OFFICE OF THE AUDITOR GENERAL THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF GOMBA DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30TH JUNE 2017 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS LIST OF ACRONYMS ......................................................................................................... 2 Key Audit Matters ............................................................................................................. 2 Utilization of Medicines and Medical Supplies .......................................... 2 Stock out ..................................................................................................................... 3 Expired drugs ............................................................................................................. 3 Key Vacant Positions ................................................................................................. 4 Other Matter ...................................................................................................................... 4 Low Recovery of Youth Livelihood Program funds. ............................................. 4 Encroachment on Forest Reserves ......................................................................... 5 Unoperational Theatre at Maddu HC IV ................................................................ 5 Understaffing ............................................................................................................. 6 Management’s Responsibility for the Financial Statements ....................................... 6 Appendices....................................................................................................................... 10 1 LIST OF ACRONYMS DLG District Local Government GOU Government of Uganda HC Health Centre 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 MoESTS Ministry of Education Science and Technology and Sports MoFPED Ministry of Finance Planning and Economic Development NMS National Medical Stores NMS National Medical Stores PFMA Public Finance Management Act 2015 PPDA Public Procurement and Disposal of Assets UGX Uganda Shillings YLP Youth Livelihood Program 2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF GOMBA DISTRICT LOCAL GOVERNMENT FOR THE YEAR ENDED 30TH JUNE 2017 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the financial statements of Gomba District Local Government which comprise the Statement of Financial Position as at 30th June 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 Gomba District Local Government 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 Government Financial and Accounting Manual, 2007. Basis for Opinion I conducted my audit in accordance with International Standards for 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 district 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. 1 Key Audit Matters Key audit matters are those matters that, in my professional judgment, are of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined the matter described below as key audit matter to be communicated in my report. Utilization of Medicines and Medical Supplies The Management of Medicines and health Supplies Manual indicates that Medicines and health supplies form the second biggest expenditure in the health sector after human resources. The security of medicines must be ensured at all levels to prevent theft, abuse, misuse and wastage. Consequently in the course of auditing Gomba District’s Financial Statements, I considered the utilisation of medicines and medical supplies as an area of focus. The audit focused on the procedures, processes, tools and documentation used to manage medicines and medical supplies which included; Involving external expertise in identifying the sample of tracer medicines and medical supplies, and developing data collection tools. Selecting medicines and medical supplies to trace their utilization in the hospital. Analysing the delivery cycles, balances on stock cards and order levels to ascertain stock outs. Obtaining and checking the records relating to the expired medicines and also inspecting the storage practices. Establishing the availability of key human resource personnel to ensure that medicines and medical supplies are not wasted as explained in the Management of Medicines and medical Supplies Manual. I obtained the approved structure and compared it with the list of existing staff. The audit involved the assessment of management of Medicines and Health supplies at Maddu Health Center (HC) IV and made the following observations; 2 Stock out Part 3 of the MMHS manual requires that management establishes policies, procedures and techniques to maintain an optimum amount of stock of each item at all Health Facilities to minimize stock outs and expiry. I analyzed the delivery cycles and balances on stock cards at Maddu Health Centre IV. I observed that 4(four) items out of the 11 (eleven) indicator EMHS experienced stock outs within the audit period. Noticeably Oxytocin for 107 days, Mama kits for 86 days and determine test kit for 55 days as shown in Appendix 1 The stock out may be a result of failure by NMS to supply drugs in the quantities ordered by the Health centre and lack of reliable information on drugs usage and stocking positions. The stock outs; erodes patient confidence in the health sector which leads patients to explore alternative and inappropriate and expensive systems of health care. The Accounting Officer explained that some of the essential medicines are usually moved from the store to the Ward because they are needed for 24 hours. The Accounting Officer should liaise with NMS to ensure continuous optimum stock of medicines and supplies. Expired drugs Part 9 – of the MMHS manual requires that Expired items should be properly recorded, placed in designated area and destroyed in accordance with the local regulations. I obtained and checked the records relating to the expired medicines and also inspected how they are stored. I observed that various essential medicines expired and stayed at Maddu HCIV for a period of more than four months without destruction as shown in Appendix 2. The expiry of the drugs may be a result of excess stocking of slow moving drugs. The Cost of destruction of expired drugs is high and there is a risk of them getting redistributed back to the market. 3 The Accounting Officer explained that NMS delivers drugs with short expiry date most of the time. However, some of the drugs highlighted are used only in emergencies so if the health centre does not get the emergency, the drugs are not consumed. The facility should liaise with NMS to ensure that expired or damaged stock is destroyed in accordance with the regulations. Key Vacant Positions I obtained the approved staff structure and compared it with the list of the existing staff. It was observed that out of 48 posts only 28 (58%) posts were filled leaving 20(42%) positions vacant. Among the key vacant positions is the critical position of a Dispenser which is crucial in medicine management 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 explained that the District submitted a recruitment plan to the Ministry of Public Service and available wage bill provisions could not allow management to fill the key positions identified. The Accounting Officer should liaise with the Ministry of Health, Ministry of Public Service, Ministry of Finance and Health Service Commission to ensure that key position is filled. Other Matter I consider it necessary to communicate the following matters other than those presented or disclosed in the financial statements: 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 Groups to be treated