THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL AGRICULTURAL RESEARCH ORGANISATION FOR THE YEAR ENDED 30TH JUNE, 2015 OFFICE OF THE AUDITOR GENERAL KAMPALA, UGANDA TABLE OF CONTENTS LIST OF ACRONYMS .................................................................................................. 2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL AGRICULTURAL RESEARCH ORGANISATION (NARO) FOR THE YEAR ENDED 30TH JUNE, 2015 ......................................................................................................................... 4 1.0 INTRODUCTION .............................................................................................. 7 2.0 BACKGROUND INFORMATION .......................................................................... 7 3.0 ENTITY FINANCING ......................................................................................... 8 4.0 OBJECTIVES OF NARO ..................................................................................... 8 5.0 AUDIT OBJECTIVES ......................................................................................... 8 6.0 AUDIT PROCEDURES PERFORMED .................................................................... 9 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS ............................................. 10 7.1 Categorization of findings ............................................................................... 10 7.2 Summary of findings ...................................................................................... 10 8.0 DETAILED FINDINGS ..................................................................................... 10 8.1 Mischarge of Expenditure ............................................................................... 10 8.2 Status of NARO Ownership of Land ................................................................. 11 8.3 Shortfall of Government Release ..................................................................... 16 8.4 Un collected NTR in Rent ................................................................................ 16 8.5 Poor Maintenance of Structures (Buildings) at the Institutes .............................. 17 8.6 Un Operational Soil Micro Biology Laboratory at NARL Kawanda ........................ 19 8.7 Status of prior year audit issues ...................................................................... 20 LIST OF ACRONYMS Acronym Meaning NARO National Agricultural Research Organisation FY Financial Year ULC Uganda Land Commission MBAZARDI Mbarara Zonal Agricultural Research Development Institute EAAPP East African Agricultural Productivity Project ZARDI Zonal Agricultural Research Development Institute NARS National Agricultural Research System. UNRA Uganda National Roads Authority ha Hectares IDA International Development Agency GOU Government of Uganda NARL National Agricultural Research Laboratories MOFPED Ministry of Finance, Planning and Economic Development UGX. Uganda Shillings NTR Non Tax Revenue PARIs Public Agricultural Research Institutes Bn Billion NAROSEC National Agricultural Research Organisation Secretariat. UEDCL Uganda Electricity Distribution Company Limited RPS Reserve Protection Services NAFORRI National Forestry Resource Research Institute BOQs Bills of Quantities NaLIRRI National Livestock Resources Research Institute NAFIRRI National Fisheries Resources Research Institute COREC Coffee Research Centre NASARRI National Semi-Arid Resources Research Institute NABUZARDI Nabuin - Zonal Agricultural Research Development Institute NIC National Insurance Corporation ABIZARDI ABI Zonal Agricultural Research Development Institute KAZARDI Kabale Zonal Agricultural Research Development Institute. 2 BUZARDI Buginyanya Zonal Agricultural Research Development Institute UETCL Uganda Electricity Transmission Company Ltd Nge ZARDI Ngetta Zonal Agricultural Research Development Institute. ATAAS Agricultural technology and Agribusiness Advisory services. MTEF Medium Term Expenditure Framework. UPDF Uganda People’s Defence Forces MOU Memorandum of Understanding PPDA Public Procurement and Disposal of Public Assets. RT. HON Right Honourable 3 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL AGRICULTURAL RESEARCH ORGANISATION (NARO) FOR THE YEAR ENDED 30TH JUNE, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of National Agricultural Research Organization (NARO) for the year ended 30th June 2015 as set out on pages 8 to 42. These financial statements comprise of the statement of financial position, the statement of financial performance and cash flow statement together with other accompanying statements, notes and accounting policies. Management Responsibility Under Article 164 of the Constitution of the Republic of Uganda (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 Organization. The Accounting Officer is also responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of the Public Finance Management Act, 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 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 (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 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 financial statements whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity’s preparation and fair presentation of financial 4 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 represents in detail all the significant audit findings made during the audit which have been brought to the attention of management and form part of my Annual Report to Parliament. PART “A” Opinion In my opinion, the financial statements of the National Agricultural Research Organization (NARO) for the year ended 30th June, 2015 were prepared 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, I draw your attention to the matter described below: Mischarge of expenditure-UGX. 66,500,000 Expenditure worth UGX.66,500,000 was spent on various activities but charged on wrong expenditure codes contrary to GOU financial requirements. The practice resulted into misrepresentation of expenditure balances in the financial statements and possible diversion of funds from the intended activities. Other matters I consider it necessary to communicate the following matters other than those that are presented or disclosed in the financial statements. 5 Land matters It was noted that NARO did not have certificates of titles as evidence of ownership for most of land at the Research Institutions located country wide. There were cases noted where the land has been encroached on. John F.S. Muwanga AUDITOR GENERAL KAMPALA 29th October, 2015 6 PART “B” DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NATIONAL AGRICULTURAL RESEARCH ORGANISATION FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2015 This section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 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 that is to say, 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 NARO to enable me report to Parliament. 2.0 BACKGROUND INFORMATION NARO is the apex body for guidance and coordination of all agricultural research activities in the National agricultural research system in Uganda. NARO is a Public Institution established by an Act of Parliament, which was enacted