OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF UGANDA

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF BUKEDEA DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2017

OFFICE OF THE AUDITOR GENERAL

UGANDA

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TABLE OF CONTENTS

list of Acronyms ............................................................................................................... iii

Key Audit Matters ............................................................................................................. 2

Utilization of Medicines and Health Supplies ......................................................... 2

Stock outs of Medicines and Health Supplies ...................................................... 3

Emphasis of Matter........................................................................................................... 4

Unauthorized Excess Expenditure ........................................................................... 4

Other Matter ...................................................................................................................... 5

Failure to Implement Budget as approved by Parliament .................................. 5

Idle dental machine. ................................................................................................. 6

Under Collection of Local Revenue ......................................................................... 6

Low Recovery of Youth Livelihood program funds. ............................................. 6

Understaffing ............................................................................................................. 7

Management’s Responsibility for the Financial Statements ....................................... 7

Auditor’s Responsibilities for the Audit of the Financial Statements ........................ 8

Appendix i: Un Implemented Activities ................................................................... 11

Appendix ii: Understaffing ......................................................................................... 12

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LIST OF ACRONYMS

DLG District Local Government

DMO District Medical Officer

EMHS Essential Medicine and Health Supplies

GOU Government of Uganda

ICT Information Communication Technology

IESBA International Ethics Standards Board for Accountants

ISSAI International Standards of Supreme Audit Institution

LGFAM Local Governments Financial and Accounting Manual 2007

LGFAR Local Governments Financial and Accounting Regulations 2007

MMHS Management of Medicine and Health Supplies

MoESTS Ministry of Education Science and Technology and Sports

MoFPED Ministry of Finance Planning and Economic Development

MOH Ministry of Health

NMS National Medical Stores

PFMA Public Finance Management Act 2015

PPDA Public Procurement and Disposal of Assets

UGX Uganda Shillings

URA Uganda Revenue Authority

VAT Value Added Tax

WHT Withholding Tax

1

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF BUKEDEA DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2017

THE RT. HON. SPEAKER OF PARLIAMENT

Opinion

I have audited the financial statements of Bukedea District Local Government which

comprise the Statement of Financial Position as at 30th 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 Bukedea District Local Government for the

year ended 30th 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 Bukedea District

Local Government 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.

2

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 matters described below as key audit matters to be communicated

in my report:

Utilization of Medicines and Health Supplies

The Management of Medicines and Health Supplies Manual indicates that Medicines and

Medical Supplies form the second biggest expenditure in the health sector after human

resources. The security of medicines must be ensured at all levels to prevent theft,

abuse, misuse and wastage. Consequently in the course of auditing the District financial

statements, I considered the utilisation of medicines and medical supplies as an area of

focus.

The audit focused on the procedures, processes, tools and documentation used to

manage medicines and medical supplies which included;

Involving external expertise in identifying the sample of tracer medicines and

medical supplies, and developing data collection tools.

Selecting medicines and medical supplies to trace their utilization in the hospital.

Analysing the delivery cycles, balances on stock cards and order levels to ascertain

stock outs.

Obtaining and checking the records relating to the expired medicines and also

inspecting the storage practices.

Establishing the availability of key human resource personnel to ensure that

medicines and medical supplies are not wasted as explained in the Management of

Medicines and medical Supplies Manual.

I obtained the approved structure and compared it with the list of existing staff.

The audit considered a preselected sample of one Health Centre IV, Bukedea HC IV and

I observed the following shortcomings at the health facility:

3

Stock outs of Medicines and Health Supplies

I observed that 3 (three) items out of the 11 (eleven) selected tracer medicines.1

EMHS experienced stock outs ranging between 158 and 253 days. Stock outs erode

patients’ confidence in the health sector which leads them to resort to alternative

and expensive alternatives of health care. 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 Accounting Officer explained that District has continuously engaged NMS and

MOH to address this issue. The Accounting Officer should liaise with NMS to ensure

continuous optimum stock of medicines and supplies.

• Inadequate Controls Surrounding Management of Domestic Arrears

Domestic arrears refer to the total value of unpaid bills for goods and services

rendered to a government entity, including wages and pension that remain

outstanding at the closure of a financial year. There has been persistent

accumulation of domestic arrears to unmanageable levels which has led to

settlement of arrears that are not authorized, unbudgeted for, inadequately

supported and in some instances there has been inadequate recognition and

disclosure of the domestic arrears. The variances between the reported figures in

the financial statements and the amounts verified by Internal Auditor General

formed a basis of my qualification of consolidated GOU financial statements for the

year ended 30th June, 2016.

Consequently, domestic arrears were considered a key audit matter which needed to

be examined to assess: the appropriateness of recording, recognition and disclosure

of domestic arrears; the trend and the underlying factors; and the adequacy of the

internal controls surrounding management of domestic arrears.

During audit planning, I focused on examination of domestic arrears in regard to

goods and services, salaries and wages, and pension and gratuity. I undertook the

following procedures in relation to domestic arrears: a trend analysis over a period

1 The Tracer medicines include; Artemether/Lumefantrine,HIV determine Test strips,Malaria

RDTs,Oxygen,Blood,Surgical gloves,Oxytocin,Safedelivery kits/mamakits, PGA 2 sutures

4

of three years to ascertain the underlying causes of accumulation; reviewed budget

and commitment control procedures to assess their effectiveness; ascertained the

authenticity of the supporting documentation and assessed the appropriateness of

the accounting treatment. I also engaged the Accounting Officer to enable me arrive

at the audit conclusions.

Based on the procedure performed, I observed that an amount of UGX.942,051,529

was irregularly incurred as domestic arrears outside the approved estimates

appropriated by Parliament. This may be as a result of existence of a weak and

ineffective internal control system over the control and management of domestic

arrears. For example, the government commitment control system was not adhered

to.

The Accounting Officer explained that these arrears have been brought to the

attention of Ministry of Finance but no action has been taken. The Accounting Officer

should continue following up this matter and ensure that the arrears are paid.

Emphasis of Matter

Without qualifying my opinion, I draw attention to the following matters:

Unauthorized Excess Expenditure

Section (37) of the Public Finance and Accountability Regulations, 2016, requires the

Accounting Officer to control and oversee all expenditure under his/her control and

ensure that authorized amounts are not exceeded. However, the district spent UGX.

1,768,291,272 under Administration and Education without approval from the

Council as per the statement of appropriation account.

Excess expenditures without supplementary appropriation suffocates expenditure in

other budget lines and weakens the budgetary control procedures.

The Accounting Officer should always seek appropriate authority before incurring

expenditure beyond the approved amounts.

5

Other Matter

In addition to the matters raised above, 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. 17,851,443,000 for key

sectors including production, education, natural resources and works the district

received UGX.17,698,957,054(99.1%) resulting into a shortfall of UGX.152,485,946

(0.9%). I further observed that a number of planned outputs for an amount of

UGX.132, 663,665 were not implemented as shown in appendix i. The most

greatly affected outputs included classroom construction, periodic maintenance of

roads and tree planting at the district and selected schools.

Failure to implement activities denies service to the beneficiary communities and

defeats the purpose for which budgeting and budgetary controls are instituted. The

failure to implement all the planned activities may have been a result of lack of

capacity and inadequate releases or may be an indication of inefficiency.

According to the Accounting Officer, this was due to failure by Government to fund

fourth quarter activities.

The Accounting Officer should engage the relevant authorities and ensure that

budget deficiencies are addressed so that all the allocated funds are released and

all activities are implemented according to the budget as approved by Parliament.

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Idle dental machine.

Audit inspection of Bukedea Health Centre IV revealed that the Dental Departmental

is equipped with a dental machine that is not functioning due to lack of major parts

for its operation.

The machine cannot be put to use due to lack of some components like; dental

forceps, dental elevators, dental examination instrument dental rotary accessories,

sterilizing unit, x-ray unit, orthodontics, teeth cleaning unit and teeth filling unit.

Failure to avail the above vital accessories may render the machine obsolete. The

Accounting Officer explained that a follow up with NMS was being made.

The matter requires urgent attention.

Under Collection of Local Revenue

Regulation 32 of the Local Governments Financial and Accounting Regulations

(LGFARs) 2007 requires prompt collection of revenue due to the Council and bank it

intact. However, it was observed that out of the budgeted local revenue of

UGX.174, 194,000, only UGX. UGX.118, 873,001 (68%) was realized resulting into a

shortfall of UGX.55, 320,999 (32%). Under collection of local revenue adversely

affects service delivery.

The Accounting Officer explained that the shortfall was mainly due to failure by the

council to constitute the Land Board thus no revenue from the land fees was

realised.

The Accounting Officer should initiate measures to ensure that all budgeted local

revenue is always collected.

Low Recovery of Youth Livelihood program funds.

Chapter 6 of Youth Livelihood Programme Guidelines 2013 directs that any

repayment that goes beyond one year will attract a Service fee of 5% to cater for

inflation. Overall, the Principal and Service fee will be paid within a period not

exceeding 3 years. It was observed that the District expected to recover

7

UGX.351,040,965 during the year but only UGX.90,611,480 (26%) was recovered

leaving UGX.260,429,485 (74%) outstanding.

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.

According to the Accounting Officer, failure to recover was mainly due to political

interferences and the drought that affected the groups that went into livestock and

produce trading. He further stated that the District had formed recovery committees

based at sub counties.

I advised the Accounting Officer to ensure that all the outstanding amounts are

recovered.

Understaffing

The District has an approved staff structure of 163 positions. Out of the approved

staff structure of 163 only 72 (45%) positions are filled leaving a staffing gap of 91

(55%) positions as shown in appendix i. 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.

The Accounting Officer explained that the district had engaged the Ministry of Public

Services for clearance to recruit.

The Accounting Officer should 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.

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

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accountable to Parliament for the funds and resources of Bukedea 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 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 Council’s ability to continue delivering its mandate, disclosing, as applicable,

matters related to affecting the delivery of the mandate of the District Council, 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 Council’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:

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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 report. However, future events

or conditions may cause the District council 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.

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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

8th December 2017

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Appendix i: Un Implemented Activities

Department

Item Description

Planned output/Quantity

Actual output/Quantity

Amount Budgeted (UGX)

Amount Released (UGX)

Variance (UGX)

Effects of shortfall

Production and Marketing Education

No. of classrooms constructed in UPE

9 Classrooms 8 Class rooms 204,238,000 174,692,335 29,545,665 Reduced funding/Reduced planned work

Length in km of district roads periodically maintained.

6 kms 4kms 27,864,000 23,512,000 4,352,000 Less km of the road were periodically maintained.

Length in km of rural roads rehabilitated

9 kms to be maintained Bukedea Kolir road

8.5 kms maintained. Bukedea Kolir road.

494,000,000 397,978,000 96,022,000 0.5 km not maintained and quality was compromised

Natural Resources

Hectares of trees planted and surviving

20 hectares to be planted in primary schools and district headquarters

15 hectares planted in primary schools

5,000,000 2,256,000 2,744,000 No trees planted at the headquarters and several primary schools.

Total 132,663,665

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Appendix ii: Understaffing

S.NO Job Title Salary Scale

Approved Establishment

No. Posts Filled

No. Vacant Posts

1 Chief Administrative Officer U1SE 1 0 1

2 Chief Finance Officer U1EU 1 1 0

3 Deputy Chief Administrative Officer U1SE 1 0 1

4 District Community Development Officer U1EU 1 1 0

5 District Education Officer U1EU 1 1 0

6 District Engineer U1EU 1 1 0

7 District Internal Auditor U2U 1 0 1

8 District Natural Resources Officer U1EU 1 0 1

9 District Planner U2U 1 1 0

10 District Production Officer UIE 1 0 1

11 Principal Personnel Officer U2L 1 0 1

12 Senior Procurement Officer U3U 1 1 0

13 Clerk to Council/Senior Assistant Secretary U3L 1 0 1

14 Internal Auditor U4U 1 1 0

15 Personal Secretary U4L 1 0 1

16 Principal Agricultural Officer U2 1 0 1

17 Principal Assistant Secretary U2L 1 1 0

18 Procurement Officer U4U 1 1 0

19 Senior Accountant U3U 1 0 1

20 Senior Community Development Officer U3L 2 0 2

21 Senior Education Officer U3L 1 0 1

22 Senior Land Management Officer U3U 1 0 1

23 Senior Probation and Welfare Officer U3L 1 1 0

24 Senior Planner U3U 1 0 1

25 Superintendent of Works U4U 1 0 1

26 Examiner of Accounts U5L 3 1 2

27 Population Officer U4U 1 1 0

28 Principal Human Resource Officer U2L 1 1 0

29 Principal Veterinary Officer U2 1 1 0

30 Secretary District Land Board/Senior Assistant Secretary

U3L 1 0 1

31 Senior Environment Officer U3U 1 1 0

32 Senior Finance Officer U3U 1 1 0

33 Senior Inspector of Schools U3L 1 1 0

34 Water Officer U4U 1 0 1

35 Accountant U4U 1 1 0

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36 Assistant Statistical Officer U5U 1 0 1

37 Environment Officer U4U 1 0 1

38 Personnel Officer U4L 1 0 1

39 Principal Fisheries Officer U2 1 0 1

40 Senior Labor Officer U3L 1 0 1

41 Senior Personnel Officer U3L 1 0 1

42 Sports Officer U4L 1 0 1

43 Assistant Chief Administrative Officer/Senior Assistant Secretary

U3L 2 1 1

44 Assistant Engineering Officer (Electrical) U5L 1 1 0

45 Assistant Labor Officer U6U 1 0 1

46 Clerk Assistant U4L 1 0 1

47 Finance Officer U4U 1 1 0

48 Forestry Officer U4U 1 0 1

49 Inspector of Schools U4L 1 1 0

50 Principal Entomologist U2 1 0 1

51 Education Officer U4L 2 1 1

52 Road Inspector U6U 2 0 2

53 Senior Accounts Assistant U5U 5 5 0

54 Senior Agricultural Officer U3 1 1 0

55 Senior Records Officer U3L 1 1 0

56 Staff Surveyor U4U 1 0 1

57 Engineering Assistant U7U 4 2 2

58 Personnel Officer/ Human Resource Officer U4L 1 1 0

59 Physical Planner U4U 1 0 1

60

Senior Agricultural Engineer (water for production) U3 1 0

1

61 Accounts Assistant U7U 7 1 6

62 Bore Maintenance Technician U7U 1 0 1

63 Information officer U4L 1 0 1

64 Land Valuer U4U 1 0 1

65 Senior Veterinary Officer U3 1 0 1

66 Artisan (Trade Tested) U7L 1 1 0

67 Records Officer U4L 1 1 0

68 Registrar of Titles U4U 1 0 1

69 Senior Entomologist U3 1 1 0

70 Cartographer U5L 1 0 1

71 Personnel Secretary U4L 1 0 1

72 Senior Fisheries Officer U3 1 1 0

73 Animal Husbandry Officer U4 1 0 1

74 Assistant Records Officer U5L 4 0 4

14

75 Plant Operator U8U 1 0 1

76 Fisheries Officer (Aquaculture) U4 1 0 1

77 Machine Operator U8U 1 1 0

78 Senior Office Supervisor U5U 1 0 1

79 Forest Ranger U7U 1 0 1

80 Laboratory Technician U5 1 0 1

81 Stenographer Secretary U5L 3 3 0

82 Assistant Agricultural Officer U5 5 2 3

83 Forest Guard U8L 3 0 3

84 Pool Stenographer U6U 1 0 1

85 Assistant Veterinary Officer U5 5 3 2

86 Telephone Operator U7U 1 0 1

87 Assistant Inventory Management Officer U7 1 0 1

88 Stores Assistant U7U 1 0 1

89 Laboratory Attendant U8 1 0 1

90 Office Typist U7U 7 7 0

91 Office Attendant U8U 11 5 6

92 Driver U8U 10 4 6

93 Agricultural Officer U4 5 5 0

94 Commercial Officer U4 1 1 0

95 Senior Engineer U3sc 1 1 0

96 Veterinary Officer U4 5 2 3

Totals 163 72 91