THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE MINISTRY OF TRADE, INDUSTRY AND COOPERATIVES FOR THE YEAR ENDED 30 TH JUNE 2014 OFFICE OF THE AUDITOR GENERAL UGANDA
TABLE OF CONTENTS ACRONYMS... ii REPORT AND OPINION OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF TRADE, INDUSTRY AND COOPERATIVES FOR THE YEAR ENDED 30 TH JUNE, 2014... 1 1.0 INTRODUCTION... 4 2.0 BACKGROUND INFORMATION... 4 3.0 ENTITY FINANCING... 5 4.0 AUDIT SCOPE... 5 5.0 AUDIT PROCEDURES PERFORMED... 6 6.0 FINDINGS... 7 6.1 Mischarges... 7 6.2 Irregular payment of monthly consolidated allowances... 7 6.3 Unaccounted for Funds... 8 6.4 Unsupported utility payments... 9 6.5 Contributions to International Organizations... 9 6.6 Review of procurements... 10 6.8 Inspections of stores management... 11 i
ACRONYMS GOU IAS IAS MFPED MTIC PFAA PPDA WRS COMESA ULC Government of Uganda International Standards on Auditing International Accounting Standards Ministry of Finance Planning And Economic Development Ministry of Trade, Industry and Cooperatives Public Finance and Accountability Act Public Procurement And Disposal Act Warehouse Receipt System Common Market for Eastern & Southern Africa Uganda Land Commission ii
REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF TRADE, INDUSTRY AND COOPERATIVES FOR THE YEAR ENDED 30 TH JUNE, 2014 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Ministry of Trade, Industry and Cooperatives for the year ended 30 th June 2014. These financial statements comprise of the Statement of Financial Position as at 30 th June 2014, Statement of Financial Performance, Statement of Changes in Equity, Cash flow Statement together with other accompanying schedules, notes and accounting policies. Management Responsibility Under Article 164 of the Constitution of the Republic of Uganda 1995 (as amended) and Section 8 of the Public Finance and Accountability Act, 2003, the Accounting Officer is accountable to Parliament for the funds and resources of the Ministry. The Accounting Officer is also responsible for the preparation and fair presentation of financial statements in accordance with the requirements of the Public Finance and Accountability Act 2003, the Financial Reporting Guide, 2008 and for such internal controls as management determines is 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 (Amended) and Sections 13 and 19 of the National Audit Act, 2008 is to audit and 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, 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. The procedures selected depend on the 1
Auditor s judgment including the assessment of risks of material misstatement of 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 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 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 of Qualified Opinion Mischarges-Shs.592,962,823 Management of Ministry of Trade, Industry and Cooperatives charged wrong expenditure codes to a tune of Shs.592,962,823. This constituted 4% of total expenditure for the Ministry. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to financial misreporting. Qualified opinion In my opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the financial statements of Ministry of Trade, Industry and Cooperatives for the year ended 30 th June, 2014 were prepared, in all material respects 2
in accordance with the Financial Reporting Guide 2008 and section 31(6) of the Public Finance and Accountability Act, 2003. John F.S. Muwanga AUDITOR GENERAL KAMPALA 20 th March, 2015 3
PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF TRADE, INDUSTRY AND COOPERATIVES FOR THE YEAR ENDED 30 TH JUNE, 2014 This Section outlines the detailed audit findings, management responses and my recommendations in respect thereof. 1.0 INTRODUCTION I am mandated by Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended), to audit and report on the public accounts of Uganda and of all public offices, including the courts, the central and local government administrations, universities and public institutions of like nature, and any public corporation or other bodies or organisations established by an Act of Parliament. Accordingly, I carried out the audit of Ministry of Trade, Industry and Cooperatives to enable me report to Parliament. 2.0 BACKGROUND INFORMATION The mandate of the Ministry of Trade, Industry and Cooperatives as derived from Article 189 and the Sixth Schedule of the Constitution of the Republic of Uganda 1995 (as amended), is To formulate and support strategies, plans and programs that promote and ensure expansion and diversification of trade, cooperatives, environmentally sustainable industrialization, appropriate technology development and transfer for value addition to natural resources and to generate wealth for poverty eradication and benefit the country socially and economically. The Ministry s key functions are to:- a. Formulate and review where necessary, appropriate policies, legislation, regulations and standards for the sustainable development of trade, industrialization and technology development, cooperatives movement and other tradable national products for increased wealth creation and benefit to the country. b. Initiate, co-ordinate, support, oversee and where applicable, facilitate implementation of strategies and programmes aimed at enhancing the 4
development and promotion of trade, cooperatives, industry and technology, conservation and preservation of national natural and cultural heritage and ensure their maximum benefit to the country. c. Inspect, monitor and evaluate the progress, standards, and efficiency of the various sectors, under its mandate for quality assurance, policy direction and guidance. d. Conduct studies and evaluate the impact of the sectoral, fiscal and other policies on the advancement of the diversified Sector so as to advise stakeholders appropriately. e. Promote and co-ordinate the research activities and initiatives of the Sector, with a view to ensure, that results are utilized and are beneficial to the country and all stakeholders. f. Assess the need and where necessary, mobilize resources to support balanced industrial, cooperatives and entrepreneurial development for the eradication of poverty in the country. g. Collect, process, analyse and disseminate national and international information on the respective sectors hence providing vital input necessary to improve rational decision-making. h. Participate in negotiations and implement bilateral and multilateral agreements. 3.0 ENTITY FINANCING During the year, the Ministry was financed by grants in form of releases to the total of Shs.15,120,482,235 from Central Government - Treasury. NTR to the total of Shs.5,832,800 was collected making a total operating revenue of Shs.15,126,315,035. The Ministry s total expenditure during the year amounted to Shs.14,558,612,970. 4.0 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. In conducting my reviews, special attention was paid to establish whether:- 5
a. The financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the year and of the financial position as at the end of the year. b. All Ministry funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Goods and services financed have been procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the Ministry, assess control risk and identify reportable conditions, including material internal control weaknesses. e. The Management of the Ministry was in compliance with the Government of Uganda financial regulations. f. All necessary supporting documents, records and accounts have been kept in respect of all Ministry activities and are in agreement with the financial statements presented. 5.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the Ministry s cashbooks and bank statements. b. Expenditure The Ministry payments vouchers 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. 6
d. Procurement Reviewed the procurement of goods and services under the Ministry during the period under review and reconciled with the approved procurement plan. e. Fixed Assets Management Reviewed the use and management of the Ministry assets during the period under review. f. Ministry 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. 6.0 FINDINGS 6.1 Mischarges-Shs.592,962,823 The Parliament of Uganda appropriates funds in accordance with the needs of the country and this appropriation is implemented through the budget in which funds are tagged to particular activities and outputs using account codes and MTEF codes. A review of the Ministry of Trade, Industry and Cooperatives expenditures revealed that the entity charged wrong expenditure codes to a tune of Shs.592,962,823. This constituted 4% of total expenditure for the Ministry. This practice undermines the importance of the budgeting process as well as the intentions of the appropriating authority and leads to financial misreporting. I advised management to streamline the budget process to ensure that sufficient funds are allocated to each account. Authority should be sought for any reallocations. 6.2 Irregular payment of monthly consolidated allowances - Shs.483,678,941 It was observed that the Ministry paid Shs.483,678,941 to staff as entitled monthly allowances in form of night subsistence allowance ranging from two to 7
three days and lunch for the various categories of staff. This allowance paid in form of night subsistence was paid irregularly because it was not supported with any administrative circulars/standing order instructions approving it from Ministry of Public Service. Management explained that the payments were a composition of field trip allowances based on departmental work plans tagged to activities that the Ministry undertook during the year. I explained to management that staffs in U8 are office support cadres and are not field based. I also explained that there are no standard field days undertaken monthly by staff. Where the need arises, subsistence allowances are requisitioned and paid separately. I advised management to liaise with the Ministry of Public Service to have the monthly allowance regularized or work within the regulations and pay for approved allowances such as mileage. 6.3 Unaccounted for Funds A review of the expenditure records for the Ministry revealed that funds worth Shs.51,338,990 were spent on various activities but lacked accountability documents such as bills, evidence of travels, minutes of meetings, attendance lists, boarding passes and activity reports. Details are as below; S/N Description Amount (Shs) 1 Advances to personal accounts 8,194,000 2 Travel abroad 26,400,000 3 Temporary advances 16,744,990 Total 51,338,990 In this regard, I was unable to confirm whether the amount involved was applied for the intended purposes. I advised management to enforce recovery measures from responsible officers. 8
6.4 Unsupported utility payments It was noted that several transactions worth Shs.163,771,216 made with utility organizations and other service providers were not supported with adequate documentation to evidence the accuracy and completeness of the amounts paid to the companies i.e. consumption statements and receipts. Management explained that they had requested the service providers to avail the documentation. I await management s efforts on the matter failure of which recovery measures should be instituted. 6.5 Contributions to International Organizations 6.5.1 Transfers to World Trade Organisation-Shs.172,765,620 Government of Uganda is a member and participates in the proceedings of World Trade Organisation Ministerial Conferences which requires the country to make an annual contribution to the World Trade Organisation budget. A statement of account for the Ministry indicated that Swiss Francs 40,803 was outstanding for the year 2012 while Swiss francs 43,010 was outstanding for the year 2013. During the year, the Ministry made a payment of Shs.172,765,620 as annual contribution to WTO which was acknowledged with a receipt of Swiss francs 20,000 leaving a balance of Swiss francs 63,811 outstanding as at October 2013. However some issues were noted as below; Delays in remittance of the Contribution (two years) impacts negatively on the image of the nation. The contribution for the year 2014 was not paid by the time of audit. Management explained that they indeed acknowledge the negative impact of the delays in remittance and attributed the problem to Ministry of Finance, Planning and Economic Development (MoFPED) inability to release funds on the budget line. 9
I advised management to liaise with the MoFPED and ensure that the contributions are prioritised and paid. 6.5.2 Contributions to the regular COMESA budget The Ministry paid a total of Shs.2,536,957,800 USD.975,754 to settle arrears of contributions for 2012 and 2013. However the following issues were observed; Out of the arrears paid, there is a component of interest on arrears of COMESA Dollars 1,281.30 COMESA Dollars accumulated as at 2 nd May, 2013. The interest component incurred could have been avoided had the management complied with Section 166(6) of COMESA. This is considered as nugatory payment. Delays in remittance of the Contribution (two years) impacts negatively on the image of the nation. The contribution for the year 2014 was not paid by the time of writing this report. Management explained that though the funds had been budgeted for, it was treated by MoFPED as unfunded priority and the funds were released under a supplementary budget and by then it had incurred interest. Management further explained that funds for the year 2014 were being processed through a supplementary budget that was before Parliament at the time of writing this report. I advised management to liaise with the MoFPED and ensure that the contributions are prioritised for the Ministry releases to avoid nugatory payments in form of interest. 6.6 Review of procurements A sample of procurements undertaken by the entity were reviewed and the following were noted; 10
6.6.1 Un implemented activities in the procurement plan A review of the procurement plan and the procurements undertaken revealed that nine procurements worth Shs.1,866,080,000 were not undertaken during the year as planned. Failure to undertake all the planned procurements could have affected the operations of the Ministry. The needs of the user departments were not met since the procurements were not fulfilled. Management explained that procurements that were not undertaken due to failure by the MoFPED to release funds for their implementation. I advised management to liaise with the MoFPED and ensure that budgeted funds are promptly released and utilized as planned. 6.7 Un supported procurement Section 56(1) of PPDA Act 2003 requires a PDE to maintain detailed records of all proceedings, preserve and safe guard all relevant documents it issues and receives. During the year, a sum of Shs.45,900,000 was spent on procurement of air ticketing services, however the procurement file with full documentation confirming that the procurement procedures and regulations were followed in obtaining the services was not provided for review. This casts doubt as to whether the PPDA regulations were adhered to. I advised Management to avail the file for confirmation of adherence to regulations. 6.8 Inspections of stores management An inspection of the stores revealed that the store is not ventilated or airconditioned to make it environmentally usable. Exposure of the store keeper to such conditions is not only a health risk but may also affect his efficiency. Further, damage or deterioration of the inventories due to dumpiness may not be ruled out. 11
Management explained that the Ministry has a very small storeroom which is poorly ventilated but that the storekeeper had been allocated accommodation in a safe working environment as his alternative office. I advised management to consider relocating the stores to a more conducive environment. 12
APPENDIX I FINANCIAL STATEMENTS 13