THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT II (ERT II) UGANDA COMMUNICATION COMMISSION COMPONENT (IDA CREDIT AGREEMENT NO.445540 UG) FOR THE YEAR ENDED 30TH JUNE, 2015 OFFICE OF THE AUDITOR GENERAL KAMPALA i
TABLE OF CONTENTS LIST OF ACRONYMS... ii DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT II (ERT II) UGANDA COMMUNICATION COMMISSION COMPONENT (IDA CREDIT AGREEMENT NO.4455 UG) FOR THE YEAR ENDED 30TH JUNE, 2015... 4 1.0 INTRODUCTION... 4 2.0 PROJECT BACKGROUND... 4 3.0 AUDIT OBJECTIVES... 5 4.0 PROCEDURES PERFORMED... 5 5.0 FINDINGS... 6 6.0 DETAILED FINDINGS... 7 i
LIST OF ACRONYMS CICs ERT II GAAPs ICT IDA MEMD MoFPED UCC UG UGX Community Information Centers Energy for Rural Transformation Project II Generally Accepted Accounting Principles Information and Communication Technology International Development Association Ministry of Energy and Mineral Development Ministry of Finance Planning and Economic Development Uganda Communications Commission Uganda Uganda Shillings ii
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT II (ERT II) UGANDA COMMUNICATION COMMISSION COMPONENT (IDA CREDIT AGREEMENT NO.4455 UG) FOR THE YEAR ENDED 30TH JUNE, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the Financial Statements of Energy for Rural Transformation Project II (ERT II) - Uganda Communications Commission Component (IDA Credit Agreement No.4554-UG) for the financial year ended 30 th June, 2015. These financial statements comprise of the Statement of Financial Position, Statement of comprehensive Income, Statement of Cash Flows, Statement of Changes in Equity and a summary of significant accounting policies and explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with the Government of Uganda and donor regulations and guidelines. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of Financial Statements that are free from material misstatement, whether due to fraud or error; 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 Statements, based on my audit. I conducted my 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 about whether the financial statements are free of material misstatement. An audit involves performing audit 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 risks of material misstatement of the 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 1
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 basis for my audit opinion. Part A of this report sets out my opinions on the financial statements and Special Account Statement. 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 Energy for Rural Transformation Project II Uganda Communications Commission Component as at 30 th June, 2015 and of its receipts and expenditure for the year then ended, in accordance with the basis of accounting set out in Note 1(a) to the financial statements and in conformity with the donor reporting guidelines and terms and conditions. John F.S. Muwanga AUDITOR GENERAL 16 st December, 2015. 2
REPORT OF THE AUDITOR GENERAL ON THE SPECIAL ACCOUNT OPERATIONS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT II (ERT II) UGANDA COMMUNICATION COMMISSION COMPONENT (IDA CREDIT AGREEMENT NO.4455 UG) FOR THE YEAR ENDED 30 TH JUNE, 2015 During the year there was no activity on the Special Account of Energy for Rural Transformation Project II (ERT II) for the year ended 30 th June 2015 and as such I have not issued an opinion on the Account. The Account balance of USD 609,000 as at 30 th June 2015 was due to be returned to IDA. John F. S. Muwanga AUDITOR GENERAL 16 st December, 2015 3
PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE ENERGY FOR RURAL TRANSFORMATION PROJECT II (ERT II) UGANDA COMMUNICATION COMMISSION COMPONENT (IDA CREDIT AGREEMENT NO.4455 UG) FOR THE YEAR ENDED 30TH JUNE, 2015 This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda requires me to audit and report on the public accounts of Uganda and 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 project to enable me report to Parliament. 2.0 PROJECT BACKGROUND The purpose of the ERT project is to develop and increase access to energy and information and communication technologies in rural Uganda. ERT also aims to develop Uganda s energy and information/communication technologies sectors, so as to make a significant contribution to rural transformation. The Uganda Communications Commission is implementing the ERT Information and communication Technology (ICT) component comprising of two sub-components of, Investment subsidy; and Technical assistance. Under ERT II the ICT component s main objectives are: i. To deploy Community Information Centres (CICs) complete with solar energy or any other appropriate energy solution for providing community charging facilities and communication services in undeserved locations. ii. To establish a last mile broad band connectivity with focus on northern region of the country; and so support development of appropriate local content in order to enhance the usage of the established ICT infrastructure and services. 4
3.0 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 objectives included establishing; a. Whether the Project managers are managing the Project in accordance with the Financing Agreement. b. Whether all donor 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. 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 Generally Accepted Accounting Principles (GAAPs). 4.0 PROCEDURES PERFORMED a. Revenue Obtained all schedules of funds provided by IDA 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 5
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. Fixed Assets Management Reviewed the use and management of the project assets during the period under review. f. Periodic Reports about the project Activities Reviewed the Agreement provisions, operational manual and reports and reconciled it with the Programme activities during the period under review. g. 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. 5.0 FINDINGS 5.1 Categorization of audit findings. The following system of grading of the audit findings has been adopted to better prioritise the implementation of audit recommendations. In the OAG, risks are classified as follows: 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, 6
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. 5.2 Summary of audit finding The following table shows the summary of audit findings. No. Title of Finding Grading 1 Project progress High a. Computers for Health ICT facilities b. Last mile broadband project c. New Communication Information Centers 2 Implementation of previous year s recommendations 6.0 DETAILED FINDINGS 6.1 Project Progress The project registered different levels of progress at the end of June 2015 as outlined below: a. Computers for Health ICT facilities During the bidding process, Farmco Ltd emerged the best evaluated bidder at USD 285,000 compared to the budgeted figure of USD 380,000. To date, Farmco Ltd has completed deploying ICT equipment in 19 Health centres. ICT equipment for additional 11 health centres have been procured using savings on the Education and Health ICT budget. The deployment of this equipment has been completed by Access IT (U) Ltd. b. Last mile broadband project Due to the closure of the project, no activities took place during the year under review. c. New Communication Information Centers Due to the closure of the project, no activities were carried out during the year. 6.2 Implementation of the previous year s recommendation 7
In the previous audit report, I suggested a number of recommendations. I reviewed the status of their implementation and noted the following: Particulars of paragraph Recommendation STATUS of implementation Funds Absorption Funds worth UGX.1,634,582,468 were not absorbed as at June 2014 Project Implementation Status Unlawful closure of ICT Component of the project I advised management to: devise measures to improve fund absorption so as to achieve the intended objectives of the project in a timely manner. ensure the project funds are spent according to the work plan and budget. I advised management to consider reviewing the project implementation plan and procurement requirements with a view to achieving agreed objectives. I advised Management to communicate to Ministry of Finance Planning and Economic Development (MoFPED) in accordance with article 3.06 of the financing agreement. As at June 2015 the same funds were not absorbed, however at the time of reporting (December 2015) a refund of USD 454,507 was made to IDA account No: 2000192003492 as per exhibit I, leaving USD 155,411 (609,919-454,507) unaccounted for out of the total unabsorbed funds. Last mile broadband project and New communication information centres were not implemented as indicated in 3.2 and 3.3 of the executive summary of the financial statements The project was closed and evidence of partial funds. 8
FINANCIAL STATEMENTS 9