OFFICE OF THE AUDITOR GENERAL

OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF TORORO MUNICIPAL COUNCIL FOR THE YEAR ENDED 30 TH JUNE 2017 OFFICE OF THE AUDITOR GENERAL UGANDA

Table of Contents List of Acronyms... iii Opinion... 1 Basis for Opinion... 1 Key Audit Matters... 2 Drug Stock out Days at Bison Health Centre III... 2 Other Matter... 2 Failure to Implement Budget as approved by Parliament... 2 Receivables... 3 Understaffing... 3 Low Recovery of Youth Livelihood Program Funds... 4 Management s Responsibility for the Financial Statements... 4 Auditor s Responsibilities for the Audit of the Financial Statements... 5 Appendix 1: Planned Activities not implemented... 7 Appendix 2: Low Recovery of YLP Funds... 7 ii

List of Acronyms BOQ Bills of Quantities C/U Church of Uganda CAO Chief Administrative Officer DEO District Education Officer DLG District Local Government FY Financial Year GOU Government of Uganda HC Health Centre IFMS Integrated Financial Management System ISSAI International Standards of Supreme Audit Institution KCCA Kampala Capital City Authority KMs Kilometers LGFAM Local Governments Financial and Accounting Manual 2007 LGFAR Local Governments Financial and Accounting Regulations 2007 LGMSD Local Government Management and Service Delivery MMHS Management of Medicines and Heath Supplies MoFPED Ministry of Finance Planning and Economic Development MoH Ministry of Health NFA National Forestry Authority NMS National Medical Stores P/S Primary School PFMA Public Finance Management Act 2015 PPDA Public Procurement and Disposal of Assets UGX Uganda Shillings URF Uganda Road Fund UWEP Uganda Women Enterprise Project YLP Youth Livelihood Programme MoU Memorandum of Understanding iii

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF TORORO MUNICIPAL COUNCIL FOR THE YEAR ENDED 30 TH JUNE 2017 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the financial statements of Tororo Municipal Council which comprise the Statement of Financial Position as at 30 th June 2017, and the Statement of Financial Performance, Statement of Changes in Equity and Statement of Cash flows together with other accompanying statements for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In my opinion, the financial statements of Tororo Municipal Council for the year ended 30 th June 2017 are prepared, in all material respects in accordance with section 51 of the Public Finance Management Act, 2015 and the Local Government Financial and Accounting Manual, 2007. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and the National Audit Act, 2008. My responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the Municipal Council in accordance with the Constitution of the Republic of Uganda, (1995) as amended, the National Audit Act, 2008, the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 1

Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined the matter described below as a key audit matter to be communicated in my report; Drug Stock out Days at Bison Health Centre III I observed that 5 items out of the 11 (eleven) selected tracer 1 EMHS experienced stock outs within the audit period. Noticeably Mama Kits were out of stock for 103 days and coartem for 63 days at Bison Health Centre III. The stock out may be a result of failure by NMS to supply drugs in the quantities ordered by Health centres and lack of reliable information on drugs usage and stocking positions. The stock outs erode patients confidence in the health sector which leads patients to explore inappropriate and expensive alternatives of health care. The Accounting officer explained that NMS always used a PUSH System to deliver drugs for which Management had no control over to determine what was delivered. The Accounting Officer was advised to liaise with NMS to ensure continuous optimum stock of medicines and supplies. Other Matter I consider it necessary to communicate the following matters other than those presented or disclosed in the financial statements: Failure to Implement Budget as approved by Parliament Section 45 (3) of the Public Finance Management Act, 2015 states that An Accounting Officer shall enter into an annual budget performance contract with the Secretary to the Treasury which shall bind the Accounting Officer to deliver on the activities in the work plan of the vote for a Financial year, submitted under section 13 (15) of the said Act. I observed that out of the budgeted revenue of UGX.841,426,759 the district received UGX.761,353,973 (90.5%) resulting into a shortfall of UGX.80,072,786 (9.5%). The 1 The Tracer medicines include; Artemether/Lumefantrine,HIV determine Test strips,malaria RDTs,Oxygen,Blood,Surgical gloves,oxytocin,safedelivery kits/mamakits, PGA 2 sutures 2

most greatly affected outputs included procurement of desks, acquisition of physical plans and a double cabin pick up as shown in appendix 1. Failure to implement activities denies service to the beneficiary communities and defeats the purpose for which budgeting and budgetary controls are instituted. According to the Accounting Officer, the shortfall was majorly due to non-collection from Taxi and Bus Park owing to change of policy. He further attributed the shortfall to the failure of the district to remit the local service tax and revenue from land fees. This affected implementation of several activities. The Accounting Officer should engage the relevant authorities and ensure that budget deficiencies are addressed and that all the allocated funds are released and all activities implemented according to the budget as approved by Parliament and Municipal Council. Receivables Regulation 2.3.2.3 of the Local Governments Financial and Accounting Regulations, 2007 requires that debts are collected promptly. A review of the Statement of Revenue Arrears revealed that the arrears figure rose from UGX.53,480,125 the prior year to UGX.133,552,911 the current year. Outstanding debtors represent an idle asset which hinders implementation of Council activities. The Accounting officer acknowledged the shortcoming and attributed it to a number of factors among which were failure to receive Local Service Tax from district staff which was not remitted, Land fees expected from Tororo Cement Industry and District Land Board, Taxi/Bus park fees and Business licenses. The Accounting Officer was advised to ensure that the outstanding amounts are collected. Understaffing It was observed that the Municipal Council had an approved staff structure of 206 positions. Out of the approved staff structure only 124 (60%) were filled leaving a staffing gap of 82 (40%) positions. Understaffing overstretches the available staff beyond their capacity, creates job-related stress to the fewer staff and negatively affects the level of public service delivery to the community. 3

The Accounting officer acknowledged the shortcoming, but attributed it to limitation of the wage bill. He explained that a follow up with the Ministry to avail funding for recruitment was being done. The Accounting Officer was advised to continue engaging the Ministry of Public Service, the Ministry of Local Government and the Ministry of Finance Planning and Economic Development to address the challenge. Low Recovery of Youth Livelihood Program Funds Section 6(i) of the Youth Livelihood Programme (YLP) document, 2013 requires all project funds disbursed to each youth interest group to be treated as a revolving fund to be repaid in accordance with the project financing agreement between the district local government and the beneficiary youth interest group witnessed by the area resident state attorney. However, an analysis of recovery of the programme funds revealed that out of UGX. 11,791,666 due for recovery only UGX.1,500,000 (9.75%) was recovered leaving UGX. 10,291,666 outstanding as shown in appendix 2. Low recovery adversely impacts on Government objectives of setting up the programme as Revolving Fund to empower the Youth in Uganda to harness their socio-economic potential and increase self-employment opportunities and income levels. The Accounting Officer explained that they encountered challenges in recovering the funds and appropriate measures were being developed to enforce recovery. The Accounting Officer should ensure that all the outstanding monies are recovered. 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 Tororo Municipal Council. 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 the Public Finance Management Act, 2015 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. In preparing the financial statements, the Accounting Officer is responsible for assessing the district s ability to continue delivering its mandate, disclosing, as applicable, matters related 4

to affecting the delivery of the mandate of the district, and using the Local Governments Financial and Accounting Manual, 2007 and Public Finance Management Act, 2015 unless the Accounting Officer has a realistic alternative to the contrary. The Accounting Officer is responsible for overseeing the district s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISSAIs, I exercise professional judgment and maintain professional scepticism throughout the audit. I also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 district s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the district s ability to deliver its mandate. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my auditor s 5

report. However, future events or conditions may cause the district to fail to deliver its mandate. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with the Accounting Officer regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. I also provide the Accounting Officer with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with him/her all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. From the matters communicated with the Accounting Officer, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. John F.S. Muwanga AUDITOR GENERAL KAMPALA 15 th December, 2017 6

APPENDICES Appendix 1: Planned Activities not implemented Activity Department Funding Amount (UGX) Purchase of double cabin Management & support Services DDEG 50,000,000 Supply of 100-3 seater desks to Tororo College PS in Nyangole Parish Education SFG 13,000,000 Supply of 30-3 seater desks to Tororo Police PS In kasoli Parish Education SFG 3,900,000 Total 66,900,000 Appendix 2: Low Recovery of YLP Funds Group Received (UGX) Expected Monthly Recoveries (UGX) Expected Recoveries during FY (UGX) Recoverie s during the year (UGX) Variance (UGX) Nyangole A youth produce 8,500,000 708,333 3,541,666 500,000 3,041,666 Agururu B1 Youth Produce 7,500,000 625,000 3,125,000 300,000 2,825,000 Agururu A Motor Garage Workshop 12,300,000 1,025,000 5,125,000 350,000 4,775,000 Total 28,300,000 2,358,333 11,791,666 1,150,000 10,641,666 Percentage Recovery 9.8 7