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.47330-UG FOR THE YEAR ENDED 30 TH JUNE 2016 OFFICE OF THE AUDITOR GENERAL UGANDA
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.47330-UG FOR THE YEAR ENDED 30TH JUNE, 2016 FOR THE FINANCIAL YEAR... 5 1.0 INTRODUCTION... 5 2.0 BACKGROUND TO THE PROJECT... 5 3.0 PROJECT FINANCING... 5 4.0 PROJECT OBJECTIVES... 6 5.0 AUDIT OBJECTIVES... 6 6.0 PROCEDURES PERFORMED... 7 7.0 AUDIT FINDINGS... 8 8.0 DETAILED FINDINGS... 8 1
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
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP) IDA CREDIT NO.47330-UG FOR THE YEAR ENDED 30 TH JUNE, 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of East African Public Health Laboratories Networking Project (EAPHLNP) for the year ended 30 th June 2016. These financial statements comprise of the Statement of Fund Balance as at 30 th June 2016, 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
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 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 position of East African Public Health Laboratories Networking Project as at 30 th June 2016 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 22 nd December 2016 4
PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF EAST AFRICAN PUBLIC HEALTH LABORATORIES NETWORKING PROJECT (EAPHLNP) IDA CREDIT NO.47330-UG FOR THE YEAR ENDED 30 TH JUNE, 2016 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 2011. Under the agreement, IDA agreed to extend a credit equivalent to SDR.6,600,000 equivalent to USD.10,100,000 towards financing the project for five years starting from March 31, 2011. However, the project received Additional Funding of SDR.10,700,000 equivalent to USD.15 million for another four years starting from March 31, 2016. 5
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 communicable diseases. EAPHLNP is implemented in three components, whose specific objectives are stated below; 4.1 Component I Strengthen the regional capacity to diagnose Tuberculosis and other communicable diseases of public health importance and share information to mount an effective regional response. 4.2 Component II Support joint training with other member countries 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 2016 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. 6
e. Project funds are managed in compliance with the covenants contained in the financing agreement as well as GoU financial regulations. 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
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 remedy may add value to the entity. It is a matter of low risk or low stakeholder interest. 7.2. Summary of Audit Findings No. Title of Finding Significance 1 Undisbursed funds as at 30 June 2016 Moderate 2 Shortfall in Counterpart fund contribution Moderate 3 Non construction and remodelling of laboratories Moderate 4 Follow up of prior year outstanding recommendations. Low 8.0 DETAILED FINDINGS 8.1 Undisbursed Funds as at 30 June 2016 I noted that, although a total of USD.10,100,000 was approved for the project, by the time of the closure of the project on 31 st March 2016, a total of USD9,530,055 (95%) had been spent resulting into undisbursed funds amounting to USD.528,713.90. The undisbursed funds were largely attributable to foreign exchange fluctuations of the disbursement currency, the US Dollar against the funding currency, the SDR. Non disbursement of funds may frustrate the achievement of planned outputs. It also makes Government to lose commitment fees paid in regard to undisbursed funds. 8
I advised Management to liaise with MoFPED to design a mechanism of compensating for losses associated with currency fluctuations. 8.2 Shortfall in counterpart fund contribution Review of the financial statements indicated that the Government of Uganda contributed only UGX.233,857,000 out of the approved budget of UGX.350,000,000 resulting into a shortfall of UGX.116,143,000 outstanding at the close of the year. Under funding may constrain the implementation of project planned activities. The Accounting Officer explained that the shortfall in counterpart funds was occasioned by low releases from the MoFPED to the Ministry of Health during the year under review. I advised the accounting Officer to liaise with MoFPED to ensure that budgeted funds are released to enable implementation of planned activities. 8.3 Non construction and remodelling of laboratories The Ministerial policy statement indicated that the project planned to construct satellite laboratories at Mbarara, Arua and Mbale RRHs as well as remodelling St. Mary s Hospital Lacor laboratory. However, the project closure report indicated that the activities were not implemented although the designs had been developed. The non-implementation negatively affected the improvement of service delivery to the communities served by the above hospitals. The Accounting Officer explained that the activity was not implemented due to underfunding. Funding has been provided in the Additional Funding of the project and has also been approved by the Ministry of Finance, Planning and Economic development. I advised the Accounting Officer to fast track the implementation of the activity. 8.4 Follow up of prior year outstanding recommendations. The findings from the review of implementation of recommendations in the previous audit report are as contained in the table below. 9
Findings Audit Recommendation Management Current Status Response Audit Remarks Loan Performance The low disbursement rate coupled with big unutilized balances does not only affect the project implementation but may also impact negatively on future donor funding. The Accounting officer was advised to always ensure that funds are well budgeted for and absorbed/expended during the implementation so as to avoid big unutilized balances and delays in the procurement / payments process minimised. The project closed on 31 st March without disbursement of USD.528,713.90 that is largely attributable to foreign exchange fluctuations of the US Dollar against the SDR Addressed Lack of Internal Audit Reports it was noted that the Internal Audit function did not perform the above roles. Failure to carry out internal evaluation of the above roles may result into misstatements due to errors and or control overrides which could go undetected. The project management is advised to consider setting up an internal audit function to strengthen its control environment and ensure that the unit is staffed with appropriate personnel and that semi annual reports are raised highlighting areas for improvement. The Internal Audit Department issued 2 Audit Reports as stipulated in the Financing Agreement. Achieved 10
FINANCIAL STATEMENTS 11