THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LAW DEVELOPMENT CENTRE FOR THE YEAR ENDED 30TH JUNE, 2015

OFFICE OF THE AUDITOR GENERAL UGANDA

TABLE OF CONTENTS

LIST OF ACRONYMS ...... 2

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LAW DEVELOPMENT CENTRE FOR THE YEAR ENDED 30th JUNE 2015 ...... 3

1.0 INTRODUCTION ...... 6

2.0 BACKGROUND INFORMATION ...... 6

3.0 ENTITY FINANCING ...... 6

4.0 OBJECTIVES ...... 7

5.0 AUDIT OBJECTIVES ...... 8

6.0 AUDIT PROCEDURES PERFORMED ...... 8

7.0 CATEGORIZATION AND SUMMARY OF FINDINGS ...... 9

7.1 Categorization of findings ...... 9

7.2 Summary of Findings...... 10

8.0 DETAILED FINDINGS ...... 10

8.1 Land and Buildings ...... 10

8.2 Delayed Completion of Auditorium ...... 12

8.3 Budget Performance – unimplemented activities ...... 13

8.4 Post of Internal Auditor ...... 14

8.5 Unserviceable Vehicles not disposed off ...... 15

1 LIST OF ACRONYMS

Acronym Meaning

EFT Electronic Funds Transfer FY Financial Year GOU Government of Uganda ICT Information Communication Technology JLOS Justice, Law and Order Sector KCC City Council LDC Law Development Centre LPOs Local Purchase Orders MDA Ministries, Departments and Agencies NSSF National Social Security Fund PFMA Public Finance Management Act, 2015 PPDA Public Procurement and Disposal of Public Assets Authority PS/ST Permanent Secretary / Secretary to the Treasury SJ Secretary to the Judiciary TAIs Treasury Accounting Instructions UGX Uganda Shillings URA Uganda Revenue Authority PFMA Public Finance Management Act, 2015

2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LAW DEVELOPMENT CENTRE FOR THE YEAR ENDED 30th JUNE 2015

THE RT. HON. SPEAKER OF PARLIAMENT

I have audited the Financial Statements of Law Development Centre (LDC) for the year ended 30th June 2015. These financial statements comprise of the Statement of financial position as at 30th June 2015, the statement of comprehensive income, statement of changes in equity and cash flow statement together with other accompanying statements, notes and accounting policies.

Responsibility of the Director The Director is responsible for the preparation and fair presentation of the financial statements, in accordance with the Development Centre Act, Cap 132 of Laws of Uganda 2000, and International Financial Reporting Standards and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility My responsibility is to express an opinion on the financial statements based on the audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risks assessments, the Auditor considers the internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Centre’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well

3 as evaluating the overall presentation of the financial statements. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my qualified opinion.

Part “A” of my report sets out my qualified opinion on the financial statements. Part “B” which forms an integral part of this report presents in detail all the significant audit findings made during the audit which were brought to the attention of management.

PART “A”

Basis of Qualified Opinion  Valuation of land and buildings The Centre’s land and buildings were reflected as UGX.19,900,000,000 and UGX.8,283,697,095 respectively in the financial statements. However, it was observed that in the period 2012/2013, the Centre revalued only part of its land. This is contrary to IAS 16 that `requires all the assets to be revalued regularly in order to reflect a fair value.

Qualified Opinion In my opinion, except for the possible effects of the matter referred to in the Basis for Qualified Opinion, the financial statements present fairly, in all material respects, the financial position of Law Development Centre (LDC) as at 30th June 2015 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Law Development Centre Act, Cap 132, Laws of Uganda 2000.

Report on other legal requirements As required by the Law development Centre (LDC) Act, 2000 and the National Audit Act, I report to you, based on my audit that, except for the effects of the matter in the Basis for qualified opinion: i. I have obtained all the information and explanations, which to the best of my knowledge and belief were necessary for the purpose of my audit. ii. In my opinion, proper books of account have been kept by the Center, so far as appears from my examination of those books; and

4 iii. The statement of financial position and statement of financial performance are in agreement with the books of account.

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

12th December, 2015

5 PART "B"

DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE LAW DEVELOPMENT CENTRE FOR THE YEAR ENDED 30th JUNE 2015

This Section outlines the detailed audit findings, management responses, and my recommendations in respect thereof.

1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended) requires me to audit and report on the public accounts of Uganda and all public offices including the courts, the central and local government administrations, universities, and public institutions of the like nature and any public corporation or other bodies or organizations established by an Act of Parliament. Accordingly, I carried out the audit of Law development Centre (LDC) to enable me report to Parliament.

2.0 BACKGROUND INFORMATION The Law Development Centre (LDC) is an educational institution for higher learning that offers Post Graduate Diplomas in Legal Practice, Diploma in Law Course and other short law courses. The centre was established by the Law Development Centre Act Cap 132. According to Act, the Law Development Centre is a body corporate with perpetual succession and a common seal and may sue and be sued in its corporate name and, subject to this Act, may do and suffer all other acts and things as bodies corporate may lawfully do and suffer. The commencement of this act was in August 1970.

The Vision of the Centre is “to be the centre for quality legal training and high academic and professional standards” and its mission is “to develop legal capacity in Uganda”. The Centre is located at Plot 339 Kagugube Road, off Muammar Ghadhafi Road, .

3.0 ENTITY FINANCING The Centre was financed by grants from Central Government, funds from Development partners and locally generated revenue mainly from tuition fees. Grants totaling to UGX.5,397,304,237 were received from Central Government, UGX.1,771,909,900 was received from Development partners (JLOS – UGX 6 1,128,000,000 and other partners UGX.643,909,900) and UGX.4,416,075,136 was received from local sources comprising of UGX.3,851,342,437 as tuition fees and UGX.564,732,699 as other income. The total income from all the sources of revenue was UGX.11,585,289,273 which was 117.5% of the entity’s approved budget estimates for the year of UGX. 8,810,554,000. Out of the total revenue received during the financial year, UGX.8,178,441,801 was spent, leaving a surplus of UGX.3,406,847,472.

4.0 OBJECTIVES The objectives of the Centre are: a) Organizing and conducting courses of instruction for the Acquisition of legal knowledge, professional skill and experience by persons intending to practice as attorneys in subjects which shall have been determined by the Law Council under the Provisions of any law in force; b) Organizing and conducting courses in legislative drafting; c) Organizing and conducting courses for magistrates and for persons provisionally selected for appointment as magistrates; d) Organizing and conducting training courses for officers of the Government and members of the Uganda Peoples’ Defense Forces with a view to promoting a better understanding of the law; e) Organizing and conducting courses for officers and personnel of courts with a view to improving their efficiency; f) Assisting any Commissioner who may be appointed in the preparation and publication of a revised edition of the Laws of Uganda; g) Assisting in the preparation of reprints of Acts of Parliament in accordance with any law for the time being in force; h) Assisting the Law Reform Commission in the performance of its functions; i) Undertaking research into any branch of the law; j) Holding seminars and conferences on legal matters and problems; k) Collecting, compiling, analyzing and abstracting statistical information on legal and related matters; l) Assisting in the provision of legal aid and advice to indigent litigants and accused persons in accordance with any law for the time being in force; m) Compiling, editing and publishing law reports for Uganda;

7 n) Publishing periodicals, bulletins, digests or other written material concerned with legal and related matters; o) Disseminating and promoting generally a better knowledge of the law; and p) Having such other functions as the Attorney General may, from time to time, specify by statutory instrument.

5.0 AUDIT OBJECTIVES The audit was carried out in accordance with International Standards on Auditing and accordingly included a review of the accounting records and agreed procedures as was considered necessary. In conducting my reviews, special attention was paid to establish:-

a. Whether the financial statements have been prepared in accordance with consistently applied Accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. Whether all Centre funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. Whether goods and services financed have been procured in accordance with the Government of Uganda procurement regulations. d. To evaluate and obtain a sufficient understanding of the internal control structure of the organization, assess control risk and identify reportable conditions, including material internal control weaknesses e. Whether the Management was in compliance with the Government of Uganda financial regulations. f. Whether all necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented.

6.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:- (a) Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements.

8 (b) Expenditure The payments vouchers were examined for proper authorization, eligibility and budgetary provision, accountability and support documentation. (c) Internal Control System Reviewed the internal control system and its operations to establish whether sound controls were applied throughout the period audited. (d) Procurement Reviewed the procurement of goods and services by the Centre during the period under review and reconciled with the approved procurement plan. (e) Fixed Assets Management Reviewed the use and management of the assets of the Centre during the period audited. (f) Centre’s Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluated the overall financial statement presentation.

7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of findings

The following system of profiling of the audit findings has been used to better prioritise the implementation of audit recommendations: No Category Description 1 High significance Has a significant/material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2 Moderate significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3 Low significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest.

9 7.2 Summary of Findings

No Finding Significance 8.1 Land and buildings High 8.2 Delayed completion of Auditorium High 8.3 Budget Performance – unimplemented activities Moderate 8.4 Post of Internal Auditor Moderate 8.5 Unserviceable Vehicles not disposed off Low

8.0 DETAILED FINDINGS 8.1 Land and Buildings 8.1.1 Valuation of Land and Buildings As at 30th June 2015, the Centre’s Land and buildings were stated at UGX.19,900,000,000 and UGX.8,283,697,095 in the financial statements respectively. The Centre follows the revaluation model when measuring the value of land and buildings. This model requires assets to be revalued with sufficient regularity. In the period 2012/2013, the Centre only revalued part of its land. As stated in my previous report, the value of buildings and part of the land may be misstated because of failure to ascertain the correct current values.

Management explained that they are now procuring a private surveyor as advised by the Commissioner land registration to survey and value all its assets.

I await the results of the Accounting Officer’s efforts.

8.1.2 Un-titled plots As noted in my previous reports, seven (7) plots (34, 508, 509, 510, 613, 614, 615) on Block 9 Makerere, Kampala were acquired by the Centre under the land acquisition instrument S.1 No. 74 of 1987-Kibuga block. However, it was noted that these plots do not have titles to evidence ownership. The plots were also not recorded in the assets register. There is a risk of loss of land since it is not appropriately recorded and titled.

Management regretted the delay in securing the titles, and indicated that they are following up the matter.

10 I advised the Accounting Officer to closely follow up on the title processing and obtain titles for the said plots. The land should be disclosed in the Fixed Assets Register (FAR) as required by TAIs.

8.1.3 Un-valued plots of land I noted that six (6) plots of land disclosed in the fixed asset register did not have land titles and were not in the valuation report. The plots were allocated the following asset codes in the assets register; 167945, 157710, 933(2), 74, 933 and 334593 (1). The Centre’s land is at risk of loss and the value of land in the financial statements as such is understated.

Management explained that they are now procuring a private surveyor as advised by the Commissioner land registration to survey and value its assets.

I await the results of the Accounting Officer’s efforts.

8.1.4 Encroached on Land (a) Plots 245,221,464 As raised in my previous report, the Law Development Centre is the registered proprietor of Plot 221 block 9 Makerere as per instrument of Registration No.334591 of June 2003. Plots 245 and 464 were also acquired under statutory instrument No 74 of 1987. The three plots were valued at UGX.300,000,000 as follows; plot 221 (UGX.80m), Plot 245 (UGX.70m), Plot 464 (UGX.150m) as per valuer’s report of 2008. However, it was observed that the plots are occupied by occupants who have put up permanent structures thus encumbering any developments the Centre may wish to make.

Furthermore, the value of these plots has not been included in the value of the Centre’s land thus understating it by 300m. The land has also not been revalued since 2008 rendering the value attached to the plots not fairly stated.

Management responded that the legal process of securing the plots is ongoing in the Courts of law. I await the results of the court process.

(b) Plots 481 and 482 The Law Development Centre is also the proprietor of Plots 481 and 482 block 9 Makerere, Kampala as per instruments of registration 334593 of 30th June 2003 and 11 334603 of 30th June 2003. The two strategically located plots are also being claimed by an individual Mailo land owner. The plots have not been valued but have been included in the asset register for the Centre. This matter has been outstanding for the last three years.

Management explained that the LDC issued instructions to its advocate to handle the matter so that LDC can secure the plots. I await the results of the Accounting Officer’s efforts.

(c) Plots 1 and 69 Estate, Kampala The Centre is also the registered proprietor of plot 1 Bukoto Estate (Private Mailo under Register Volume No 1693 Folio 22) as per Instrument of registration No KLA 167945 of 17th August 1994 and plot 69 Bukoto Estate (Private Mailo under register volume 1537 Folio 25) as per Instrument of registration No KLA 157710 of 12th March 1993.

Part of this land is occupied by persons that claim to have bought the land from the caretaker and about 0.60 acres is occupied by the Northern by pass. I could not ascertain whether the Centre was compensated by the Uganda National Roads Authority at the time the Northern by pass was being constructed and if it was compensated how the funds were eventually accounted for.

Management explained that they have instructed their lawyer to handle the matter. I await the results of the Accounting Officer’s efforts.

8.2 Delayed Completion of Auditorium The Center contracted a local company to construct the LDC Auditorium at a contract sum of UGX.3,971,880,902. The original completion period date for the construction works was June 2013. It was observed that in the process of executing the contract, the contractor incurred additional construction costs that were outside the contract worth UGX.953,251,416 which constituted 24% of the contract price. The contract manager however, approved only UGX.588,596,596 as additional costs. It was also noted that the LDC Contracts Committee did not approve the contract variations, and as a result construction work stalled for a period of two years.

A technical review by the Engineers from the Ministry of Works and Transport, advised the Centre to terminate the contract and the un completed works be 12 completed with a new contract. A new contract of UGX.1,620,910,733 was drawn and has now been signed with the same company to complete the works bringing the total construction cost to UGX.5,592,791,635.

The LDC Contracts Committee refusal to approve the contract variations as approved by the project supervisor and delays by the technical committee to advise on time caused Government a financial loss of UGX.1,032,314,137. I find this expenditure wasteful.

The Accounting Officer explained that a new contract has been signed, and works are expected to be completed in February 2016.

I advised the Accounting Officer to follow up and ensure completion of the auditorium within the agreed time.

8.3 Budget Performance – unimplemented activities During the year, the approved recurrent and development budget for the Centre amounted to UGX.8,810,554,000. The total income from all the sources of revenue was UGX.11,585,289,273 which was 117.5% of the entity’s approved budget estimates for the year of UGX. 8,810,554,000. Out of the total revenue received during the financial year, UGX.8,178,441,801 was spent, leaving a surplus of UGX.3,406,847,472. The excess in the income was attributed to an increase in revenue collected at source from fees.

It was noted that despite the good revenue performance, some planned activities were not implemented. Refer to the table below:

Planned Key Expected Output Actual output Under/over Reason Activity performance Legal Training Admit 50 students 50 students on 29 students on 21 students not Course still new on Diploma in Human Diploma in Human Diploma in Human recruited. (42% under and just picking Rights Course. Rights Course Rights Course performance) up. admitted and admitted and trained. trained. Admit and train 650 650 students on 425 students on 225 students not Not stated students on Administrative Administrative admitted. (34.6% Administrative Officers Law Course Officers Law Course under performance) Officers Law Course. admitted and admitted and

13 trained. trained. Send 100 students to 100 students sent 16 students sent to 84 students not sent. Withdrawal of hard to reach areas to hard to reach hard to reach areas (84% under support from as part of their areas as part of as part of their performance) some clerkship. their clerkship. clerkship. Development partners. Establishment of new New study Centres Centre not 100% under Lack of human study Centres in in Hoima and Arua. established. performance. resource. Hoima and Arua. Community Service Expand the Legal Aid Legal Aid outreach None 100% under Funding from outreach to 10 other expanded to 10 performance. JLOS not Districts other Districts received. Administration Complete and furnish Auditorium Work still in Fresh contract Auditorium completed and progress. made with the furnished. former contractor.

Unimplemented activities negatively affect the achievement of the Centre’s mandate.

The Accounting Officer explained that the failure to achieve the planned activities was affected by a number of reasons including reduced funding by development partners and lack of human resources.

I advised the Accounting Officer to make realistic plans and budgets in accordance with available resources, and also ensure that planned activities are implemented within the approved timelines.

8.4 Post of Internal Auditor The LDC Organizational structure provides for the post of Internal Auditor who heads the unit and reports to the Director. The Internal Auditor is in salary scale 5 (LS 5) whose responsibility is to undertake a comprehensive, independent and objective evaluation of all LDC operations and organization processes among others. The qualifications and experience include an Honors degree in commerce (accounting or Finance Option), a Master’s degree in Finance or Accounting (added advantage), Possession of ACCA, CIA,CPA,CIMA, Membership of the Institute of Internal Auditors (added advantage) and seven years relevant working experience in internal audit functions with four years at a senior or management level. 14

It was noted that the responsibilities, qualifications and experience required for the post are not commensurate with the title and the salary scale. The post has therefore failed to attract a willing individual and has remained vacant.

The Accounting Officer explained that the salary scale will be strengthened once a review of LDC organizational structure is undertaken. This activity is scheduled to start in July 2016.

I await the Accounting Officer’s action on the matter.

8.5 Unserviceable Vehicles not disposed off A review of the service status for the LDC vehicles as at 30th June 2015 indicated 3 unserviceable vehicles, which were recommended for disposal sometime back. However, by the time of audit, the said vehicles had not been disposed of. These vehicles are parked in the Centre’s parking yard. Refer to the table below:

Reg. No Make Type Date of Purchase UG 0202J Toyota Prado Station Wagon 14/11/2004 UAA 143X Toyota Omnibus - UG 0809J Tata Pick Up 2005

Failure to dispose off the grounded vehicles can result into further loss in value due to depreciation and pilferage of vehicle parts.

The Accounting Officer regretted the delay in disposal of the vehicles but indicated that the process had commenced.

I advised the Accounting Officer to expedite the disposal process to ensure the items are disposed off.

15 APPENDIX 1

FINANCIAL STATEMENTS

16