THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA PRINTING AND PUBLISHING CORPORATION FOR THE YEAR ENDED 30 TH JUNE 2016 OFFICE OF THE AUDITOR GENERAL UGANDA
TABLE OF CONTENTS ACRONYMS... 2 1.0 INTRODUCTION... 7 2.0 BACKGROUND AND OBJECTIVES... 7 3.0 AUDIT OBJECTIVES... 7 4.0 PROCEDURES PERFORMED... 8 5.0 CATEGORIZATION AND SUMMARY OF FINDINGS... 9 5.1 Categorization of findings... 9 5.2 Summary of findings... 9 6.0 DETAILED FINDINGS... 9 6.1 Trade debtors-uncertainty in recoverability... 9 6.2 Unsettled Statutory obligations... 10 6.3 Governance weaknesses... 11 6.4 Implementation of the procurement plan... 11 6.5 Fixed Assets register... 12 6.6 Staff advances... 12 6.7 Deliveries made without proper documentation (Electoral commission)... 12 6.8 Preparation of bank reconciliation statements... 13 Appendix 1: Financial Statements 1
ACRONYMS Acronyms UPPC GAAP UGX PAYE NSSF WHT VAT LST Meaning Uganda Printing and Publishing Corporation Generally Accepted Accounting Principles Uganda Shillings Pay As You Earn National Social Security Fund Withholding Tax Value Added Tax Local Service Tax 2
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA PRINTING AND PUBLISHING CORPORATION FOR THE YEAR ENDED 30 TH JUNE 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the accompanying financial statements of the Uganda Printing and Publishing Corporation (UPPC) together with the notes thereon for the year ended 30 th June, 2016.These financial statements comprise of statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes to the financial statements including a summary of significant accounting policies used. Management Responsibility Under the provision of the Uganda Printing and Publishing Corporation (UPPC) Act (Cap 330) Section 17(2) (iii), the Directors are responsible for the preparation of the financial statements which give a true and fair view of the state of affairs and operating results of the Corporation. 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 as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 13 and 19 of the National Audit Act, 2008 is to express an opinion on the financial 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 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 financial statements in order to design audit procedures that are appropriate in the 3
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 qualified opinion. Part A of this report sets out my qualified 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 Basis for Qualified Opinion Un-reconciled trade receivables balances There were discrepancies in the receivables balances. The Corporation reflected UGX.251,317,278 as part of the receivables balance, however, responses from debt circularization procedures revealed that this amount was not owed to UPPC by the stated entities. Furthermore, credit balances in the receivables ledger amounting to UGX 41,562,306 were not supported by evidence of payments. As a result, receivables in the financial statements are misstated. Qualified Opinion In my opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly in all material respects, the financial position of the Uganda Printing and Publishing Corporation as at 30 th June 2016 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the Corporation Act (Cap 330 of the Laws of the Republic of Uganda). Report on other Legal Requirements As required by the Uganda Printing and Publishing Corporation Act and the Uganda Companies Act, I report to you based on the audit that; i) I have obtained all the information and explanations which to the best of my knowledge and belief were necessary for the purpose of my audit. 4
ii) iii) Proper books of account have been kept by the Corporation, so far as appears from my examination of those books; and The corporation s financial position and statement of comprehensive income are in agreement with the books of account Emphasis of Matter Without qualifying my opinion further, I draw your attention to the following additional matters to the financial statements: Trade receivables outstanding for over 10 years The carrying value of receivables as at 30 th June 2016 was reflected as UGX.2,713,629,404 (2015: UGX. 2,832,892,578). The major categories of these debts are owed by the Government of Uganda. These debts have been outstanding for over 10 years and their recoverability is uncertain. Unsettled tax obligations The Corporation has unsettled tax obligations owed to Uganda Revenue Authority (URA) amounting to UGX.3,554,603,433. These unsettled obligations may attract fines and penalties thus causing financial loss to the Corporation in the near future. John F.S. Muwanga AUDITOR GENERAL KAMPALA 21 st December, 2016 5
REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION 6
PART B DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA PRINTING AND PUBLISHING CORPORATION FOR THE YEAR ENDED 30 TH JUNE 2016 This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION Under the terms of Section 17(2) (iii) of the Uganda Printing and Publishing Corporation Act (Cap 330) and Section 17 of the National Audit Act (2008), I am required to audit the accounts of Uganda Printing and Publishing Corporation (UPPC) and report to Parliament. In accordance with the provisions of the same Act, I appointed M/s Axis Associates, Certified Public Accountant to audit the accounts of the Corporation on my behalf and report to me so as to enable me report to Parliament in accordance with Article 163 (4) of the Constitution. 2.0 BACKGROUND AND OBJECTIVES Uganda Printing and Publishing Corporation was set up by an Act of Parliament (Cap 330) in 1992. It is a Corporate Commercial Enterprise fully owned by the Government of Uganda. The objectives of the Corporation include the following; (a) To turn the government printer into an effective and efficient resource. (b) To improve the administration of government business by providing improved printing services. (c) To improve the productivity levels of the printer. (d) To improve on the capacity and quality of the printer services available to the government. 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 following were the audit objectives:- a. To express an opinion whether the financial statements present fairly, in all material respects, Corporation receipts and expenditure incurred for the period, and are in conformity with Generally Accepted Accounting Principles; 7
b. To evaluate and obtain a sufficient understanding of the internal control structure of the Corporation, assess control risk and identify reportable conditions, including material internal control weakness; c. To perform tests to determine whether the Corporation complied, in all material respects, applicable laws and regulations; d. All Corporation funds were utilised with due attention to economy and efficiency and only for the purposes for which the funds were provided. e. Goods and services financed have been procured in accordance with the PPDA Act. f. Management was in compliance with the Government of Uganda financial regulations. g. All necessary supporting documents, records and accounts have been kept in respect of all Corporation activities, and are in agreement with the financial statements presented. 4.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the Corporation s cashbooks and bank statements. b. Expenditure The Corporation payments vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. It was established that all Corporation funds were utilized for the intend purposes. 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 Corporation 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 Corporation during the period under review. 8
f. Corporation s 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 CATEGORIZATION AND SUMMARY OF FINDINGS 5.1 Categorization of findings The following system of profiling of the audit findings is used to 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 S/No Finding Priority 7.1 Uncertainty in recoverability of trade debtors High 7.2 Unsettled Statutory obligations High 7.3 Governance weaknesses High 7.4 Implementation of the procurement plan Moderate 7.5 Fixed assets register Moderate 7.6 Staff advances Moderate 7.7 Deliveries made without proper documentation Low 7.8 Preparation of bank reconciliation statements Low 6.0 DETAILED FINDINGS 6.1 Trade debtors-uncertainty in recoverability Trade receivables slightly decreased from the prior year amount of UGX. 2,968,039,234 to UGX 2,713,629,404 as at 30 th June 2016. However, the following were noted; 9
Unsupported credit balances in the receivables ledger of UGX. 41,562,306. Management explained that there are payments made to the Corporation account without issuance of invoices. Responses from debtor circularization revealed that receivables were overstated by UGX 211,366,579 as the debtors did not acknowledge the debts. The major categories of these debts are owned by Government of Uganda Ministries, Departments and Agencies whose recoverability is uncertain as these have been outstanding for over 10 years. There is a risk that the long overdue debts may not be recoverable and as such receivables in financial statements may not be fairly stated. Management explained that some efforts were made by Management to collect the debts for instance the Corporation recovered UGX.874million from the Ministry of internal affairs. Management further explained that the long overdue debts will be forwarded to the Board to with a view of writing them off. I advised Management to critically analyze and reconcile the accounts in the receivables ledger to ensure that the receivables balances represent a true and fair view. 6.2 Unsettled Statutory obligations The income tax act cap340 section 116 (1, 2 & 3) requires an employer to withhold tax and remit it within 15 days of the following month. As noted in the prior years, the Corporation persistently failed to settle tax obligations relating to PAYE, WHT, VAT, LST and NSSF to relevant authorities. During the year under review, the Corporation had unsettled statutory obligations of UGX. 3,554,603,433. Noncompliance with the statutory deductions may result into unnecessary fines, penalties and interest charged for late remittance of statutory deductions. Management explained that this tax liability had been outstanding since 2010 and the Corporation was considering entering into Memorandum of Understanding with URA on how this liability could be cleared. 10
I advised to Management to comply with statutory obligations in order to avoid fines, penalties and interest. 6.3 Governance weaknesses The progress of the Corporation is adversely affected as Management spends a lot of its time resolving disputes rather than implementation of the Corporation s plans. A case in point is the office of the Managing Director (MD) that was affected by several court cases and wrangles which have rendered the office vacant for a long period of time. Furthermore, the Corporation was left without a Board of Directors for a period of four months from the time the term of the previous Board ended on 30 th June 2016. A new board was appointed in the month of November 2016 Management explained that the Corporation has a substantive Board that was appointed on 1 st November 2016 and is set to recruit a production manager to complete the senior management team. Management further explained that the Corporation was in the process of developing a corporate culture that will steer the Corporation to success. I advised Management to promote a spirit of teamwork within the Corporation to avoid interferences in the normal flow of business and ensure the Corporation s success. 6.4 Implementation of the procurement plan A review of the procurement plan indicates that the Corporation planned to procure goods and services worth UGX 12,662,480,000 using several sources of funding during the year under review. However the procurement department procured only 6.6% of the total budgeted amount. Under the circumstances the Corporation was unable to achieve all its planned outputs. Management explained the Corporation expected funding from Government, however, this did not materialize hence negatively affecting the implementation of the procurement plan for 2015/2016. I advised Management to regularly update the procurement plan in line with realistic funding expectations. I further advised Management to engage the Ministry of 11
Finance, Planning and Economic Development to ensure that budgeted funds are realized. 6.5 Fixed Assets register The Corporation did not maintain an updated fixed assets register. This makes it difficult for the Corporation to know the fixed assets it had in good working condition. For example additions amounting to UGX 2,850,000 were made to furniture and fittings in the financial year 2015/2016. However this amount was not yet reflected in the fixed assets register. The items of property, plant and equipment may not be fairly stated or valued and could be misstated in the financial statements. Management explained that the Corporation had procured the services of the Consultant to undertake the valuation of all Assets of the Corporation which will enable them to accurately post the fixed assets register. I await the outcome of Management s efforts to have an updated fixed assets register. 6.6 Staff advances - UGX. 73,900,364 Advances totaling to UGX.73,900,364 were given to staff as salary advances. However these amounts have been outstanding for over a year. Furthermore UGX 46,361,955 relates to staff that left the Corporation. This casts doubt on recoverability of these advances. Management explained that recovery will be made through monthly payrolls. I advised Management to ensure that salary advances are recovered in the month for which the advance was given. 6.7 Deliveries made without proper documentation (Electoral commission) An LPO provides a clear statement to the supplier of goods required. This document minimizes the likelihood of un-reconciled supplies. 12
During the year under review, it was noted that some work was carried out by the Corporation and delivered to clients without local purchase orders. Refer to the invoices to the Electoral Commission which were not supported by LPOs below; Date Invoice No. Amount UGX 24/06/2016 IN-CO2-00002589 216,000,000 27/04/2016 IN-CO2-00002567 924,000,000 10/12/2015 IN-CO2-00002568 302,400,000 07/03/2016 IN-CO2-00002566 81,600,000 24/07/2015 IN-CO2-00002568 144,000,000 Total 1,668,000,000 Without a Local Purchase Order there is potential for financial losses if the recipient of goods does not pay. Management explained that this was as a result of gazetting the Presidential and Parliamentary polling stations which had to be executed without delay in order to conduct the elections. I advised Management to ensure that the LPOs are obtained before rendering any service. 6.8 Preparation of bank reconciliation statements It was noted during the year under review that bank reconciliation statements were not prepared for the Corporation s crane bank account. Furthermore, there was no evidence that the bank reconciliation statements for Corporations Stanbic bank and Bank of Africa accounts were independently reviewed. In the absence of bank reconciliations, cash and cash equivalents may be misstated. Management explained that Crane bank reconciliations were not prepared for some time because the account was made dormant for almost four months and no transactions were being done through the said account. Management further explained that the managing director had instructed the bank to close this account. 13
I advised Management to ensure that bank reconciliation statements for all bank accounts are prepared and reviewed on a monthly basis. 14
APPENDIX I FINANCIAL STATEMENTS 15