THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2020 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE FINANCIAL YEAR ENDED 30TH JUNE, 2020 ............................. 3 Opinion ............................................................................................................................. 3 Basis for Qualified Opinion .................................................................................................. 3 1.0 Improperly maintained Receivables Ledgers ............................................................... 3 2.0 Mischarge of Expenditure –UGX 289,157,979,077 ....................................................... 3 Key Audit Matters............................................................................................................... 4 3.0 Implementation of the approved budget .................................................................... 4 Emphasis of Matter ...........................................................................................................10 4.0 Unbudgeted for domestic arrears- UGX.452,810,845,128 ............................................10 Other Information .............................................................................................................11 Management Responsibilities for the Financial Statements ....................................................11 Auditor General’s Responsibilities for the audit of the Financial Statements ............................12 Other Reporting Responsibilities .........................................................................................13 Report on the Audit of Compliance with Legislation ..............................................................13 5.0 Management of the Authority Fleet ...........................................................................13 6.0 Nugatory Expenditure - Interest on delayed payments to contractors – ........................19 UGX. 7,309,410,300 ..........................................................................................................19 7.0 Slow progress of works ............................................................................................19 8.0 Road Maintenance Funds .........................................................................................22 9.0 Inadequate feasibility studies during planning and design of Nakalama- Tirinyi-Mbale Road… .............................................................................................................................22 10.0 Liquidated damages on Hima-Katunguru road project- UGX 1,873,318,398 ...............24 11.0 Engineering Audit of a selected sample of Road Development, Bridge, Rehabilitation and maintenance Projects implemented during the year .......................................................24 11.1 Background .........................................................................................................24 11.2 Inadequate planning ............................................................................................25 11.3 Delays in completion of design reviews ..................................................................26 11.4 Delays in progress of works ..................................................................................27 11.5 Use of lump sum contracts ...................................................................................27 11.6 Inclusion of contingency in design and build contracts ............................................28 11.7 Unrealistic rates by Contractors .............................................................................28 11.8 Unenforceable clauses in works contracts ..............................................................29 11.9 Lack of dispute boards .........................................................................................29 11.10 Inclusion of unnecessary items in BOQs .................................................................29 11.11 Inadequacies in work programs.............................................................................30 APPENDICES ....................................................................................................................32 2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF UGANDA NATIONAL ROADS AUTHORITY FOR THE FINANCIAL YEAR ENDED 30TH JUNE, 2020 THE RT. HON. SPEAKER OF PARLIAMENT Opinion I have audited the accompanying financial statements of Uganda National Roads Authority for the year ending 30th June 2020, which comprise the Statement of Financial Position as at 30th June 2020, 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, except for the possible effect of the matters described in the Basis for Qualified Opinion section of my report, the financial statements of Uganda National Roads Authority for the year ended 30th June 2020 are prepared, in all material respects, in accordance with section 51 of the Public Finance Management Act, 2015 and the Financial Reporting Guide, 2018. Basis for Qualified Opinion 1.0 Improperly maintained Receivables Ledgers Receivables totalling to UGX.604,835,635,481 relating to Development and maintenance projects were reported in the financial statements for the year. However, contracts and receivables ledgers were improperly maintained or not maintained for some of the road projects. Without proper ledgers, I was unable to confirm the accuracy and completeness of the figures reported for the advances and recoveries therefrom. 2.0 Mischarge of Expenditure –UGX 289,157,979,077 Expenditure totalling to UGX 289,157,979,077 (UGX 288,713,825,335 from UNRA TSSA and UGX 444,153,742 from UNRA Road Funds) was charged on budget lines to fund activities that were not planned for without authority. The practice undermines the budgetary process and the intensions of the appropriating authority as funds are not utilized for the intended purpose. The accuracy and completeness of the financial statements is compromised, since the figures reported therein do not reflect the actual amounts and outputs for which the funds were expended. I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). 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 Uganda National Roads Authority in accordance with the Constitution of the Republic of Uganda (1995) as amended, the National Audit Act, 2008, the International Organization of 3 Supreme Audit Institutions (INTOSAI) Code of Ethics, the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B) (IESBA Code), and other independence requirements applicable to performing audits of Financial Statements in Uganda. I have fulfilled my other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical requirements applicable to performing audits in Uganda. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion. Key Audit Matters Key audit matters are those matters, in my professional judgment, were 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 this matter. In addition to the matters described in the Basis for Qualified for Opinion section of my report, I have determined the matter described below to be a key audit matter communicated in my report. 3.0 Implementation of the approved budget Every year, Government plans and allocates funds to MDAs for implementation of activities that would enable the country to attain sustainable development. I observed that MDAs have challenges with regard to implementation of planned activities, which negatively affects service delivery and improvement of the people’s wellbeing. As a result, the implementation of the approved budget was considered a key audit matter and during the office-wide planning, I identified risks common with MDAs which include; non-implementation of strategic plans, underperformance of revenue, implementation of off-budget activities, under absorption of funds, insufficient quantification of outputs, partial and non-implementation of outputs, diversion of funds and challenges in budget monitoring and reporting of performance. Uganda National Roads Authority has a constitutional mandate to manage, maintain and develop the national roads network; to advise the Government on policy matters concerning roads generally, and to assist in the co-ordination and implementation of the policies governing road development and maintenance. In order to achieve this mandate, the Authority planned to implement and achieve a number of both recurrent and development outputs under various programmes. A review of the entity’s budget revealed that the UNRA had an approved budget of UGX 4,019,068,912,990, out of