OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF REGIONAL REFERRAL HOSPITAL FOR THE YEAR ENDED 30TH JUNE 2016

Table of Contents LIST OF ACROYNMS ...... 2 1.0 INTRODUCTION ...... 5 2.0 AUDIT OBJECTIVES ...... 5 3.0 AUDIT PROCEDURES PERFORMED ...... 6 4.0 ENTITY FINANCING ...... 6 5.0 FINDINGS ...... 7 5.1 Categorization of Findings ...... 7 5.2 Summary of Findings ...... 7 6.0 DETAILED AUDIT FINDINGS ...... 7 6.1 Utilization of Non-Tax Revenue (NTR) without Authority ...... 8 6.2 Lack of Land Titles ...... 8 6.3 Understaffing ...... 8 6.4 Expired Drugs ...... 9 6.5 Un-acknowledged Tax payments ...... 9 APPENDIX I: UTILIZATION OF NON-TAX REVENUE (NTR) WITHOUT AUTHORITY ...... 11 APPENDIX III: EXPIRED DRUGS ...... 11 APPENDIX III: UN-ACKNOWLEDGED TAX PAYMENTS ...... 12

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LIST OF ACROYNMS

DLG District Local Government

ICT Information Communication Technology

MoFPED Ministry of Finance Planning and Economic Development

UGX Uganda Shillings

VAT Value Added Tax

WHT Withholding Tax

URA Uganda Revenue Authority

PFMA Public Finance Management Act

ISA International Standards on Auditing

ISSAI International Standards for Supreme Audit Institutions

PPDA Public Procurement and Disposal of Assets

TAI Treasury Accounting Instructions

NTR Non Tax Revenue

MoU Memorandum of Understanding

NMS National Medical Stores

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REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF MBALE REGIONAL REFERRAL HOSPITALFOR THE YEAR ENDED 30TH JUNE 2016

THE RT. HON. SPEAKER OF PARLIAMENT Introduction I have audited the accompanying financial statements of Mbale Regional Referral Hospital for the year ended 30th June 2016. These financial Statements comprise the statement of financial position as at 30th June 2016, statement of financial performance, statement of chnages in equity, cash flow statement together with other accompanying statments, notes and accounting policies.

Management Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Mbale Regional Referral Hospital. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Financial Reporting Guide, 2008, and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

Auditor’s Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (as amended), and Sections 13, 16 and 19 of the National Audit Act, 2008 is to express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing audit procedures to obtain evidence about the amounts and disclosures in the financial statements as well as evidence supporting compliance with relevant laws and regulations. The procedures selected depend on the Auditor’s judgment, including the 3

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

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

PART “A”

Opinion In my opinion, the financial statements of Mbale Regional Referral Hospital as at 30th June 2016 are prepared, in all material respects, in accordance with the Local Governments Financial and Accounting Manual, 2007, Section 51(3) of the Public Finance Management Act 2015, the Local Governments Financial and Accounting Regulations, 2007 and the Local Governments Act, 1997, cap 243 (as amended), of the Laws of Uganda

John F. S. Muwanga AUDITOR GENERAL

15th December, 2016

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PART "B"

MBALE REGIONAL REFERRAL HOSPITAL DETAILED REPORT OF THE AUDITOR GENERAL FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2016

1.0 INTRODUCTION In accordance with Article 163(3), of the Constitution of the Republic of Uganda I am required to audit and report on the public accounts of Uganda and of all public offices, including the courts, the central and the 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 the Hoima Regional Referral Hospital to enable me report to Parliament.

2.0 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. The audit was carried out with regard to the following objectives:- a. To verify whether the financial statements have been prepared in accordance with the Uganda Public Finance Management Act of 2016, and fairly present the income and expenditures for the year and of the financial position as at the end of the year. b. To verify whether all the entity funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. c. To verify whether goods and services financed have been procured in accordance with the Public Procurement and Disposal of Assets PPDA Act, 2003 (as amended). d. To evaluate and obtain a sufficient understanding of the internal control structure of the entity, assess control risk and identify reportable conditions, including material internal control weaknesses. e. To verify whether management of the entity funds was in compliance with the Government of Uganda financial regulations.

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f. To verify 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.

3.0 AUDIT PROCEDURES PERFORMED The following audit procedures were undertaken:-

a. Revenue Obtained all schedules of all revenues collected and reconciled the amounts to the entity’s cashbooks and bank statements.

b. Expenditure The entity’s payment 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

d. Procurement Reviewed the procurement of goods and services under the various departments during the period under review and reconciled with the approved procurement plan.

e. Fixed Assets Management Reviewed the use and management of the entity’s assets during the period under review

f. Financial Statements Examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessed the accounting principles used and significant estimates made by management; as well as evaluating the overall financial statement presentation.

4.0 ENTITY FINANCING Mbale Regional Referral Hospital is financed by grants (Conditional and Unconditional) from the Central Government and locally generated revenues from the Private Wing 6

(NTR). During the year, the Hospital received grants totaling to UGX.6,068,496,591 from the Central Government; and UGX.235,353,962 from locally generated revenues. The total revenue of UGX.6,303,850,553 constituting 100.9% of its approved budget estimates of UGX.6,248,496,591.

5.0 FINDINGS

5.1 Categorization of Findings The following system of profiling of the audit findings has been adopted to better prioritize the implementation of audit recommendations:

N Category Description o 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.

5.2 Summary of Findings No Finding Significance 6.1 Utilization of Non-Tax Revenue (NTR) without authority High

6.2 Lack of Land Titles High

6.3 Understaffing Moderate

6.4 Expired Drugs Moderate

6.5 Un-acknowledged Tax payments Moderate

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

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6.1 Utilization of Non-Tax Revenue (NTR) without Authority Paragraph 94 of Treasury Accounting Instructions (TAI), 2003 prohibits utilisation of NTR at source unless authorised by the Accountant General. However, it was observed that an amount of UGX.10,132,000 was spent at source without the Accountant General’s authority as required as shown in the Appendix I.

The Accounting Officer attributed the anomaly to hospital operational emergencies.

I advised the Accounting Officer to comply with the regulations.

6.2 Lack of Land Titles The Hospital lacks land titles of title to its property located on plot No’s. 19-21, Union Road, Plot numbers; 2-6, Nabuyonga Rise and Plot numbers; 34-42 and Pallisa Road all in Mbale Municipality. In the absence of the land title, the hospital land is exposed to the risk of encroachment and disputes.

The Accounting Officer explained that management was in the process of acquiring certificates of titles and evicting encroachers.

I advised the Accounting Officer to expedite the process of securing the land titles.

6.3 Understaffing The hospital has a staff establishment structure of 441 posts. However, out of the 441 approved posts, only 357( 81%) posts had been filled leaving 84(19%) posts vacant as shown below;

Department Approved Filled Vacant Hospital Director 1 0 1 Specialists 26 10 16 Medical Doctors 18 19 -1 Allied Health Professionals 79 69 10 Nursing 206 160 46 Administrative Staff 34 18 16 Support staff 80 81 1 Total 441 357 84

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Understaffing overstretches the available staff beyond their capacity, creates job-related stress to the fewer staff and negatively affects the level of public service delivery to the community.

The Accounting Officer explained that Council had communicated to the Ministry of Public Service as well as the Ministry of Health to allow recruitment of more staff.

I urged the Accounting Officer to continue engaging the Ministry of Public Service and Ministry of Health to fill the vacant posts.

6.4 Expired Drugs Section 1.1.1 (f) of the Memorandum of Understanding (MoU) between the Government of Uganda (GoU) and the National Medical Stores (NMS) requires the Ministry of Health to communicate mechanisms of reducing expiries, carry out periodic collection and disposal of expired medicines from the districts and health facilities in collaboration with Ministry of Local Government and National Medical Stores. However, it was observed that the Hospital had an assortment of expired drugs as shown in Appendix II.

This creates a risk that the expired medicines may end up on the market and be misused.

The Accounting Officer explained that laboratory and ARVs supplies were delivered when they had a short shelf life and some others were pushed on to the Hospital by NMS.

I advised management to ensure that the expired medicines are disposed off promptly to avoid misuse.

6.5 Un-acknowledged Tax payments Section 123(1) of the Income Tax Act CAP 340 of the laws of Uganda, 2000, requires a withholding tax agent to pay to the commissioner any tax that had been withheld or that should have been withheld within fifteen days after the end of the month in which payment subject to withholding tax was made. However, tax amounting to UGX.12,427,942 lacked acknowledgement receipts by the Uganda Revenue Authority as shown in the Appendix III.

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Non-compliance with the tax law may attract fines and penalties.

I advised the Accounting Officer to obtain the receipts from Uganda Revenue Authority and present them for audit verification.

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APPENDIX I: UTILIZATION OF NON-TAX REVENUE (NTR) WITHOUT AUTHORITY Month Collections Banked (UGX) Unbanked (UGX) (UGX) July, 2015 30,395,760 22,906,560 7,489,200 August, 2015 19,620,000 12,414,000 7,206,000 September, 2015 20,096,160 12,814,460 7,281,700 October, 2015 22,626,900 15,064,500 7,562,400 November, 2015 22,568,170 15,088,670 7,479,500 December, 2015 22,247,200 16,541,000 5,706,200 January, 2016 19,359,800 15,294,900 4,064,900 February, 2016 22,304,300 17,835,000 4,469,300 March, 2016 22,655,910 20,094,010 2,561,900 April, 2016 10,782,100 7,757,000 3,025,100 May, 2016 18,537,310 13,085,710 5,451,600 June, 2016 29,907,940 27,439,440 2,468,500 Total 261,101,550 196,335,250 64,766,300

APPENDIX III: EXPIRED DRUGS

S/No. Drug Name Quantity Expiry Date 1 Cycloserine 4 pkts 04/2016 2 Quinine sulphate 2x1000 03/2016 3 Abacavir sulphate tablets for Oral suspension 60mg (58x60) tablets 01/2016 4 Abacavir sulphate & Lamivudine,tabs for Oral suspension (1x60) tabs 02/2016 5 Tenofovir Disoproxil fumarate/Lamivudine/Efavirenz tabs (128x60) tabs 05/2016 6 Abamune 60 (Abacavir sulphate 60mg) (33x60) tabs 11/2014 7 Amphotericin B for Injection U.S.P 20 vials 08/2013 8 Bupiracaine HCI in dextrose injection U.S.P 142 Ampoules 11/2014 9 Diazepam Tablets B.P 6125 tabs 09/2015 10 Aspirin Tablets 1000 tabs 09/2015 11 Imipramine Tablets 1000 tabs 09/2015 12 Haloperidol Injection (48x5) Ampoules 07/2015 13 Quinine Sulphate tabs B.P 455 tabs 09/2015 14 Chlorpromazine injection 50mg/2ml (5x10) Ampoules 06/2014 15 SUXAMETHENIUM Chloride Injection 100mg (22x10) Ampoules 08/2015 16 Dapsone tablets 100mg 50 tabs 08/2015 17 Metronidazole Intravenous injection BP 500mg/100ml 01 Bottle 12/2014 18 Chlorhexidine hand scrub 500ml 10 bottles 08/2014 19 Povidone iodine Topical Solution USP 10% 01 Bottle 08/2015 20 Insulitard 100 Iv/ml 05 vials 10/2015 21 Nystatin Oral Suspension 100,000 Iv/ml 01 bottle 09/2012 22 Cell clean 05 06/2016 23 Stat pak 01 03/2016 24 Tenofovir/Lamivudine/Efarvenz 2356 07/2016 25 HIV Ddetermine 129 strips 06/2016 26 Uni-Gold HIV 60 test cassetes 24/07/2016 27 Humatrol .N 03 12/2015 28 Humatrol .N 03 12/2015 29 Humatrol .N 02 03/2016 11

30 Humatrol .D 01 07/2015 31 BAT 02 05/2016 32 Anti AB 02 09/2015 33 Stromatolyser 4Ds 01 19/01/2016 34 One step Syphilis Anti-TP test 30 tests - 35 White Additive 09 06/2016 37 Glucose Liquicolor 17 05/2016 38 Auto-Bilirubine –D 01 05/2016 Auto – Bilirubin-T 04 05/2016 39 Urea 01 05/2016 40 Total Protein 01 05/2016 41 CD4 Monoclonal 22 05/2016 CD3/CD8/CD45/CD4 31 05/2016 42 Lopinavir 80mg +Ritonavir 20mg solution 24x5 08/2016 43 RPR100 Test kit 06 06/2016 44 TPHA Test kits 29 07/2016 45 Stat pack 9 strips 15/2015 46 Stat pack 19 strips 16/02/2016 47 Quinine Sulphate tabs 1x1000 08/2016 48 Cycloserin tabs 6x100 04/2014 49 RHZ paed 20 12/2015 50 Caps Kaletra 80/20mg 30 09/2014 51 Tabs Quinine 300mg 2x1000 08/2014 52 Vit. A caps 1000 10/2015 53 F/Acid tabs 1x1000 10/2015 54 F/Acid tabs 15x10 10/2015 55 Inj. Aminophyline 20 Amps 2014 56 Tablets Fansider 01 06/2016 57 Caps. Nifedipine 10mg 02 08/2012 58 Tabs.Nitrfuraton 1x1000 07/2015 59 Tabs.Metochlorpranide 1x1000 05/2015 60 Iv Manitoi (cystaliser) 02 04/2015 61 Iv Dextrose 50% 30 - 62 Oral morphine solution 12 12/2015 63 Chloramphenicol Ear Drops 100 11/2015 64 Epinephrine injection 5x10 08/2016 65 Neverapine Syrup 112 bottles 09/2016 66 Tabs. Frusemide 1x1000 08/2016 67 Cell pack 20 10/2016 68 Quinine injection 1x100 Amps 06/2016

APPENDIX III: UN-ACKNOWLEDGED TAX PAYMENTS Date Description EFT Amount (UGX) 23-Sep-15 Withholding Tax - Wej Uganda Limited - 6698605 211,200 RB15/09/118 / 23-Sep-15 Withholding Tax - Wej Uganda Limited - 6698605 211,200 RB15/09/118 / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 874,038

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ENTERPRISE LIMITED - RB15/09/116B / 1-Oct-15 Withholding Tax - Namugi Technical Systems 6698605 119,100 Ltd - RB15/09/179 / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 644,940 ENTERPRISE LIMITED - RB15/09/178 / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 874,038 ENTERPRISE LIMITED - RB15/09/116B / 1-Oct-15 Withholding Tax - Namugi Technical Systems 6698605 119,100 Ltd - RB15/09/179 / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 874,038 ENTERPRISE LIMITED - RB15/09/116B / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 644,940 ENTERPRISE LIMITED - RB15/09/178 / 1-Oct-15 Withholding Tax - Namugi Technical Systems 6698605 119,100 Ltd - RB15/09/179 / 1-Oct-15 Withholding Tax - SMECO GENERAL 6698605 644,940 ENTERPRISE LIMITED - RB15/09/178 / 13-Oct-15 Withholding Tax - Wej Uganda Limited - 6698605 726,120 RB15/09/115A / 9-Dec-15 Withholding Tax - Wej Uganda Limited - 7378203 295,200 RB15/12/096 / 9-Dec-15 Withholding Tax - Safi Cleaning Services Ltd - 7378203 185,496 RB15/12/097 / 9-Dec-15 Withholding Tax - Lukhonge Enterprises - 7378203 253,938 RB15/12/099 / 9-Dec-15 Withholding Tax - Wej Uganda Limited - 7378203 295,200 RB15/12/096 / 16-Dec-15 Withholding Tax - Lukhonge Enterprises - 7715384 253,938 RB15/12/109 / 18-Dec-15 Withholding Tax - SMECO GENERAL 7715384 861,240 ENTERPRISE LIMITED - RB15/12/150 / 22-Dec-15 Withholding Tax - Wamuco Motors (U) Limited - 7715384 285,466 RB15/12/167 / 22-Dec-15 Withholding Tax - GIZEBERT AUTO SPAN 7715384 416,005 LIMITED - RB15/12/171 / 22-Dec-15 Withholding Tax - Wamuco Motors (U) Limited - 7715384 285,466 RB15/12/167 / 22-Dec-15 Withholding Tax - SDC Enterprises - 7715384 262,800 RB15/12/166 / 2-Feb-16 Withholding Tax - SDC Enterprises - 8049195 86,400 RB16/01/096 / 2-Feb-16 Withholding Tax - FREBALEX TECH LTD - 8049195 113,400 RB16/01/096 / 23-Feb-16 Withholding Tax - TOSCO FRIENDS UGANDA 8409619 31,170 LIMITED - RB16/02/069 / 25-Feb-16 Withholding Tax - GIZEBERT AUTO SPAN 8409619 45,012 LIMITED - RB16/02/128 / 25-Feb-16 Withholding Tax - Wamuco Motors (U) Limited - 8409619 191,760 RB16/02/129 / 25-Feb-16 Withholding Tax - TOSCO FRIENDS UGANDA 8409619 72,210 LIMITED - RB16/02/126 / 13

26-Feb-16 Withholding Tax - Safi Cleaning Services Ltd - 8409619 185,496 RB16/02/184 / 19-Apr-16 Withholding Tax - Safi Cleaning Services Ltd - 8733139 185,496 RB16/04/003 / 4-May-16 Withholding Tax - Safi Cleaning Services Ltd - 9133495 185,496 RB16/05/064 / 4-May-16 Withholding Tax - Lukhonge Enterprises - 9133495 253,938 RB16/05/065 / 13-Jun-16 Withholding Tax - Namaato Contractors Ltd - 9481489 94,704 RB16/06/093 / 13-Jun-16 Withholding Tax - Namaato Contractors Ltd - 9481489 94,704 RB16/06/093 / 13-Jun-16 Withholding Tax - Safi Cleaning Services Ltd - 9481489 185,496 RB16/06/103 / 13-Jun-16 Withholding Tax - Uganda Medical Workers 9703578 53,370 Union Branch - RB16/06/095 / 13-Jun-16 Withholding Tax - LAB-PLUS (U) Ltd - 9481489 136,110 RB16/06/091 / 13-Jun-16 Withholding Tax - TOSCO FRIENDS UGANDA 9481489 62,460 LIMITED - RB16/06/107 / 13-Jun-16 Withholding Tax - Safi Cleaning Services Ltd - 9481489 185,496 RB16/06/104 / 13-Jun-16 Withholding Tax - Safi Cleaning Services Ltd - 9481489 185,496 RB16/06/106 / 16-Jun-16 Withholding Tax - Uganda Medical Workers 9703578 90,912 Union Mbale Hospital Branch - 117706-Jun16 / 17-Jun-16 Withholding Tax - ANSE INVESTMENTS LIMITED 9703578 89,400 - RB16/06/118 / 17-Jun-16 Withholding Tax - Namugi Technical Systems 9703578 86,235 Ltd - RB16/06/123 / 21-Jun-16 Withholding Tax - GIZEBERT AUTO SPAN 9703578 194,700 LIMITED - RB16/06/099B / 22-Jun-16 Withholding Tax - GIZEBERT AUTO SPAN 9703578 160,978 LIMITED - RB16/06/124 / TOTAL 12,427,942

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