i

THE REPUBLIC OF UGANDA

OFFICE OF THE AUDITOR GENERAL

ANNUAL REPORT OF THE AUDITOR

GENERAL

FOR THE YEAR ENDED 30TH JUNE 2011

VOLUME 1

PERFORMANCE REPORT

i

Table of Contents

List of Tables ..................................................................................................... iii

List of Acronyms ................................................................................................ iv

Executive Summary ........................................................................................... ix

1.0 Introduction .............................................................................................. 1

2.0 Performance of the Audit Function ........................................................... 5

2.1 Major Audit Focus during the year ............................................................ 5

2.2 Performance in Financial and Value for Money Audits ............................. 6

2.3 Audit of Central Government Entities ....................................................... 7

2.4 Audit of Statutory Corporations .............................................................. 10

2.5 Audit of Local Authorities ........................................................................ 13

2.6 Value for Money and Specialized Audits ................................................. 15

2.7 Support to Oversight Committees of Parliament .................................... 17

2.8 Information Technology and Audit Development ................................... 17

2.9 Audit Quality Control and Quality Assurance .......................................... 17

3.0 Performance of the Corporate Services Function ................................... 19

3.1 Human Resource Management and Development .................................. 19

3.1.1 Human Resource Policies ........................................................................ 20

3.1.2 Staff Recruitment and Promotion ........................................................... 20

3.1.3 Staff Trainings and Development ............................................................ 21

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3.1.4 International Trainings ........................................................................... 22

3.1.6 Restructuring of the Office ...................................................................... 22

3.1.7 De-linkage from Public Service ............................................................... 23

3.1.8 OAG Health Policies ................................................................................. 23

3.2 Administration, Communication and Judicial Matters ............................ 24

3.2.1 Records and Information Management .................................................. 24

3.2.3 Communication and Public Relations...................................................... 26

3.2.4 Legal Representation .............................................................................. 27

3.3 Financial Management and Internal Audit .............................................. 29

4.0 International Relations ........................................................................... 33

5.0 Registrations of Accountants .................................................................. 39

Appendix I: Unaudited Financial Statements of OAG for the year ended 30th

June 2011. ........................................................................................................ 41

Appendix II: Regional Branch Offices ............................................................. 56

iii

List of Tables

Table 1: Major Audit Focus in the FY 2010/11 ........................................................................................ 6

Table 2: Status of Audit Performance for the FY 2010/11 ..................................................................... 6

Table 3: Value of grants of credits issued during the FY 2010/11 ....................................................... 7

Table 4: Trends in the number of Professional Accountants since 2004/2005 ................................ 21

Table 5: Budget, Actual Releases and MTEF Projections (Billions) ..................................................... 31

iv

List of Acronyms

ACCA Association of Chartered Certified Accountants

ADB African Development Bank

AFROSAI African Organization of Supreme Audit Institution

AFROSAI-E Sub-Regional Organization of English Speaking AFROSAI

AG Auditor General

BFP Budget Framework Paper

Bn Billion

CAATS Computer Assisted Audit Techniques

CHOGM Common Wealth Heads of Government Meeting

COSASE Committee on Commissions, Statutory Authorities and State Enterprises

CPA Certified Public Accountant

DFID Department for International Development

DPAC District Public Accounts Committee

FINMAP Financial Management and Accountability Programme

GAO United States Government Accountability Office

GoU Government of Uganda

HLGs Higher Local Governments

HRMD Human Resource Management and Development

ICGFM International Consortium on Government Financial Management

ICT Information Communications Technology

IDI INTOSAI Development Initiative

IFMS Integrated Financial Management System

INTOSAI International Organizational of Supreme Audit Institutions

ISSAI International Standards of Supreme Audit Institutions

IT Information Technology

JICA Japan International Cooperation Agency

KCC Kampala City Council

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KCCA Kampala Capital City Authority

LGMSD Local Government Management Service Delivery Programme

LGAC Local Government Accounts Committee

LLGs Lower Local Governments

MAAG Multilateral Audit Advisory Group

MCC Millennium Challenge Cooperation

MDA Ministries, Departments and Agencies

MTEF Medium Term Expenditure Framework

NAA National Audit Act

NAADS National Agricultural Advisory Services

OAG Office of the Auditor General

PAC Public Accounts Committee

PFAA Public Finance and Accountability Act

PPDA Public Procurement and Disposal Authority

ROM Results Oriented Management

RRHs Regional Referral Hospitals

SAI Supreme Audit Institution

Shs Shillings

VFM Value for Money

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Office of the Auditor General

Vision, Mission and the Core Values

Vision

“To be an effective and efficient Supreme Audit Institution (SAI) in promoting effective

public accountability”.

Mission

“To audit and report to Parliament and thereby make an effective contribution to

improving public accountability and value for money spent”.

Core Values

The Auditor General and the staff of the Office of the Auditor General in executing their

responsibilities are committed to live by the office’s core values of:

Integrity: Being upright and honest

Objectivity: To display impartiality and professional judgment

Professional competence: To act with diligence, proficiency and team spirit.

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Foreword by the Auditor General

In accordance with my mandate as stipulated under Article 163 of

the Constitution of the Republic of Uganda and as elaborated on by

the National Audit Act, 2008, it is my pleasure to present to you the

Annual Audit Report on the public accounts of Uganda for the

Financial Year 2010/2011 in five volumes.

The first volume of the report is about the general performance of the office as a whole,

while the second, third, fourth and fifth volumes are about the performance of the

external audit function. The executive summary which follows this foreword outlines the

content of the five volumes which constitute my annual report for the year 2010/11.

In the audit of the accounts of the FY 2010/11, the office adopted a sector approach in

order to improve on the quality and content of the audit reports. To achieve this, the

former directorates of Central Government and Statutory Corporations were collapsed

and reconstituted into the directorates of Central Government One and Central

Government Two. The central government directorates cover the audit of specific

sectors as defined by Government in the National Development Plan 2010-15.

The office planned to carry out a total of 1,888 Audits which included 1,872 financial, 12

Value for Money and 4 forensic audits. As at 31st March 2012, a total of 1,292 audits

were completed and reported on, while 591 were in progress. In addition, all the 1,059

sub county audit backlogs relating to FY 2009/10 were completed.

Under Value for Money and Specialized Audits, the office audited and reported on 12

audits as detailed in Volume 5 of my report.

The division of Corporate Services that supports and facilitates the performance of the

audit function successfully managed the budget process for the financial year. It

prepared and submitted for approval to Parliament a total budget of Shs 38.76Bn

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including a funding gap of Shs 5.25Bn. Parliament subsequently approved a total budget

of Shs 36.617Bn for the financial year 2011/12.

I would like to acknowledge the support from the Parliament of the Republic of Uganda

and its oversight committees, the Executive and the Development Partners who have

enabled me to successfully execute my statutory mandate.

My sincere gratitude is also extended to my staff for positively embracing the ongoing

developments in the office and for their efforts towards the achievements realized during

the year.

John F.S. Muwanga

AUDITOR GENERAL

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Executive Summary

Under Article 163(3) of the Constitution of the Republic of Uganda and Section 13 of the

National Audit Act 2008, the Auditor General is mandated to audit and report to

Parliament, 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 organizations

established by an Act of Parliament annually, a report of the accounts audited for the

financial year immediately preceding.

It is in line with the above mandate that this report is herewith provided in five volumes:

Volume 1 - Annual Performance Report of the Office of the Auditor General;

Volume 2 - Audit Report on Central Government Ministries, Departments and

Agencies;

Volume 3 - Audit Report on Local Authorities including Regional Referral Hospitals;

Volume 4 - Audit Report on State Enterprises, Commissions and Statutory

Corporations;

Volume 5 - Value for Money and Specialized Audit Reports.

This Volume 1 of the report is presented in 5 sections as follows;

Section 1, covers a brief introduction of OAG, Mandate, Functions of the Auditor

General, Corporate Plan implementation, Current Macro Structure and Recent

Developments.

Section 2, presents a summary of the performance of the audit function as defined

under Article 163 of the Constitution of the Republic of Uganda and Section 13 of the

National Audit Act 2008.

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Section 3, presents a performance review of the Corporate Services function in the

following areas: Human Resources Management and Development, Administration,

Communication and Judicial matters, Financial Management and Internal Audit.

Section 4, provides details of the performance of the office in international relations

and its obligations.

Section 5, presents a review of the performance of the Auditor General as Registrar of

Accountants as mandated under Section 18 of the Accountants Act, 1992.

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1.0 Introduction

1.1 Brief History

External audit function in Uganda dates back to 1920s when Uganda as a protectorate

had its accounts audited by the Colonial Audit Office in London. It evolved overtime from

being headed by an Auditor in 1929 to an Auditor General appointed in 1952 in Kampala.

In 1962, the office started expanding progressively by opening regional offices. To-date,

a total of nine regional offices are operational in Gulu, Arua, Mbale, Soroti, Jinja,

Masaka, Mbarara, Fort Portal and Kampala. Plans are underway to open additional

regional offices to meet the ever increasing audit entities in Local Governments.

1.2 Mandate and functions of the Auditor General

Article 163 (3) of the Constitution and as amplified by Section 13(1) and Section 18 of

the National Audit Act 2008, the Auditor General is required to audit and report to

Parliament 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 Corporations or other bodies established by an

Act of Parliament and report to Parliament.

Article 163 (3) (b) requires the Auditor General to conduct Financial and Value for Money

audits in respect of any project involving public funds.

1.3 Corporate Plan Implementation

The Office of the Auditor General has been implementing a Five Year Corporate Plan for

the period 2006-11 which has since been updated to cover the period 2011-16.

The Strategic Objectives of OAG as stated in the above Corporate Plan have been:

To secure the financial and operational independence of the Auditor General

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To improve the quality of both the OAG’s budget preparation and Monitoring

processes and management information systems.

To create an environment that enables the OAG to operate efficiently and recruit,

retain and motivate suitable staff.

To improve internal and external communications to raise the profile of the OAG

with staff and key stakeholders

To improve the quality of audit work by improving financial and value for money

audits and developing and implementing effective quality assurance

arrangements

To promote increased accountability, probity and transparency in the

management of public funds and resources by producing reports that add value

and make positive and practical recommendations.

The Corporate Plan provided policy direction in the preparation of the Annual

Operational Plans of the financial years since 2006/07. The assessment of performance

regarding achievements of the objectives runs through this performance report of the

office as contained in this Volume 1 of the OAG report.

The implementation of the 2006-11 OAG Corporate Plan expired on 30th June 2011.

During the same year, with support from the Financial Management and accountability

Program (FINMAP) under the Ministry of Finance Planning and Economic Development,

the office procured the services of the National Audit Office of the UK to assist in the

development of the next Corporate Plan for the period 2011-16. At the time of reporting

the new Corporate Plan was in place.

1.4 Current Macro Structure of the Office

The Office of the Auditor General (OAG) underwent a restructuring process which was

aimed at coming up with an appropriate structure which matches with the Audit

Workload. The new Strucure with a total establishment of 481 positions was approved

in the FY 2010/11. According to the new structure, the office has 5 Directorates, 4

3

Departments and 3 Units. The Office is headed by the Auditor General (AG) who is

assisted by the Assistant Auditor General (AAG) and Chief Operating Officer.

The Assistant Auditor General who heads the external audit function is assisted by 4

Directors of Audit.

The Chief Operating Officer who heads the Corporate Services function is assisted by the

Director Corporate Services.

The Macro-Structure of the OAG is as depicted below:-

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1.5 Recent Developments

1.5.1 Automation of Audit Processes

The office has extended the use of ICT beyond facilitating internal and external

communications to automation of audit processes. The use of computerized audit tools

has taken root in financial audit directorates and currently 75% of the audit staff are

using teammate audit soft ware.

1.5.2 Adoption of Sector Approach to Audit

The Office adopted a sector wide approach to auditing with effect from the FY 2010/11.

This methodology aligns the audit process to the Government sector wide planning and

budgeting approach. This has contributed to knowledge accumulation and audit

efficiency.

1.5.3 Quality Assurance

In accordance with International Standards of Supreme Audit Institutions (ISSAI) 40, all

Supreme Audit Institutions are required to establish and maintain an appropriate quality

control system which covers all their work. The new structure provided for a Quality

Assurance unit and it was instituted during the year.

1.5.4 Corporate Services

The Corporate Services function that is responsible for supporting the external audit

function was strengthened by the recruitment of a Chief Operating Officer who is

responsible for ensuring that business operations within the office are efficient and

effective and that resources are properly managed.

1.5.5 Increased Audit Scope

The audit Scope has of recent increased to cover new Audits like, Energy, Oil and Gas,

Environment, Public Works, post primary schools and newly created Local Government

Councils.

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2.0 Performance of the Audit Function

2.1 Major Audit Focus during the year

In determining the major focus for the FY 2010/11 audits, the office based its approach

on the following:

i. The National Budget Estimates for the FY 2010/11;

ii. Sector Priorities for the FY 2010/11;

iii. Major Findings in the Audit Report for the FY 2009/10.

iv. The OAG Corporate Plan 2006/07 – 2010/2011;

The two strategic objectives considered in the OAG Corporate Plan 2006/07 – 2010/2011

were:

i) To promote increased accountability, probity and transparency in the

management of public funds and resources by producing reports that add

value;

ii) To improve quality of audit work by improving financial and Value for

Money audits and having effective quality assurance arrangements.

In the FY 2010/11, the Accountability sector of which OAG is a member committed itself

to strengthening the adherence to compliance policies, service delivery standards and

regulations; promotion of the culture of public demand for accountability and value for

money as well as intensifying the fight against corruption. Hence, the major focus in the

Audits of the FY 2010/11 was as summarized in table 1 below:

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Table 1: Major Audit Focus in the FY 2010/11

2.2 Performance in Financial and Value for Money Audits

In the Audit Period, the Auditor General planned to conduct a total of 1,872

Financial/regularity audits, 12 value for money and 4 forensic audits. However, it

completed a total of 2,339 financial audits including a backlog of 1,059 sub county

audits and 12 Performance audits respectively. The details are provided in table 2 below.

Table 2: Status of Audit Performance for the FY 2010/11

Directorate Entities Planned number of audit entities

Audits Completed

Percentage Audits in progress

Central Government

MDAs 97 92 95% 1

Projects 128 82 64% 20

Special Audits 10 5 50% -

Local Government HLGs 316 288 91%

LLGs 1,183 1,772 150% 550

Regional Hospitals

13 13 100%

Projects 0 5 100%

Special Audits 40 15 38% 13

State Corporations State Corporations

75 63 84% 7

Special Audits 10 4 40% -

Total 1,872 2,339 125% 591

Value for Money VFM Audits 12 12 100% -

Forensic Audits 4 -

Total 1,888 2,351 124.5% 591

Audits Major focus

Local Authorities Audits Service delivery with focus on Universal Primary Education, Health services and roads

Statutory Corporations Audits

Energy sector

Central Government Audits Public works, budget performance and consolidated financial statements

Value for money and specialized audits

Roads, electricity, agriculture, maternal health, tourism, communication services, environment, police and lands.

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Grants of Credit Issued

Article 154 (3) of the Constitution of the Republic of Uganda requires the Auditor

General to approve withdrawals of all monies from the consolidated funds. Accordingly,

during the year 2010/2011, the Auditor General authorized withdrawals from the

consolidated funds amounting to Shs. 9,821,544,153,083. The details are in the table 3

below:

Table 3: Value of grants of credits issued during the FY 2010/11

Expenditure No. of Warrants Issued

Amount (Shs)

Recurrent 25 4,546,120,650,371

Development 17 3,836,396,733,773

Statutory 10 1,439,026,768,939

Total 52 9,821,544,153,083

2.3 Audit of Central Government Entities

This audit covered 92 MDAs and 42 projects and below are the major findings.

Summary of Major Findings

Implementation of the National budget

during the year was not properly

aligned with the National Development

Plan (NDP). Comparison of NDP

Sectoral allocations with the approved

budget allocation showed huge

variances at both budget and release

level.

Physical performance fell short of the

planned outputs in many sectors as a

result of budget cuts undertaken during

the year. This impairs the credibility of

the budget process.

Shs.10billion was released by MOFPED

to Microfinance Support Centre Ltd in

2011 to cater for the Presidential

initiative for market vendors and small

business operators. There were no

procedures in place to ensure proper

accountability and management of the

funds especially with respect to

Kampala based SACCOS.

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Between March 2006 and May 2011,

UMEME offset shs.27.96 billion against

lease rentals payable to UEDCL in

respect of outstanding electricity bills

for government ministries, however,

there is no record showing the various

ministry accounts credited.

The Ministry of Local Government spent

a total of US$4,298,636 to open a

Letter of Credit (LC) for the supply of

70,000 bicycles for the chairpersons of

parish and village councils. 40% of the

LC representing US$1,719,454 was

fraudulently paid to the supplier since

the bicycles had not been delivered.

The fraudulently paid funds had not

been recovered by the time of audit.

Shs.10, 501,924,831were irregular

payments made to the contractor for

Kabale-Kisoro-Bunagana road as

compensation for change of prices of

basic materials and labour under the

“Price Adjustment” (VOP) clause in the

contract. Shs.837, 386,254 and Euros

255,124 were overpaid to various road

contractors resulting from inaccurate

measurements.

By year end, UNRA had not paid a total

of Shs.146, 264,347,800to various

contractors and consultants on a

number of roads because of failure by

government to meet the commitments

made during the year. This will attract

extra claims for interest by the

contractors resulting in nugatory

expenditure.

Ministry of works made irregular

payments amounting to Shs.4,

473,003,963 to contractors.

Shs.1, 214,590,305 to four contractors

was nugatory since it arose from

interest accrued on the delayed

payments for CHOGM 2007

infrastructure works maintenance

projects.

A case of loss (embezzlement) of

shs.521, 688,900 in a ministry that

occurred in 2007/2008 and involved a

number of employees in the Ministries

of Works & Transport, and Finance,

Planning and Economic Development

was dismissed by the magistrate

because the State failed to present

Police file in court throughout the

period the case was mentioned inspite

of overwhelming evidence available.

Government entered into a

memorandum of Understanding with an

unknown foreign firm for the sale of

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Posta Uganda Ltd without the approval

of the Attorney General. The matter

needs further investigation to establish

the circumstances and the implications

to government.

Agreement for seven loans equivalent

to shs.1.1 trillion were signed before

their approval by Parliament contrary to

Article 159 of the Constitution of the

Republic of Uganda.

Government has not yet put in place a

policy or law to regulate and guide

compensations, particularly those

relating to war yet Ministry of Justice is

processing war debt compensation

claims for Northern Uganda (Acholi,

Lango, and Teso) in spite of similar

verifications undertaken earlier by the

Bigombe Team and another by the

Ministry of Defence.

A total of shs.906, 568,335 was granted

as incentives for hotel construction

when the facility had ended in

December 2010.

shs.150,284,885,491 had been paid to

the supplier for implementation of

National Security information Systems

(National Identity Card)project yet by

March 2012, only 400 cards had been

personalized. No funding of the

operational costs estimated at shs.72,

271,834,000 had been released

crippling the overall implementation of

the project. This project funded through

borrowing from BOU has attracted

interest costs of over shs.3,

227,538,712.

Since 2006 government has budgeted

shs.92 billion annually for subsidies for

electricity despite the fact that subsidies

have been much higher. This has

created a shortfall of shs.275 billion

since 2006 to date.

UMEME energy loss broken down into

technical and commercial losses is not

known yet over the years, UMEME

reported that its actual losses at 30%

which is higher than the target loss of

28%.

Audit undertaken of Production Sharing

Agreements have ascertained a total of

US$.492, 544,876 as recoverable

expenses to be borne by government

upon the commencement of oil

production. The Accountant General has

not yet prescribed the accounting

treatment of such expenses in the GoU

financial statements.

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Challenges

The major challenges encountered were;

The organizational reforms (i.e)

restructuring, recruitment and re-

organization impacted on the

implementation of the agreed

operational plan. Staff had to adapt

to the new sector based approach to

audits. In addition new staff had to

adopt to the use of electronic

working papers.

Due to constraints in funding, key

areas of focus like public works had

to be undertaken on a sample basis.

Out of 225 contracts implemented

by UNRA the Directorate was able to

audit 25 with the funds that were

allocated for that purpose

2.4 Audit of Statutory Corporations

This audit covered 63 Statutory Corporations and 40 projects and below are the major

findings.

Summary of Major Findings

Based on the above scope and objectives, below is a summary of the Major finding for

the year:

During the year, Bank of Uganda

issued letters of comfort to various

commercial banks in favour of

borrowings by HABA Group

amounting to shs.153 billion. As at

30th June 2011, the Bank had paid

shs.82 billion to two of the

commercial banks following

nonpayment of HABA Group’s

borrowings as agreed with the

commercial banks. Other

commitments amounting to shs.71

billion for which letters of comfort

were issued were due to mature after

30th June 2011. The letters of

comfort were issued on the request

of the Minister of Finance, Planning

and Economic Development.

Parliamentary approval was not

obtained. The Bank has recognized a

financial loss of shs.153 billion in the

financial statements as it follows up

this matter with Government.

As at 30th June 2011, the Bank of

Uganda capital reserves after

excluding accumulated unrealised

foreign exchange gains (translation

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reserves) was a net deficit of shs.168

billion. This indicates that the capital

of the Bank is eroded and there is

need for urgent corrective action.

Management of Uganda Broadcasting

Corporation disposed 53.283 acres

out of 59.1 acres of UBC land located

at Bugolobi in Kampala, between

2007 and 2011. However, the

disposal of this land was

characterized by a number of

irregularities. These included sale of

UBC core assets contrary to the

established policies, disposal of the

land without the prior approval of the

Minister, sale of the land at less the

market valuation, breach of contracts

of sale by the purchasers and undue

influence exerted by the Minister on

the Board in matters relating to land

disposal.

The Corporation Secretary of the

Electricity Regularity Authority (ERA)

did not seek the approval of the

Board before issuing a letter to a

thermal company amending the

terms of the license relating to the

power plant fuel consumption rates,

which action resulted into a loss of

US$4,078,329 to government.

Differences in the interpretation of

some of the provisions of the

Electricity Act 1999 by the Electricity

Regulation Authority (ERA) and the

Ministry of Energy and Mineral

Development (MEMD) has resulted

in the duplication of some of the key

functions of the Sector regulation in

respect of human resource

management, Electricity Sector

planning and tariff setting. This has

affected the effectiveness of ERA.

The duplication of roles resulted in

ERA seeking a legal opinion from the

Solicitor General whose response also

appears to be at variance with the

provisions of the Act.

Four parastatal bodies, three of them

wholly Government owned proposed

dividends totalling Shs.4,098,059,000

during the year under review.

However, the dividends had not been

remitted to the Government

Consolidated Fund Account by the

time of writing this report.

Government entered into a consent

judgment to settle Pension, Gratuity

and other costs to former employees

of UEB totalling Shs.47,972,421,017.

Out of this amount, a total of

Shs.17,953,672,247 in respect of

Interest (Shs.16,144,172,247) and

damages (Shs.1,109,500,000) could

have been avoided had the

provisions of Section 129 of the

Electricity Act been complied with by

the Privatization, Enterprise Reform

and Divestiture Unit (PU).

Contractual arrangements between

UEDCL and UMEME allow UMEME to

set off from lease rentals payable to

UEDCL amounts outstanding in

respect of GOU MDA bills. A sum of

Shs.27, 911,559,659 had been offset

against lease rentals between 15th

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March 2006 to 15th May 2011,

however, because individual MDAs

are not informed of this

arrangement, they have continued

making full payment of their

Electricity bills. There is a risk of

double payment of these bills by

MDAs.

A private law firm was paid Shs.5.4

billion by Civil Aviation Authority

(CAA) as debt collection fees having

purportedly assisted CAA collect a

debt of shs.54 billion owed by

Government. This expenditure was

unnecessary, could have been

avoided given that Government had

already committed itself to pay it. I

have recommended that the matter

should be investigated further to

establish the circumstances under

which the transaction was handled

and any loss arising should be

recovered and action taken against

those response.

Ministry of Finance, Planning and

Economic Development through the

Privatization Unit paid an amount of

Shs.4.7bn to a local firm as an out of

Court settlement after directing

Kilembe Mines Ltd not to pursue a

court case in a matter that KML had

been assured by their lawyers that

they had a Good Case. This amount,

which KML was directed to recognize

as a loan in its books at an interest

rate of 9% was not approved by KML

Board of Directors. As at 31st

December, 2010 the Loan had

attracted accumulated interest of

shs.1,269, 000,000.

Challenges

The major challenges encountered were;

Delayed presentation of draft

accounts for audit by some

entities.

Failure by some entities to

provide timely responses to

management letters issued to

them.

Delayed start of the audits due to

unavailability of documents

withdrawn from some entities by

other investigative agencies e.g.

National Theatre, Cancer

Institute, etc.

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2.5 Audit of Local Authorities

This audit covered 2,093 Local Authorities including 5 projects and below are the major

findings.

Summary of Major Findings

Basing on the above scope and objective, below is a summary of the major findings for

the year.

Accounts for 45% of HLGs and 45%

of LLGs were unqualified;51% of

HLGs and 42% of were qualified

while 4% for HLGs and 13% for LLGs

had disclaimer opinions.

Revenue performance of 87 councils

revealed that out of the budgeted

sum of Shs. 38,186,314,821 only Shs.

25,824,525,226 was realized resulting

into a short fall of Shs.

12,361,789,595 which is equivalent to

32.4% under collection. With regard

to the sampled Lower Local

Governments (Sub Counties) an

amount of Shs. 8,489,933,773

remained uncollected during the

period.

A review of Various Council records

revealed losses of funds amounting to

Shs 1,039,878,751. The losses were

in respect of misappropriated revenue

and unauthorized withdrawal of funds

from bank accounts.

Shs. 17,909,576,428 in respect of

HLGs comprising of administrative

advances, incompletely vouched

expenditure, un-vouched expenditure

and Doubtful expenditure remained

outstanding contrary to the

regulations.

Shs. 34,034,740,313 in Higher Local

Governments were balances in cash

unspent by year end. This represents

an increase of 17% from the previous

year. In addition Shs. 2,646,728,346

remained unspent in the sampled

Lower Local Governments.

A number of higher and lower local

governments accumulated

outstanding commitments amounting

to Shs. 9,629,524,558 and Shs

271,983,680

beyond their approved budget

estimates respectively .

A number of Local Governments

procured items and services worth

Shs. 24,346,888,735 without

following Public Procurement

Regulations and guidelines.

Shs. 12,306,938,816 and Shs.

1,322,057,657 was spent by higher

and sampled lower local governments

respectively in excess of provisions

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authorized in the approved estimates

contrary to Financial Regulations. The

previous year’s unauthorized excess

expenditure for higher local

governments amounted to Shs.

6,944,000,005 implying an increment

of 77% in the current year.

A sum of Shs. 2,334,135,412 in

respect of conditional grants was

diverted by some Local Governments

to activities not prescribed in the

conditions and guidelines of the

grants in question. This represents

an increase of 1.3 billion from the

previous year.

Expenditure amounting to Shs

1,434,444,106 in some council was

utilized for activities that were not

beneficial to the Councils and hence

were considered wasteful. This

represents an increase of Shs.1.2

billion from the previous year.

With reference to Primary Leaving

Examinations for the academic year

2010 an average pass rate of 84%

and a failure rate of 16% were

observed. My inspection of schools

revealed the following as the major

shortcomings that negatively affect

service delivery in the education

sector: Lack of teacher’s

accommodation; Lack of lunch for

pupils and teachers; High Teacher to

pupil ratio of 1:83 compared to the

recommended 1:53; Inadequate

latrine facilities; Crowded class

rooms, a ratio of over 1:80 compared

to the recommended 1:53;Delayed

distribution of UPE funds; Poor

infrastructure such as old dilapidated

classrooms and toilets.

Inspection of Referral Hospitals,

District hospitals and Health centers

revealed a number of weaknesses

that hinder effective health services

which included: Severe staffing

shortages; inadequate transport

facilities; Lack of medical equipment;

inadequate delivery of medical

supplies; Expiry of drugs; Inadequate

patients’ wards; Dilapidated buildings;

Incomplete building structures;

Limited staff accommodation; Poor

record keeping and in some cases

non- availability of records; Minimal

support supervision; Inadequate

power supply; Lack of drug store

keepers

Review of the utilization of Uganda

Road Funds by 10 entities revealed

that out of disbursements of Shs.

14,097,342,554 only

Shs.2,600,728,856 was utilized

leaving Shs. 11,496,613,698 idle.

It was noted that various entities

lacked land titles for public land

occupied by schools, Health Centers

and administrative headquarters.

There is a risk of encroachment and

loss of the properties.

15

Challenges

The major audit challenges encountered were;

Increasing audit population;

Delayed submission of financial

statements and responses to audit

queries by Accounting Officer;

Shortages in staffing levels though it

has been solved.

2.6 Value for Money and Specialized Audits

Value for Money (VFM) audit examines the economy, efficiency, effectiveness and

environmental effects of government projects and operations. The audits endeavor to

evaluate if activities, programmes or projects involving public funds in audited

organizations have been managed and conducted with due regard to economy,

efficiency and effectiveness. During the FY 2010/2011, the VFM audits were conducted

in accordance with the International Organizations of Supreme Audit Institutions

(INTOSAI) standards.

During the year 2010/11, the Directorate of Value for money and specialized audits

carried out 12 studies and completed all of them. The detailed findings and

recommendations are in Volume 5 of the Auditor General’s report and in the individual

audit reports. The individual studies were as follows:

1. Regulation and Provision of Communication Services by Uganda Communications

Commission (UCC);

2. Production of Deed Plans and Maps by the Department of Surveys and Mapping in

the Ministry of Lands, Housing and Urban Development;

3. Rehabilitation and Maintenance of Feeder Roads in Uganda: A case study of

Hoima, Kumi, Masindi, Mukono and Wakiso Districts;

16

4. Conservation of Wildlife by the Uganda Wildlife Authority;

5. Management of Accommodation by the Uganda Police Force;

6. Implementation of Bujagali Interconnection Project by Uganda Electricity

Transmission Company Limited (BIP);

7. Management of Fisheries on Lake Victoria;

8. Management of National Agricultural and Advisory Services (NAADS): A case

study of Kabarole, Kasese, Lira, Manafwa, Mubende and Tororo Districts;

9. Protection of Central Forest Reserves in Uganda Implemented by National Forest

Authority (NFA);

10. Management of the Presidential Initiative on Banana Industrial Development

Project (PIBID);

11. Provision of Maternal Health Services by the Ministry of Health;

12. Management of Academic Programmes at Makerere University;

Challenges

The major challenges encountered were;

Delayed consideration of VFM audit reports by Parliament

17

2.7 Support to Oversight Committees of Parliament

In accordance with Article 153 of the Constitution of the Republic of Uganda, Parliament

through its oversight Committees, performs the oversight function over public funds and

requires the Executive to account for the public resources entrusted to them for

provision of the public services. The Accountability Committees include: the Public

Accounts Committee (PAC) for Central Government, the Local Government Accounts

Committee (LGAC) for Local Governments and the Committee on Commissions, Statutory

Authorities and State Enterprises (COSASE).

During the year 2010/2011, the Auditor General actively provided support to the

Committees during discussions.

2.8 Information Technology and Audit Development

In the OAG Corporate Plan 2006-2011, the Office of the Auditor General focused on

creation of an appropriate IT governance structure, development of IT infrastructure and

staff capacity to facilitate the adoption and rollout of automated audit tools for

improved audit business processes. The office also acquired software licenses for

teammate and IDEA data analysis soft ware and trained staff in the areas of IT audit,

network data back up and data management and structured query language (SQL).

2.9 Audit Quality Control and Quality Assurance

Besides the internal audit quality control and assurance through regular reviews by

supervisors, the office is also subjected to external quality review carried out after every

three years by the African Organization of Supreme Audit Institutions of the English

Speaking Countries (AFROSAI-E), Office of the Auditor General was carrying out.

18

During the year, AFROSAI carried out a quality control and assurance review on the

office by a high level team of eight reviewers drawn from five SAIs of Norway, Sweden,

South Africa, Kenya and Tanzania with representation from AFROSAI-E secretariat.

AFROSAI-E team poses for a group photo with the Assistant Auditor General Mrs. Keto N.

Kayemba (centre), the Chief Operating Officer (2nd row first from right) and the Director /

Corporate Support Executive (first from right)

19

3.0 Performance of the Corporate Services Function

The Corporate services function supports the external audit function by managing

financial and human resources; internal and external communications; other office

operations and administrative issues. The subsequent sections explain the achievements

during the year.

3.1 Human Resource Management and Development

The office of the Auditor General continued with the implementation of its strategic

objective of creating an environment that enables it to operate efficiently, Recruit, Retain

and Motivate suitable staff. During the year, the Human Resource Department managed

the restructuring process, implemented the new structure, and managed staff

performance, capacity building activities as well as staff welfare.

OAG Staff during the Annual Staff meeting held at Serena Hotel

20

3.1.1 Human Resource Policies

The final OAG staff structure, the National Audit (Terms and Conditions of staff)

Regulation 2011 were approved by Parliament and is now operational.

3.1.2 Staff Recruitment and Promotion

The new staff structure with a total establishment of 481 provides for a total of 324

Audit staff and 157 non audit staff. The structure is being implemented in phases due to

financial and Office Accommodation Constraints. During the Audit year 2011/12, 68

Officers were recruited and 69 promoted. The 68 officers recruited included 55 Audit and

13 non Audit staff. At the time of reporting the staffing level was at 88% of which 74%

are audit while 13% are non audit staff.

Recently recruited OAG staff taking oath of secrecy following a pre-induction ceremony held in the Ministry of Finance

Planning and Economic Development Conference room.

21

3.1.3 Staff Trainings and Development

The office sponsored staff to pursue professional accounting and other qualifications. A

total of nine (9) officers completed various professional courses while 20 staff are yet to

complete. The number of professionally qualified staff increased from 52 in 2005 to 98

in 2010/11 as indicated below:-

Table 4: Trends in the number of Professional Accountants since 2004/2005

Year Number at the

beginning of the year

Increment* (Net

Adjustment)

Number at end

of year

2004/2005 48 4 52

2005/2006 52 6 58

2006/2007 58 5 63

2007/2008 63 7 70

2008/2009 70 6 76

2009/2010 76 7 83

2010/2011 83 15 98

Note:

The increment (Net adjustment) figure caters for staff who trained and qualified as well

as those who joined OAG with full professional qualifications.

In regards to other professions, at the time of reporting one staff had completed a

Masters Degree in Business Administration and total of 9 staff members were pursuing

various courses leading to the award of Masters, Post graduate Diplomas, Diplomas and

certificates.

In addition the office supported staff for skills development trainings. During the year,

staffs were trained in the following areas: procurement audit; forensic audit, IDEA,

Records Retention and Disposal, Advanced auditing, taxation auditing and treasury

management.

22

3.1.4 International Trainings

As one of the Capacity Building Strategy, Office of the Auditor General facilitates its staff

for attachment programs to other SAIs and relevant organizations abroad to learn, share

information and experiences. During the year of reporting: a team of 8 Officers were

trained in India in the areas of Performance Audit, IT Audit, Public Sector Audit and

Regularity Audit. The Internal Audit Unit staff attended an international Annual

Conference in Tanzania. Other officers from the office also attended the East and

Southern African Association of Accountant Generals Conference, in Swaziland. Two staff

attended training in Value for Money performance audit in Sierra Leone. Two staff in

Information security from Nairobi and 2 staff trained in IT management from National

Audit Office of UK.

3.1.5 Staff Performance Appraisal

The Office of the Auditor General is currently using the scalar rating method in

appraising staff performance. The office conducted appraisals for 358 staff members.

Initiatives were undertaken to adopt the Result Oriented Management but it could not

be fully implemented due to inadequate manpower in the Human Resource Department

to provide continued support and monitoring of staff performance, especially in the

regional Branch Offices.

However, as a result of the implementation of the new structure, the Staffing level in the

Human Resource Department increased from 4 staff in the year 2010/11 to 6 in the

audit year 2011/12. The two staff recruited included a Manager (HRMD) and a Senior

Personnel Officer.

3.1.6 Restructuring of the Office

To achieve objective 3 in the Corporate Plan 2006/2007 – 2010/2011 which is; to create

an environment that enables the office to operate efficiently, recruit, retain and motivate

suitable staff, it was envisaged that the OAG structure needed to be reviewed. During

the year 2009/2010 the Office outsourced the services of the National Audit Office of the

23

UK to conduct the restructuring exercise. The draft OAG restructuring report containing

findings and recommendations was submitted to Parliament for approval and

subsequently approved. The implementation of the approved structure commenced in

the year 2010/11 and is in progress

The structure is being implemented in phases due to financial and office accommodation

constraints. The new structure provided for the Directorate of Corporate Services,

Department of Technical Support Services under which the Quality Assurance Section

falls and the IT Department. During the year, a Chief Operating Officer, Director

Corporate Services and Manager IT were recruited. The Value for Money Audit

Department was also elevated to a Directorate in charge of Value for Money and

Specialized Audits and a Director Value for Money was recruited.

3.1.7 De-linkage from Public Service

Section 9 of the National Audit Act 2008 empowers the Auditor General to appoint and

manage staff of the office. However, to fully operationalise these provisions, there was

need to come up with OAG specific staff Rules and Regulations (TCS) to facilitate the

de-linkage of OAG staff from the Main stream Public Service. In the Audit year 2010/11,

The National Audit (Terms and Conditions) Regulations 2011 which operationalises the

above provisions were approved and appointments for all staff from the main stream

public service were regularized. At the time of reporting, the draft Human Resource

Manual was under review and it is expected to be approved by end of the year 2012.

3.1.8 OAG Health Policies

The office of the Auditor General Continued with the implementation of the HIV/AIDS

policy under which 27 staff and their spouses who live with HIV/AIDS as well as those

with life threatening illnesses like hypertension, cancer and diabetes are supported to

ensure that they live a useful life both to the nation in general and OAG in particular. In

addition, a health care scheme which covers the employee, their spouses and two

biological children was introduced in the year 2011.

24

3.2 Administration, Communication and Judicial Matters

3.2.1 Records and Information Management

The OAG Records Information Management (RIM) Unit comprises of the Central Registry

at the Headquarters where all current Human Resource Management and administrative

records are controlled, Records centre (Archives) where all semi-current and archival

records are managed, Resource Centre where all Library and knowledge resource

material are managed. There is also a Branch Registry at every Regional Audit Branch

Office managed by 9 Administrative Assistants.

Office of the Auditor General, like any other organization, needs records in the conduct

of current business, making decisions and taking actions. Where records are not properly

managed, the ability of government to deliver its programs and services while meeting

its accountability requirements is compromised. Poorly managed information can

increase the risk of OAG’s failure to make an effective contribution to improving public

accountability and value for money spent hence the need for effective means of

managing information.

During the Audit year 2011/12, the Resource Centre was stocked with 144 publications

including journals and various reports; the office boosted the storage capacity by re-

equipping every department with shelves, cabinets, desktops and acid-free file boxes

and a refresher training in Records retention and disposal for Administrative Assistants

was carried out.

However, the office continued to grapple with proliferation of paper documents in very

limited and expensively rented office space. Priority shall thus be apportioned to

electronic archiving and establishing an e-resource Centre for enhanced knowledge

management. As a step to the achievement of the above, a Senior Knowledge

management Officer was recruited and the resource center equipped with 8 Desk Top

Computers and a projector.

25

In the OAG Corporate Plan 2011-2016, the office has committed itself to strategically

re–organize information both manually and electronically. The knowledge and

information management function and staff will be rationalized under the Technical

Support Services Department. A robust records storage and retrieval system is to be

established with well developed mechanisms for automated knowledge management

and skills transfer with aim to benefit both internal and external stakeholders.

3.2.2 Information Communications Technology Development

The application of ICT in the office of the Auditor General has been extended beyond

facilitating internal and external communication to automation of audit processes;

modernization of training methods; facilitation of knowledge sharing and management of

Records and Information.

In the audit year 2009/2010, the OAG web site and the intranet were launched. The

intranet has continued to be an important communications tool in the Office with regular

updates on office activities on the net. In the audit year 2011/12, the OAG web site was

upgraded to improve on its user interface and the quality of the content.

At the time of reporting all OAG regional offices except Jinja and Mbale were connected

to the Wide Area Network and staff members have access to the intranet. The office

used to experience net work failures as the staffing levels increased due to limitations in

the band width and load shedding. During the year, band width for the head Office and

Regional Offices was upgraded from 1MB- 7MB and 128KB to 1 MB respectively. In a bid

to address the frequent load shedding which affect the operations of the Regional

Offices, power back up batteries were installed at Gulu, Soroti, Masaka and Fort Portal

Regional Offices.

With support from JICA, the Office developed its IT Strategic Plan for the period 2011-16

which covers both IT audit an ICT infrastructure development within the Office.

26

However, the efficient operation of OAG-ICT was hampered by several challenges. The

office has not been able to fully develop ICT infrastructure in the Rented Premises due

to the high installations costs involved. In addition due to budget constraints, the office

was not able to connect the newly commissioned Regional Offices in Jinja and Mbale to

WAN. Maintaining optimum link speed in our branches and Headquarters office provided

a challenge in the IT operations of the Office. Embassy house and Lourdel road were

seriously affected so were Soroti and Arua Offices. The measure to mitigate this

challenge include upgrading the Data Centre to provide better services.

3.2.3 Communication and Public Relations

The communications unit which falls under the technical support department is charged

with the responsibility of formulation, implementation, monitoring and review of the

internal and external OAG communication strategies. Through the execution of the

above stated functions the unit has assisted the office in raising its profile amongst the

stakeholders. Following the recruitment of the Senior Public Relations Officer last year,

internal communication has been boosted through the bi-monthly flyers which are

accessed by staff through the intranet. With the upgrade of the intranet, staff will now

be able to interact and chat by blogging. The suggestion box and the notice board were

also included on the intranet.

A draft Communications Policy was developed and at the time of reporting, it was under

review. In addition, the Senior Public Relations Officer maintained a close link with the

media to ensure accuracy and consistence of the information communicated to the

public.

The office undertook various social initiatives to support social causes which contribute

to community welfare. These initiatives were aimed at improving the corporate image of

the office.

27

In the year 2010/11, the office participated in the MTN marathon which is an annual

sports event hosted by MTN to mobilize resources to support various community health

programs like maternal health, water and sanitation and to assist the disadvantaged

persons in the war ravaged areas of Northern Uganda.

Through the OAG Women’s Forum the office contributed mattresses and baby cots to

Nakaseke Hospital. Through employee’s contributions, the office donated Shs. 2.77m for

clinical beds to Lungujja Community Health Caring Organization (LUCOHECO) which

provides health care and support to the vulnerable people of Lubaga Division especially

those infected and affected by HIV/AIDS, orphans, widows, and the elderly. In addition,

the office contributed Shs 1m towards Kyanja Community Health Center to help in the

fight against infant mortality.

Members of the OAG Women’s Forum led by the Assistant Auditor General Mrs. Keto N Kayemba (center) at Nakaseke

Hospital handing over baby cots and mattresses.

3.2.4 Legal Representation

The office has a Legal Unit/Chambers that is fully registered and operational with two

(2) staff members. This Unit is fully responsible for providing legal guidance and also

28

over seeing all legal issues that may arise against the office. In addition the Unit has

effectively represented the office as far as legal matters are concerned.

During the year, the unit created a mini-library that includes; Laws of Uganda 2000-2004

and subsidiary legislation and, Publications from renowned legal scholars. Furthermore,

the National Audit Regulations 2011 were enforced and are operational. The Legal and

Compliance Policy was drafted and at the time of reporting, it was under review by Top

Management. The Unit is also acknowledged for its conclusive disposal of 5 staff

disciplinary cases.

3.2.5 Professional Liability Indemnity Insurance

During the year 2010/2011, the office took a professional liability indemnity insurance

policy to protect itself in the probable event that the office is sued on the contents of its

audit reports.

3.2.6 Office Accommodation and Transport Equipment

The Office of the Auditor General Headquarters is accommodated partly in the Treasury

Building and in rented premises within Kampala. At the beginning of the financial year

2010/11, five Regional Offices of Arua, Gulu, Soroti, Fort Portal and Masaka were

accommodated in OAG premises while the other five Offices of Jinja, Mbale, Kampala,

Kampala City Council and Mbarara were accommodated in other Government

institutional buildings.

With support from FINMAP, the office secured funding for the construction of the Audit

House in Kampala and three Regional Offices in Jinja, Mbale and Mbarara Towns.

During the Financial year 2010/11, construction of two Regional office blocks in Jinja and

Mbale Towns were completed and the Offices handed over to the office and are now in

use. At the time of reporting, the construction of the Audit House and the development

of the detailed design for Mbarara Regional Office were in progress.

29

The Speaker of Parliament, Rt. Hon. Rebecca Alitwala Kadaga (left) officially breaking the ground for Kampala Audit

House. Looking on is the Auditor General, Mr. John F.S. Muwanga, the Chairman Parliamentary Committee on Finance

Hon. Frank Tumwebaze and the representative of the Contractor, M/s Seyani Brothers & Co. (U) Ltd.

Due to inadequate office space at the head quarters, some of the OAG staff members

were temporarily being accommodated in the premises of the Audit entities which was

envisaged to be a threat to their independence in execution of their statutory mandate.

To overcome the above threat, during the year, the office rented extra office space and

withdrew all its staff members from the premises of the Audit entities.

During the year 2010/2011, the office acquired a total of 4 vehicles. These vehicles were

deployed to the various Directorates to facilitate field operations.

3.3 Financial Management and Internal Audit

In accordance with the two strategic objectives of the OAG;

To improve the quality of budget preparation, financial management and budget

monitoring ;

To secure financial and operational independence of the Office.

During the year, the office used the Output Budgeting Tool (OBT) to prepare its Budget

Framework Paper, Draft Budget Estimates for the FY 2011/12 and the Quarterly

30

Progress Reports for the FY 2010/11 and submitted to the Ministry of Finance Planning

and Economic Development in time.

3.3.1 Budget Performance for the FY 2010/11

Pursuant to the National Audit Act 2008 section 33 which provides for the preparation

and submission of estimates for the year, of administrative and development

expenditures and estimates of revenues of the Office of the Auditor General, the office

prepared its budget for the financial year 2011/2012 and Submitted to Parliament. The

total budget approved for the office for the Financial Year 2010/2011 was Shs 33.397Bn

for both development and statutory recurrent expenditures including non resource taxes.

The total budget of Shs 33.397Bn included Shs 32.643Bn GoU funds and Shs 0.754Bn

donor funds. The allocation of Shs 33.397Bn GOU funding was as follows: Statutory

wage Shs 12.991Bn, non wage Shs 18.692Bn and Development Shs 0.960Bn including

taxes.

In addition, donor funds totaling to US$6.588m administered under FINMAP project

were allocated to the office for capacity building interventions which included

construction of the Audit House and a Regional Office in Mbarara, retooling and staff

training.

The OAG budget increased as compared to financial year 2009/10. Whereas the

approved budget for 2009/10 was 24.518Bn (with an actual outturn of Shs.22.5Bn) a

20% increment was given in the Financial Year 2010/11 to reach an approved budget of

Shs. 33.397Bn with an outturn of Shs. 32.348Bn.

31

A summary of the Budget, Actual Releases and MTEF Projections for three years is

shown in table 5 below:

Table 5: Budget, Actual Releases and MTEF Projections (Billions)

3.3.2 Internal Audit

The Internal Audits Unit is charged with the responsibility of verifying the effectiveness

of internal controls and advise Top management on risk management. The recruitment

of a Principal Internal Auditor strengthened the Capacity of the Unit which has enhanced

its performance. During the year, the unit was able to produce a draft copy of the

Enterprise Risk Management Frame work; a risk register and 2 Consolidated Internal

Audit Reports for the FY 2010/11.

3.3.3 Financial Reporting and Audit

In accordance with section 35 of the National Audit Act 2008 the office prepared and

submitted the financial statements for the financial year ending 30th June 2011 as per

the required statutory date of 30th September 2011. In regards to external audit of

accounts of the office, at the time of reporting, Parliament was handling the

procurement process for the external Auditor to audit the accounts of the Office of the

Auditor General for the Financial Years 2005/2006 to 2010/2011.

2009/10 2010/11 2011/12 MTEF Projections

Budget

Type

Approved

Budget

Actual

Outturn

Approved

Budget

Actual

Outturn

Approved

Budget

2012/13 2013/14

Recurrent 24.518 22.5 31.683 31.508 35.047 35.047 39.646

GoU Devt 0.900 0.8 0.960 0.810 0.76 0.66 0.726

Donor Devt 2.310 2.310 0.754 0.030 0.800 - -

Total 27.728 25.710 33.397 32.348 36.607 35.707 40.372

32

3.3.4 Procurement and Disposal

The Procurement and Disposal Unit is headed by the Senior Procurement Officer.

Together with the contracts committee, the unit is entrusted with handling the

procurement and Disposal function in the office.

In order to facilitate orderly execution of the procurement activities of the office, the

Unit consolidated the Procurement Plan for the year 2010/2011 which was executed.

As a statutory and compliance requirement, the Unit prepared and submitted the

monthly reports to PPDA in time; it updated the prequalification list of providers for

works, supplies and services which are of routine nature.

3.3.5 Assets Management

The office has continued to maintain an asset register that was installed in 2007/2008.

The register was updated with the details of all the office assets including vehicles,

furniture, motorcycles, buildings etc acquired during the year 2010/2011. Updates were

done in the assets register whenever there was any asset acquisition, transfer and

disposal. The assets were fully engraved in their respective categories including both

donated and GoU assets.

33

4.0 International Relations

During the year, the Office of the Auditor General maintained its relations with a number

of International Organizations for knowledge and experience sharing. Staff from the

office (OAG) made international visits to other relevant organizations and for

international conferences outside Uganda to learn from and share experiences with

them.

4.1.1 INTOSAI and IDI

INTOSAI is the International Organization of Supreme Audit Institutions. It is an

organization or association of Supreme Audit Institutions (SAIs) of countries who are

members of the United Nations (UN). IDI means International Development Initiative. It

is the training arm of the INTOSAI through which members of INTOSAI share

knowledge, skills and information through training.

The Office of the Auditor General subscribes to and is a permanent member of INTOSAI.

During the year, the Assistant Auditor General and the Director/Corporate Support

Executive attended a conference for INTOSAI working Group on environmental Audit in

Argentina.

4.1.2 AFROSAI and AFROSAI-E

AFROSAI is the African Organization of Supreme Audit Institutions. It is a continent

wide organization of Supreme Audit Institutions (SAIs) of Africa and a Regional African

continental member of the INTOSAI. Through participating in the programmes and

events of AFROSAI, member SAIs share knowledge, information and experiences on

public sector audit issues.

The Office of the Auditor General subscribes to and is a member of AFROSAI. During

the financial year, three staff (Chief Operating Officer, the Director/ Corporate Support

Executive and one Senior Principal Auditor) attended the Annual AFROSAI Technical

Update.

34

The Senior Public Relations Officer Gloria Namugera (left) poses for a photo with communication experts from SAI

Tanzania, SAI Namibia and SAI Swaziland during the AFROSAI-E Communication Workshop.

In addition, two staff attended a management development conference in South Africa;

the Principal Internal Auditor attended a conference on Risk Based Internal Auditing in

Swaziland and the Senior Public Relations Officer attended the communications

workshop on increasing knowledge and working with communication in supreme audit

institutions.

4.1.3 The Common Wealth Auditor Generals’ Conference

The Commonwealth Auditor Generals’ Conference is organized once every three (3)

years by the Countries who belong to the Commonwealth. The Office of the Auditor

General of Uganda is a member of the Commonwealth Auditor Generals’ Conference. In

the FY 2010/11, the office was represented by the Assistant Auditor General and

Assistant Director Audit in the 21st conference whose theme was “Pioneering Excellence

in Public Sector Auditing,” which was held in Windhoek, Namibia, April 2011. The next

conference will be hosted by the Malta National Audit Office in 2014.

35

4.1.4 United Nations Independent Audit Advisory Committee (UN-IAAC)

The Independent Audit Advisory Committee of the United Nations (UN-IAAC) is a

subsidiary body of the General Assembly of the United Nations (UN) established to serve

in an expert advisory capacity to assist the General Assembly of the UN in fulfilling its

oversight responsibilities.

The Auditor General of Uganda was appointed the Chairperson to the Committee and in

his capacity as Chairperson, he attended all the meetings of the Committee in the during

the year.

Secretary-General Ban Ki-Moon (4th from left) meets with members of the Independent Audit Advisory Committee

(IAAC). 2nd from right is the Auditor General of Uganda Mr. John F.S. Muwanga who is now the Chairman of the

Committee.

36

4.1.5 World Bank Multilateral Audit Advisory Group

The World Bank Group established a Multilateral Audit Advisory Group (MAAG) that is

specifically tasked with advising the Audit Committee of the World Bank (WB) on audit

requests from the Supreme Audit Institution (SAI) or other National Audit Offices. The

advice given (by MAAG) includes assessing compliance of the SAIs with the agreed

terms of references for the audit; assessing adherence to the agreed group rules, and

providing objective comments on the resulting audit reports. The Auditor General of

Uganda is a member of this Multilateral Audit Advisory Group (MAAG) of the World Bank.

4.1.6 International Consortium on Government Financial Management

(ICGFM)

The ICGFM works globally with Governments, Organizations and individuals who are

interested in developments in public financial management. The Consortium brings

together diverse Governmental Entities, Organizations and individuals who include

financial management practitioners in all levels of Government.

During the Financial Year 2010/11, the office sent four (5) Senior Officers to participate

in the Conference activities of the Consortium.

4.1.7 International Delegations

Due to the improvements in the quality of performance and autonomy of the Office of

the Auditor General and the successful adoption of efficient and effective audit tools and

methods in auditing computerized accounting and financial management Systems, (such

as the IFMS) the office started receiving a stream of International Delegations wishing to

share experiences and broaden their knowledge with SAI Uganda.

37

In the period of reporting, the office hosted International delegations from the following

SAIs and other institutions:

The National Audit office of Tanzania;

National Audit Office of UK;

Swedish National Audit Office.

Office of Comptroller & Auditor General of India;

Lesotho Revenue Authority;

Office of the Accountant General Somalia;

National Audit Office of Malawi

In addition, the office hosted the audit team comprising of members from SAI Kenya,

SAI Tanzania and SAI Cameroon for the joint Value for Money Audit of the Lake Victoria.

A team from SAI Tanzania, SAI Uganda, SAI Kenya with an observer from SAI Cameroon pose for photo following Joint Environmental Audit of Management of Fisheries on Lake Victoria. In the middle of the photo is Mr. John F.S.

Muwanga, the Auditor General.

4.1.8 JICA and OAG

JICA and OAG have related closely, with the former giving capacity building support to

the latter. During the year of reporting, JICA supported the office in three major areas:-

VFM, IT and Public works.

38

i. In the area of ICT it supported the following capacity building interventions:

The development of the IT strategy for the period 2011-2016;

Training 5 staff in IT audit;

Training 26 staff in IDEA and 137 staff trained in procurement Audit;

Training 30 staff in Teammate refresher course;

ii. In the area of Public Works it:

Supported the development of the Public Works Audit Strategy for the period

2011-2015;

Trained 2 auditors in public works audit in Japan.

iii. In the Area of Value for Money it;

Supported the development and production of the VFM Audit awareness

leaflets.

39

5.0 Registration of Accountants

Section 8 of the Accountants Act 1992 empowers the Auditor General to be the Registrar

of Accountants in Uganda. It requires the Auditor General to register and maintain a

register for the Accountants. During the year the Auditor General registered 190

Accountants. At the time of reporting 89 applications were in process.

40

41

Appendix I: Unaudited Financial Statements of OAG for the year ended

30th June 2011.

GOVERNMENT OF THE REPUBLIC OF UGANDA

REPORTS AND FINANCIAL STATEMENTS FOR

…OFFICE OF THE AUDITOR GENERAL …

FOR THE YEAR END 30th June 2011

Financial Statements for the Financial Year ended 30th June 2011

42

Statement of Responsibilities of the Accounting Officer

The financial statements set out on pages 1 to 22 have been prepared in accordance with the

provisions of the Public Finance and Accountability Act, 2003 [the Act]. The financial statements

have been prepared on the modified cash basis of accounting and comply with the generally

accepted accounting practice for the public sector.

In accordance with the provisions of Section 8 of the Public Finance and Accountability Act,

2003, [the Act], I am responsible for the control and personally accountable to Parliament for

the regularity and propriety of the expenditure of money applied by an expenditure vote, or any

provision funded wholly through the Consolidated Fund, and for all resources received, held or

disposed of.

Under the provisions of Section 31 of the same Act, I am required to prepare, sign and submit

financial statements to the Minister responsible for Finance, the Auditor General, and to the

Accountant General within a period of three months from the end of the Financial Year.

Accordingly, I am pleased to submit the required financial statements in compliance with the

Act. I have provided, and will continue to provide all the information and explanations as maybe

required in connection with these financial statements.

To the best of my knowledge and belief, these financial statements agree with the books of

account, which have been properly kept.

I accept responsibility for the integrity of these financial statements, the financial

information they contain and their compliance with the Public Finance and

Accountability Act, 2003.

…… Constant O Mayende ………….

Accounting Officer [Names & Signature]

………Office of the Auditor General…………………

Date: …31st August 2011….

Financial Statements for the Financial Year ended 30th June 2011

43

THE ROLE OF OFFICE OF THE AUDITOR GENERAL

The principal address of the Office is:

Office of the Auditor General

Plot 2/12 Apollo Kagwa Road

P.O Box 7083, Kampala

Tel; (+256-414) 344340/521

Fax: (+256-414) 345674

E-mail: info@oag.go.ug

Website: www.oag.go.ug

VISION: “To be an effective and efficient Supreme Audit Institution in promoting effective public

accountability”

MISSION: “To audit and report to Parliament and thereby make an effective contribution to improving

public accountability and value for money spent”

CORE VALUES

The Office is committed to upholding the following as its core values:-

Integrity – Being upright and honest.

Objectivity – Display impartiality and professional judgment.

Professional Competence – Act with diligence, proficiency and team spirit.

The Office is the Supreme Audit Institution (SAI) provided for under Article 163 (3) of the Constitution of

the Republic of Uganda. The Office is responsible for auditing and reporting 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 Public Corporations or other bodies established by

an Act of Parliament also form the scope of this audit for reporting to Parliament.

Financial Statements for the Financial Year ended 30th June 2011

44

Commentary on the Financial Statements by the Head of Accounts

For 2010/11, the Office had an approved annual budget of Shs. 33bn including

development budget of Shs. 09bn. Being a statutory vote, a full release was made for

the expenditure items except salaries which are paid via Straight Thru Processing (STP)

payment method based on filled positions. Over 98% (Shs. 32.3bn)of the budgeted

funds for the financial year 2010/11 were received to facilitate the audit activities for

the period.

For the same financial year 2010/11, the office did not have any domestic arrears and

therefore there were no such payments in the accounts. All the unspent balances

carried forward from 2008/09 financial year up to 30th June 2011 have been

transferred to the Consolidated Fund and details of the transfers are contained in the

attached receipts of transfers.

I take full responsibility for the integrity of these Financial Statements, the financial information they

contain and their compliance with the PFAA 2003.

………Ambrose Promise……………..………..

Head of Accounts [Names & Signature]

……31st August 2011……….

Date:

Financial Statements for the Financial Year ended 30th June 2011

45

Statement of Financial Performance for the period ended 30th June 2011

[Based on classification of expenditures by nature]

Budget

2011

Shs

Notes Actual

30th June 2011

Shs

Actual

30th June 2010

Shs

Operating revenue

Grants from foreign governments 2 -

Grants from international organizations 3 -

Domestic Grants 4 -

33,200,720,000 Transfers received from the Treasury 5 32,317,943,278 23,458,997,707

Transfers received from other government units 6

Non-Tax Revenues 7 7,650,000 500,000

Other Revenue 8

33,200,720,000 Total operating revenue 32,325,593,278 23,459,497,707

Operating expenses

17,561,359,000 Employee costs 9 16,922,470,968 14,339,438,185

14,678,993,000 Goods and services consumed 10 14,573,991,722 8,195,625,960

960,368,000 Consumption of property, plant & equipments 11 806,080,326 869,221,553

Interest expense 12

Subsidies 13

Transfers to other Organizations 14 23,050,262 31,526,910

Social benefits 15

Other expenses 16

Foreign exchange losses (gains) 18

33,200,720,000 Total operating expenses 32,325,593,278 23,435,812,608

- Surplus/(deficit) from operating activities 0 23,685,099

Finance costs 17

Losses of cash only (refer to Statement of reported

losses)

Extraordinary items 19

- Net surplus/ (deficit) after extraordinary

items

0 23,685,099

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

…… Constant O Mayende ………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

46

Statement of Financial Position as at 30th June 2011.

Notes 30th June 2011

Shs

30 June 2010

Shs

ASSETS

Cash and Cash equivalents 20 0 671,418,781

Receivables 21

Inventories 22

Investments 23

Investment properties 24

Total Assets 0 671,418,781

LIABILITIES

Borrowings (interest bearing liabilities) 25 0 26,590,279

Payables 26

Pension liabilities 27

Total liabilities 0 26,590,279

NET ASSETS / (LIABILITIES) 0 644,828,502

REPRESENTED BY;

NET FINANCIAL WORTH 0 644,828,502

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

……… Constant O Mayende …………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

47

STATEMENT OF CHANGES IN EQUITY (NETWORTH) AS AT 30th June 2011

30th June 2011

Shs

30 June 2010

Shs Net worth Last Year (B/F) 644,828,502 623,313,031

Less: Transfers to the UCF account ( Balances) (668,507,017) -

Add: Treasury General Deficit (balances c/f & W/off to Reserves) 26,590,279 -

Less: Project Balances -

Adjustment : Under/Over Statement of Domestic Arrears of Past Years -

Less: Cash WHT to URA (Unrecoverable) - (2,619,628)

Add: Prior Year understated Cash balance refunded to TGA 2,911,764 450,000

Add: Surplus/ Deficit for the Year

- 23,685,099

CLOSING NET FINANCIAL WORTH 0 644,828,502

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

……… Constant O Mayende …………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

48

Cash Flow Statement for the year ended 30th June 2011 [Direct Method]

Notes 30th June 2011

Shs

30th June 2010

Shs

CASH FLOWS FROM OPERATING ACTIVITIES

Total receipts from operating revenues were (see below): 32,325,593,278 23,459,497,707

PAYMENTS FOR OPERATING EXPENSES:

Employee costs 16,922,470,968 14,339,438,185

Goods and services consumed 14,573,991,722 8,195,625,960

Interest expense

Subsidies

Transfers to other Organizations 23,050,262 31,526,910

Social benefits

Other expenses

Net Advances paid

Domestic arrears paid during the year

Pension Arrears paid during the Year

Losses of cash

Letters of Credit receivable

Extraordinary items

Total payments for operating activities 31,519,512,952 22,566,591,055

Net cash inflows/(outflows) from operating activities 806,080,326 892,906,652

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipments (806,080,326) (869,221,553)

Proceeds from sale of property, plant and equipments

Purchase of investments

Proceeds from sale of investments

Purchase of investment properties

Financial Statements for the Financial Year ended 30th June 2011

49

Proceeds from sale of investment properties

Net cash inflows/(outflows) from investing activities (806,080,326) (869,221,553)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from external borrowings

Repayments of external borrowings

Proceeds from other domestic borrowings

Repayments of other domestic borrowings

Net cash flows from financing activities - -

Net increase (decrease) in cash and cash equivalents - 23,685,099

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

…………… Constant O Mayende …………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

50

Cash Flow Statement for the year ended 30th June 2011 (continued)

For cash flow purposes receipts from operating revenue

comprise:

Notes 30th June 2011

Shs

30th June 2010

Shs

Operating revenue

Grants from foreign governments 2

Grants from international organizations 3

Equalization grants 4

Transfers received from the Treasury 5 32,317,943,278 23,458,997,707

Transfers received from other government units 6

Non-tax revenues 7 7,650,000 500,000

Miscellaneous 8

Advances Recovered

Deposits Received

Total receipts from operating activities 32,325,593,278 23,459,497,707

Reconciliation of movement of cash during the year

Notes 30th June 2011

Shs

30 June 2010

Shs

At the beginning of the year 671,418,781 649,903,310

Less: Transfers to UCF account (Balances) (668,507,017) -

Less: Overdrawn balance B/F -

Add: Bounced EFTs ( Stale cheques)

Less: WHT paid to URA - Unrecoverable - (2,619,628)

Add: Prior Year Cash balance understated refunded to TGA 2,911,764 450,000

Financial Statements for the Financial Year ended 30th June 2011

51

Net increase (decrease) of cash from the Cash flow Statement 0 23,685,099

At the end of the year 0 671,418,781

For purposes of the cash flow statement, cash and cash equivalents comprise

30th June 2011

Shs

30th June 2010

Shs

Cash and bank balances 20 0 671,418,781

Less bank overdrafts 25

Net cash and bank balances 0 671,418,781

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

……… Constant O Mayende ………………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

52

Statement of Appropriation Account [Based on services voted by Parliament]

Actual

30 June

2011

Shs.

Notes Actual

30th June 2011

Shs.

Budget

30th June 2011

Shs.

Variance

30th June

2011

Shs.

RECEIPTS

Grants from foreign governments 2

Grants from international organizations 3

23,458,997,707 Transfers received from the Treasury 5 32,317,943,278 33,200,720,000 882,776,722

Transfers received from other government

units

6

Non-Tax Revenues 7

Miscellaneous 8

23,458,997,707 Total receipts 32,317,943,278 33,200,720,000 882,776,722

EXPENDITURE- by services as per

appropriation

7,073,570,118 Prog 01 - Headquarters 11,443,294,412 11,488,582,000 45,287,588

3,936,218,844 Prog 02 – Directorate of Central Government 4,236,364,470 4,286,927,040 50,562,570

2,541,014,635 Prog 03 – Directorate of Statutory Authorities 3,102,490,105 3,105,885,000 3,394,895

6,505,898,674 Prog 04 – Directorate of Local Authorities 8,985,477,856 9,586,436,500 600,958,644

2,479,801,494 Prog 05 – Directorate of Value for Money and

Quality Assurance

3,728,835,847 3,772,521,460 43,685,613

869,221,553 Development Budget Expenditure 806,080,326 960,368,000 154,287,674

23,405,725,318 Total expenditure for services appropriated 32,302,543,016 33,200,720,000 898,176,984

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.The

financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

……… Constant O Mayende ………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

53

Statement of Appropriation Account [Based on nature of expenditure for services voted]

Actual

30 June

2011

Shs

Notes Actual

30th June 2011

Shs

Budget

30th June 2011

Shs

Variance

30th June

2011

Shs

RECEIPTS

Grants from foreign governments 2

Grants from international organizations 3

23,458,997,707 Transfers received from the Treasury 5 32,317,943,278 33,200,720,000 882,776,722

Transfers from other government units 6

Non-Tax Revenues 7

Miscellaneous 8

23,458,997,707 Total receipts 32,317,943,278 33,200,720,000 882,776,722

EXPENDITURE-by nature of expenditure

14,339,438,185 Employee costs 9 16,922,470,968 17,561,359,000 638,888,032

8,197,065,580 Goods and services consumed 10 14,573,991,722 14,678,993,000 105,001,278

869,221,553 Consumption of property, plant & equipments

(fixed assets)

11 806,080,326 960,368,000 154,287,674

Interest expense 12

Subsidies 13

Transfers to other government units 14

Social benefits 15

Other operating expenses 16

Domestic arrears paid

23,405,725,318 Total operating expenses 32,302,543,016 33,200,720,000 898,176,984

Finance costs 17

23,405,725,318 Total Expenditure 32,302,543,016 33,200,720,000 898,176,984

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

………… Constant O Mayende …………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

54

Statement of reconciliation between total expenditure per Statement of Appropriation Account to

total expenditure in Statement of Financial Performance

Notes Actual

30th June 2011

Shs

Actual

30th June 2010

Shs

Total expenditure per Appropriation Account 32,302,543,016 23,405,725,318

Add:

Letters of credit receivable prior year but

delivered during the year

Transfers received from other government units -

Transfer to Treasury NTR 7,650,000 500,000

Transfer to Treasury Gross Tax 31,026,910

Transfer to Treasury – Unspent Balances 15,400,262

Accrued Expenditure

Foreign exchange losses (gains)

Sub-Total 32,325,593,278 23,437,252,228

Less:

Letters of credit receivable at year-end -

Transfers made to other government units - 1,439,620

Domestic Arrears paid -

Total Expenditure per Statement of Financial

Performance

32,325,593,278 23,437,252,228

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

…… Constant O Mayende ………

Accounting Officer [Names & Signature]

Financial Statements for the Financial Year ended 30th June 2011

55

Statement of Revenues collected during the year ended 30th June 2011

[Based on source of revenue] (Memorandum Statement)

Actual

30 June

2010

Shs

Notes Actual

30th June 2011

Shs

Budget

30th June 2011

Shs

Variance

30th June

2011

Shs

RECEIPTS

Non-tax revenues

Investment income

Dividends

Rent

Other property income

Income from Disposal of Assets

Administrative fees & licenses

Fines and penalties

500,000 Miscellaneous receipts 7,650,000 - (7,650,000)

500,000 Total Non-Tax Revenue 7,650,000 - 7,650,000

The accounting policies and notes set out on pages 23 to 40 form an integral part of these financial statements.

The financial statements on pages 5 to 20 were approved by the Accounting Officer on 31st August 2011

………… Constant O Mayende ………………

Accounting Officer [Names & Signature]

56

Appendix II: Regional Branch Offices

1. ARUA Regional Audit Branch Office

2. GULU Regional Audit Branch Office

3. FORTPORTAL Audit Regional Branch Office

4. JINJA Regional Audit Branch Office

5. KAMPALA Regional Audit Branch Office

6. MASAKA Regional Audit Branch Office

7. MBALE Regional Audit Branch Office

8. MBARARA Regional Audit Branch Office

9. SOROTI Regional Audit Branch Office