Uganda Broadcasting Corporation gets a big portion of its revenue from sale of TV and Radio airtime. This revenue is subject to fluctuation which varies according to duration, timing and type as governed by UBC rate cards in force. When an advertiser accepts the terms of sale for a transaction, and accountable document known as a Time Order is filled in quadruplet by the sales person and signed by the advertiser. The completed Time Order is thereafter taken to the Sales Manager and Marketing Manager for approval and authorization. After approval and authorization, the Time Order is submitted to the Internal Auditor to ascertain among other things:- a) Compliance with the rate card; b) Arithmetical accuracy of amounts; c) Terms of payment; d) Safeguards against bad debts; e) Type of transaction i.e. announcement, sponsorship, promotional etc. After verification of the Time Order by the Internal Auditor, the sales person takes it to the sales administrator to log the transaction in the daily commercial transmission schedule. The daily commercial transmission schedule gives details of the client s name, timing, duration, start date and end date of the advertisement. Ultimately, a copy of the time order is taken to accounts office for invoicing the client. A review of the above system revealed the following shortcomings: (i) Incomplete Time Orders Majority of the sales executives do not provide all the required information on time orders that is; payment mode, type of transaction, etc. thus making verification of the worthiness of the business impossible. (ii) Arbitrary discounts by sales executives Sales executives offer airtime to clients at lower rates. These discounts given off the rate card are arbitrary so it is not possible to ascertain whether they are within reasonable bounds or how much revenue the Corporation is losing from the unwarranted discounts. 13

20 (iii) Lack of a Discount and Credit Policy It was noted that there is no definitive discount and credit sales policy which renders the revenue collection subject to manipulation by sales executives. (iv) Absence of Internal Controls for approved, authorized and verified Time Orders There is a high risk of Sales Personnel denying the Corporation revenue by not submitting Time Orders to accounts office for invoicing. (v) Indication of Value Added Tax on Time Orders Most of the Sales Persons did not indicate the VAT payable by advertisers on the Time Orders hence the amount was converted into airtime which resulted into a loss to UBC. (vi) Daily Commercial Transmission Schedules by Radio Stations Some Radio Stations prepare commercial transmission schedules intermittently and some do not at all hence the risk of airing unapproved, unauthorized and unverified promotional materials that make UBC lose revenue. The above weaknesses lead to loss of revenue to the Corporation which negatively affects the Corporations sustainability. I advised management to develop and implement a manual that prescribes procedures/practical instructions for handling sales for sales personnel, develop a credit and discount policy, consider procurement of an internal software that will aid the monitoring of UBC airwaves, ensure all sales persons indicate the VAT charged to all advertisers on time orders and the tax obligations be met as they fall due to avoid penalties. Furthermore, as an immediate control measure of invoicing advertisers, the Sales Administrator should be given partial rights to the pastel accounting system so that he updates time orders electronically and all Radio Stations and Star television make daily Commercial Transmission. 14

21 7.11 Road Transport Fleet Fuel issues and motor vehicle maintenance It was noted that fuel was issued to 5 (five) grounded vehicles and one (one) motor cycle to the tune Shs.7.5 million kept at Bugolobi Transmission station, various garages and at Broadcast House. Details are as below: REG. NO MAKE LOCATION UAA 585 F Toyota G - Touring Bugolobi UAA 991 E Toyota G - Touring Bugolobi UAA 586 F Suzuki Decollis Garage UAH 563 V Toyota Hiace Decollis Garage UG 0152 C Toyota Hilux Planet Garage UBA 190 Z TVS Broadcast House Further, it was noted that the logbooks are partially maintained by the drivers and not checked by the Transport Officer. In absence of fully maintained logbooks, it was difficult to analyze and examine distance covered by each vehicle. It was noted that most of the vehicles did not have formal written requisitions from either the official users or drivers before the vehicles were repaired. In the absence of requisitions by users, it was difficult to ascertain whether the repairs were justified. UBC has 3 grounded vehicles in various garages vandalized beyond repair. The said vehicles have been grounded for a long time without being repaired or disposed of. Details are as below: REG.NO MAKE CONDITION LOCATION UG 0152 C Toyota Hilux Double Cabin Grounded, Cannibalized UG OO73C Nissan Urvan Grounded, Cannibalized UG 0079 C Nissan Urvan Grounded, Cannibalized Planet Auto Garage Ltd. Central Auto Centre Garage Ltd. Central Auto Centre Garage Ltd. Under the circumstances, the Corporation s vehicle fleet is prone to misuse and vandalism leading to further loss in value. 15

22 I advised management to address the issues raised and have grounded vehicles removed from the garages and taken to Bugolobi Transmission Station for safe custody and subsequent disposal. Furthermore, an investigation should be instituted for fuel issued to grounded vehicles Field inspections Inspections of UBC out posts were carried out during the period and several observations were noted with regard to facilities as below; Lack of a pertinent record of equipment at the site - Some resident technicians do not keep a pertinent record of non-current assets at the site. Poor infrastructure - The Power House, Staff Quarters, Transmission House are in poor condition for some stations. Un-surveyed, un-titled Land - UBC land at several transmission sites was not titled. Faulty Radio Transmitter - The power supply systems of some Radio Transmitters are faulty. Faulty Generator - The Injector Pump and Self Starter of some Generators were faulty. The assets of the Corporation are prone to misuse, wastage and encroachment of the corporation land. I advised Management to ensure that resident technicians develop and maintain an up-to-date pertinent record of non-current /fixed assets which indicate the date of receipt, description and serial numbers where applicable, have station buildings reconstructed and repainted. Furthermore, management should have the Corporation land fenced off, surveyed and obtain titles to avoid encroachment. The exciters should be repaired and put into use without further delay Follow-up of prior year audit recommendations A review of the previous year s audit recommendations was done and the status is shown below; Audit Issue(fyr:2012/2013) Recommendation Current Status Valuation of property, plant and equipment un-revalued fixed assets Unsupported Trade and other payables Management to expedite the revaluation process and the updating of the fixed assets register. Management was advised to ensure that all documents relating to payables 16 Repeated Repeated

23 Unsupported Trade and other receivables Foreign currency translation gains Absence of Board/Directors and Senior Management Outstanding Statutory deductions Sale of Television and Radio airtime UBC non-current assets at upcountry stations Hire of staff who have reached retirement age are properly kept and filed for future reference. Management advised to update debt ledgers Management advised to ensure that all documents relating to foreign exchange gains/losses are properly kept and filed for future reference Awaited outcome of line Ministers efforts Management advised to ensure strict adherence with the provisions under the Income Tax Act and NSSF Act. Management advised to develop and implement a manual that prescribes procedures for handling sales for its staff, develop a credit and discount policy, consider procurement of software that will aid the monitoring of UBC airwaves, ensure all sales persons indicate the VAT charged to all advertisers on time orders. Furthermore, as an immediate control measure of invoicing advertisers, the Sales Administrator should be given partial rights to the pastel accounting system so that he/she updates time orders electronically Management to ensure all assets are engraved, records of equipment kept, infrastructure maintained, land surveyed and land titles obtained Management advised to comply with the Act and recruit young staff with requisite skills and have a succession plan in place Not repeated Not repeated Repeated for senior management Repeated and increased Repeated Repeated Repeated 17

24 APPENDIX 1 FINANCIAL STATEMENTS 18