THE REPUBLIC OF UGANDA

Transcription

1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP)IDA CREDIT NO.4531-UG FOR THE YEAR ENDED 30 TH JUNE 2015 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS PAGE TABLE OF CONTENTS... 1 LIST OF ACRONYMS... 2 DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP)IDA CREDIT NO.4531-UG FOR THE YEAR ENDED 30TH JUNE, 2015 FOR THE FINANCIAL YEAR INTRODUCTION BACKGROUND TO THE PROJECT PROJECT FINANCING PROJECT BROAD OBJECTIVE AUDIT OBJECTIVES PROCEDURES PERFORMED AUDIT FINDINGS DETAILED FINDINGS

3 LIST OF ACRONYMS EAC EAPHLNP ECSA-HC GoU IAS IDA SDR UGX USD NDP NSSF LPO WHO NTRL East African Community East African Public Health Laboratories Networking Project East, Central and Southern African - Health Community Government of Uganda International Accounting Standards International Development Association Special Drawing Rights Uganda Shillings United States Dollars National Development Plan National Social Security Fund Local Purchase Order World Health Organization National TB Reference Laboratory 2

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP)IDA CREDIT NO.4531-UG FOR THE YEAR ENDED 30 TH JUNE, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of the East African Public Health Laboratories Networking Project (EAPHLNP) for the year ended 30 th June These financial statements comprise of the Statement of Fund Balance as at 30 th June 2015, Statement of Receipts and Expenditure together with other accompanying statements, notes and accounting policies. Management Responsibility for the Financial Statements The management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for maintenance of such internal controls that are necessary for the fair presentation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended) and Sections 13 and 19 of the National Audit Act, 2008 is to express an opinion on the financial statements based on my audit. I conducted my audit in accordance with the International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor s judgment, including the assessment of risks of material misstatement of the financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates 3

5 made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Part A of my report sets out my opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management. PART "A" Opinion In my opinion, the financial statements present fairly in all material respects the financial statements of the East African Public Health Laboratories Networking Project as at 30 th June 2015 and the income and expenditure for the year then ended in accordance with the basis of accounting stated under note 1.1 to the financial statements and the guidelines for Accounting and Auditing of Grants to Government and Parastatal Organisations and Non-Governmental Organizations, issued by IDA. John F. S. Muwanga AUDITOR GENERAL 7 th December

6 PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP)IDA CREDIT NO.4531-UG FOR THE YEAR ENDED 30TH JUNE, 2015 FOR THE FINANCIAL YEAR This section outlines in detail the audit scope, audit findings, my recommendations and management responses in respect thereof. 1.0 INTRODUCTION I am mandated by Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended), to audit and report on the public accounts of Uganda and of all public offices including the courts, the central and local government administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the above project to enable me report to Parliament and the Development Partners. 2.0 BACKGROUND TO THE PROJECT The East African Public Health laboratory Networking Project (EAPHLNP) is a regional project implemented in 5 East African Countries of Uganda, Kenya, Rwanda, Tanzania and Burundi. The East, Central and Southern African - Health Community (ECSA-HC) under the East African Community (EAC) plays the oversight role and offers guidance to ensure effective implementation. 3.0 PROJECT FINANCING The financing agreement between the International Development Association (IDA) and the Government of Uganda (GoU) was signed on 12 th August 2010 and the project became effective on 10 th February Under the agreement, IDA is to extend credit equivalent to SDR.6,600,000 towards financing the project which is to run for 5 years. 4.0 PROJECT BROAD OBJECTIVE The EAPHLNP was set up to establish a network of efficient, high quality, accessible public health laboratories for the diagnosis and surveillance of TB and other 5

7 communicable diseases. EAPHLNP is implemented in three components, whose specific objectives are stated below; 4.1 Component I Strengthen the regional capacity to diagnose communicable diseases of public health importance and share information to mount an effective regional response. 4.2 Component II Support joint training and capacity building to expand the pool of qualified laboratory technicians. 4.3 Component III Fund joint operational research and promote knowledge sharing to enhance the evidence base for these investments and support regional coordination and program management. 5.0 AUDIT OBJECTIVES The audit was carried out in accordance with the International Standards on Auditing and accordingly included a review of the accounting records, agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish whether:- a. The Financial Statements for EAPHLNP have been prepared in accordance with consistently applied International Accounting Standards (IAS) and that they present fairly the financial performance and position of the project as at 30 th June b. Management put in place a sufficient Internal Control Structure and the internal controls worked as intended throughout the year. c. All necessary supporting documents and records have been maintained and are in agreement with the financial statements presented. d. Goods and services have been procured in accordance with relevant financing agreement and the Government of Uganda (GoU) procurement regulations. e. Project funds are managed in compliance with the covenants contained in the financing agreement as well as GoU financial regulations. 6

8 6.0 PROCEDURES PERFORMED 1) Revenue/Receipts Obtained schedules of funds provided by the development partners and Government of Uganda and reconciled the amounts to the entity s cashbooks and bank statements. 2) Expenditure Vouched transactions to establish whether documentation in support of the expenditures agreed with the amounts and descriptions on the vouchers; reviewed and reconciled the bank statement transactions to test for occurrence and whether they were properly controlled and accounted for. 3) Internal Control System Reviewed the internal control system and its operations to establish whether the controls were sound and were applied throughout the period under review. 4) Procurement Reviewed the procurement of goods and services under the Project during the period under review and reconciled with the approved procurement plan. 5) Periodic reports of the project Reviewed the agreement provisions, operational manual, aide memoires and reports and reconciled them with the Project activities during the period under review. 6) Project 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

9 7.0 AUDIT FINDINGS 7.1 Categorization of Audit findings The following system of profiling of the audit findings has been adopted to better prioritise implementation of audit recommendations. Category Description 1 High significance Has a significant / material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2 Moderate significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3 Low significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest Summary of Audit Findings No. Title of Finding Significance 1 Delays in procurement of Principal Investigators (PIs) and Moderate Logistics 2 Delayed Construction of Hospital Laboratories in Mbale and Moderate remodelling Lacor 3 Inadequate Planning for Critical Laboratory equipment: Moderate 4 Loan Performance Moderate 5 Lack of Internal Audit Reports Low 8.0 DETAILED FINDINGS 8.1 Status of Implementation of Project Activities Delays in procurement of Principal Investigators (PIs) and Logistics The EAPHLNP Annual Health Sector Performance Report (AHSPR) for financial year 2014/15 indicated that an operational research on Malaria, TB and Enterics was to be 8

10 conducted, data collection completed and analysis done and final operational research report prepared. Audit however noted that although study sites were prepared, the activity was not done. This was attributed to the fact that the Principal Investigators (PIs) and necessary logistics were not procured. The Accounting officer in response regretted the anomaly and explained that an agreement had been reached between MOH and WB to sign contracts with institutions rather than with individual PIs in order to expedite the activities. I await the results of the new approach Delayed Construction of Hospital Laboratories in Mbale and remodelling of Lacor Hospital The EAPHLNP is guided by the main objective of establishing a network of efficient high quality and accessible public health laboratories for diagnosis of TB and other communicable diseases. In pursuit of this objective, the project management, among other things, was required to construct Hospital laboratory in Mbale and remodelling the one of Lacor Hospital. M/S AMHOLD consultant was assigned to do the architectural designs for the above. This activity was among the milestones that were supposed to be achieved earlier than the year 2012/2013, It was however observed that the final architectural designs and BOQs (Bills of Quantities) were approved in 2015/2016 financial year and currently, the procurement unit is preparing for the bidding process for the construction of both Laboratories. Delayed construction of the hospital laboratories hinders timely achievement of project objectives. I advised the Accounting Officer to streamline procurement activities to ensure timely construction of the laboratories Inadequate Planning for Critical Laboratory equipment: According to the EAPHLNP (AHSPR) Output report for financial year 2014/15, critical labaratory equipment was to be installed at the five (05) satellite sites and NTRL in Wandegeya. Installation of the critical laboratory equipment at the project sites of Arua, Mbale, Mulago and Lacor was undertaken by M/S Globe Corporation, the supplier of the equipment. Whereas the installation at Arua and Lacor was successful, the one for the other sites had the following anomalies; 9

11 Failure to install critical lab equipment hampers service delivery resulting into failure to detect and control communicable and non communicable diseases. This is attributed to inadequate planning (involving procuring equipment when there was inadequate storage space) and failure to involve end users in the procurement. Poor storage would pose further damage and loss of equipment. The Accounting Officer in response explained that the planning for procurements including the equipment, ordering time and their installation time, as well as identification of installation space for equipment will be harmonised in future to avoid any delays. I advised the Accounting Officer to ensure that appropriate space is availed and critical equipment is installed and in future to avoid undertaking procurements of such critical equipment whose storage and installation is not guaranteed. 8.2 Loan Performance A review of the loan status revealed that the loan whose closing date was 30th March 2016 had a low disbursement rate. Of the loan amount of USD.10,100,000, only USD.7,376, (73.04%) had been disbursed. Audit also noted that, of the funds disbursed in the current year under review, USD 1,336, remained unutilized. The low disbursement rate coupled with big unutilized balances do not only affect the project implementation but may also impact negatively on future donor funding. The anomalies were attributed to delays in the payment system, procurement process and unpreparedness to manage the project. In response, the Accounting officer explained that the balance left on the account related to committed funds for construction of the National TB Reference Laboratory (NTRL) at Butabika and Renovation of the satellite sites laboratories of Lacor Hospital in Gulu and Mbale Regional Referral Hospital and that the delay in completing the civil works was leading to the apparent low disbursement of the funds which was also attributed to changes in the design of the NTRL building and its upgrade to suit the current trends of modern laboratories I advise management to streamline the procurement and payment processes as well as the construction activities so as to absorb funds released in timely manner. 10

12 8.3 Lack of Internal Audit Reports The project financing agreement between GOU and BOU requires the Internal Audit function to carry out semi - annual reviews of the EAPHLNP activities, for purposes of assisting management in assessing the system of internal controls, risk management and good governance practices and to suggest improvements where there are deficiencies. It was however noted that the Internal Audit function did not perform the above roles, and this may result into misstatements remaining undetected over long periods. There is further risk that weaknesses in the internal control structure may not be identified and addressed timely. The anomaly was attributed to lack of funds to recruit a project internal auditor. The accounting Officer explained that a request had been made to the Internal Auditor General to assign an officer to review the World Bank portfolio of Ministry of Health. I await results of management s action in this regard. 9.0 Status of prior year audit recommendations I reviewed the implementation of the previous year audit recommendations and the following table summarizes the status of implementation and actions taken by management: Issue Recommendation PAC recommend ation Funds not Advised to strengthen Recovery accounted and enforce controls for related to accounting for funds and should ensure recovery of the outstanding amounts. Doubtful Advised to investigate Recovery Expenditure the circumstances surrounding the event with a view of ensuring that the intended MGT RESPONSE The Project Development Objective was To establish a network of efficient, high quality, accessible public health laboratories for the diagnosis and surveillance of TB and other communicable diseases Disbursed was to Satellite sites to implement activities in form of Budget support but original Accountabilities were kept at the sites, they furnished the Ministry with both Financial and Narrative reports. The doubtful expenditure related to photocopied Attendance sheets that were attached on the Hotel payment and the original on the advance for staff. Audit Status Partly Addressed Partly Addressed 11

13 objective was met. I further advised him to always ensure that original documents were used whilst making payments. Un- Advised to endeavor to Recovery from Withholding Tax was duly deducted from the Partly acknowledge recover the tax and to supplier payments and transferred to the Uganda addressed d Statutory ensure that withholding Revenue Authority collection account held with Remittances tax was always Bank of Uganda. Non- deducted from At the time of Audit, the team did not find deduction of suppliers of goods and receipts from URA. The receipts were obtained Tax services to avoid later from URA and attached on the payment. penalties and fines from URA. Advised to provide the A/O to prove Management obtained the receipts from NSSF Partly Un- necessary remittance and were available for your review. addressed acknowledge documentation for d audit and to always remittances obtain official to NSSF acknowledgement receipts for proper documentation and accountability. Status of To expedite the A/O to submit Received disbursements totaling to USD: Status sent by Implementati implementation of the status of 8,871, of the total Loan amounting to A/O to PAC. on of Project outstanding activities implementatio USD: 10,100,000. Activities so as to improve on n to The Construction of the NTRL at Butabika which Addressed Loan funds absorption and Committee was major activity of the Project was scheduled Performance thus disbursement to be completed in March rates, so as to attain The Project was in decisions with the World the project objectives. Bank for Additional Financing to address gaps in Viral Hemorrhagic Fevers (VHF) management e.g. Ebola. Delayed The project A/O to submit The project had registered good progress in the Submitted to Implementatio management to status of implementation of the project per Committee the n of Project expedite the works so implementatio Statement of Receipts and Expenditure for the status of Activities as to ensure that the n to FY ended 2014/15 and the narrative report. implementatio. implementation is in Committee n. accordance with the project work plans Addressed Lack of The Project PAC to Project Management implemented the audit Partly Proper management to pronounce recommendation by formalizing asset usage Addressed 12

14 Authorization institute asset itself on final using the exiting Public service standing for use of management measures decision. instructions. Motor for proper Vehicles accountability of project assets. Inspection of The Project A/O to confirm The Gene X-pert machine in Mbale Regional Addressed supply and Management to liaise whether asset Referral Hospital in the short term was replaced delivery of with the respective was replaced by spare one at the Centre for continuity of the the Gene X- stakeholders to ensure health service and In the long run the supplier pert machine that the equipment is WHO was informed of the issue and carried out repaired. the calibration since the machine was still under Warranty. I advised management to ensure the outgoing recommendation is followed up. 13

15 FINANCIAL STATEMENTS 14

16 1