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Office of the Auditor General OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NANSANA MUNICIPAL COUNCIL FOR THE YEAR ENDED 30TH JUNE 2017 OFFICE OF THE AUDITOR GENRAL UGANDA TABLE OF CONTENTS LIST OF ACRONYMS ......................................................................................................... 2 Key Audit Matters ............................................................................................................. 4 Other Matter ...................................................................................................................... 4 Failure to Implement Budget as approved by Parliament .................................. 4 Low Recovery of Youth Livelihood program funds .............................................. 5 Understaffing ............................................................................................................. 5 Lack of Land Titles .................................................................................................... 6 Management’s Responsibility for the Financial Statements ....................................... 6 Auditor’s Responsibilities for the Audit of the Financial Statements ........................ 7 Appendices......................................................................................................................... 9 Appendix 1 ......................................................................................................................... 9 Budget Performance (Financial) ..................................................................................... 9 Appendix 2: Low Recovery of Youth Livelihood program funds ............................. 12 Appendix 3 under Staffing............................................................................................. 14 Appendix 4 health centers without land titles ............................................................ 16 1 LIST OF ACRONYMS DLG District Local Government GOU Government of Uganda ISSAI International Standards of Supreme Audit Institution LGFAM Local Governments Financial and Accounting Manual 2007 LGFAR Local Governments Financial and Accounting Regulations 2007 LGMSD Local Government Management and Service Delivery MC Municipal Council MMHS Management of medicines and Health Supplies MoFPED Ministry of Finance Planning and Economic Development NEMA National Environment Management Authority NMS National Medical Stores PFMA Public Finance Management Act 2015 PPDA Public Procurement and Disposal of Public Assets UGX Uganda Shillings 2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NANSANA MUNICIPAL COUNCIL FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2017 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the financial statements of Nansana Municipal Council which comprise the Statement of Financial Position as at 30thJune 2017, and the Statement of Financial Performance, Statement of Changes in Equity and statement of Cash flows together with other accompanying statements for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In my opinion, the financial statements of Nansana Municipal Council for the year ended 30th June 2017 are prepared, in all material respects in accordance with section 51 of the Public Finance Management Act, 2015 and the Local Governments Financial and Accounting Manual, 2007. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs) and the National Audit Act 2008. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am independent of the municipal Council in accordance with the Constitution of the Republic of Uganda (1995) as amended, the National Audit Act 2008, the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to my audit of the financial statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 3 Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. I have determined that there are no key audit matters to communicate in my report. Other Matter I consider it necessary to communicate the following matters other than those presented or disclosed in the financial statements: Failure to Implement Budget as approved by Council Section 45 (3) of the Public Finance Management Act, 2015 states that “ An Accounting Officer shall enter into an annual budget performance contract with the Secretary to the Treasury which shall bind the Accounting Officer to deliver on the activities in the work plan of the vote for a Financial year, submitted under section 13 (15)” of the said Act. Based on the procedures performed, I observed that out of the budgeted revenue of UGX.14,002,596,787; the Municipal Council received UGX.12,405,907,664 (89%) leading to a shortfall of UGX.1,596,689,120 (11%). Consequently, a number of planned outputs were not implemented. The most greatly affected outputs included the procurement of land and the Roads Maintenance among others as shown in Appendix 1. Failure to implement activities denies service to the beneficiary communities and defeats the purpose for which budgeting and budgetary controls are instituted. The failure to implement all the planned activities may have been a result of inadequate releases or may be an indication of inefficiency. According to the Accounting Officer the shortfall was due to budget cut for the Non- wage recurrent and challenges with collection of taxi park fees. The Accounting Officer is advised to engage the relevant authorities and ensure that budget deficiencies are addressed and that all the allocated funds are released and all activities are implemented according to the budget as approved by parliament. 4 Low Recovery of Youth Livelihood program funds Section 6(1) of the Youth Livelihood Programme (YLP) document 2013 requires all Project Funds disbursed to each Youth Interest Group to be treated as a Revolving Fund to be repaid in accordance with the Project Financing Agreement between the Municipality and the beneficiary Youth Interest Group witnessed by the Area Resident State Attorney. However, an analysis of recovery of the programme funds by the Municipal Council revealed low recovery of funds. Out of UGX.237,893,000 due for recovery as at 30thJune 2017, only UGX.17,215,000 (7%) was recovered leaving a balance of UGX.220,678,000 (93%) outstanding as shown in Appendix 2. Low recovery adversely impacts on Government objectives of setting up a revolving fund to empower the Youth in Uganda to harness their socio-economic potential and increase self-employment opportunities and income levels The Accounting Officer explained that recoveries started with groups that signed commitments and payment plans. The Accounting Officer is advised to ensure that outstanding amount is recovered. Understaffing The Municipal Council has an approved staff structure of 898 positions. Out of the approved staff structure of 898 only 631 (70%) are filled leaving a staffing gap of 267 (30%) positions as shown in Appendix 3. 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 attributed the under staffing to the wage bill limitations. He further stated that recruitment in a number of positions had been prioritized and a recruitment plan set up. 5 The Accounting Officers is advised to continue engaging the Ministry of Public Service, the Ministry of Local Government and the Ministry of Finance Planning and Economic Development to address the challenge. Lack of Land Titles Regulation 58(4) of Local Governments Financial and Accounting Regulations 2007 (LGFARs) requires that in order to comply with the required accounting systems, the properties, and assets of a Local Government, shall be properly registered, titles issued, and valued and that requirement shall apply to both movable and immovable properties and assets and it shall constitute a fixed assets register. However I observed that the Municipality did not have titles for the land where its Health Centres are located as shown in Appendix 4. This creates a risk that the Council Land is exposed to encroachment and Land disputes. The Accounting Officer explained that the Municipal Council was in the process of collecting information about the schools and Health Centres. The matter requires urgent attention. 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 Nansana Municipal Council The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Local Governments Financial and Accounting Manual, 2007 and the Public Finance Management Act 2015 and for such internal
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