OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KYANKWANZI DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30 TH JUNE, 2016
TABLE OF CONTENTS 1.0 INTRODUCTION... 7 2.0 ENTITY FINANCING... 7 3.0 AUDIT SCOPE... 7 4.0 AUDIT PROCEDURES PERFORMED... 8 5.0 FINDINGS... 9 5.1 Categorization of findings... 9 5.2 Summary of findings... 9 6.0 DETAILED AUDIT FINDINGS... 10 6.1 Low- of Youth Livelihood Program Funds... 10 6.3 Unaccounted for funds... 11 Appendix 1: Recovered Funds from YLP... 12 Appendix 2: Understaffing... 14 Appendix 3: Unaccounted for funds... 14 2
LIST OF ACROYNMS DLG ICT ISSAI District Local Government Information Communication Technology International Standards of Supreme Audit Institution LGFAM Local Government Financial and Accounting Manual 2007 LGFAR Local Government Financial and Accounting Regulations 2007 MoESTS MoFPED NMS Ministry of Education Science and Technology and Sports Ministry of Finance Planning and Economic Development National Medical Stores PFMA Public Finance Management Act 2015 PPDA UGX URA USMID VAT WHT Public Procurement and Disposal of Assets Uganda Shillings Uganda Revenue Authority Uganda Support to Municipal Infrastructure Development Value Added Tax Withholding Tax 3
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KYANKWANZI DISTRICT FOR THE YEAR ENDED 30 TH JUNE 2016 THE RT. HON. SPEAKER OF PARLIAMENT Introduction I have audited the accompanying financial statements of Kyankwanzi District Local Government for the year ended 30th June 2016. These financial statements comprise of the Statement of Financial Position as at 30 th June 2016, Statement of Financial Performance, Statement of Changes in Equity, Cash flow Statement together with other accompanying statements, notes and accounting policies. Management s Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Kyankwanzi District Local Government. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Government Financial and Accounting Manual, 2007, and for such internal control as management determines 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), section 87 of the Local Government Act, 1997 and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 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. 4
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 of financial statements in order to design audit procedures that are appropriate in the circumstances but not for 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 unqualified 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 Unqualified Opinion In my opinion, the financial statements of Kyankwanzi District Local Government as at 30 th June 2016 are prepared, in all material respects, in accordance with the Local Governments Financial and Accounting Manual, 2007, Section 51(3) of the Public Financial Management Act 2015, the Local Governments Financial and Accounting Regulations, 2007 and the Local Governments Act cap 243, 1997 (as amended), of the Laws of Uganda. Emphasis of matter Without qualifying my opinion, attention is drawn to the following matter which is also included in part B of this report. 5
Low- of Youth Livelihood Program Funds It was observed that Council had advanced an amount of UGX.335,575,000 to Youth Livelihood Programme but had not recovered a sum of UGX.244,456,000 from the various Youth Interest Groups. The low recovery rate may render the programme unsustainable. John F.S. Muwanga AUDITOR GENERAL 28 th November 2016 6
PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF KYANKWANZI DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30 TH JUNE 2016 This section outlines the detailed introduction, background information, entity financing audit findings, management responses and my recommendations in the respect thereof. 1.0 INTRODUCTION In accordance with Article 163 (3) of the Constitution of the Republic of Uganda 1995 (as amended), 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 Kyankwanzi District Local Government to enable me report to Parliament. 2.0 ENTITY FINANCING Kyankwanzi District was financed by grants (Conditional and Unconditional) from the Central Government, development partners and locally generated revenues from taxes, fees, licenses and charges. During the financial year 2015/2016, the district received grants totalling to UGX.13,674,608,227 from the Central Government; UGX.317,505,400 from development partners and UGX.254,866,733 from locally generated revenues. The total revenue of UGX.14,246,980,360 constituted 99.6% of its revised approved budget estimates of UGX.14,300,559,525. 3.0 AUDIT SCOPE The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. The audit was carried out with regard to the following objectives:- a. To verify whether the financial statements had been prepared in accordance with the requirements of the Local Governments Financial and Accounting Manual 2007; and the Local Governments Financial and Accounting Regulations 7
2007; and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. To verify whether all the funds of the entity had been utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed had been procured in accordance with the PPDA Act. d. To evaluate and obtain sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses e. To verify whether the management of the funds of the entity was in compliance with the Government of Uganda financial regulations. f. To verify whether all the necessary supporting documents, records and accounts had been kept in respect of all activities, and are in agreement with the financial statements presented. 4.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements of the entity. b. Expenditure The payment vouchers of the entity were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. 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 entity during the period under review and reconciled with the approved procurement plan. 8
e. Fixed Assets Management Reviewed the use and management of the assets of the entity during the period under review. f. 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 evaluated the overall financial statement presentation. 5.0 FINDINGS 5.1 Categorization of findings The following system of profiling of the audit findings has been adopted to better prioritize 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. 5.2 Summary of findings No Finding Significance 6.1 Low- of Youth Livelihood Program Funds (UGX High 91,118,350) 6.2 Understaffing Moderate 6.3 Unaccounted for funds Low 9
6.0 DETAILED AUDIT FINDINGS This section outlines the detailed audit findings, management responses and my recommendations. 6.1 Low- of Youth Livelihood Program Funds Chapter 6(i) and (ii) of the Youth Livelihood Programme (YLP) document in the Ministry of Gender, Labour and Social Development, requires scheduling of repayment of the revolving fund and recovery of the funds. On the contrary, Council had advanced an amount of UGX.335,575,000 to Youth Livelihood Programme but had not recovered a sum of UGX.244,456,000 from the various Youth Interest Groups as shown in the table below: Financial Year Amount Received Total Revolving Funds 335,575,000 Amount Recovered (Appendix 2) 91,118,350 Amount not Recovered 244,456,650 This is attributed to the laxity on part of management to enforce recovery measures for the revolving funds in line with the provisions of the guidelines. Failure by Council to recover the funds implies that the program may not be sustainable. The Accounting Officer explained that re-enforcement has been done towards the recovery process by engaging police to follow up the defaulters. I await the outcome of the Accounting Officer s actions. 6.2 Understaffing The district had an approved staff establishment of 2,010 positions. However, only 1,370 (68.2%) positions were filled leaving 640 (31.8%) posts vacant as shown in Appendix 2. 10
Understaffing overstretches the available staff beyond their capacity, creates jobrelated stress to the fewer and negatively affects the level of public service delivery to the community. The Accounting Officer explained that submissions have been made and adverts are soon to appear to fill some of the vacant positions but the wage inadequacy has consistently remained a challenge that has restrained us from recruiting staff to the required levels. Secondly the district has made effort before to recruit and fill the posts of the District Internal Auditor and District Engineer but failed to attract any suitable applicants. I advised the Accounting Officer to follow up the matter with the Ministry of Public Service and ensure that the vacant posts are filled. 6.3 Unaccounted for funds Regulation 43 (2) of the Local Governments Financial and Accounting Regulations, 2007 requires administrative advances to council employees to be authorized by the Chief Executive and to be accounted for within a month. At the time of audit, a total of UGX.4,785,300 had not been accounted for as shown in Appendix 3. In the absence of the accountability documents, I was unable to confirm that the funds were utilised for the intended purposes. I advised the Accounting Officer to ensure that all the funds are properly accounted for or else effect recovery from the responsible officers. 11
APPENDICES Appendix 1: Recovered Funds from YLP Receipt Date Code Payer Details Amount Number 2801 19/01/2016 142219 Kakifulukwa Produce buying and YLP Loan Trading 2802 19/01/2016 142219 Kakifulukwa Produce buying and YLP Loan Trading 2803 19/01/2016 142219 Kakifulukwa Produce buying and YLP Loan Trading 2804 19/01/2016 142219 Kayalama Youth live hood Bull YLP Loan 5,000,000 fattening 2805 19/01/2016 142219 Kayalama Youth live hood Bull YLP Loan 3,600,000 fattening 2806 19/01/2016 142219 Kamucope Produce Youth live hood YLP Loan Project 2807 19/01/2016 142219 Kikoma A Youth live hood Produce YLP Loan 300,000 buying 2808 19/01/2016 142219 Kikoma A Youth live hood Produce YLP Loan 250,000 buying 2809 19/01/2016 142219 Wattuba Produce Trading YLP Loan 310,000 Youthlivehood 2810 19/01/2016 142219 Kiryanongo Cosmetology and Hair YLP Loan 200,000 2811 19/01/2016 142219 Kikoma A Youth live hood Produce YLP Loan 500,000 buying 2812 19/01/2016 142219 Mugereka YLP YLP Loan 500,000 2813 19/01/2016 142219 Kiryanongo Cosmetology and Hair YLP Loan 400,000 2814 19/01/2016 142219 wattuba YLP YLP Loan 235,000 2815 19/01/2016 142219 Cancelled - 2816 19/01/2016 142219 Mpango Youth live hood YLP Loan 3,000,000 2817 19/01/2016 142219 Kikoma A Youth live hood Produce YLP Loan 500,000 buying 2818 19/01/2016 142219 Kiryanongo Cosmetology and Hair YLP Loan 300,000 2819 19/01/2016 142219 Kiryanongo Cosmetology and Hair YLP Loan 300,000 2820 19/01/2016 142219 Cancelled - 2821 19/01/2016 142219 Kinoni Produce Buying & Selling YLP Loan 2822 19/01/2016 142219 Kinoni Produce Buying & Selling YLP Loan 2823 19/01/2016 142219 Wattuba Produce Trading Youth live YLP Loan hood 2824 27/01/2016 142219 Wattuba Produce Trading Youth live YLP Loan hood 2825 27/01/2016 142219 Wattuba Produce Trading Youth live YLP Loan hood 2826 27/01/2016 142219 Wattuba Produce Trading Youth live YLP Loan hood 2827 27/01/2016 142219 Wattuba Produce Trading Youth live YLP Loan hood 2828 27/01/2016 142219 Kinoni Produce Buying & Selling YLP Loan 12 600,000 400,000 232,000 140,000 100,000 240,000 200,000 700,000
2829 27/01/2016 142219 Mugereka YLP YLP Loan 2830 10/03/2016 142219 KY Enterprise YLP Loan 2831 10/03/2016 142219 KY Enterprise YLP Loan 2832 10/03/2016 142219 Kiyombya Bull Fattening YLP Loan 2833 17/03/2016 142219 Masodde Piggery Youth live hood YLP Loan 2834 05/04/2016 142219 Kabanga Bull fattening YLP Loan 2835 26/04/2016 142219 Kiseresi Bull Fattening Group YLP Loan 2836 26/04/2016 142219 Mugereka Produce Buying & Selling YLP Loan 2837 03/05/2016 142219 Silimilla Bull Fattening Project YLP Loan 2838 08/04/2016 142219 Masodde Piggery Youth Live Hood YLP Loan 2839 08/04/2016 142219 Mulagi Beef YLP Loan 2840 25/04/2016 142219 Ntwetwe Piggery YLP Loan 2841 27/06/2016 142219 Kikonge Bull Fattening Youth Live YLP Loan hood 2842 28/06/2016 142219 Mpango Youth Bull Fattening Project YLP Loan 2843 28/06/2016 142219 Wattuba Youth Produce Buying & YLP Loan Selling 2844 28/06/2016 142219 Kinoni Produce Buying & Selling YLP Loan 2845 28/06/2016 142219 Ntunda Youth Cattle Keepers YLP Loan 2846 28/06/2016 142219 Masodde Piggery Youth live hood YLP Loan 2847 28/06/2016 142219 Kosoloza Youth YLP Loan 2848 12/07/2016 142219 Masodde Piggery Youth live hood YLP Loan 2849 12/07/2016 142219 Kakyabutala Youth live hood Project YLP Loan 2850 Unused Total Recovered in other years Total Recovered 500,000 250,000 250,000 1,100,000 1,400,000 1,110,000 2,000,000 5,765,000 270,000 300,000 1,950,000 2,000,000 320,000 950,000 600,000 550,000 46,322,000 44,796,350 91,118,350 13
Appendix 2: Understaffing KYANKWANZI DISTRICT STAFF ESTABLISHMENT SHOWING BOTH FILLED AND VACANT POSTS Department Establishment Filled Vacant Administration 21 14 7 Statutory Bodies 7 4 3 Finance 17 11 6 Procurement 2 1 1 Planning Unit 6 2 4 Works 20 11 9 Education 9 3 6 Community 8 2 6 Natural Resources 18 3 15 Internal Audit 6 3 3 Production 20 6 14 DHO's Office 11 5 6 Health Centre IV 48 38 10 Health Centre III 152 104 48 Health Centre II 45 18 27 Primary Teachers 1356 1007 349 Secondary 147 102 45 Sub County MGT 117 36 81 Total 2010 1370 640 Appendix 3: Unaccounted for funds Vouc her No 28- Oct 20- Sep 04- Oct Total Paym ent Date 29/10/ 2015 29/09/ 2015 29/10/ 2015 Payee's Name Details Audit Amount Ssemakula Samuel Makamba Jackson Gwalwa Christine & Kobil Kiboga Ssaza Payment refund while attending a pension workshop Facilitation to conduct interviews for routine maintenance gangs Facilitation to education officers & other key stakeholders, service & materials Audit Remarks 468,000 Receipt of funds not acknowledged 1,849,000 List of interviewees not attached. 2,468,300 No accountability attached. Receipt of funds not acknowledged 4,785,300 14