OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF PALLISA DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30 TH JUNE 2015
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF PALLISA DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30 th JUNE 2015 THE RT. HON. SPEAKER OF PARLIAMENT Introduction I have audited the accompanying financial statements of Pallisa District Local Government for the year ended 30 th June 2015. These financial statements comprise of the Statement of Financial Position as at 30 th June 2015, 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 Pallisa District Local Government. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments 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 Governments Act, 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. 2
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 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 present fairly in all material respects the financial position of Pallisa District Local Government as at 30 th June 2015 and the results of its operations and cash flows for the year then ended, and comply in all material respects with the Generally Accepted Accounting Practice, the Local Governments Act 1997 cap 243 of the Laws of Uganda (as amended) and the Local Governments Financial and Accounting Regulations, 2007. Emphasis of matter Without qualifying further my opinion, I draw your attention to the following matter disclosed in the financial statements. 3
Funds not Properly Accounted for A sum of UGX.82,118,665 remained unaccounted for at the time of audit. Consequently, I could not confirm that the funds were utilised for the intended purpose. John F. S. Muwanga AUDITOR GENERAL 30 th November, 2015 4
PART "B" PALLISA DISTRICT DETAILED REPORT OF THE AUDITOR GENERAL FOR THE FINANCIAL YEAR ENDED 30 TH JUNE, 2015 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 Pallisa District to enable me report to Parliament. 2.0 AUDIT OBJECTIVES 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 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 were 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 have 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 5
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. 3.0 AUDIT METHODOLOGY 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 various departments during the period under review and reconciled with the approved procurement plan. 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 6
made by management; as well as evaluated the overall financial statement presentation. 4.0 ENTITY FINANCING Pallisa District is financed by grants (Conditional and Unconditional) from the Central Government, donations and locally generated revenues from taxes, fees, licenses and charges. During the year, the district received grants totaling to UGX.24, 643,596,540 from the Central Government; UGX.209,756,064 from donors; and UGX.191, 373,021 from locally generated revenues all totaling to UGX.25,033,058,889 which constitutes 81% of its approved budget estimates of UGX.30,941,832,057. 5.0 DETAILED AUDIT FINDINGS This Section outlines the detailed audit findings, management responses and my recommendations in respect thereof. 5.1 Funds not properly accounted for 5.1.1 Lack of Acknowledgement Receipts from URA Regulation 123 of the Income Tax Act, 1997, requires a withholding agent to pay URA any tax that has or should have been withheld within fifteen days after the end of the month in which the payment subject to withholding tax was made. It was however observed that UGX. 37,307,015 deducted from employees as PAYE was not supported by URA acknowledgment receipts as shown in appendix I. This creates a risk that the funds may not have been recovered by URA. I advised the Accounting Officer to obtain the acknowledgement receipts from URA. 5.1.2 Incompletely Vouched Expenditure Section 5.4.6 (1) of the Local Governments Financial and Accounting Manual (LGFAM), 2007, requires the head of finance to ensure that payment vouchers bear adequate supporting documents. However, it was observed that a sum of UGX.36, 657,650 was not adequately supported with accountability documents as indicated in Appendix II(a). Unsupported expenditure remains doubtful. 7
The Accounting Officer was advised to obtain the accountabilities or else recovery be effected from the responsible officers. 5.1.3 Un accounted for Funds Regulation 42 and 43 (2) of the Local Government Financial and Accounting Regulations (LGFAR), 2007, require funds to be properly vouched and accounted for within a period of a month. However it was observed that UGX. 8,154,000 advanced to various officers remained unaccounted for by time of audit contrary to the Regulations as shown in Appendix II(b). Consequently, I could not confirm that the funds were utilized for the intended purposes. I advised the Accounting Officer to ensure that the funds are properly accounted for or else recovery be made from the responsible officers. 5.2 Local Revenue Shortfall Regulation 32 of the Local Governments Financial and Accounting Regulations, 2007, requires the head of finance to be responsible for revenue collection and ensure that all revenue due to the council is promptly collected and banked intact. In case of arrears, regulation 101 requires that the revenue arrears statement should be prepared and submitted. In this respect, UGX 759,435,000 was budgeted for, but only UGX 195,220,750 (25.7%) was realized leading to a shortfall of UGX 564,214,250 representing 74.3% under performance. This adversely affected service delivery to the local community. The Accounting Officer explained that management had come up with revenue enhancement strategies to assist in improving revenue collection. I urged management to ensure that all budgeted revenue is collected in a timely and vigorous manner. 8
5.3 Lack of Land Titles Regulation 58(4) of the LGFAR, 2007 requires that the property and assets of a local Government shall be properly registered, titles issued and valued. However, it was noted that the District Council did not have land title for its institutions. The Council risks its land being encroached on. The Accounting Officer explained that the district had acquired comprehensive survey equipment s under PRDP fund to ease the process of surveying public land. I advised the Accounting Officer to ensure that the process of surveying the land is intiated to ensure that land titles are secured. 9
APPENDIX I: DOUBTFUL TAX REMMITTANCES Voucher no. EFT no. Date Department Payee Details Amount UGX. PPV-07061 5480206000031 12/15/14 Admin-Nusaf URA WHT From 148842 II operations Pal bookshop PPV-07065 5480206000035 12/15/14 Admin-Nusaf II operations URA WHT From Oraldo Enterprises Ltd 180000 PPV-07218 5480206000042 01/28/15 Admin-Nusaf II operations 10 URA PPV-06380 5480208000255 10/08/2014 Education uganda revenue authority PPV-07993 5480208000364 04/30/15 Education uganda revenue authority PV- Ed00566 5480208000408 6/22/15 Education uganda revenue authority WHT FM ORALDO ENTER LTD WHT from Bafakulera constn co ltd WHT from Inyako company ltd WHT from Bafakulera constn co ltd 180000 44931 819158 854858 PPV-07689 5480220000139 03/09/2015 Finance URA WHT from 180000 print pack PPV-06201 5480501000040 09/17/14 Health DFCU URA Uganda 345384 Revenue 6% WHT frm Ripako PPV-07053 5480501000093 12/15/14 Health DFCU URA WHT fm AX 272818 PPV-07647 5480501000153 03/03/2015 Health DFCU URA WHTfm 74412 bafakulera PPV-07730 5480501000161 03/12/2015 Health DFCU URA WHT fm nak 20167 PPV-07821 5480501000168 04/01/2015 Health DFCU URA WHT fm bikrikwog PPV-07375 5480105000456 02/11/2015 LGMSD URA WHT from Omaiga & sons Enterprises PPV-08402 5480105000499 06/10/2015 LGMSD URA WHT from Gean farmers PPV-08403 5480105000500 06/10/2015 LGMSD URA WHT from Victoria Outlets ltd PPV-06703 5480207000267 11/13/14 productionnaads uganda Payt of paye revenue from NAADS authority STAFF PPV-05982 5480205000182 08/12/2014 Water global URA W/tax from Bukomolo & Brothers PPV-06411 5480205000212 10/24/14 Water global URA 6% WHT frm KLR 745713 876825 476181 747600 29282000 60180 1012462
PPV-08097 5480205000307 05/12/2015 Water global URA W/Tax fro Orient technologies 18/03/2015 31/03/2015 Pallisa Hospital 09/01/2015 30/01/2015 Pallisa Hospital 08/10/2014 08/10/2014 Pallisa Hospital 24/08/2014 27/08/2014 Pallisa Hospital URA URA URA URA wht from Dema holdings ltd wht from Dema holdings ltd wht from oraldo Enterprises wht from pal bookshop 370756 301898 35030 225000 52800 37307015 APPENDIX II(a): INCOMPLETELY VOUCHED EXPENDITURE Vouche r no. PPV- 05890 PPV- 07147 PVwk00358 PVwk00356 EFT no. 54801010 00753 54801150 01277 54801150 01349 54801150 01347 Depart ment Administr ation works works works Payee Details Amount UGX Ulga collection Payt 4 ULGA a/c Subscription Fee 2014/15 6000000 pallisa Gapco serv station Had multipurpose ent Pallisa Gapco serv station Payment of fuel Supplied to Works 11550000 Hire of grader for roads repair 7500000 fuel for repair of roads 11607650 36,657,650 Remarks no acknowledg ement of receipt of funds no receipts, no consumptio n statement attached no receipt, agreement attached no receipt, no consumptio n statement APPENDIX II(b) UN ACCOUNTED FOR FUNDS Vouch er no. PPV- 06814 EFT no. 5480102 000476 Depart ment Statutory Bodies Payee Details Amount UGX Hared Petroleum ltd Hared Petroleum LTD 6850000 Remarks no receipt, consumption schedule, vehicle 11
15/06/2 015 05/06/2 015 Pallisa Hospital Pallisa Hospital Ikuolot Josephine Okoth David Purchase of buckets Purchase of computer and photocopier tonner 504000 800000 8,154,000 movement logbook,lpo not charged to store not charged to store 12