Nyabyeya Forestry College - Office of the Auditor General

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1 THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE NYABYEYA FORESTRY COLLEGE FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2015 OFFICE OF THE AUDITOR GENERAL UGANDA

2 TABLE OF CONTENTS PAGE LIST OF ACRONYMS ............................................................................................................................. 3 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE NYABYEYA FORESTRY COLLEGE FOR THE YEAR ENDED 30TH JUNE, 2015 .................................................. 4 DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE NYABYEYA FORESTRY COLLEGE FOR THE YEAR ENDED 30TH JUNE, 2015 ................................ 6 1.0 INTRODUCTION ........................................................................................................................ 6 2.0 BACKGROUND INFORMATION................................................................................................ 6 3.0 ENTITY FINANCING ................................................................................................................. 7 4.0 OBJECTIVES OF NFC ................................................................................................................ 7 5.0 AUDIT OBJECTIVES.................................................................................................................. 7 6.0 PROCEDURES PERFORMED..................................................................................................... 8 7.0 FINDINGS................................................................................................................................... 9 2

3 LIST OF ACRONYMS Acronym ANAAFE African Network for Agriculture, Agroforestry and Natural Resources Education GoU Government of Uganda ISAs International Standards on Auditing MoFPED Ministry of Finance Planning and Economic Development MWE Ministry of Water and Environment NFC Nyabyeya Forestry College PFMA Public Finance Management Act PPDA Public Procurement and Disposal of Public Assets UGX Uganda Shillings 3

4 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE NYABYEYA FORESTRY COLLEGE FOR THE YEAR ENDED 30TH JUNE, 2015 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of Nyabyeya Forestry College (NFC) for the year ended 30th June 2015. 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. Managements Responsibility 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 NFC. The Accounting Officer is also responsible for the preparation of financial statements in accordance with the requirements of the Public Finance Management Act (PFMA), 2015, 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. Auditors Responsibility My responsibility as required by Article 163 of the Constitution of the Republic of Uganda, 1995 (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 Auditors 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 entitys preparation and fair presentation of financial 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 entitys 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 4

5 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 opinion. Part A of this report sets out my 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 and form part of my Annual Report to Parliament. PART A Opinion In my opinion, the financial statements of Nyabyeya Forestry College for the year ended 30th June 2015 are prepared, in all material respects in accordance with the Financial Reporting Guide, 2008 and Section 51(1) of the Public Finance Management Act, 2015. John F.S. Muwanga AUDITOR GENERAL 15th December, 2015 5

6 PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE NYABYEYA FORESTRY COLLEGE FOR THE YEAR ENDED 30TH JUNE, 2015 This section outlines the detailed audit findings, management responses, and my recommendations in respect thereof. 1.0 INTRODUCTION Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended) requires me to audit and report on the public accounts of Uganda and all public offices including the courts, the central and 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 the Nyabyeya Forestry College to enable me report to Parliament. 2.0 BACKGROUND INFORMATION Nyabyeya Forestry College is located in Masindi District in Western Uganda, 32 km from Masindi on the Masindi-Butiaba road, and 240 km from Kampala, off the Kampala Gulu highway. The College is found on the fringes of Budongo tropical high forest, in a typical forest environment, most ideal for various tropical forestry research and training aspects. Nyabyeya Forestry College is the only institution in Uganda, which offers practical oriented technical forestry and the related training at Diploma and Certificates levels, besides a host of many demand driven vocational short courses for the various forest sector stakeholders and interest groups/agencies. It started as a departmental training institution under the Forest Department in 1932. It is a co-educational institution, with female students continuously increasing in number (average 35%), and excelling in performance. History of Technical Forestry Training in Uganda Technical Forestry Training in Uganda started in 1932 at Kityerera in Mayuge District, in Eastern Uganda, with the training of local forest workers to assist colonial foresters working in the Forest Department. The school was unfortunately closed in 1936, due to an outbreak of sleeping sickness. During the Second World War, many Polish refugees were brought to Uganda and located in Bunyoro on the fringes of

7 Budongo forest at Nyabyeya. When these refugees were evacuated after the war had ended, the forestry college was transferred to occupy the facilities that had been left behind by the Polish refugees at the present site, and reopened in 1948. A two-year formal certificate course in Forestry was started immediately in June 1948, while an in-service Diploma Programme in Forestry was started in 1952. The 16 months Programme was partly tenable in UK at the Dean of Foresters School Gloucestershire (six months), till 1967 when a revised Diploma Programme of 18 months, tenable at Nyabyeya Forestry College, was put in place. Since 1948, the number of training programs offered has been diversified, and content of the traditional ones has also been enriched. 3.0 ENTITY FINANCING The College was financed by Grants from Central Government to the tune of UGX.918,087,424, salaries from Government of UGX.180,527,304, grant from development partners (ANAFE) to the tune of UGX.38,025,000; school fees of UGX.640,866,200 and local revenue of UGX.162,005,750 was also collected, bringing the total revenue to UGX.1,939,511,678. The total grants revenue of UGX.956,112,424 constituted 48% of its approved budget estimates of UGX.1,983,600,916. 4.0 OBJECTIVES OF NFC The major objective of NFC is to contribute to the improved management and utilization of Uganda's forest resources, and environmental conservation in Uganda. 5.0 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. In conducting my reviews, special attention was paid to establish:- a. Whether the financial statements have been prepared in accordance with consistently applied accounting Policies and fairly present the revenues and expenditures for the period and of the financial position as at the end of the period. b. Whether all funds were utilized with due attention to economy and efficiency and only for the purposes for which the funds were provided. 7

8 c. Whether goods and services financed have been procured in accordance with the Government of Uganda Procurement regulations. d. Whether the management of College had a sufficient internal control structure and the internal controls were working as intended. e. Whether the management was in compliance with the Government of Uganda financial regulations. f. Whether all necessary supporting documents, records and accounts have been kept in respect of all activities, and are in agreement with the financial statements presented. 6.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- (a) Revenue Obtained schedules of all revenues collected and reconciled the amounts to the cashbooks and bank statements. (b) Expenditure The payment vouchers 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 audited. (d) Procurement Reviewed the procurement of goods and services by the Ministry during the period under review and reconciled with the approved procurement plan. (e) Fixed Asset Management Reviewed the use and management of the Ministry assets during the period under audit (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 evaluating the overall financial statement presentation. 8

9 7.0 FINDINGS 7.1 Categorization of audit findings The following system of grading of the audit findings has been adopted to better prioritize the implementation of audit recommendations: Category Description 1. High Significance Has a significant / material impact, has a high likelihood of reoccurrence, and in the opinion of the Auditor General, it requires urgent remedial action. It is a matter of high risk or high stakeholder interest. 2. Moderate Significance Has a moderate impact, has a likelihood of reoccurrence, and in the opinion of the Auditor General, it requires remedial action. It is a matter of medium risk or moderate stakeholder interest. 3. Low Significance Has a low impact, has a remote likelihood of reoccurrence, and in the opinion of the Auditor General, may not require much attention, though its remediation may add value to the entity. It is a matter of low risk or low stakeholder interest. 7.2 Summary of audit findings No. Title of Finding Significance 1 Non- payment of Salary Increment of 30% for Science High Teachers. 2 Unauthorized reallocation High 3 Use of inappropriate Procurement Method. Medium 4 Non-Remittance of Withholding Tax Low 5 Low Revenue collections from Guest House 8.0 DETAILED FINDINGS 8.1 Non payment of salary increment for Science Teachers The Ministry of Public Service under the standing instruction No 1 of 2012 increased the salary of science teachers in Post Primary Institutions and Public Universities by 30% with effect from 1st July 2012. Audit however observed that Nyabyeya Forest College science teachers have never received the 30% salary increment as directed by the Minister of Public Service. As a result, the college had accumulated arrears of UGX.142,264,072 to its employees. 9

10 The non-payment of the salary increment to the teaching staff of the College leads to low morale and may result into high turnover of the Lecturers. The College administration indicated that the above matter was brought to the attention of the Permanent Secretary Ministry of Water and Environment (MWE) and awaits the response. I advised the Accounting Officer to liaise with the relevant stakeholders and ensure funds are set aside to settle the obligations in accordance with the circular standing instruction. 8.2 Unauthorized reallocation Regulation 37(b) of Public Finance and Accountability Regulations, 2003, requires the Accounting Officer to ensure that the provision for services as authorized by accounting warrants are not exceeded, and is held personally responsible for any excess expenditure that is incurred without proper authority. Comparison between approved budget and actual expenditure revealed that the College spent UGX.776,995,502 in excess of the budget on six line items without authority from the Finance Committee of the College. The practice not only contravenes budgetary controls but also impacts negatively on the implementation of planned activities. Management attributed the over expenditure to sudden price changes in goods & services, delayed clearances from Prime Ministers office for vehicles purchases, and carried-over retention money for the construction works from previous Financial Year. I advised the Accounting Officer to always operate within the approved budget estimates and where reallocations are necessary, to seek approvals for budget variations from the Finance Committee of the College. 8.3 Use of inappropriate procurement method Section 8 (5) of PPDA Act 2014 gives guidance that a procuring and disposing entity before using the direct procurement method in an emergency situation, should give priority to other competitive procurement methods in accordance with sub- regulations (6), (7), (8) and (9). 10

11 Audit noted that the college used direct procurement method for the construction of a 4 stance pit latrine, supply of water pump and another water equipment at a total sum of UGX.49,302,558 without following the above procedures. It was further observed that the contractor for the 4 stance pit latrine was paid UGX.2,593,220 (18% VAT) without submitting the VAT invoice contrary to the VAT Act. Its likely that VAT involved was erroneously paid. Management explained that these items were procured to cater for the emergency situations which arose as a result of the break down in the college water system. However, audit noted that emergency procurement procedures were not followed. I advised the Accounting Officer to adequately follow the procurement procedures even in situations of emergency. 8.4 Non-Remittance of Withholding Tax Section 123 of the Uganda Income Tax Act requires a withholding agent to pay to the Commissioner any tax that has been withheld or that should have been withheld within fifteen days after the end of the month in which the payment subject to withholding tax was made by the withholding agent. Contrary to the above requirement, the College failed to remit funds withheld from various suppliers totaling to UGX.9,398,240 to Uganda Revenue Authority (URA). Non-compliance with the tax law exposes the college to penalties. Management explained that the delay in remitting the tax was as a result of change in policy by the URA in which use of Tax Identification Numbers (TINs) for suppliers as opposed to the College TIN was required. I have advised the Accounting Officer to remit the tax to URA promptly in accordance with the Tax Law. 8.5 Revenue collections from Guest House The college manages a 25 bedroomed guest house from which a total amount of UGX.6,979,500 out of the budget of UGX.10,000,000 was collected. Audit however noted the current revenue collections decreased by 82% from last years collections of UGX.38,362,100. 11

12 Management explained that the Guest house structures have not been renovated for a long time due to cash flow constraints and as a result, the number of guests has drastically decreased. I advised the Accounting Officer to include the renovation of the guest house in the college strategic Plan and ensure that resources are adequately mobilized for the purpose during the implementation period. 12

13 FINANCIAL STATEMENTS 13

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