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Report of the Auditor General on the Financial Statements of the Uganda National Roads Authority for the Year Ended 30Th June 2016

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Report of the Auditor General on the Financial Statements of the Uganda National Roads Authority for the Year Ended 30Th June 2016 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE 2016 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS LIST OF ACRONYMS ..................................................................................................... iii 1.0 INTRODUCTION ................................................................................................. 1 2.0 BACKGROUND INFORMATION ............................................................................. 1 3.0 ENTITY FINANCING ............................................................................................ 1 4.0 MANDATE AND OBJECTIVES OF THE AUTHORITY ................................................. 2 5.0 AUDIT OBJECTIVES ............................................................................................ 2 6.0 AUDIT PROCEDURES PERFORMED ....................................................................... 3 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS .................................................. 4 7.1 Categorization of Findings ................................................................................... 4 7.2 Summary of Findings .......................................................................................... 4 8.0 DETAILED FINDINGS .......................................................................................... 5 8.1 Mischarge of Expenditure .................................................................................... 5 8.2 Domestic Arrears ................................................................................................ 5 8.3 Outstanding advances to contractors .................................................................... 6 8.4 Non-deduction of Withholding Tax on Projects ...................................................... 6 8.5 Kalangala Infrastructure Services (KIS) ................................................................ 7 8.6 Budget Performance ........................................................................................... 9 8.7 Nugatory Expenditure ....................................................................................... 17 8.8 Staffing Gaps ................................................................................................... 18 8.9 Loss of maintenance funds through garnishment by URA ..................................... 18 8.10 Compensation of Project Affected Persons (PAPS) ............................................... 19 8.11 Payments made to Telecom providers without valid contracts .............................. 21 8.12 Non-functional Multi-Deck Weighbridges ............................................................. 22 8.13 TECHNICAL (ENGINEERING) AUDIT OF ROAD AND BRIDGE CONSTRUCTION PROJECTS ....................................................................................................... 23 ii LIST OF ACRONYMS Acronym Meaning $ United States Dollar CGV Chief Government Valuer EFT Electronic funds transfer FYR Financial Year GOU Government of Uganda GRN Goods received Note IFMS Integrated Financial Management System IGG Inspector General of Government KCCA Kampala Capital City Authority KIS Kalangala Infrastructure Services KNBP Kampala Northern Bypass LBCs Labour based Contracts LPO Local Purchase Order Ltd Limited MDAs Ministry, Department and Agencies MIS Management information system MoFPED Ministry of Finance, Planning and Economic Development MOU Memorandum of understanding MoWT Ministry of Works and Transport MTEF Medium Term Expenditure Framework NARO National research Organisation NITA-U National information technology authority Uganda NTR Non Tax Revenue PAP Project affected person PDU Procurement and Disposal Unit PFMA Public Finance Management Act, 2015 PPDA Public Procurement and Disposal of Public Assets Authority PPP Public Private Partnership PS/ST Permanent secretary/ secretary to treasury RAFU Road Formation Unit Rd Road RT. Hon Right Honourable SG Solicitor General SRIV Stores Requisition Issue Form Voucher TAI Treasury Accounting instructions TIN Tax Identification Number TSDP Transport Sector Development Project UGX Uganda Shillings ULC Uganda land commission UNRA Uganda National Roads Authority URA Uganda Revenue Authority iii REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE YEAR ENDED 30TH JUNE, 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of Uganda National Roads Authority (UNRA) for the year ended 30th June 2016. These financial statements comprise of the statement of financial position, statement of financial performance, statement of cash flows, statement of changes in equity together with other accompanying statements, notes and accounting policies. Management Responsibility 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 the Uganda National Roads Authority. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance Management Act 2015, and the Financial Reporting Guide, 2008, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatements, 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 and 19 of the National Audit Act, 2008 is to audit and express an opinion on these statements based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. 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 assessment of risks of material misstatements of financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal controls relevant to the entity’s preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances but not for purposes of expressing an opinion on the effectiveness of the entity’s internal controls. An iv audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion. Part “A” of this report sets out my qualified opinion on the financial statements. Part “B” which forms an integral part of this report presents in detail all the significant audit findings made during the audit which have been brought to the attention of management and will form part of my Annual Report to Parliament. PART “A” Basis for Qualified Opinion Mischarge of Expenditure –UGX.150,486,219,673 Expenditure totaling to UGX.150,486,219,673 was inappropriately charged on budget lines to fund activities that were not planned for without authority. Mischarges undermine the budgetary process and the intensions of the appropriating authority as funds are not utilized for the intended purpose. The practice also leads to financial misreporting. Qualified Opinion In my opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the financial statements of the Uganda National Roads Authority for the year ended 30th June 2016, are prepared, in all material respects, in accordance with Section 51 of the Public Finance Management Act, 2015, and the Financial Reporting Guide, 2008. Emphasis of matter Without qualifying my opinion further, I draw attention to the following matter described in note 19 and 24 of the financial statements, and also in paragraph 8.3 and 8.4 of my report: Outstanding Domestic arrears- UGX.283,820,541,567 UNRA had outstanding commitments amounting to UGX.283,820,541,567 contrary to set procedure. Outstanding payables adversely hamper budget performance in the subsequent year and accumulation of debts results into possible interest payments and litigation expenses to the entity. v Outstanding advances to contractors- UGX.765,673,455,447 Advance payments to contractors amounting to UGX.765,673,455,447 remained outstanding at the close of the Financial Year. I noted that some of these receivables have been outstanding for more than two years which is an indication of slow moving projects. Huge outstanding receivables for advance payments tie up UNRA funds in slow moving projects that would have been utilized for clearance of pending certificates. Other Matter I consider it necessary to communicate the following matter other than those presented or disclosed in the financial statements: Non-deduction of Withholding tax- UGX.2,326,841,565 UNRA did not withhold tax to the tune of UGX.2,326,841,565 on payments to several contractors to whom payments
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