THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DANIDA SUPPORT TO BUDGET MONITORING AND ACCOUNTABILITY UNIT PROJECT FOR THE PERIOD ENDED 30 TH JUNE 2016 OFFICE OF THE AUDITOR GENERAL UGANDA
TABLE OF CONTENTS LIST OF ACRONYMS... iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DANIDA SUPPORT TO BUDGET MONITORING AND ACCOUNTABILITY UNIT PROJECT FOR THE PERIOD ENDED 30 TH JUNE, 2016... iv 1.0 INTRODUCTION... 1 2.0 BACKGROUND INFORMATION... 1 3.0 OBJECTIVES OF THE PROJECT... 2 4.0 DESCRIPTION OF THE PROJECT... 2 5.0 AUDIT SCOPE... 2 6.0 PROCEDURES PERFORMED... 3 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS... 4 7.1 Categorization of findings... 4 7.2 Summary of Findings... 4 8.0 DETAILED FINDINGS... 4 8.1 Compliance with the Financing Agreement and Government of Uganda Provisions 4 8.1.1 Limited bidding period offered to Bidders for procurement of printing services.. 5 8.1.2 Composition of the Steering Committee... 5 8.2 General Standard of Accounting and Internal Control... 6 8.3 External Communication... 6 ii
LIST OF ACRONYMS Acronym RFQ BMAU PPDA ROM M & E PFMA UGX Meaning Request for Quotations Budget Monitoring and Accountability Unit Public Procurement and Disposal of Assets Results Oriented Management Monitoring and Evaluation Public Finance Management Act Ugandan Currency (Shilling) iii
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DANIDA SUPPORT TO BUDGET MONITORING AND ACCOUNTABILITY UNIT PROJECT FOR THE PERIOD ENDED 30 TH JUNE, 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of the Budget Monitoring and Accountability Unit Project (BMAU) for the period ended 30 th June 2016. The financial statements which are set out on pages 8 to 14 comprise of; Balance sheet Fund accountability statement Statement of budget analysis against expenditure Notes to the financial statements including a summary of significant accounting policies adopted. Management responsibility Project management is responsible for preparation and fair presentation of the project financial statements in accordance with the Government of Uganda and DANIDA guidelines. Management is also responsible for designing and implementing internal controls relevant to the preparation of the project financial statement that is free from material misrepresentation, whether due to fraud or error and selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility My responsibility is to express an opinion on the financial statement based on my audit. I conducted the audit in accordance with International Standards on Auditing and donor regulations and guidelines. Those standards and the donor guidelines require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement. I believe that the audit provides a reasonable basis for my opinion. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor s judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor iv
considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the 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 reasonable basis for my audit opinion. Part A of this report sets out my opinion on the financial statements. Part B which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management. PART A Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of the project for the period ended 30 th June 2016 and the receipts and expenditures for the period then ended in accordance with the accounting policies stated under notes to the financial statements. John F.S. Muwanga AUDITOR GENERAL KAMPALA 19 th December, 2016 v
REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION
PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE DANIDA SUPPORT TO BUDGET MONITORING AND ACCOUNTABILITY UNIT PROJECT FOR THE PERIOD ENDED 30 TH JUNE 2016 This section outlines the detailed audit findings, management responses and my recommendations 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 INFORMATION The Budget Monitoring and Accountability Unit (BMAU) were established in July 2008 under the Ministry of Finance Planning and Economic Development to enhance monitoring efforts geared towards effective implementation of government programmes and projects. Budget monitoring is concerned with tracking implementation of selected government programs or projects to determine the extent to which the performance/improvements in the key areas funded under the budget lead to improved service delivery. BMAU is funded by the Danish Ministry of Foreign Affairs regarding development cooperation for the period December, 2013 to December, 2015. In line with the Denmark s strategy to improve accountability and the fight against corruption, the Danish Government agreed to provide financing worth DKK 2.5 million. During the period under review, a sum of UGX.312,656,328 was received by the Project in addition to a balance b/f of UGX.96,061,862 all totalling to UGX.408,718,190. During the year, a sum of UGX.733,742,423 was applied to the project activities and a fund balance of UGX.262,669 was carried forward to the project commitment in the next financial year. 1
3.0 OBJECTIVES OF THE PROJECT The overall objective of this financing is to help BMAU to; Enhance effectiveness of implementation of programmes in the monitoring sectors of Agriculture, Infrastructure, Industrialization and ICT, Social services and Micro Finance. Enhance the capacity of Members of Parliament and other stakeholders to demand for accountability. Budget monitoring seeks to; To verify information in the quarterly performance reports To assess the link between budget allocation and physical performance 4.0 DESCRIPTION OF THE PROJECT The role of this BMAU has since evolved to include undertaking research into specific issues around poor performance. The research is usually contracted by other government departments and agencies and serves as a basis for making policy recommendations. Some of the studies done so far include; Non-compliance in public financial management; the state of primary schools; spending constraints in local governments; the adequacy and impact of financing the food security budget through the National Agricultural Advisory Services; and an evaluation of the rural financial services programme and the Uganda Cooperative Savings and Credit Union. 5.0 AUDIT SCOPE 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:- a. Whether the Project managers are managing the Project in accordance with the Financing Agreement; b. Whether all funds have been used in accordance with conditions of the financing agreements, with due attention to economy and efficiency and only for the purposes for which the financing was provided; 2
c. Whether counterpart funds have been provided and used in accordance with the conditions of the financing agreements, with due attention to economy and efficiency and only for the purpose for which they were provided; d. Whether goods and services financed have been procured in accordance with the financing agreements and in accordance with the donor rules and procedures; e. Whether all necessary supporting documents, records and accounts have been kept in respect of all project activities and whether linkages exist between the books of account and the financial statements; f. Whether the special accounts have been maintained in accordance with the provisions of the financing agreements and in accordance with the donor regulations and procedures; and g. Whether the financial statements present a true and fair view of project financial position as at 30 th June 2015, and its receipts and expenditure incurred for the period, in conformity with the requirements of the PFMA, 2015 and the donor guidelines. h. The project assets were well managed in the period under review. 6.0 PROCEDURES PERFORMED a) Revenue Obtained all schedules of funds provided by DANIDA, and Government of Uganda and reconciled the amounts to the project s cashbooks and bank statements. b) Expenditure Vouched transactions including Statements of Expenditure and Financial Monitoring Reports used for submission of withdrawal applications during the period to establish whether documentation in support of expenditure agreed with the amount and description on the vouchers and/or applications and bank statements, and was properly controlled and accounted for. c) Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period d) Procurement Reviewed the procurement of goods and services under the project during the period under review and reconciled with the approved procurement plan. e) Periodic Reports about the project Activities Reviewed the Agreement provisions, operational manual and reports and reconciled it with the project activities during the period under review. 3
f) 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. 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of findings The following system of profiling of the audit findings has been adopted to better prioritise the 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. 7.2 Summary of Findings No Finding Significance 8.1.1 Limited Bidding Period offered to Bidders for Procurement of Moderate Printing Services 8.1.2 Composition of the Steering Committee High 8.3 Current State of External Communication High 8.0 DETAILED FINDINGS 8.1 Compliance with the Financing Agreement and Government of Uganda Provisions A review was carried out on the project compliance with the Grant agreement provisions and GOU financial regulations and it was noted that the project complied in all material respects with the provisions in the agreement and applied GOU regulations except for the following matters; 4
8.1.1 Limited bidding period offered to Bidders for procurement of printing services Section 64 of the PPDA Act, 2003 requires the bidding period to be sufficient to allow bidders to prepare and submit their bids and shall not be reduced with the aim of limiting competition. Section 46(1)(e) of the PPDA regulations, 2014 (Rules and Methods of procurement of Services) sets the minimum bidding period as (5) days for the quotations method of procurement. A review of procurement for printing of the BMAU Annual sector reports FY 2014/15 revealed that whereas the minimum number of quotations of three (3) were received as required by the PPDA Act/guidelines for Request for Quotations Method (RFQ). However, it was noted that the period provided for bidders was limited as shown below; The Bidding document were approved by the contracts committee on Thursday, 29 th October, 2015 The bidding documents were issued on 29 th October,2015 and was recorded using Form (8) Bidding was closed on Tuesday, 3 rd November,2015 at 10.00am at MoFPED Committee Rm2 A public bid opening was held at Committee Room 2 on 3 rd November,2015 This implies that only three (3) working days were provided to bidders to respond. The contract was eventually awarded to a local company at a total contract price of UGX.39,530,000 inclusive of VAT. Ideally, the bidders should have been given 5 working days according to the PPDA regulations. The practice of reducing on the bidding period limits competition and the services may not have been provided at the most competitive prices. In response, management agreed that the two days of the weekend affected the required number of days. I advised management to always ensure adherence to the regulations to avoid administrative reviews. 8.1.2 Composition of the Steering Committee Section 7.1 of the Project Financing Agreement provides for a steering committee chaired by the Director Budget-Ministry of Finance, Planning and Economic 5
Development for policy guidance. Members to this committee shall be drawn from the following institutions; Director Budget, MFPED Office of the Prime Minister (Dept. of M&E) Office of the President (Monitoring Office) DANIDA Parliamentary Budget Office Ministry of Public Service (ROM) Coordinator of CSBAG BMAU It was noted during review of steering committee minutes that the National Planning Authority and the Ministry of Public Service had not nominated representatives to the steering committee. There is a risk that the project did not benefit from the expertise/resources from these institutions and this may have negatively impacted the achievement of the project objectives. Management explained that the two institutions were invited to form part of the steering committee but didn t respond. I advised the project management to continue engaging these institutions and ensure that steering committee is fully constituted as planned. 8.2 General Standard of Accounting and Internal Control A review of the project financial management system was carried out and it was noted that management had instituted adequate controls to manage project resources. 8.3 External Communication The following were noted during review of the communications strategy, regarding external communication with stake holders; The BMAU has not extensively used the media to disseminate its information, thus limiting visibility opportunities. This leaves the public with little information about the work of the Unit. The BMAU has a page on the Finance Ministry website containing only a short brief about the unit, monitoring reports and policy briefs. At times, current information is not quickly uploaded on the page. The structure of Government 6
websites does not allow for flexible sharing of various forms of information like video clips and photos. In light of the above, there is a risk that the project may not obtain valuable comments from the public with regard to its activities. Although management indicated that reports are now accessible on the MoFPED website and various for a, they acknowledge that it is slow and makes access to information rather difficult. I advised management to address the gaps identified above during future projects implementation. 7
APPENDIX 1 FINANCIAL STATEMENTS 8