OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA UGANDA EMBASSY, CAIRO REPORT AND OPINION OF THE AUDITOR GENERAL

Transcription

1 OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA UGANDA EMBASSY, CAIRO REPORT AND OPINION OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 TH JUNE 2014 MARCH, 2015 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS Page ACRONYMS... iii REPORT AND OPINION OF THE AUDITOR GENERAL TO PARLIAMENT... 1 DETAILED REPORT OF THE AUDITOR GENERAL INTRODUCTION BACKGROUND INFORMATION OBJECTIVES OF THE EMBASSY AUDIT SCOPE PROCEDURES PERFORMED AUDIT FINDINGS... 6 ii

3 ACRONYMS Acronym Description AO Accounting Officer BoU Bank of Uganda CC Contracts Committee EC Evaluation Committee ECTS Engineering Centre of Technical Services EGP Egyptian Pound FY Financial Year HoC Head of Chancery HoM Head of Mission MoW&T Ministry of Works and Transport NTR Non-Tax Revenue OAG Office of the Auditor General PDU Procurement and Disposal Unit PPDA Public Procurement and Disposal of Public Assets PPDA Public Procurement and Disposal Act, 2003 PS/MoFA Permanent Secretary, Ministry of Foreign Affairs PS/MoPS Permanent Secretary, Ministry of Public Service PS/ST Permanent Secretary/Secretary to the Treasury TAI Treasury Accounting Instructions, 2003 UCF Uganda Consolidated Fund UGX Uganda shillings USD United States of America Dollars iii

4 UGANDA EMBASSY - CAIRO REPORT AND OPINION OF THE AUDITOR GENERAL TO PARLIAMENT FOR THE FINANCIAL YEAR ENDED 30 TH JUNE 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of the Uganda Embassy, Cairo, for the year ended 30 th June These financial statements comprise of the Statement of Financial Position as at 30 th June 2014, Statement of Financial Performance, Statement of Changes in Equity and Statement of Cash Flow for the year then ended, together with other accompanying schedules, notes and accounting policies. Management s Responsibility Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 8 of the Public Finance and Accountability Act (PFAA), 2003, the Accounting Officer is accountable to Parliament for the funds and resources of the Embassy. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Financial Reporting Guide, 2008, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended) and Sections 13 and 19 of the National Audit Act, 2008, is to audit and express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA)/International Standards of Supreme Audit Institutions (ISSAIs). Those standards require that I comply with ethical requirements, plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor s judgment including the assessment of risks of material misstatement of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for 1

5 purposes 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 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 opinion. Part A of this report sets out my opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management. PART A Unqualified Opinion In my opinion the financial statements of the Uganda Embassy, Cairo for the year ended 30 th June, 2014 are prepared, in all material respects, in accordance with the Financial Reporting Guide, 2008 and Section 31(6) of the Public Finance and Accountability Act, 2003, of the Laws of Uganda, as well as the modified cash basis of accounting described under accounting policy 2(a). Emphasis of Matter Without qualifying my opinion, I draw your attention to the following matters, which have been included in the Mission financial statements; Outstanding Commitments Of the outstanding commitments as at the beginning of the year under review amounting to UGX.158,679,788, the Mission was only able to pay UGX.2,644,082 during the year, leaving a balance of UGX.156,035,706 outstanding for more than a year. A significant portion of the outstanding commitments relates to staff social benefits of UGX.106,912,112, which accrued due to failure by the Mission to pay the 13 th month for the local staff. There is an increased risk of the mission being taken to courts of law if the obligations are not settled. Unbudgeted Non -Tax Revenue - UGX.115,291,861 Although a sum of UGX.115,291,861 was collected as NTR, the mission did not provide an estimate of revenue in its annual budgets contrary to Paragraph 2 (c) of the third schedule of the Public Finance and Accountability Act, As a result, 2

6 management could not assess and monitor its revenue performance, and submit accurate revenue returns to the Accountant General, thus posing a risk of misuse of the monies collected under NTR. Other matter Without qualifying my opinion, I further draw your attention to the following matter which has not been reflected in the financial statements; Prepaid Rent It was noted that a sum of USD.9,000 (Approximately UGX.22,500,000) was paid for rent in respect of periods straddling into the ensuing financial year, but was not recognized as prepayments in the financial statements as prescribed in the accounting policies adopted by the Mission. John F.S. Muwanga AUDITOR GENERAL KAMPALA 23 rd March,

7 PART B DETAILED REPORT OF THE AUDITOR GENERAL This section outlines the detailed audit findings, management responses and my recommendations in respect thereof INTRODUCTION In accordance with Article 163(3), of the Constitution of the Republic of Uganda, I am required to audit and report on the public accounts of Uganda that is to say, all public offices including the courts, the central and the local government administrations, universities and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of the above Embassy to enable me report to Parliament BACKGROUND INFORMATION The Uganda Embassy in Cairo is located on Plot 66, Road 10, Maadi, Cairo, Arab Republic of Egypt OBJECTIVES OF THE EMBASSY The Embassy prepared a Mission Charter to facilitate its service delivery by focusing on three thematic areas: Economic/Commercial diplomacy; Regional/International peace and security; and the well-being of Ugandans. In order to further streamline its focus on the thematic areas, the Embassy developed eight (8) strategic objectives, with clearly defined key outputs, performance indicators, and performance targets. These objectives include the following; i. To promote trade, investment and tourism between Uganda and Egypt, Israel, Syria and Lebanon; ii. To strengthen bilateral relations with the countries of accreditation (Egypt, Israel, Syria and Lebanon); iii. To maximize benefits from regional and sub-regional organizations in countries of accreditation; iv. To promote sustainable management and cooperative exploitation of R. Nile resources; v. To promote and safeguard interests and welfare of Ugandans in the diaspora; vi. To source scholarship/external funds for human resource development of Ugandans; 4

8 vii. viii. To provide diplomatic, protocol and consular services; and To create or put in place a conducive atmosphere and acquire appropriate tools to facilitate the work environment AUDIT SCOPE The audit was carried out in accordance with International Standards on Auditing (ISA)/International Standards of Supreme Audit Institutions (ISSAIs) and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish whether; a. The financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. All Embassy funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Goods and services financed have been procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the Embassy, assess control risk and identify reportable conditions, including material internal control weaknesses. e. The Embassy s Management was in compliance with the Government of Uganda financial regulations. f. All necessary supporting documents, records and accounts have been kept in respect of all Embassy activities, and are in agreement with the financial statements presented PROCEDURES PERFORMED The following audit procedures were undertaken; a. Revenue Obtained schedules of all revenues collected and reconciled the amounts to the Embassy s cashbooks and bank statements. b. Expenditure The Embassy payments vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. 5

9 c. Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period audited. d. Procurement Reviewed the procurement of goods and services under the Embassy during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the Embassy assets, and carried out physical inspection of these assets. f. Embassy 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 AUDIT FINDINGS 6.1 Budget Performance - Recurrent The activities and operations of the Mission are financed through budget support by Government of Uganda. In the financial year under review, the mission received a sum of UGX.1,321,748,000 against an approved budget of UGX.1,321,749,000, which constituted 99.9% budget performance level. However, comparing this performance with previous year, the mission s budget declined by UGX.52 Million in recurrent budget support as indicated in the table below; Analysis of budget performance-recurrent Financial Year Initial Budget (UGX) Revised Budget (UGX) Actual Release (UGX) Budget performance (%) FY 2012/13 1,662,518,484 1,373,748,679 1,373,748, % FY 2013/14 1,321,749,000 1,321,749,000 1,321,748, % Variance 51,999,679 52,000,679 With the increased responsibilities of the mission as described in its Mission Charter, the reduction in its budget may negatively affect its capacity to effectively deliver its mandate. 6

10 I advised the Accounting Officer to liaise with the responsible authorities, to ensure that the identified priorities in the Mission Charter are adequately funded during the budgeting process. 6.2 Budget Performance-Capital development In the FY 2013/14, a sum of UGX.250 Million was budgeted and released to the Mission to cater for capital development expenditure. However, I noted that out of the funds released, only UGX.140,133,583 was spent on renovation of the Chancery. The balance of UGX.109,866,417 remained unspent at year end. I was not availed any evidence to show that authority was granted to the Mission by the PS/ST to retain the unspent funds as is required under the TAI, The Accounting officer explained that the Mission received a directive from the Ministry of Foreign Affairs, to stop the ongoing works at the residence until further notice and this was at the beginning of a new financial year, when funds had already been committed to the said activity. However, Management will ensure that it seeks authority to retain unutilized funds at the close of every financial year. I advised the Accounting Officer to ensure that authority to retain unutilized funds at the close of the year is always sought and obtained as required by the TAIs. 6.3 Non-Tax Revenue The Mission collects its NTR from administrative fees and miscellaneous revenue, which mainly includes proceeds from the issuance of Visas, and travel documents. In the financial year under review, a total of UGX.115,291,861 was collected. However, scrutiny of NTR transactions revealed the following irregularities; a. Unbudgeted NTR Paragraph 2(c) of the third schedule of the Public Finance and Accountability Act 2003, requires the Accounting Officers to submit to the Accountant General a statement of revenue received during the year, showing the amount contained in the estimates of revenue for each source of revenue, the amount actually collected, with explanation for any variation between the revenues collected and estimated. Contrary to the above provision, the mission did not provide an estimate of revenue to be collected under NTR in its annual budget for the year under review. As a result, management could not assess and monitor its revenue performance, and submit accurate revenue returns to the Accountant General. This poses a high risk of misuse of such funds. 7

11 The Accounting Officer explained that the mission collects Non tax revenue only in the form of Visa fees, Endorsements and Emergency travel documents. These are variable fees and very hard to estimate, however, the mission would seek further guidance on the issue from the concerned departments. I advised the Accounting Officer to start budgeting for NTR as per the provisions of the Public Finance and Accountability Act, 2003 to enable the Mission assess and monitor NTR performance. b. Non remittance of NTR to the Consolidated Fund Paragraphs of the TAI, 2003 specify how Accounting Officers should account for revenue collected. Included in the specifications is the requirement to transfer money to BoU on an account designated by the Accountant General from which such revenue is periodically transferred to the Uganda Consolidated Fund (UCF) Account. On Transfer of the revenue to the UCF, both the Accountant General and the Accounting Officer are notified by BoU. I noted that at the closure of the financial year under review, the Accounting Officer did not transfer all the collected revenue to the UCF as required by TAIs, hence leading to the creation of unnecessary arrears of revenue, which stood at UGX.93,194,267. The failure by the Accounting Officer to remit monies to the UCF denies government of the revenue required to implement its programmes, thus affecting service delivery. In addition, it increases the risk of misuse of the funds if strict adherence to regulations prohibiting utilization of funds at source is not observed. The Accounting Officer attributed this anomaly to the political situation in the country and the fact that the Central Bank put restrictions and a limit to the foreign exchange out flow. I advised the Accounting Officer to liaise with the PS/Ministry of Foreign Affairs and the PS/ST to find out a solution to this challenge. 6.4 Irregular Payment of Staff rent - USD.66,500 Examination of payment vouchers revealed that staff were directly paid monies in respect of their rent totaling to USD.66,500 (Approximately UGX.186,200,000) instead of the amounts being paid to the landlords. In addition, the monies were being paid to staff in cash, thus increasing a risk of misuse by staff through fraudulent activities, such as paying for less expensive and unbefitting accommodation, and irregularly saving on the balance of the amount claimed. I further noted that some staff were paid for rent periods that did not fall in the 8

12 respective financial years being charged without declaring the source of the funds in the budgets. Scrutiny of the lease agreements further revealed the following irregularities; The lease agreements were drawn in English by the Mission staff and not translated in Arabic (official language of the host country), thus standing a risk of limited legal enforcement, especially in a foreign country. Some lease agreements had no dates of expiry indicated, thus leaving them open for unspecified periods. Although they contained a provision of automatic renewal in case the occupant continued using the premises, it is important that the start and end dates be specified in the agreements. The lease agreements required landlords to furnish the client with a list/inventory of household items, but in most of the agreements reviewed the lists were not provided. Some agreements lacked the telephone contacts of the landlords, although this was specifically provided for. Given the above mentioned irregularities in the agreements and the method of cash payment to the landlords, the rent transactions are susceptible to abuse. The Accounting Officer explained that; In the near future the mission shall ensure that contracts are drawn up by a law firm and also translated to Arabic. Regarding the lease period, they had assumed that in the absence of notification from either party, the rent for the next period becomes automatic as stated in the agreement. The Mission always recommends that all officers rent fully furnished apartments to avoid purchasing of house hold items by the Mission hence all inventory for the officer s apartments are available in their respective places of residence. We shall get a copy and attach it on the new agreements accordingly. Telephone contacts for the various landlords will be added to each agreement. I advised the Mission Management as follows; The Accounting Officer should desist from paying cash to landlords and all payments to landlords should be by bank. 9

13 The Head of Mission should ensure that legally binding lease agreements are drawn by a reputable law firm in the country to avoid undesirable circumstances that may occur in future. 6.5 Payment of Child Education Allowances Section E-e (Foreign Services Allowances) Paragraph of the Public Service Standing Orders, 2010 (Revised), prescribe the preconditions for the payment of Child Education Allowance to mission staff. In particular, Paragraph 19 provides for the payment of education allowance directly to the school and reimbursement from the officer for his/her personal share should be made at source. Furthermore, Paragraph 20 of the same Standing Orders provides for each application for an education allowance to be approved by the Responsible Officer and must be accompanied by a certification by the Head of Mission confirming; The circumstances provided by the officer are correct; The period of education to be carried; The date of birth of the child; and The evidence of child parenthood/adoption. During the period under review, child education allowance totaling USD.14,000 (Approximately UGX.39,200,000) was paid to staff of the mission. However it was noted that the allowances were paid to the individuals (Mission staff) without evidence on staff personal files of approval of the prescribed conditions by the HoM, and there were no receipts from the schools acknowledging payment of the amounts. In the absence of certification by the HoM and the relevant supporting documentation, the possibility that allowances were not paid for the intended purposes cannot be ruled out. The Accounting Officer explained that Payment of child education allowance was standardized by the Ministry of Public Service and it was advised that for all officers who have children between the ages of 4 and 18 must be paid a uniform amount of money (i.e. Us$.2,000) per child every year irrespective of how much the officer is actually paying. I noted that although the circular standardized the amount to be paid per child every year, it remained silent on the provisions in the Public Service Standing Orders that prescribe how child allowance should be paid and accounted for. I advised the 10

14 Accounting Officer to liaise with PS/MoFA and PS/MoPS to ensure that the circular directives are harmonized with the Public Service standing orders. 6.6 Staff Insurance and Medical Refunds Section M-a (Medical Attention) Para.14 of the Public Service Standing Orders, 2010 (Revised) requires a Foreign Service officer to be fully covered by a medical insurance. I noted, in accordance with the above provision, that the mission was paying for medical insurance to a few staff and had incurred a sum of EGP.6,845 (Approximately UGX.2,590,000) in the period under review. However, I further noted that the mission was spending heavily on staff medical refunds and as a result, a sum of EGP.120,489 (Approximately UGX.45,590,360), which was almost eighteen times more than what was paid in staff medical insurance scheme. Those payments were found irregular, given the fact that the staff were supposed to send their medical claims to the insurance companies for settlement. Notable incidents included the following; The treatment of one staff, who is said to be terminally ill, is drawing a significant proportion of staff medical refunds. Given the officer s current health condition, the mission cannot continuously sustain payment of his medical bills without suffocating the payment of other financial obligations. The treatment of HoM, when he was involved in a motor accident in Kampala, has also exerted financial pressure on the mission budget. A sum of USD.6,000 had been spent on his treatment and was still undergoing treatment at the time of the audit (November, 2014). An outstanding claim for medical bills incurred in Kampala of UGX.5,427,160 had not been settled by the Accounting Officer as directed by the PS/Ministry of Foreign Affairs. The treatment of Administrative Attaché also significantly drained the mission resources. The above cases and many others, cannot be sustained by the mission s meager resources, hence the urgent need for a comprehensive insurance scheme for all mission staff. The Accounting Officer explained that the above matter was being looked into but it has been difficult to find an insurance company with 100% comprehensive coverage. She further explained that she had written to different insurance companies and was still looking around to make sure this issue is resolved notwithstanding the 11

15 ailments that are not covered. I advised the Accounting Officer to take up the matter with the relevant authorities to ensure that a sustainable solution is reached. 6.7 Repair of Vehicles A sum of EGP.139,082 (Approximately UGX.52,625,621) was spent on repair of the two utility vehicles and one representation car in the year under review. However, the following anomalies were noted; Although there used to be a sound vehicle repair system, it has currently broken down, whereby drivers do not report vehicle repair requirements in writing; vehicles are not inspected before and after repairs; and garages are being paid in cash other than by cheques or bank transfers. The representation vehicle has been involved in a series of accidents more than the other two vehicles since its acquisition in However the major accident, which cost the Embassy heavily, occurred at Cairo International Airport whereby a substantial amount of EGP.84,370 (Approximately UGX.31,923,783) was paid to a repairing firm. Although the vehicle was comprehensively insured, the insurance company refunded the Embassy only EGP.32,978 (39.1% of the cost incurred), due to the fact that the car was improperly handled by the driver right after the accident. According to the insurance company, the driver tried to drive the car immediately after the accident instead of putting it on a car carrier, thus causing more significant damage than what was caused by the accident itself. Through negligence, the driver occasioned a financial loss of EGP.51,392 (Approximately UGX.19,445,621) to government. Although the payments were supported by receipts, invoices and other supporting documents, I could not fully rely on them because of the weaknesses in the vehicle management system. The Accounting Officer explained that the Mission was in the process of putting up a tightly controlled fleet management system as recommended. I advised the Accounting Officer to restore the vehicle management system to oversee vehicle repairs, fuelling and movements. In addition, all vehicle repair bills should be paid through the bank. 12

16 6.8 Management of Imprest Paragraph 20 of the TAIs requires Imprest holders to be appointed by the Accounting Officers on specific approval by the Accountant General. Paragraph 23 of TAIs further specifies that all appointments of Imprest holders must be notified to the Accountant General, Auditor-General and the officer to whom the Imprest Holder is to account. Para 24.of TAIs require that in fixing the amount of the imprest, Accounting Officers appointing Imprest holders will have regard to the facilities available to them for the safe keeping of money, and will not authorize the holding of sums larger than those for which suitable accommodation is available. I noted that the Accounts Assistant also doubled as the Mission s Imprest holder, but contrary to the above provisions in the TAIs, he was not duly appointed. I further noted that large amounts of money would be drawn ranging between UGX.1 million to UGX.50 million as imprest and there was no imprest limit set by the Accounting Officer. I further noted that although the Accounts Assistant properly maintained the imprest cash book and accounted for the imprest advances, some ineligible expenses, such as: vehicle repairs (notably EGP.84,370, which was paid to a garage when the representation vehicle was involved in an accident); staff medical claims and telephone expenses-international VOIP that would be charged from the Mission s operation account, were charged on imprest. In his response, the Accounting Officer acknowledged the anomaly and indicated that an imprest holder would be appointed going forward. I advised the Accounting Officer to expedite this action and also ensure that imprest management is in accordance with the provisions under the Treasury Accounting Instructions, Procurement a. Absence of a Procurement Plan Regulation No.96, sections (1) to (3) of the PPDA Regulations, 2003 requires a user department to prepare and submit to the PDU a multi-annual rolling work plan for procurements based on approved budget. The procurement plan should enhance financial predictability, accounting and control over procurement budgets. In addition, the plan should facilitate the entity to plan, organize, forecast and schedule its procurement activities. A review of the mission s procurement files and records showed that the mission did not have a comprehensive procurement plan in a format prescribed by the above 13

17 regulation. Although the Accounting Officer explained that the Mission had a procurement Plan, the plan availed was a listing of the items to be procured with no details such estimated amounts, procurement method and timing. In addition, there was no evidence to indicate that the mission prepared and filed procurement returns with PPDA Authority. I advised the Accounting Officer to ensure that procurement plans are always prepared in accordance with the PPDA regulations, to effectively guide the mission s procurement activities. In addition, procurement returns should be prepared and filed with PPDA authority. b. Absence of Evaluation Committee Regulation No.169, Section (1) of the PPDA Regulations, 2003, requires an evaluation to be conducted by an Evaluation Committee (EC). Section (2) of the same regulation requires the Procurement and Disposal Unit (PDU) to recommend the membership of the EC to the Contracts Committee (CC) for approval. According to Section (3) of the Regulation, the number of members will depend on the value and complexity of the procurement requirements, but shall not be less than three. Section (4) further requires that the members should be of an appropriate level of seniority and experience depending on the value and complexity of the procurement. A review of the procurement files for the mission revealed that all awards by the Contracts Committee (CC), were not backed by recommendations of an evaluation committee contrary to PPDA regulations. In some instances, the CC would irregularly constitute itself into an Evaluation Committee in the same meetings of tender award, thus adapting the name Evaluation/Contracts Committee However, during discussions with the mission staff, it was noted that with the appointment of the CC, the other remaining staff (i.e. HoM, A/O and Accounts Staff) by nature of their duties, would automatically not qualify to serve as members of the EC. I noted the leanness of the Mission staff structure and found out that it hinders the separation of the EC from CC. The absence of a technical evaluation committee not only contravened the PPDA regulations, but also resulted into various irregularities being committed by the CC as discussed in the subsequent paragraphs. The Accounting Officer explained that the Mission will seek guidance from relevant authorities regarding the above aspect and also conduct training for staff involved. I await the outcome of this management commitment. 14

18 c. Botched Renovation of the Official Residence Two companies were invited to tender for renovation works at the official residence. However the following anomalies were noted; No evidence was availed to indicate that the works were advertised and request for bids sent to bidders. The method of direct procurement as explained by management, was not appropriate given the nature of the contract and the procurement threshold prescribed by PPDA regulations. The two companies each quoted for works in different currencies. It was noted that without an evaluation report, the CC went ahead to award the contract to one of the companies. The scope and magnitude of renovation works were not first ascertained by the Mission and as a result, each bidder visited the official residence to determine for themselves what the works would entail. This implied that there could not be an effective comparison of the two bids since there was no common stand on the scope of works. Due to the threat to sue by the other company which lost the tender, and the decision by H.E the Ambassador to stop the contractor, the CC on its sitting on 8 th July, 2014, under minute 1/07/2014, decided to defer the renovation works. However, there is no evidence on the procurement file indicating that the decision was duly communicated to the company that had been awarded the contract. In its effort to rectify the situation, management requested for the works to be assessed and sought assistance from government engineers from the Ministry of Works and Transport (MoW&T), who were facilitated by the embassy to the tune of EGP.13,500 (UGX.5,108,108) in air tickets. However, at the time of the audit (November, 2014), the Engineers had not provided the Mission with an assessment report and as a result the procurement process had stalled. Government had released a sum of UGX.250,000,000 for capital development, but as at closure of the financial year, only UGX.109,866,417 had remained unapplied. There is a risk that the funds may continue being applied on other mission activities if the tender process is not expedited. The Accounting Officer explained that the Mission will send a reminder to the officials from Ministry of Works to furnish management with a proper works assessment 15

19 report to allow the procurement process to commence. I advised the Accounting Officer to expedite this action, and ensure that proper procurement procedures are observed in accordance with the PPDA regulations. d. Procurement of Office Laptops Three firms were sourced by the mission through direct physical contact, to supply four office laptops. The following anomalies were noted; Although the CC opted for the direct method of procurement, there is no evidence that the technical specifications, such as: storage memory, processing speed, monitor size, etc, had been specified, to allow for easy comparison during evaluation. Although the awarded firm had quoted lower than others, the comparison was not done on standard technical specifications. There was no technical evaluation report on file to back the decision of the CC, despite the complex nature of the procurement. According to the quotation from one of the firms, it indicated that it was authored on the 17 th June, Comparing this date with the date of CC sitting on 18 th June, 2014, it was revealed that the procurement was hurriedly concluded, thus posing a risk that the mission may not have obtained value for money in the procurement due to the opted procurement method. The Accounting Officer explained as follows; The late award of the tender was as a result of administrative issues in terms of interference in the work of the contracts committee. The committee was not independent hence the delay. As long as there is no interference in the activities of the contracts committee all future procurements will be concluded according to the plans set in the PPDA regulations. I advised the Accounting Officer to ensure that future procurements are concluded according to the procurement plan and in accordance with the PPDA regulations. e. Redesigning of the Chancery Reception Three firms were invited for redesigning of the chancery reception and the contract was awarded to one of the firms for USD.10,000. It was noted that the redesign of the chancery reception has improved the general appearance of the Embassy. However, the following anomalies were noted; 16

20 There was no evidence on the procurement file to indicate that the evaluation committee report was prepared before the award by the CC. One firm quoted in a different currency and there is no evidence to show that the CC committee made a currency conversion to enable equitable comparison. There was no evidence on file to indicate that specifications for the works were prepared and communicated to all firms. The work of the redesign of the reception was so technical, thus needed a fully constituted technical evaluation committee. The procurement method used was beyond the PPDA permitted threshold of such works. No designs were obtained from the other two companies apart from the one that won the tender. The Accounting Officer acknowledged the above anomalies and indicated that all mission procurements will in future be conducted in accordance with the PPDA regulations. I await the outcome of this commitment by the Accounting Officer Mission Charter and Performance Reporting The Embassy prepared a mission charter to facilitate its service delivery by focusing on three thematic areas: Economic/Commercial diplomacy; Regional/International peace and security; and the well-being of Ugandans. In order to further streamline its focus on the thematic areas, the Embassy developed eight (8) strategic objectives, with clearly defined key outputs, performance indicators, and performance targets, as indicated in paragraph 3.0 above. In his letter referenced MFA/X/16 of 16 th April, 2014, the Hon. Minister of Foreign Affairs, further gave guidance to the HoM to give priority attention to the following specific actions and report on them on a quarterly basis; a) Engage Egypt to be supportive of various peace building initiatives/processes on interest to Uganda and Great Lakes Region; b) Lobby Egypt s understanding and appreciation of Uganda s position on various important issues, particularly the Nile and regional geo-politics; c) Facilitate promotion of at least USD.200M worth of Uganda exports to Egypt annually; 17

21 d) Lobby for inward transfer of at least USD.300M worth of investment from Egypt per year; e) Facilitate attraction of at least 150,000 tourists from Egypt per year; f) Handle at least 600,000 requests for Consular services annually; g) Identify and facilitate of appropriate technology from Egypt; h) Engage Ugandan Diaspora in Egypt to actively contribute to development at home; and i) Identify and facilitate acquisition, development and maintenance of at least one Government property in Cairo annually. A review of the 3 rd quarter performance report of the FY 2013/14 submitted to PS/Ministry of Foreign Affairs on 6 th May, 2014, indicated promising results and achievements by the mission. Notable achievements included; Increased coordination of mission activities, including allocation of duties to staff; Followed the geo-politics in the countries of accreditation; Coordinated UPDF and Police trainings in Egypt Issued 225 visas; and Received company profiles of firms interested in renewable sources of energy, gas supply and oil refinery. I did not review the 4 th quarter report as it was not availed to me. However, comparing the mission charter strategic objectives, key outputs, performance indicators and targets, with the mission quarterly performance report, the following areas of improvement are suggested; Staff activity reports should be prepared in line with their allocated duties, which should also be linked to the strategic objectives of the mission charter. The quarterly performance report by the HoM should be linked to staff activity reports. The Quarterly performance report should, to a large extent, focus on the key outputs, performance indicators and targets. The Accounting Officer has committed to ensure that the Staff activity and quarterly performance reports are improved and adjusted accordingly. 18

22 6.11 Cash payments of staff salaries Paragraph 268 of the TAIs and Section B-a 9 of the Public Service Standing Orders, 2010 (Revised), provide for payment of staff salaries into the individual bank accounts of staff. I noted that in most occasions, staff salaries were being paid in cash by the Accounts Assistant, after drawing lump sum amounts from the bank. Such a practice exposes the mission to a risk of loss, given the risks associated with cash. Besides, some officers had financial obligations (loan repayments) with their banks. This implies that payment of salaries in cash may hinder the recovery efforts by banks, which may in turn cause diplomatic embarrassments. The Accounting Officer explained that the payment method was adopted due to the fact that only two officers hold bank accounts. Since the revolution in the country, the Egyptian fiscal policies tremendously changed. For example, it takes a lot of scrutiny just to cash the mission cheques. However, officers without bank accounts have been advised to follow up with the various banks in order to get bank accounts. She further explained that management would make all efforts to minimize cash transactions. I advised the Accounting Officer to ensure that this practice is stopped henceforth and that all salary payments are made through the bank Staff Performance Management of staff performance requires the appraisees to agree with their supervisors on the activities, key performance indicators, and outputs/targets for the appraisal period. The agreed outputs together with the activities constitute staff performance plans, which should form the basis for appraisal of staff at the end of the appraisal period. However, there was no evidence on staff personal files, to indicate that the staff prepared and discussed performance plans with their supervisors at the beginning of the appraisal period, and that they were appraised at the end of the year. The absence of performance plans, with clear outputs/targets, limits the effective supervision and monitoring of staff activities, which eventually frustrates the objectives of performance appraisals at the end of the period. In addition, this affects the attainment of the objectives in the Mission Charter. Further noted was that staff activity reports were not specific and did not, on many occasions, contain measurable outputs or targets. They were so narrative and could not be aligned back to the objectives of the Mission Charter. I advised the HoM to 19

23 ensure that staff performance plans, with measurable targets which link to the objectives of the Mission Charter, are drawn at the beginning of the appraisal period to form the basis of staff appraisal at the end of such periods Physical Inspection of Mission Properties a. Chancery Building The first phase of the renovation of the chancery building had just been completed at the time of audit. The contractors for both the general renovation and redesign of the chancery reception appear to have exhibited good workmanship skills. Below are some of the photographs taken during inspection; Photographs taken during inspection of the chancery building Photograph Remarks Photograph showing the front view of the newly redesigned chancery reception Photograph showing the behind view of the newly redesigned chancery reception. 20

24 The photograph showing the recently renovated staff boardroom with new furniture. b. Official Residence The general condition of the official residence was generally appalling. The residence is comprised of a storeyed building with servant quarters on the roof top. The following conditions were observed; The paint on the walls was peeling off; The roof top was leaking whenever it rains; The kitchen facilities including the cookers, fridges require urgent attention; Electrical switches and sockets were found broken and the wires were exposed, posing safety risk to the occupants; and Water heaters were not functioning. The Accounting Officer explained that the Mission was awaiting the MoW&T engineers to finalize the assessment report in order to embark on the renovation works. I advised the Accounting Officer to liaise with the PS/Ministry of Foreign Affairs to ensure that the MoW&T engineers finalize the assessment report, to enable the commencement of the procurement process for the renovation works without further delay Financial Statements a. Staff Arrears and Other Commitments A review of the financial statements (Statement of outstanding commitments) revealed that, of the total outstanding commitments as at the beginning of the year under review amounting to UGX.158,679,788, the Mission was only able to pay UGX.2,644,082 during the year, leaving a balance of UGX.156,035,706 outstanding for more than a year. It is apparent that the Mission s efforts towards settlement of outstanding arrears are minimal. Also noted was that a significant portion of the outstanding commitments is staff social benefits of UGX.106,912,112, which accrued 21

25 due to failure by the mission to pay the 13 th month for the local staff. There is an increased risk of the mission being taken to courts of law if the obligations are not settled and this may tarnish the diplomatic image of the country. The Accounting Officer explained that the matter was brought to the attention of the Permanent Secretaries in the Ministries of Foreign Affairs and that of Finance Planning and Economic Development. However, although these arrears have been budgeted for in the past financial years, the funds in question have not been availed to the Mission. I advised the Accounting Officer to continue following up this matter until the obligations are settled. b. Prepaid Rent It was noted that rental payments totaling to USD.9,000 were made in respect of periods straddling in the ensuing financial year, but were not recognized as prepayments in the financial statements as prescribed in the accounting policies Details as per table below; Prepaid Rent not disclosed in the financial statements DATE PVR.NO. CHQ.NO. DESCRIPTION AMOUNT (USD) 15/06/2014 PV-2479 CH.1177 Rents for (July-sept14) 4, /06/2014 PV-2480 CH.1178 Rents for (July-sept14) 4, Total 9, Although the Accounting Officer explained that adjustments to recognize prepaid rent would be effected in the financial statements, by the time of concluding this audit, this had not been effected. I advised the Accounts Assistant to recognize the amount of prepaid rent in accordance with the prescription in the basis of preparation of accounts Follow-up on previous year s Audit findings The status of the findings pointed out in the previous years audit report was as summarized in the following table:- No Issue raised Comment on implementation status 1 Statement of Outstanding Commitments A total of UGX.158,679,788 was reflected in the accounts as outstanding commitments, out of which UGX.106,669,223 and UGX.51,562,039 was for social benefits and Goods and services, respectively. However, the balances were not The Balances have continued not to be supported with a schedule and the 22

26 supported with schedules and/or notes to the accounts. outstanding debt has not been paid. 2 Statement of Disposal of physical assets Proceeds from the sale of boarded off furniture and fittings to staff amounting to EGP.1,820 were not reflected in the cash flow statement. The anomaly has been corrected 23