OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF DISTRICT LOCAL GOVERNMENT 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 FIXED ASSETS MANAGEMENT ...... 7 6.1.1 Lack of a Land Title ...... 7 6.1.2 Failure to dispose of obsolete assets ...... 8 6.2 Under Staffing ...... 8 6.3 Poor recovery of Youth Livelihood Program Funds...... 9 6.4 Under Collection of Local Revenue ...... 10 APPENDICES ...... 11 Appendix I: Under Staffing ...... 11 Appendix II: Poor Recovery of Youth Livelihood Program Funds ...... 11

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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

MoESTS Ministry of Education Science and Technology and Sports

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REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF LOCAL GOVERNMENT FOR THE YEAR ENDED 30th JUNE 2016

THE RT. HON. SPEAKER OF PARLIAMENT Introduction I have audited the accompanying financial statements of Kibuku District Local Government for the year ended 30th June 2016. These financial statements comprise of the Statement of Financial Position as at 30th June 2016, Statement of Financial Performance, Statement of Changes in Equity, Cash flow Statement together with other accompanying statements, notes and accounting policies.

Management’s Responsibility for the Financial Statements Under Article 164 of the Constitution of the Republic of Uganda, 1995(as amended) and Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is accountable to Parliament for the funds and resources of Kibuku District Local Government. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Government Financial and Accounting Manual, 2007, 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), section 87 of the Local Government Act, 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 assessment of 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 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 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 audit opinion.

Part ‘‘A’’ of this 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 Kibuku District Council as at 30th June 2016 are prepared, in all material respects, in accordance with the Local Government Financial and Accounting Manual, 2007, Section 51(3) of the Public Finance Management Act 2015, the Local Government Financial and Accounting Regulations, 2007 and the Local Governments Act cap 243 (as amended), of the Laws of Uganda.

John F. S. Muwanga AUDITOR GENERAL 28th November, 2016

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PART "B"

KIBUKU DISTRICT 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, 1995 (as amended), 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 Kibuku District 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 requirements of the Local Governments Financial and Accounting Manual 2007; and the Local Governments Financial and Accounting Regulations 2007; 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 funds of the entity 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 PPDA Act 2003 (as amended)

d. To evaluate and obtain 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 the management of the funds of the entity was in compliance with the Government of Uganda Financial Regulations.

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f. To verify whether all the 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 cashbooks and bank statements of the entity.

b. Expenditure

The payment vouchers of the entity 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 assets of the entity 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 evaluated the overall financial statement presentation.

4.0 ENTITY FINANCING Kibuku District is financed by grants (Conditional and Unconditional) from the Central Government, donations and locally generated revenues from taxes, fees, licenses and charges. During the year, the district received grants totaling to

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UGX.13,587,909,287 from the Central Government; UGX.74,582,320 from locally generated revenues and UGX.988,962,453 transfers from other government units all totaling UGX.14,651,454,060 which constitutes 98% which constituted of the budgete estimates of UGX.14,964,207,948.

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 6.1.1 Lack of a Land Title High

6.1.2 Failure to dispose off obsolete assets Low

6.2 Understaffing High

6.3 Poor recovery of Youth Livelihood Program Funds High

6.4 Under Collection of Local Revenue High

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

6.1 FIXED ASSETS MANAGEMENT

6.1.1 Lack of a Land Title Regulation 58(4) of the Local Government Financial and Accounting Regulations 2007 requires that properties and assets of a Local Government should be properly registered and titles issued. However, it was observed that the district does not have a land title for the land where its offices are located.

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The Accounting Officer explained that the land title could not be processed as the district was still in wrangles over it and the district had lodged a complaint with the IGG and the matter was still under investigations.

The Council risks losing the land to encroachers.

The matter requires urgent attention.

6.1.2 Failure to dispose of obsolete assets

Section of 2.3.2.2 of the LGFAM, 2007 requires assets that are not in use to be disposed off in accordance with the Local Government Public Procurement and Disposal of Assets (LGPPDA), 2006 regulations, on recommendation by the Board of Survey. However, the district had not disposed off a number of vehicles as shown below;

The delay to dispose off the assets may lead to further deterioration in value.

The Accounting Officer explained that the grounded vehicles were given to the District by the mother district without logbooks and therefore disposal became difficult since the district did not legally own them.

The matter requires urgent attention.

6.2 Under Staffing The district has an approved staff establishment of 1413 positions. However, out of the approved 1414 positions, 1271, posts (90%) were filled leaving 143 (10%) vacant positions. It was further observed that some staff had been acting beyond the recommended period of twelve month as shown in Appendix I.

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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 the funds to fill critical positions had been secured and the process of recruitment was initiated by getting clearance from the Ministry of Public Service.

I urged the Accounting Officer to ensure that the vacant posts are filled.

6.3 Poor recovery of Youth Livelihood Program Funds The district disbursed a total of UGX.225,253,660 to 38 youth groups in 2014/2015 and according to the disbursement schedules, a total amount of UGX.90,065,667 was expected to have been recovered by the end of financial year 2015/2016. However, only UGX.16,125,000(18%) had been recovered leaving an outstanding amount of UGX.73,940,667 (82%) as shown in Appendix II.

In addition, it was observed that some groups mismanaged the funds as detailed in the table below;

S/N NAME OF THE GROUP AMOUNT DISBURSED REMARKS (UGX) 1 Kakunyumunyu Youth Bakery 6, 293,029 Misappropriated by the Project (Bulangira Sub County) Chairperson of the Group.

2 Buyemba Youth Produce Buying 5,000,000 Misappropriated by the and Selling Project (Bulangira Chairperson of the Group in Sub County) connivance with a Youth Councilor. 3 Lyama Youth Produce Buying 5,000,000 misappropriated by the and Selling Project (Bulangira Chairperson of the Group Sub County) 4 Goligoli Youth Improved Goat UGX 6,090,000 Half of the UGX 6,090,000 Rearing Project (Kagumu Sub disbursed is said to have County) been shared among the members, while the Chairperson of the Group took the other half.

I advised the Accounting Officer to step up efforts to have the outstanding funds recovered.

Low recovery rate may render the programme unsustainable.

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The Accounting Officer explained that the Youth interest groups were reported to have misappropriated funds, they were also reported to police and the matter was being investigated by Police.

6.4 Under Collection of Local Revenue Regulation 32 of the Local Governments Financial and Accounting Regulations 2007 requires the head of finance to be responsible for revenue collection and ensure that all revenue due to the council is promptly collected and banked intact. However, it was observed that out of the budgeted local revenue of UGX.119,896,000 only UGX.79,519,190 i.e. (66%) was realized leading to a shortfall of UGX.40,376,810 (34%). The under collection of local revenue adversely affects service delivery.

The Accounting Officer attributed the shortfall to political pronouncements on collection of fees from the two taxi parks at and Tirinyi and also failure to realize anticipated service tax from new staff/teachers and other traditional civil servants whose recruitment was halted by court.

I advised the Accounting Officer to initiate measures and ensure that all budgeted local revenue is collected.

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APPENDICES Appendix I: Under Staffing

S/N Name Title Scale Acting Position Scale 1 Senior Medical Officer Bumba Ahmed U3 District Health Officer U1 2 Population Officer Kirya Paul Sajja U4 District Planner U2 Senior Education 3 Wamika Christopher Officer U3 District Education Officer U1 4 Supretendant of Works Puche David U4 District Engineer U1 Senior Probation & welfare 5 officer Negesa Grace Hirya U3 District Com. Dev’t. Officer U1 6 Internal Auditor Kayenda John U4 District Internal Auditor U2 District Production 7 Principal Agricultural Officer Nyiro Julius U2 Coordinator U1

Appendix II: Poor Recovery of Youth Livelihood Program Funds

PROJECT NAME AMOUNT JUNE SUBCOUNTY AMOUNT OUTSTANDING CUMULATIVE RECOVERED T.C/DIVISION EXPECTED Kadoto Youth Produce Buying and Bulangira Selling Project 3,780,000 - 3,780,000 Pulaka Kenya Produce Buying and Bulangira Selling Project 4,800,000 1,100,000 3,700,000 Lyama Youth Produce Buying and Bulangira Selling Project 2,680,000 1,500,000 1,180,000 Kakunyumunyu Youth Bakery Bulangira Project 4,800,000 - 4,800,000 Buyamba Youth Produce Buying & Selling Bulangira 2,450,000 200,000 2,250,000 Buseta Natoto B Youth Piggery Project 2,800,000 - 2,800,000 Bubulanga A Produce Buying and Buseta Selling Project 1,200,000 - 1,200,000 Buseta Katiryo I Youth Cattle Trade Project 2,700,000 300,000 2,400,000 Buseta I Youth Metal Fabrication Project Buseta 4,500,000 - 4,500,000 Bulyampiti Youth Produce Buying Kabweri and Selling Project 3,600,000 - 3,600,000 Nabikabala Youth Produce Buying Kabweri and Selling Project 2,345,000 955,000 1,390,000 Busiginyi Produce Buying and Kabweri Selling Project 1,800,000 2,900,000 (1,100,000) Buganza Youth Ground Nuts Kadama Farming Project 1,200,000 600,000 600,000 Kwankira Youth Piggery Rearing Kadama Project 2,661,000 - 2,661,000 Bulalaka Youth Produce Buying and Kadama Selling Project 520,000 1,160,000 (640,000) Kadama Kategere Youth Salon Project 2,700,000 - 2,700,000 Nabuli Youth Animal Traction Kagumu Project 3,144,000 - 3,144,000 Nakitende Youth Animal Traction Kagumu Project 1,300,000 800,000 500,000 Nakooma Youth Goat Rearing Kagumu Project 260,000 - 260,000

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Goli-Goli Youth Improved Goats Kagumu Rearing Project 1,218,000 - 1,218,000 Kagumu Twekolele Youth Tailoring Kagumu Project 1,640,000 100,000 1,540,000 Dokya Youth Improved Goat Kasasira Rearing Project 610,000 - 610,000 Kasasira Township Organic Piggery Kasasira Youth Project 1,500,000 - 1,500,000 Kasasira I Youth Empowered Kasasira Piggery Project 1,680,000 - 1,680,000 Nansonko Youth Produce Buying Kasasira and Selling Project 1,250,000 3,450,000 (2,200,000) Kasasira Nankodo Youth Tailoring Project 1,200,000 - 1,200,000 Bukatikoko Youth Dairy Cattle Project Kibuku rural 1,223,499 - 1,223,499

Bumiza Youth Bakery Project Kibuku rural 2,566,668 - 2,566,668 Kibuku Youth Turkey Rearing Kibuku T/C Project 1,200,000 - 1,200,000

Bubera Youth Hair Dressing Project Kibuku T/C 2,000,000 250,000 1,750,000 Kabusule B Youth Dairy Heifer Kirika Rearing Project 4,000,000 - 4,000,000 Buganza Youth Dairy Heifer Kirika Rearing Project 3,200,000 - 3,200,000 Bwibere Youth Improved Piggery Kirika Rearing Project 2,500,000 500,000 2,000,000 Namiru Youth Tailoring and Kirika Garment Cutting Project 1,750,000 - 1,750,000 Kalampete Youth Galic Growing Tirinyi Project 5,600,000 400,000 5,200,000 Bugwere Youth Goat Rearing Tirinyi Project 4,087,500 410,000 3,677,500 Bukachera Youth Brick Making Tirinyi Project 2,000,000 500,000 1,500,000 Tirinyi Namuyonga II Youth Produce

Buying And Selling Project 1,600,000 1,000,000 600,000

90,065,667 16,125,000 73,940,667

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