1

OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF UGANDA

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF SOROTI MUNICIPAL COUNCIL

FOR THE YEAR ENDED 30TH JUNE 2014

2

REPORT AND OPINION OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF SOROTI MUNICIPAL COUNCIL

FOR THE YEAR ENDED 30TH JUNE 2014

THE RT. HON. SPEAKER OF PARLIAMENT

Introduction

I have audited the accompanying financial statements of Soroti Municipal Council for the

year ended 30th June 2014. These financial Statements comprise of the statement of

financial position as at 30th June 2014, statement of financial performance, statement of

chnages in equity, cash flow statment together with other accomapnying statments, notes

and accounting policies.

Management Responsibility for the Financial Statements

Under Article 164 of the Constitution of the Republic of Uganda and Section 8 of the Public

Finance and Accountability Act, 2003 and section 65 and 86 of the Local Governments’ Act

1997 as amended, the Accounting Officer is accountable to Parliament for the funds and

resources of the Local Government. The Accounting Officer is responsible for the

preparation of financial statements, in accordance with regulation 68 of the Local

Governments Financial and Accounting Regulation, 2007 and for such internal controls as

management determines necessary to enable the preparation of financial statements that

are free from material misstatements whether due to fraud or error.

Auditor’s Responsibility

My responsibility as required by Article 163 of the Constitution of the Republic of Uganda,

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 my

audit in accordance with the International Standards on Auditing(ISA)/ International

Standards of Supreme Audit Institutions (ISSAIs). Those standards require that I comply

with 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 the risks of material misstatement of the financial statements,

whether due to fraud or error. In making those risk assessments, the Auditor considers

3

internal controls relevant to the entity’s preparation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose

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 my report sets out my unqualified 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"

Unqualified Opinion

In my opinion, the financial statements of Soroti Municipal Council as at 30th June 2014 are

prepared, in all material respects, in accordance with the Local Governments Financial and

Accounting Manual, 2007, Section 31(6) of the Public Finance and Accountability Act 2003,

the Local Governments Financial and Accounting Regulations, 2007 and the Local

Governments Act cap 243 (as amended), of the Laws of Uganda.

Emphasis of Matter

Without qualifying my opinion further, I draw attention to the following matter presented in

the financial statements which in my judgement is of such importance and fundamental to

users understanding of the financial statement.

Outstanding Receivables

An amount of UGX 140,636,095 in respect of debtors remained outstanding . Council

was denied funds for service delivery.

John F.S. Muwanga

AUDITOR GENERAL

20th Feburary 2015

4

PART “B”

SOROTI MUNICIPAL COUNCIL DETAILED REPORT OF THE AUDITOR GENERAL

FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2014

1.0 Introduction

In accordance with Article 163(3) of the Constitution of the Republic of Uganda 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 Soroti Municipal Council 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.

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.

5

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 METHODOLOGY

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 payments 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

Soroti Municipal Council is financed by grants (Conditional and Unconditional) from

Central Government, Development Partners and Locally Generated Revenues from

6

taxes, fees, licenses and charges. During the year, the Council received grants

totaling to UGX 9,542,220,560 from Central Government, UGX 15,830,722 from

development partners and UGX 622,668,924 from locally generated revenues. The

total revenue of UGX 10,180,720,206 constituted 74.5% of its approved budget

estimates of UGX 13,668,182,615.

5.0 Detailed Audit Findings

This section outlines the detailed audit findings and my recommendations in respect

thereof.

5.1 Outstanding Receivables

Regulation 32 of the Local Governments Financial and Accounting Regulations 2007

requires the Head of Finance to ensure that revenue due to the council is promptly

collected and bank it intact.

However, an amount of UGX 140,636,095 remained outstanding as shown in the

table below;

Details 30 th June-14 30th June-13

Domestic Amount (UGX) Amount (UGX)

1

Uganda Land

Commission 19,050,158 19,050,158

2 Eastern Division 94,560,937 94,560,937

3 FAW Company 12,900,000 0

4 Teso Coaches 14,000,000 0

5 Etiono Aijar Traders 125,000 0

Totals 140,636,095 113,611,095

The outstanding debtors represent idle funds which adversely affect service delivery.

This was due to failure by management to follow up the collection of debts in a

timely, systematic and vigorous manner.

I advised the Accounting Officer to take necessary measures to recover the funds.

7

5.2 Unaccounted for Funds

Regulation 43(2) of the local government financial and accounting regulations 2007

requires that administrative advances to council employees are accounted for within

one month.

An amount of UGX. 9,610,756 remained unaccounted for at the time of audit

contrary to the regulations as shown in appendix i.

This was attributed to laxity by management to enforce accountability.

The delays to present accountability can lead to falsification of documents.

I advised the Accounting Officer to obtain the accountabilities or else recover the

funds from the responsible officers.

5.3 Dilapidated school accommodation and classroom structures

Audit inspection revealed that some schools had very poor classroom structure and

old toilet facilities as shown below

Name of

School

Issue Photos

Kichinjaji Pri

Sch.

The school has dilapidated

classroom structures that are

dangerous.

The school has got no staff room

block as the teachers were found

seated and marking pupil’s

exercise in an opening in the

compound.

Majengo Pri

Sch.

The school had a dilapidated

latrine block.

8

This was attributed to low funding of the Education Sector by the Municipality

Council.

The Accounting Officer explained that the Council had started to build a toilet at

Majengo Primary School and the buildings at Kichinjanji Primary School have been

taken up by the community.

I advised the Accounting Officer to liaise with relevant stakeholders to ensure that

classroom structures are given priority and the toilet should be repaired or

demolished to avoid accidents.

5.4 Under Staffing

The Municipality has an approved establishment of 190. However, it was observed

that out of the 190, only 95 (50%) positions were filled leaving a staffing gap of 95

(50%) staffing gap as shown in appendix II. Understaffing adversely affects service

delivery.

This was attributed to limited wage bill by the Ministry of Public Service.

The Accounting Officer further explained that the position of Municipal Council

Engineer was advertised but attracted applicants that were not registered with

Uganda Institute of Professional Engineers.

I advised the Accounting Officer to liaise with the relevant Ministries to ensure that

the vacant posts are filled.

5.5 Lease of Soroti Municipal S. S.

Regulation 32 of the Local Governments Financial and Accounting Regulations 2007

requires the head of finance to be responsible for collection of all revenue for the

district.

The Municipal council rented out Soroti Municipal Secondary School to a pilgrim

company at a monthly rental fee of UGX.600,000.

Documentation review revealed the following shortcomings:

The tenancy agreement expired in 2012 implying that Pilgrim company is occupying

government property illegally.

9

Capital developments have been made on school premises without approval by the

council.

The Accounting Officer explained that a Government valuer had recommended

rentable value of UGX.2,600,000 p.m but a tenancy agreement is yet to be issued to

the tenant.

The matter require urgent attention.

5.6 Lease of Madera Hostel along Moroto Road

Regulation 32 of the Local Government Financial and Accounting Regulations 2007

requires the head of finance to be responsible for collection of all revenue for the

district.

The Municipal leased Madera Student hostel to FAW Company to establish a regional

service Centre at the premises as per the council minute CR/1200/22 dated 11th

January 2013.

Documentation review revealed the following short coming :-

Lease application form by FAW Company was not available.

The Offer letter did not specify the lease terms like lease fee, lease period and other

conditions for both the lease’ and the lessor.

A tentative consideration sum of UGX. 5,000,000 as annual rental fee and a monthly

fee of UGX. 300,000 was requested from FAW under correspondence Ref:

CR/1200/22 dated 26th February 2013. However there was no formal acceptance

from the tenant attached on file.

There was no evidence of involvement of the Chief Government Valuer on the set

lease fee.

There was no evidence of payment of sum of UGX. 5,000,000 as annual rental fee

and UGX. 300,000 as monthly fee.

The Accounting Officer explained that a submission to the chief government valuer

was made, inspection was done and a response is awaited.

10

I advised the Accounting Officer to obtain the valuation by the Chief Government

valuer for proper rental charges.

5.7 Lack of Land Titles

Regulation 58 (4) of the LGFARs of 2007 requires that the properties and assets of a

Local Government including land be properly registered and titles issued.

However, some of the council’s land and buildings had no certificates of titles as

shown in appendix iii

The council risks loss of land to encroachers.

The Accounting Officer explained that so far it has six land titles and the process of

acquiring land titles for Municipal Secondary School,MTN Mast in Akisim, FAW site

and the bus park is planned for during 2014/15 FYR.

I advised the Accounting officer to expedite the process of acquiring titles for all the

council land.

11

Appendix i

Unaccounted for funds

Vr. No. Date Payee Details Amount Remarks

ADMINISTR

ATION

5 4/7/2013 Okaja E Fuel for Town clerk and deputy Town clerk

700,000 No consumption schedule attached

83 14/10/2013

SMC

Western Division

Transfer of 30% local revenue 1,000,000

No

Acknowledgement Receipts

BOARDS &

COMM

20 25/02/2014 Okello

Robert

Facilitate Speaker to travel for

UUCSA 740,000

No fuel receipts

attached.

PROUCTION & MKT'G

CBS

8 28/5/2014 SMC LLGs Disbursement of 4th quarto

2013/14 Western division 1,031,856

No

Acknowledgement Receipts

CDD

1 29/9/2013 Nile energy

ltd

Fuel for aminit dumping

ground( compost project) 918,900

No Consumption

Statement

WORKS

16/10 16-Oct-13 Nile Energy Fuel Supply 640,000 No Consumption Statement

13/11 29-Nov-13 Nile Energy Fuel Supply 900,000 No Consumption

Statement

7/12 6-Dec-13 Nile Energy Fuel Supply 990,000 No Consumption

Statement

11/12 6-Dec-13 Nile Energy Fuel Supply 850,000 No Consumption Statement

7/1 7-Jan-14 Nile Energy Fuel Supply 990,000 No Consumption

Statement

Total 9,610,756

12

Appendix ii

Staffing Levels

JOB TITLE APPROVED FILLED VACANT

Assistant Inspector of Schools 1 0 1

Assistant Town Clerk 1 0 1

Inspector of Schools 1 1 0

Public Health Dental Officer 1 1 0

Stenographer Secretary 1 1 0

Veterinary Officer 1 1 0

Accountant 1 0 1

Accounts Assistant 3 1 2

Anesthetic Assistant 2 0 2

Anesthetic Officer 1 0 1

Askari 3 2 1

Assistant Agricultural Officer 1 0 1

Assistant Clerk to Council 1 0 1

Assistant Com. Dev. Off. 7 4 3

Assistant Commercial Officer 1 0 1

Assistant Education Officer 1 1 0

Assistant Eng Officer (Civil) 1 1 0

Assistant Health Educator 1 0 1

Assistant Sports Officer 1 0 1

Assistant Tax Officer 2 0 2

Asst Entomological off (Medical) 1 1 0

Asst Information Officer 1 1 0

Auditor 1 0 1

Cartographer 1 0 1

Clinical Officer 2 0 2

Cold Chain Assistant 1 0 1

Comm Dev't Officer 1 0 1

Deputy Mayor 1 1 0

Deputy Town Clerk 1 1 0

Dispenser 1 0 1

Driver 11 4 7

Education Officer 1 1 0

Enrolled Nurse 3 3 0

Enrolled Midwife 3 3 0

13

Enrolled Psychiatry Nurse 1 0 1

Environment Officer 1 0 1

Exam. of A/C. 2 1 1

Forman Works 1 0 1

Health Assistant 1 0 1

Health Educator 1 0 1

Health Information Asst 1 0 1

Health Inspector 3 3 0

Information Officer 1 0 1

Laboratory Assistant 1 1 0

Laboratory Technician 4 4 0

Land Supervisor 1 1 0

Law Enf Assistants 13 3 10

Law Enforcement Officer 1 0 1

Medical Officer 1 0 1

Principal Medical Officer 1 1 0

Mortuary Attendant 3 1 2

Mortuary Technician 1 1 0

Mun Eng(Princ Exec Eng) 1 0 1

Nursing Assistant 5 5 0

Nursing Officer 3 3 0

Nursing Officer (Midwifery) 1 1 0

Nursing Officer (Nursing) 1 1 0

Nursing Officer (Psychiatry) 1 0 1

Office Attendant 10 5 5

Office Typist 2 1 1

Ophthalmic Clinical Officer 1 0 1

Personal Secretary 1 1 0

Personnel Officer 1 0 1

Physical Planner 1 0 1

Plant Operator 1 0 1

Pool stenographer 3 2 1

Porter 5 1 4

Principal Commercial Officer 1 0 1

Principal Community Development Officer 1 0 1

Principal Education Officer 1 1 0

Principal Health Inspector 1 1 0

14

Principal Treasurer 1 1 0

Procurement Officer 1 0 1

Senior Assistant Town Clerk 3 3 0

Public Health Nurse 1 0 1

Records Assistant 1 0 1

Records Assistant 1 1 0

Records Assistant 1 0 1

Records Assistant 3 1 2

Records Officer 1 1 0

Road Inspector 1 0 1

Sen. Planner 1 1 0

Senior Accountant Expenditure 1 1 0

Senior Accounts Assistant 4 1 3

Senior Assistant Engineering Officer 2 2 0

Senior Clinical Officer 3 3 0

Senior Committee Clerk 1 0 1

Senior Enforcement Off. 1 1 0

Senior Finance Officer (Revenue) 1 0 1

Senior Medical Officer 2 1 1

Senior Office Supervisor 1 1 0

Senior Personnel Officer 1 1 0

Senior Procurement officer 1 1 0

SIA 1 1 0

Staff Surveyor 1 0 1

Statician 1 1 0

Stenographer 1 1 0

Stores Assistant 1 0 1

Stores Assistant 1 1 0

Stores Assistant 1 1 0

Superintendent of Works (Civil) 1 1 0

Surveying Attendant 1 0 1

Surveyor 1 1 0

Theatre Assistant 2 0 2

Town Agent 4 1 3

Town Clerk 1 1 0

Total 190 95 95

15

Appendix iii

No Land Titles

No. Name Of Property Plot No. Location

01 Pamba Market 70-72 old Mbale road Pamba western division

02 Nakatunya Market 29-35 Ecobu road Nakatunya western division

03 Kigandani Market 47-57 Obwangor road Kigandani eastern division

04 Moruapesur Market 1-9 Jones road Moruapesur eastern division

05 Kichinjaji Market 16-22 Olaboro road Kichinjaji Nothern division

06 Campswahili Market 1-5 Ojirot road Campswahili Northern divisi

07 Madera Market 9-13 Madera road Madera Northern division

08 Northern division offices 144-146 Moroto road Campswahili Northern divisi

09 Residential house 6 Harper road Senior qtrs. Western division

10 Car Park 133-141 Cementry rd Campswahili Northern divisi