DCG.151/253/01/16 29th December, 2016 The Rt. Hon. Speaker of Parliament Parliament of Uganda Kampala REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF COMPETITIVENESS AND ENTERPR DEVELOPMENT PROJECT (CEDP) COMPONENT 2-5, IDA CREDIT AGREEMENT CR 5269-UG FOR THE YEAR ENDED 30TH JUNE 2016 In accordance with Article 163 (4) of the Constitution, I forward herewith audited financial statements of Competitiveness and Enterprise Development Project for the year ended 30th June 2016 together with my report and opinion thereon. John F.S. Muwanga AUDITOR GENERAL Copy to: The Permanent Secretary/Secretary to the Treasury Ministry of Finance, Planning and Economic Development The International Development Agency/World Bank The Executive Director, Private Sector Foundation Uganda The Project Coordinator CEDP 一一－～一＇－由－由＇，戶－&－〞－-- THE REPUBLIC OF UGANDA REPPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) COMPONENT 2-5 IDA CREDIT AGREEMENT CR 52690-UG PROJECT ID P130471 FOR THE YEAR ENDED 30TIl JUNE 2016 OFFICE OF THE AUDITOR GENERAL UGANDA I r r { r r r i TABLE OF CONTENTS ACRONYMS AND ABBREVIATIONS...................................................... M REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT FOR THE YEAR ENDED 30T' JU N E 2016016........................................................................... ii REPORT OF THE AUDITOR GENERAL ON THE SPECIAL ACCOUNT STATEMENTS FOR THE FINANCIAL YEAR ENDED 30n JUNE 2016..................................................................... REPORT OF THE AUDITOR GENERAL ON THE INTERNAL CONTROL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2016..................................................................... vi 1.0 INTRO DUCTIO N RODUCTIO.......... . 1...................... .................................................... 1 2.0 PROJECT BACKGROUND...................................................................................... 3.0 PROJECT OBJECTIVES ................................EC..EC................................................... 1 4.0 PROJECT CO M PONENTS...................................................................................... 1 5.0 AUDIT PRO CEDURES ...........................................................................................4 6.0 PROCEDURES PERFORM ED ............................RMD................ . .............................. 5 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of findings.......................................... .......................................6 7.2 Sum m ary of findings..................-..---.--......------6.-.......ig........................................6 8.0 DETAILED FIND INGS ...........................................................................................7 8.1 Compliance with the Financing Agreement & GoU Financial Regulations..................7 8.2 General Standards of Accounting and Internal Control ..........................................7 8.2.1 W rong com putation of Per Diem .....................................................................7 7 8.2.2 Budget perform ance ................r...orm--an-ce.---7... ..............................................e.7 11 г i г i г г i г г t � г г г � г г г г 1 ACRONYMS AND ABBREVIATIONS AG Accountant General AGO Accountant General's Office BIK Benefits in Kind BoU Bank of Uganda CEDP Competitiveness and Enterprise Development Project CG Central Government DA Designated Account DP Development Partner DST Deputy Secretary to Treasury FA Financing Agreement GoU Government of Uganda HQ Headquarters HTTI Hotel Tourism Training Institute IDA International Development Association IECS Information Education Communication Strategy IFMS Integrated Financial Management System IFRs Interim Financial Reports ism Implementation Support Mission r'FA Income Tax Act KCCA Kampala Capital City Authority M&E Monitoring and Evaluation MDA Ministries, Departments and Agencies MGF Matching Grant Facility MLHUD Ministry of Land Housing and Urban Development MoFPED Ministry of Finance, Planning and Economic Development Mou Memorandum of Understanding MTEF Medium Term Expenditure Framework MTWA Ministry of Tourism Wildlife and Antiquities NSSF National Social Security Fund OAG Office of the Auditor General PA Project Agreement PAYE Pay As You Earn PCU Project Coordination Unit PDE Procuring and Disposing Entity PPDA Public Procurement and Disposal of Public Assets Authority PS/ST Permanent Secretary/Secretary to Treasury PSC Project Steering Committee PSCPII Second Private Sector Competitiveness Project PSFU Private Sector Foundation Uganda PTC Project Technical Committee SGA Subsidiary Grant Agreement TIMS Tourism Information Management System UGX Uganda Shillings URA Uganda Revenue Authority URSB Uganda Registration Services Bureau USD United States Dollars UTB Uganda Tourism Board VAT Value Added Tax "--i-m- ==-a-as Imi----a mi-a--a m-a- REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT FOR THE YEAR ENDED 30T" JUNE 2016 THE RT. HON. SPEAKER OF PARLIAMENT I have audited the financial statements of the Competitiveness and Enterprise Development Project (CEDP) Component 2-5, (IDA Credit Agreement Cr 52690-UG) Project ID P130471 for the year ended 30th June, 2016. The financial statements are set out on pages 29 to 41 of appendix 1 and comprise of:- * Statement of receipts and payments * Statement of financial position * Statement of special account * Statement of cash flows * Notes to the accounts which contain the summary of significant accounting policies. Management's Responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Standards on Auditing. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's responsibility My responsibility is to express an opinion on the financial statements based on my audit. I conducted the audit in accordance with International Standards on Auditing (ISA). Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor's judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers 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 iv r г г i � i г � г г г 1 г � г € i i г � audit also includes evaluadng 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 obtained is sufficient and appropriate to provide a basis for my audit opinion. Part "A" of this report sets out my opinion on the flnancial 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" Opinion In my opinion, the financial statements give a true and fair view of the financial position of the Competitiveness and Enterprise Development Project Component 2-5, as at 3 01h June 2016 and of its financial performance and cash flows for the period then ended, in accordance with the terms of the agreements and in conformity with the basis of accounting described in Note 7.5.1 to the financial statements, John F.S. Muwanga AUDITOR GENERAL KAMPALA 9'h December, 2016 V "mamme helem REPORT OF THE AUDITOR GENERAL ON THE SPECIAL ACCOUNT STATEMENTS FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2016 I have audited the accompanying Special Accounts designated for Competitiveness and Enterprise Development Project (CEDP) activities and Financial Monitoring Reports submitted to the Bank during the year ended 30' June, 2016 in support of loan withdrawals under IDA Credit Agreement (Cr 5269-UG) Project ID P130471. Management Responsibility for the Special Accounts Statements Management is responsible for preparation of the special account statements and fair presentation in accordance with the requirements of financing agreement. Management is also responsible for designing and implementing internal controls relevant to the preparation of the special accounts statements that are free from material misrepresentation, whether due to fraud or error and selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility My responsibility is to express an opinion on the special account statements based on our audit. I conducted our audit in accordance with generally accepted auditing standards that accordingly included examination, on a test basis, of evidence supporting the amounts and disclosures in the Special Accounts designated for Competitiveness and Enterprise Development Project (CEDP) activities. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall statement presentation. I believe my audit provides a reasonable basis for our opinion. Opinion In my opinion, the IDA Designated account statement gives a true and fair view of operations of the project for the year ended 30th June 2016 in accordance with the terms of the agreement and in conformity with the basis of accounting described in paragraph 7.5.1 of the report. John F.S. Muwanga AUDITOR GENERAL 9th December, 2016 Vi 4-me" REPORT OF THE AUDITOR GENERAL ON THE INTERNAL CONTROL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30TH JUNE 2016 I have audited the financial statements of the Competitiveness and Enterprise Development Project (CEDP) Component 2-5 (IDA Credit Agreement CR 5269-UG) Project ID P130471 and reviewed the Internal Control procedures relevant to generation of accounting information presented in the financial statements, and those relevant to control over programme finances and the safeguard of its assets. I obtained all the information and explanations I considered necessary for the audit. Management Responsibility for the Internal Control System Project management is responsible for the designing, establishing and maintaining a control structure that provides management with reasonable assurance that adequate procedures are followed for generation of accounting information for reliable financial statements, and control over finances and safeguarding assets against loss and unauthorized use or disposal. Management is also responsible for ensuring that conditions provided for in the funding agreements and other legal requirements are observed. Auditor's Responsibility My responsibility is to express an opinion on the internal control system based on my audit. I conducted the audit in accordance with International Standards on Auditing. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the internal control mechanisms for generation of accounting information and for the safeguard of assets are adequate. I assessed the control risk in order to confirm that my audit procedures are adequate to express an independent opinion on the control system. I believe that my audit provides a reasonable basis for my opinion. I obtained an understanding of the design of the relevant policies and procedures and whether they have been in operation and I assessed the control risk. I noted certain matters involving internal control and its operation that I consider to be reportable conditions under standards established by the International Standards on Auditing. Reportable conditions involve matters coming to my attention relating to significant deficiencies in the design or operation of internal control that, in my judgment could adversely affect the recipient's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statement. Vii m--me A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control elements does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the financial statement may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. My consideration of the internal control would not necessarily disclose all matters in internal control that might be reportable conditions and, accordingly would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. The results of my tests disciosed some internal control issue which is a reportable condition and is of material weaknesses as described in more details in section 8.2 of this report as summarised below; Wrong computation of per diem. John F.S. Muwanga AUDITOR GENERAL KAM PALA 9th December, 2016 Viii -an --Mar REPORT OF THE AUDITOR GENERAL AND SUPPLEMENTARY INFORMATION -sa--i- am m--i-se -mm -a- •sa-a- PART "B" DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) FOR THE YEAR ENDED 30TH JUNE 2016 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 appointed M/s PIM + CO, Certified Public Accountants to carry out the audit on my behalf and report to me to enable me report to Parliament. 2.0 PROJECT BACKGROUND A financing agreement between Government of Uganda (GoU) and the International Development Association (IDA) was signed on 315' January 2014. Under the agreement, IDA agreed to provide SDR 66,100,00 (equivalent to USD 100,000,000) with USD 54,600,00 to finance land reforms for component 1 and USD 46,400,000 for 2-5 for (URBS, HTfI, MTWA, UTB and MGF) activities. The Government of Uganda (GOU) financing is USD 2,500,000. The Government of Uganda delegated the overall coordination of CEDP to the Private Sector Foundation Uganda (PSFU) through a subsidiary agreement entered on 28t" March 2014 and it is expected to close on 31th March 2019. 3.0 PROJECT OBJECTIVES The Project Development Objective (PDO) of CEDP is to improve the competitiveness of enterprises in Uganda by providing support for: (i) the implementation of business environment reforms, including land administration reform; and (01) the development of priority productive and service sectors. 4.0 PROJECT COMPONENTS The project is being implemented by the Ministry of Lands, Housing and Urban Development for Component I and Private Sector Foundation Uganda (PSFU) for Component 2-5 as indicated below; miemme Component Scope of Work Component 1: The Component is supporting the continuation and scale Land Administration up of Land Reform processes carried out under the PSCP Reform II. It involves: a) Improving land administration including rolling out the land information system (LIS) b) Strengthening land Valuation and land use planning functions, developing and strengthening Geodetic, Surveying and mapping policies and infrastructure, supplying base maps for the project and supporting the Uganda Land Commission's Housing and Urban Policies and Programmes c) Systematic Registration of Communally and Individually owned lands d) Strengthening Systems and Institutions for Land Dispute Resolutions e) Strengthening Land Administration and Management Institution. Component 2: This component objective is to reduce the burden for Business Registration and businesses in dealing with registration and licensing Licensing Reforms procedures by creating an online one-stop-shop for business registration and e-registry for business licensing, and by implementing measures aimed at simplifying and streamlining business registration and licensing procedures. The component is financing the following broad activities: - (a) Strengthening business registration and licensing processes, in particular: (i) Construction of Uganda Business Facilitation Centre that will accommodate URSB/UIA/CMA and a physical One Stop Centre (ii) Establishing an e-Registry for business Licensing including, an appropriate technology platform and software application (ii) Establishing One Stop Shop for Business Registration, including a network of local and regional offices (iv) Streamlining Business Registration and Licensing procedures (Eliminating � € г г � � г � i i г г г г г г г г i г Component scope of Work unnecessary procedures) (v) Carrying out an impact assessment of the said reforms. (b) To Implementing capacity building activities for URSB and other relevant regulatory agencies staff. (c) Developing and implementing information, education & communication strategy (IECS). Component 3: The objective of this component is to provide support to Tourism Competitiveness the tourism sector through strengthening public and Development private sector stakeholders and their collaboration to develop a competitive tourism offering. The activities supported under this component include: (a) Development of the Labour force for the Tourism Sub sector through the following; 1. Construction and equipping the Hotel and Tourism Training Institute ii. Provision of training for the Institute Instructors and Administrators iii, Reviewing and Accrediting the Institutes and Curriculum and Instructional Programmes iv. Developing and implementing a sustainable business model including a revenue generating strategy for the institute (b) Strengthening the capaco of the MoTWA and UTB through: i. Developing technical skills of tourism sector staff ii. Tracking tourism sector performance iii. Designing and implementing lodging classification and grading system iv. Implementing relevant policies, including the national tourism levy (c) Tourism product planning, packaging and promotion through: Developing and 3 me-mer Component Scope of Work implementing: i. Tourism products ii. Tourism value chain packages and supporting linkages between public and private sector entities iii. Marketing and promotional materials iv. Strengthening the capacity of sector institutions/agencies. Component 4: The component objective is to enhance the capacity Matching Grant Facility productivity and competitiveness of the private sector enterprises through provision of Matching Grants for undertaking business development services including but not limited to technology improvement, management training, record keeping, quality certification and marketing. The grants are being made to enterprises operating in the key priority sub-sectors namely: tourism; coffee; grains and pulses; horticulture; edible oils; fisheries and information technology/business process outsourcing. The component will contribute to increasing productivity sales revenues and provision of employment at firm level. Component 5: The objective of the component is to Strengthen the Project Implementation capacity of the PSFU for overall coordination and management of activities through: (a) Provision of technical advisory services, goods, non- consulting services, training, and operating costs (b) Strengthening transparency and governance arrangement for the project (c) Develop and implementing an information, education and communications strategy for the project. 5.0 AUDIT PROCEDURES 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 4 i � � с � � � { � t i { г r Е г г г i � was considered necessary. The audit was carried out with regard to the following objectives- a. To express an opinion whether the financial statements present fairly, in all material respects, project receipts and expenditure incurred for the period, and are in conformity with generally accepted accounting principles; b. To evaluate and obtain a sufficient understanding of the internal control structure of the Project assess control risk and identify reportable conditions, including material internal control weakness; C. To perform tests to determine whether the Project complied, in all material respects, with agreement terms and applicable laws and regulations; d. To establish whether all external funds have been used in accordance with conditions of the relevant legal agreements, with due attention to economy and efficiency and only for the purposes for which the financing was provided; e. To establish whether counterpart funds have been provided and used only for the purposes for which they were provided and in accordance with the relevant flnancing agreement, with due attention to economy and efficiency; f. Establish whether goods and services financed have been procured in accordance with relevant financing agreement; 9. To establish whether proper books of accounts were duly kept in accordance with the generally accepted accounting principles. 6.0 PROCEDURES PERFORMED The following audit procedures were undertaken:- a. Revenue Obtained schedules of ali revenues collected and reconciled the amounts to the Project's cashbooks and bank statements. b. Expenclitur The Project 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. -mmmm •m d. Procurement Reviewed the procurement of goods and services under the Project 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 Project during the period under review. f. Periodic Reports about the project Activities Reviewed the Agreement provisions, operational manual and the Financial Monitoring Reports and reconciled them with the project activities during the period under review. g. Project 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. 7.0 CATEGORIZATION AND SUMMARY OF FINDINGS 7.1 Categorization of findings The following system of profiling of the audit findings has been adopted to better prioritise the implementation of audit recommendations: Category Description 1 High signiAcance Has a significant/materal 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 h7gh 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 s/gniflcance 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 findings No Finding Significance 8.1.1 Wrong computation of per diem Moderate 6 -m•m- 8.2.2 Budget performance High 8.3 Follow up of World Bank review recommendations Moderate 8.0 DETAILED FINDINGS 8.1 Compliance with the Financing Agreement & GoU Financial Regulations It was observed that management had complied in all material aspects with the financing agreement and GoU financial regulations. 8.2 General Standards of Accounting and Internal Control A review carried out on the General Standards of Accounting and internal control system revealed the following shortcomings; 8.2.1 Wronq computation of Per Diem It was noted that an equivalent of US $ 1,724 in respect of per diem was paid in Uganda Shillings using an incorrect exchange rate of UGX.3,393.43 instead of UGX.3,339.43 which translated into UGX.5,850,273 instead of UGX.5,757,177. Therefore, the computation error resulted into an over payment of UGX.93,096. There seems to have been an oversight in checking with regard to the computation. Wrong computation may result into incorrect amount being paid. Management explained that there was a transposition error in the exchange rate figure. The over-paid amount was recovered and a copy of the receipt and bank deposit slip were filed with the project accounting records. I advised Management to ensure that payment documentation is subjected to adequate checking prior to effecting payment. 8.2.2 Budget performance (a) Expenditure versus budget I noted that planned activities were fully executed and their expenditure were within the budget, showing minor positive variances which were due to estimates in USD made at higher exchange rates than the exchange rates eventually used for effecting payments. However, there were two budget lines/activities that had material variances as shown below; 7 -h-+ - v - (i) Transport equipment - variance of UGX.517,569,670 This was due to planned activities not undertaken, namely the procurement of trip vehicles and buses. (ii) Office accommodation - variance of UGX.630,000,000 This was due to the planned construction of the URSB office which was not undertaken due to delayed procurement process. I advised project management to ensure project activities are executed as planned. 8.3 Follow up of World Bank review recommendations It was noted that the agreed upon actions were attained, except for the following; Agreed action Status Management comments 1. PSFU to finalize the Not applicable. Roll out differed due to procurement of the Smart proposed changes in Card system for UWA technical specifications for a more robust system. The system was abandoned in favour of another. 2. Establish a banking Not attained. A Memorandum of counter at the MLHUD understanding has been headquarters to collect entered between MLHUD and stamp duties and all fees. Diamond Trust Bank for establishment of a banking counter. I await management's follow up action. 8 ½a-a-- i. mh-m- ==== • =- APPENDIX I FINANCIAL STATEMENTS 9 -km•ra ma--a COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) COMPONENT 2- 5 (IDA CREDIT AGREEMENT CR 52690-UG) PROJECT ID P1 30471 AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2016 COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 - Audit Report for the Year ended 30 June 2016 ACRONYMS AG - Accountant General AGO - Accountant Generals Office BlK - Benefits in Kind BOU - Bank of Uganda CEDP - Competitiveness and Enterprise Development Project CG - Central Government CMA - Capital Markets Authority DA - Designated Account DP - Development Partner DST - Deputy Secretary to Treasury FA - Financing Agreement GOU - Government of Uganda HQ - Headquarters HTTI - Hotel and Tourism Training Institute IDA - International Development Association IECS - Information Education and Communication Strategy IFMS - Integrated Financial Management System IFRs - Interim Financial Reports ITA - Income Tax Act KCCA - Kampala Capital City Authority LIS - Land Information System M&E - Monitoring and Evaluation MDA - Ministries, Departments and Agencies MGF - Matching Grant Facility MICE - Meeting Incentives Conventions and Events MLHUD - Ministry of Land Housing and Urban Development MOFPED - Ministry of Finance, Planning and Economic Development MOU - Memorandum of Understanding •I-m- m-a--u COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 -5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the Year ended 30 June 2016 ACRONYMS MTEF - Medium Term Expenditure Framework MTWA - Ministry of Tourism Wildlife and Antiquities NCDC - National Curriculum Development Centre NCHE - National Council for Higher Education NSSF - National Social Security Fund OAG - Office of the Auditor General PA - Project Agreement PAYE - Pay As You Earn PCU - Project Coordination Unit PDE - Procuring and Disposing Entity PPDA - Public Procurement and Disposal of Public Assets Authority PR - Public Relations PS/ST - Permanent Secretary/Secretary to Treasury PSC - Project Steering Committee PSCF II - Second Private Sector Competitiveness Project PSFU - Private Sector Foundation Uganda PTC - Project Technical Committee SGA - Subsidiary Grant Agreement TIMS - Tourism Information Management System UGX - Uganda Shillings UIA - Uganda Investments Authority URA - Uganda Revenue Authority URSB - Uganda Registration Services Bureau USD - United States Dollars UTB - Uganda Tourism Board UWA - Uganda Wildlife Authority VAT - Value Added Tax Imi-mes- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 -5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the Year ended 30 June 2016 TABLE OF CONTENTS Page 1.0 Project Information 1 2.0 Project Management Report 2.1 Project background 3 2.2 Project key dates 3 2.3 Project Development Objective (PDO) 3 2.4 Project scope 4 2.5 Governance 4 2.6 Project financing 5 2.7 Project components 5-8 2.8 Project Agreement between PSFU and the World Bank and Subsidiary agreement 8 between (GOU) and PSFU on the implementation of (CEDP) 2.9 GOU Responsibilities 8 2,10 Subsidiary Grant Agreement 8 211 CEDP Funding for the FY 2015/16 9 2.12 Performance Highlights for the FY ended 30 June 2016 9-15 2.13 Project Implementation Challenges 16 2.14 Internal Audit 17 3.0 Statement of Project Management Responsibilities 18 4.0 Audit Objectives, Scope, Approach and Results 4.1 Audit objectives 19 4.2 Audit scope 19-20 4.3 Audit methodology 20-21 4.4 Results of the audit 22-24 5.0 Independent Auditor's Report on the CEDP-PSFU Financial Statements 25 - 26 4-rm- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the Year ended 30 June 2016 TABLE OF CONTENTS Page 6.0 Independent Auditor's Report on the IDA Designated Account Statement 27- 28 7.0 Financial Statements 7.1 Statement of Comprehensive Income 29 7.2 Statement of Financial Position 30 7 3 Statement of Cash Flows 31 T4 IDA Designated Account Statement 32-34 7.5 Notes to the Financial Statements 35-41 76 Budget performance 42-44 8.0 Internal Control Structure 8.1 Independent Auditor's report on internal control 45-46 8.2 Findings and recommendations on internal control 47 8.3 Follow up on previous year 2014115 audit issues 48-49 8.4 Follow up on World Bank recommendations 50 8.5 Verification exercise 51 9.0 Compliance with Funding Terms, Applicable Laws and Regulations 9.1 Independent auditor's report on compliance 52 (iv) - 군 COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 1.0 PROJECT INFORMATION FUNDERS International Development Association 1818 H Street, NW Washington, DC 20433 United States of America Government of Uganda represented by MoFPED Plot 2-12 Apollo Kaggwa Road P.O. Box 8147 Kampala. Uganda OFFICE AND PLACE OF BUSINESS Private Sector Foundation Uganda CEDP Coordination Unit Plot 43, Nalkasero, Road, P.O Box 7683, Kampala Tel', 0312-214600 Email: info@cedp.go.ug Website: www.cedp.go.ug PROJECT SECRETARIAT, COORDINATION UNIT AND COMPONENT MANAGERS Mr. Gideon Badagawa Executive Director, PSFU PROJECT COORDINATION UNIT MANAGEMENT TEAM John Marie Kyewalabye - Project Coordinator Elijah Tugume - Financial Management Specialist Stephen Alongu Ariko - Procurement Specialist Richard Ojilong - M&E Specialist Lillian Akot Okura - Communication Specialist David Lutwama Kasule Project Engineer Joseph Lubega Internal Auditor COMPONENT MANAGERS 1 Richard Oput Project Coordinator- PCU 1 2 Bemanya Twebaze - Registrar General, URS8 3A Miriam Amori Namutosi - Ag. Principal, HTTI 315 Grace Aulo Mbabazi - Ag. Director, Wildlife & Antiquities 3C Dr. Andrew Seguya - Executive Director, UWA 3D Stephen Asiirnwe - Chief Executive Officer, UTB 4 Dan Kisekka Manager, Matching Grant Facility (MGF), PSFU 5 John Marie. Kyewalabye Project Coordinator PCU 2 L几叫．~. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) C o rn ponent 2 - 5 (1 DA C redit Ag reement C R 52690- UG) Proj ect I D P1 30471 Audit Report for the year ended 30 June 2016 1.0 PROJECT INFORMATION BANKERS Bank of Uganda P.O. Box 7120 Kampala, Uganda AUDITORS: (For and on behalf of the Auditor General) PIM + CO Certified Public Accountants loth Floor, Uganda House Plot 8-10, Kampala Road. P.O. Box 866 Kampala, Uganda. E-mW : LimLcfd p co m pim.company@yahoo.com Website: www.pirncoug.com f � � � t t г г f f � � г � г � � � г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project I D PI 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT The Management of the Competitiveness and Enterprise Development Project (CEDP) presents its Annual Report and Financial Statements for the year ended 30th June 2016. 21 PROJECT BACKGROUND The Competitiveness Enterprise Development Project (CEDP) is a US $102.5 million, five year Government of Uganda GoU) Project financed under 0A credit of US$ 100 million and Government of Uganda contribution of US$ 2,5 million. The Project c;ornprises five components and is implemented by seven Agencies as shown below:- Component Implementing Agency AllocaUon in US $ (000,000) 1 . Land Administration Reform MLHUD 54.0 2. Business Registration URSB 10.0 3. Tourism Competitiveness HTTI, UWA, UTB and MoTWA 25.0 Development 4. Matching Grant Facility PSFU 8,0 5, Project Implementation PSFU (PCU I and H) 6,5 6. Total 102.5 The PC U at PSFU is directly responsible for com po nents 2-5 having a total allocation of US $46 mil lion from I DA and manages GoU contribution. 2.2 PROJECT KEY DATES The Project was approved by the WB Board on May 9, 2013, signed January 31, 2014, became effective June 6, 2014, and planned to close on March 31, 2019. Operations effectively commenced on July 2, 2014. The report details the projects' second year of implementation. 23 PROJECT DEVELOPMENT OBJECTIVE (PDO) The Project Development Objective (PDO) is to improve the competitiveness of enterprises in Uganda by providing support for: (1) the implementation of business environment reforms, including land administration reform; and (ii) the development Of pTiority productive and service sectors, COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.4 PROJECT SCOPE The project activities focus on support for creating an enabling business environment specifically in business registration and licensing; Tourism competiveness development and Enterprise development support to MSMEs through provision of matching grants to enterprises in selected sub-sectors of tourism; coffee; grains and pulses; horticulture; edible oils; fisheries and information technology/business process outsourcing. 2.5 GOVERNANCE The Project Steering Committee (PSC) The PSC is in place and provides policy/strategic guidance and oversight. It receives and takes action on reports from the PTC. The PSC provides a mechanism for GoU to plan and effectively monitor CEDP implementation towards attainment of the project development objective of enhancing competitiveness of the private sector. It is chaired by the Permanent Secretary/Secretary to the Treasury (PS/ST) and comprises of Permanent Secretaries from ministries responsible for the respective project components and private sector representatives with its secretariat at PSFU. Project Technical Committee (PTC) The PTC is responsible for providing day-to-day technical guidance and supervision of project implementation including: (i) review of consolidated annual work plans, budget, and procurement plan, as well as regular reviews of project M&E data to determine progress and propose any adjustments to the PSC to ensure project effectiveness and satisfactory achievement of end-of-project outcomes; (ii) consensus building on key policy issues related to implementation; and (iii) monitoring of issues related to implementation of reforms and environmental and social safeguard and due diligence work. The PTC, whose secretariat is at PSFU, meets monthly basis and prepares quarterly reports for presentation to the PSC. The PTC is chaired by the Executive Director, PSFU and comprises of all Heads/Chief Executives of implementing agencies with its secretariat at PSFU. Project Coordination Unit (PCU) The Executive Director of PSFU is the designated Accounting Officer of project and has overall responsibility for coordinating and implementing the Project components 2 - 5. The Project Coordinator with a team of technical staff under the Project Coordination Unit (PC U) support the implementation of the project. r r i r i[ r r r I COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.6 PROJECT FINANCING Total Project financing is US $ 100 million (SDR 66.1 million) as IDA credit with $ 54 million financing for component 1 (Land Reforms) and $ 46 million for components 2-5 and GoU contribution of US $ 2.5 million. During the financial year 2015/16, total disbursements received from the IDA for components 2-5 amounted to US $ 10.11 million and GoU contribution of Uganda Shillings 800 million. Cumulatively IDA has disbursed US $ 12.4 million and GOU Uganda Shillings 1.6 billion for the components above. Source of Funding GoU IDA (World Bank) Channel: Treasury [DA Credit Account Access MoFPED Treasury Single Account Designated Account CEDP-GoU-UGX Account Project Financing Agreement dated 31 Project Financing Agreement dated 31 Legal Document January 2013 (CR. 5269 UG / Subsidiary January 2013 (CR. 5269 UG/Project Grant Agreement) Agreement) 2.7 PROJECT COMPONENTS Component Scope of Work Component 1: The Component is supporting the continuation and scale up of Land Reform processes carried out under the PSCP I1. It involves: Land Administration Reform a) Improving land administration including rolling out the land information system (LIS) b) Strengthening land Valuation and land use planning functions, developing and strengthening Geodetic, Surveying and mapping policies and infrastructure, supplying base maps for the project and supporting the Uganda Land Commission's Housing and Urban Policies and Programmes c) Systematic Registration of Communally and Individually owned lands d) Strengthening Systems and Institutions for Land Dispute Resolutions e) Strengthening Land Administration and Management Institution { г � г � г г г r � � � г ; i i г г г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2,7 PROJECT COMPONENTS - (contd) Component Scope of Work Component 2: This component objective is to red uc the"b urd-en -for businesses -in de-aling with registration and licensing procedures by creating an online one-stop-shop for Business RegIstration and Licensing business registration and e-registry for business licensing, and by implementing Reforms measures aimed at simplifying and streamlining business registration and licensing procedures. The component is financing the following broad activities - Strengthening business registration and licensing processes, in particular: (i) Construction of Uganda Business Facilitation Centre that will accommodate URSB/UIA/CMA and a physical One Stop Centre (4) Establishing an e-Registry for business Licensing 'including, an appropriate technology platform and software application (iii) Establishing One Stop Shop for Business Registration, including a network of local and regional offices (iv) Streamlining Business RegIstration and Licensing procedures (Eliminating unnecessary procedures) (v) Carrying out an impact assessment of the said reforms. (b) To Implementing capac ty building activities for URSB. and other relevant regulatory agencies staff. (c) Developing and implementing information, education & communication strategy (IECS) г г � г г г г t г г г t г t г г t г г { COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.7 PROJECT COMPONENTS - (contd) Component Scope of Work _Y_ . The objective of this component is to provide support to the tourism sector th ough strengthening public and private sector stakeholders and their collaboration to develop Tourism Competitiveness a competitive tourism offering. The activities supported under this component iriclude Development (a) Development of the Labour force for the Tourism Sub sector through the following; i. Construction and equipping the Hotel and Tourism Training Institute ii. P rovis ion of tra i n i n g fo r t he I n stitute I nstructo rs a nd Ad m i n istrators iii. Reviewing and Accrediting the Institutes and Curriculum and Instructional Programmes iv. Developing and implementing a sustainable business model including a revenue generating strategy for the institute (b) Strengthening the capacity of the MoTWA and UTB through: j. Developing technical skills of tourism sector staff ii. Tracking tourism sector performance iii. Designing and implementing lodging classification and grading system iv. Implementing relevant policies, including the national tourism levy (c.) Tourism product planning, packaging and promotion through: Developing and implementing: i. Tourism products ii. Tourism value chain packages and supporting linkages between public and private sector entities iii. Marketing and promotional materials iv. Strengthening the capacity of sector institutions/. agencies Component objective is to enhance the capacity productivity and competitiveness Matching Grant Facility of the private sector enterprises through provision of Matching Grants for undertaking business development services including but not limited to technology improvement, management training, record keeping, quality certification and marketing. The grants are being made to enterprises operating in the key priority sub-sectors namely: tourism; coffee; grains and pulses; horticulture; edible oils; fisheries and information technology/business process outsourcing. The component will contribute to increasing productivity sales revenues and provision of employment at firm level. J г � г г � г � г г � � г � г г � г г г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (1 DA Credit Agreement CR 52690-UG) Project I D P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.7 PROJECT COMPONENTS - conf'd) Component Scopoz-of Wo.rk z Component 5: The objective of the component is to Strengthen the capacity of the PSFUI for Project Implementation overall coordination and management of activities through: (a) Provision of technical advisory services, goods, non-consulting services, 1 training, and operating costs (b) Strengthening transparency and governance arrangement for the project (c) Develop and implementing an Information, education and communications strategy for the project 2,8 PROJECT AGREEMENT BETWEEN PSFU AND THE WORLD BANK AND SUBSIDIARY AGREEMENT 8 ETWEEN GOVERNME NT OF U GAN DA (GoU) AN D PSFU FOR TH E I MPLEMENTATI ON 0 F CED P The Project Agreement and the Subsidiary Grant Agreement show the responsibilities of PSFU, related Agencies and GoU in the implementation of CEDP. The Agreements cover the financial and technical support to the project, and spell out the coordinating framework for consultation between the signatories for joint reviews of performance, common procedures on disbursements, reporting and audits. 2.9 GoU RESPONSIBILITIES GoU is fully responsible and accountable for the implementation and management of the credit. GoU delegated authority for the overall coordination of implementation of the Project to PSFU through a grant subsidiary agreement entered on March 28, 2014. However, GoU maintains the oversight roles and provides strategic guidance through the Project Steering Committee (PSC) chaired by the PSST. PSFU is required to maintain financial records in accordance with GoLl financial management and accounting regulations/guldelines. Under the Project Operations Manual, Financing Agreement and Project Agreement PSFU is required to clearly identify and incorporate activities financed under the project 'in the Medium Term Expenditure Framework and Annual National Budget. 2.10 SUBSIDIARY GRANT AGREEMENT GoU entered 'into Subsidiary Grant Agreement with PSFU delegating authority for overall coordination and implementation of the project with respective Agencies, PSFU was required to establish a PCU to technically support implementation of the project- A fully constituted and functional PCU is in place. PSFU also has a delegated contracts committee and PSFU chairs the PTC. г i г г г г i г i i г i г г � i г г г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Co rn ponent 2 - 5 f IDA C redit A9 reement C R 52690- U G) Proj ect I D P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.11 CEDIP FUNDING FOR THE FY 2015116 The project had an opening balance of US $ 1,381,376 and received US $ 10,110,000 from IDA applied for during the year. Government of Uganda released UGX 800 million as a contribution and UGX 17.8 million was received from sale of bidding documents. 2.12 PERFORMAN CE H IG H Ll G HTS FOR FY ENDED 30 J U IN E 2016 The main objectives for the second year of implementation were: - 1 To finalize designs and commence construction for infrastructural related activities majorly under MLHUD, HTTI and URSB and UWA. 2) Installations of the various IT systems to support automation of processes especially at MLHUD, URSB and UWA. 3) To undertake continuous monitoring of implementation progress, capturing the results, accountability and promoting leaming. 4) Continue strengthening institutional capacity of agencies through provision of technical support and targeted staff training and equipping in bid to ensure sustainability post project, 5) To finalize and implement the communication strategy that will ensure continued stakeholder engagement and involvement to ensure buy in and support of the reforms being implemented as well as share project results, 6) Institute a robust M&E and results tracking mechanismfsystem aimed at supporting project as well as guide/inform project interventions. -rom- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (cont'd) Implementation Progress Component 2: Business Registration and Business Licensing Reforms The component is directly implemented by URSB. The objective of the component is to reduce the burden for businesses in dealing with registration and licensing procedures by creating an online one-stop-shop for business registration and e- registry for business licensing, and by implementing measures aimed at simplifying and streamlining business registration and licensing procedures. During the FY the following activities have been undertaken. Engagement of the Consultant to undertake design of the Central Office for URSB/ULIA/CMA/Physical One Stop Centre - Business Facilitation Centre was completed. Preliminary design was concluded, reviewed and approved in May 2016. The detailed design of the building will be concluded in October 2016. The procurement process for the Consultant to undertake design and installation of an Electronic Document Management System (EDMS) was finalized and the contract was signed on the July 1, 2016. Improvement of IT Infrastructure that involved structure cabling for local area network (LAN) and Wide area network (WAN) for both the headquarters and regional offices of URSB was completed. This has enabled linking of all the offices, easing communication and service delivery. a A Customer Call Centre was established and functional at URSB headquarters. A A review of the Business Licensing Reform Report and recommended reforms was undertaken and prepared a work plan for implementing the recommendations. A consultant was also engaged to support the MDAs in preparing principles for amending the laws on Business Licensing. 13 draft principles for amendment of business licensing related laws were delivered. x An upgrade of the E-licensing portal was finalized. This is a repository of over 520 licenses and provides vital information on business licences in terms of the type of license name, purpose and applicationlicense fee, duration of license, licensee requirements, legal basis and application forms. www.businesslicenses.go.us. a Seven staff from URSB and First Parliamentary Council undertook a benchmarking study tour on business licensing reforms to Zambia. 1 URSB established an interim records tracking system to enhance the process of registration through SMS/Email notification. " Two branches of URSB office were established at Nakivubo and Post Office building in Kampala- These have enabled decongesting the head office and easing access to services by the public. " Two pick-up trucks and four motor cycles were acquired and allocated to support Mbarara and Gulu regional offices. i i Е г � � г i г г � г г i � г г г г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project I D P1 30471 Audit Report for the year ended 30 June 2016 2,0 PROJECT MANAGEMENT REPORT 2.12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (cont'd) Implementation Progress - (contd) Component 2: Business Registration and Business Licensing Reforms - (contd) a URSB was equipped with 95 desktop computers, 30 laptops, 4 generators, 7 servers, 6 thermal printers, CCTV security cameras, access control, carpeting, 3 motor vehicles and a range of assorted furniture. 0 36 staff have been recruited comprising technical and administrative to support implementation of project activities. 9 A Consultant to undertake the Organization wide review of the structure, process and operations of URSB was engaged on the 1802016 and will complete the assignment in September 2016. The study will inform the restructuring of the entity in a bid to improve its effectiveness. W Radio infornercials have run on various radios to inform and educate the public on business registration, a 16 stakeholders' engagementsi workshops were undertaken across all regions of Uganda to sensitise the masses on business registration and business licensing. a Advertisement of the e- licensing port:al in both the print and electronic media was undertaken and has resulted in increase of hits locally and internationally to 23,000. a Specific Radio, TV talk shows, jingles & spot adverts for Gulu and Mbarara were ran at the respective media platforms. W Contract for Media Campaigns on Bukede and NTV were concluded. However, the actual campaigns will commence next financial year- s Business registration clinics/ barazas have been undertaken to sensitize and enhance registration where most of the business community members have benefited from instant registrations of business names and cerfificates given at ago. W The following IEC materials have been developed Quarterly Newsletter, business registration information guide book, branded pens for conference usage, branded business registration folders, branded business registration notebooks, branded business registration out-door banners, branded business registration car stickers branded tyre covers business name registration flyers Key Achievements towards attainment of the PDO 1) Business Name search is now instant 2) Business name reservations and searches may be conducted online 3) Number of days to register a business has reduced from 33 days baseline in 2013/2014 to I day. 4) Cost to register a business as a percentage of income per capita fell from 76.7% baseline to 39.7% in 2016. 5) There is an increase in number of businesses registered from 16,234 in 201312014 to 19,818 in 2015. 6) Increase in NTR collections per year from UGX 5 billion in 2010/2011 to over UGX 23 billion in 201412015 (URSB Records). COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (FDA Credit Agreement CR 52690-UG) Project 10 P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (contd) Implementation Progress - (cont'd) Component 3: Tourism Competitiveness Development The Component is directly implemented by 4 entities: The Ministry of Tourism Wildlife and Antiquities (MoTWA), Uganda Tourism Board (UTB), Uganda Wildlife Authority (UWA) and Hotel Tourism Training Institute (HTTI). The objective of this component is to provide support to the tourism sector through strengthening public and private sector stakeholders and their collaboration to develop a competitive tourism offering. Activities financed under the component are in three broad areas namely: Development of Labour force for tourism sub sector; Strengthening the capacity of the MoTWA and UTB and Tourism product planning, packaging, and promotion as detailed below: - fi) Development of labour force for the tourism sub-sector (HTTI) Key activities financed include: Preparation of the feasibility study and business plan to determine the viability of the investment (environmental, economic & financial), Design and construction supervision consultancy; training needs assessment, development and implementation of a training plan; a review of curricula and development of proposals for accreditation and engagement; development and implementation of a sustainable business model and revenue generation strategy. During the FY the following have been undertaken: * Engagement of Salzburg School Austria to undertake the feasibility study and preparation of business plan which was finalised and will feed into the design of the proposed facilities for the Institute. * Procurement of a consultant to undertake design and construction supervision of HTTI facilities was undertaken, finalised and consultants engaged. The execution has commenced. * The first stage of the curriculum review that involved development of a curriculum outline to international standard was completed with support from the Salzburg School Austria. HTTI completed the second stage of developing the curriculum details including specific course unit durations In line with the Ugandan standards with support from NCDC. This is expected to be concluded in September 2016 with a draft curriculum being submitted to NCHE for approval. (ii) Strengthening the capacity of MoTWA and UTB Key activities financed include: Development of technical skills of tourism sector staff, track tourism sector performance including collection, analysis and dissemination of appropriate data, implementation of relevant policies including national tourism levy. During the FY the following have been accomplished: I..I.w COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (confd) Implementation Progress - (cont'd) Component 3: Tourism Competitiveness Development - (cont'd) (ii) Strengthening the capacity of MoTWA and UTB * Completed the procurement of a consultant for design of the Tourism Management Information System (TIMS) * Procurement of firm to conduct capacity assessment for the 4 agencies was undertaken and is in the final stages of contracting. * The procurement of a consultant to support MoTWA in the development of the Meetings Incentives Conventions and Events (MICE) Policy commenced and will be concluded in October 2016. * The procurement for a consultant to undertake a Value Chain Analysis for Uganda was initiated and will be completed in October 2016. (iii) Tourism product planning, packaging, and promotion (UTB and UWA) Key activities financed include: implementation of a lodging classification and grading system, development and implementation of tourism products development and implementation of marketing and promotion activities. During the FY the following have been accomplished: * The procurement and engagement of the three PR firms to undertake market representation of Uganda in the USA, UK and Germany was concluded and firms commenced on the work. * Procurement of a consultant to undertake research on Tourism Product Development was initiated and will be concluded in October 2016. * UTB was supported to participate in 2 major international expos and run the 1st ever Pearl of Africa Expo to market Uganda. * Procurement of 5 - 52 seater domestic tour buses for UWA was concluded and delivery is expected in December 2016. * Procurement of 3 - 45 seater launches (motorized boats) was concluded and delivery is expected in December 2016. * Designs for proposed construction of six (6) Visitors Centres/ Gates at selected National Parks was finalized. * A Fleet management system was designed and installed for UWA * Procurement of an IFMIS for UWA was initiated and the process is on-going. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID PI 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2,12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (confd) Implementation Progress - (contfd) Component 3: Tourism Competitiveness Development - (cont'd) Key Achievements towards attainment of the PDO: 1) Increase in international tourist arrivals: The number of international tourist arrivals rose from 945,000 in 2010 to 1,206,000 in 2014 a percentage increase of 28%. The target for end of project is 1,500,000 arrivals in 2019. 2) Tourism sector employment: The number rose from 225,300 in 2010 to 520,000 in 2015 an increase of 130/o. The Project is targeting 1,000,000. Component 4: Matching Grant Facility The component is directly implemented by PSFU. The objective of the component is to enhance the capacity productivity and competitiveness of the private sector enterprises through provision of Matching Grants for undertaking business development services including but not limited to technology improvement, management training, record keeping, quality certification and marketing etc. Major activities include: Enhancing the capacity of PSFU to manage MGF, provide T/A & Grants for business development, and provide logistical and operational support to MGF). The grants are being made to enterprises operating in the key priority sub-sectors namely: tourism; coffee; grains and pulsesi horticulture; edible oils; fisheries and information technology/business process outsourcing. During the FY the following have been accomplished: * Three rounds of call for proposals were published in June/ December 2015 and April 2016 with a total of 850 applications received. * 244 Agreements have been entered with private sector enterprises with commitments totaling US$ 2,384,411 (34 %/ of the allocated total grant). * 67 Requests for re-imbursements were received totaling US$ 427,060 and reimbursement of US $ 302,526.66 has been effected. * A web Portal for the grant was developed and is being used for processing grants online. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT 2.12 PERFORMANCE HIGHLIGHTS FOR FY ENDED 30 JUNE 2016 - (cont'd) Implementation Progress - (confd) Component 4: Matching Grant Facility Key Achievements towards attainment of the PDO 1) Total number of enterprises approved is 235 up to the second call for proposals out of the targeted 500. An additional 170 applications under the third call are being reviewed and will change the total allocations. 2) Total number of direct project beneficiaries reached is 182,159 out of the targeted 400,000 for the 2nd year of implementation and the planned 1,000,000 over the project life time. With the completion of processing of the third call, this is expected to change. 3) Out of the reached beneficiaries, females comprise 50.3% above the target for two years' of 12% and the planned 18% over the project lifetime. Overall the targeting of the grant is very effective in reaching female beneficiaries. 4) The baseline values of the employees of the 235 supported enterprises is 7,801 staff (MGF database) Component 5: Project Implementation Coordination (PCU) The component is directly implemented by PSFU through a Project Coordination Unit (PCU). The objective of the component is to strengthen the capacity of the PSFU for overall coordination and management of activities through: (a) Provision of technical advisory services, goods, non-consulting services, training, and operating costs (b) Strengthening transparency and governance arrangement for the project (c) Developing and implementing an information, education and communications strategy for the project. During the FY the following has been accomplished: * The PCU is fully constituted and continued to technically support the implementing agencies and undertaking coordination role of the project. * The Contracts committee continued supporting project procurement processes. * The PSC met 6 times and continues to provide oversight and strategic guidance * The PTC meets regularly, reviews and discusses implementation progress. * The World Bank conducted both the financial and procurement reviews and project was rated satisfactory. * MTR for the project undertaken and completed in August 2016. * The Project's Results Framework was reviewed to align it to the activities being financed and the indicators. * The PCU submits timely Interim Financial Reports (IFRs) to IDA. * Progress reports to GoU have been submitted up to June 2016. * Project IEC materials have been developed, produced and circulated to various stakeholders. Key Achievement towards attainment of the PDO 1) The project is currently rated moderately satisfactory by iDA and satisfactory by Office of the Prime Minister. 2) The project still remains on course towards attainment of the PDO. 3) The project has covered 44% of its lifecycle with disbursement of 32%. 4Isa-m- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT {CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT Implementation Progress - (cont'd) 2.13 PROJECT [MPLEMENTATION CHALLENGES The project faced a few challenges as detailed below: 1) Exchange rate risk - The project suffered an exchange loss of about US$ 8 million due to the significant appreciation/ gains of the US$ against the SDR. This has resulted into a financing gap that is being closely monitored. The recovery has been rather slow and may not adjust. In the event that the loss persists, there will be an impact on implementation of planned activities. 2) Low absorption of funds - The project absorption rate was low, largely attributed to delayed start of implementation of the project and the lengthy procurement processes it has begun picking up in line with concluded procurements. The project lost 1 year and 2 months between approval and declaration of effectiveness. 3) Delayed release of GoU contribution: During FY 2015/2016 there were delays in releasing funding for quarter 2 and quarter 3. This affected execution of activities ear-marked for financing under GoU contribution. 4) CEOP is under PSFU and financing is managed as a subvention, this has caused challenges in budget programming into one expenditure item. This distorts budget execution when operating using the IFMS system given that budget allocation is appropriated on a single transfer item Which is not suitable for operating under IFMS. Addressing the anomaly requires breakdown of budget into various expenditure items to enable spending and reporting that is in line with the financial management requirement. 5) Preparation of ambitious plans: There has been a tendency for implementing agencies to prepare rather ambitious work-plans including numerous activities which at the end of year remain un-implemented. This is partly caused by lack of proper scheduling/sequencing of activities within the project time lines. 6) Delayed enactment of key legislation that complement the reforms being taken 7) Inadequate capacity at agency level that affects the pace of implementation of activities and sustainability post project w masad- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 2.0 PROJECT MANAGEMENT REPORT Implementation Progress - (cont'd) 2.14 INTERNAL AUDIT The internal audit function of the project is handled by the Internal Auditor with oversight of the Ministry of Finance Accountability Sector Audit Committee and the Project Steering Committee. The respective entity Internal Audit Departments are also involved in undertaking specific audits for example Uganda Registration Services Bureau (URSB) conducted a systems and internal audit review. The URSB conducted an internal audit review regarding functions of the components and audit verification for specific items acquired during the year. Executive Director, PSFU Project Coordinator ial Management Specialist Kampala, Uganda Date 2016 U F I -a-w -me- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 3.0 STATEMENT OF PROJECT MANAGEMENT'S RESPONSIBILITIES Section Il B 1 of the Project Agreement between IDA and the Government of Uganda requires that the Project management maintains a financial management system and prepares financial statements in accordance with consistently applied and acceptable accounting standards, both in a manner adequate to reflect the operations and financial condition of the Project Implementing Entity; including the operations, resources and expenditure related to its respective Par of the Project- The management of Competitiveness and Enterprise Development Project (CEDP) is responsible for preparing the financial statements for each financial year which gives a true and fair view of the state of affairs of project as at the end of the financial year. The Project management are required to ensure the project keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the project. They are also responsible for safeguarding the assets of the project. The management is ultimately responsible for the internal controls The overall management delegate responsibility for internal control to project management. Standards and systems of internal control are designed and implemented by management to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard. verify and maintain accountability of the project's assets. Appropriate accounting policies supported by reasonable and prudent judgements and estimates are applied on a consistent basis. These systems and controls inc!ude the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties- The management of the Project accept responsibility for statement of comprehensive income, statement of financial position and special account activity statement which has been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates. The management of the project are of the opinion that the statement of comprehensive income, statement of financial position and Special account activity statement gives a true and fair view of the state of the financial affairs of the project and of the results of its activities. The management of the project further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of the financial statement of the project, as wel dequate systems of internal financial control. Executive Director Project Coordinator Fin e9magpment Specialist .Nx i � i � г г i г � г � г г г r г � � [ COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) C ornpu nent 2 - 5 (1 DA Credit Aq reement C R 52690-UG) Project I D PI 30471 Au d it Report f or t h e year end ed 30 Ju ne 2016 4.0 AUDIT OBJECTIVES, SCOPE, APPROACH AND RESULTS The Auditors, Messrs PIM + CO. were appointed by the Auditor General to carry out the audit of Competitiveness and Enterprise Development Project (CEDP) Component 2-5, (IDA Credit Agreement CR.52690-UG) for the year ended 30 June 2016. 4.1 AUDIT OBJECTIVES ARE TO: 0 Express an opinion on whether the project's financial statements present fairly, in all material respects, revenues received, costs incurred and commodities and technical assistance directly procured by IDA for the period audited is in conformity with the terms of the agreement and generally accepted accounting principles or other comprehensive basis of accounting (including the Gash receipts and disbursements basis and modifications of the cash basis). 0 Evaluate and obtain a sufficient understanding of the recipient's internal control related to IDA funded project: assess the soundness and adequacy of the project's procedures, and whether those procedures are consistently applied by the project in the normal course of operations, a Perform tests to determine whether the recipient complied, in all material respects, with agreement terms (including cost-sharing, if applicable) and applicable laws and regulations related to IDA - funded projects. At[ material instances of non compliance and all illegal acts that have occurred or are likely to have occurred should be identified. Such tests should include the compliance requirements related to required costs-sharing contributions, if applicable. 0 To establish whether all external funds have been used in accordance with conditions of the relevant legal agreements, with due attention to economy and efficiency and only for the purposes for which the financing was provided; 0 To establish whether counterpart funds have been provided and used only for the purposes for which they were provided and in accordance with the relevant financing agreements, with due attention to economy and efficiency; 0 Establish whether goods and services financed have been procured in accordance with relevant financing agreements; a To establish whether proper books of accounts were duly kept in accordance with the generally accepted accounting principles. 4,2 AUDIT SCOPE The audit scope required us to design and carry out sufficient audit steps and procedures in accordance with International Standards on Auditing to ensure that the audit objectives were met for the year ended 30 June 2016. The scope of the assig nrnent covered loan by IDA and GoU contribution for the implementation of Competitiveness and Enterprise Development Project (CEDP) Component 2-5, (IDA Credit Agreement CR.52690-UG). COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 4.0 AUDIT OBJECTIVES, SCOPE, AUDIT APPROACH AND RESULTS 4.2 AUDIT SCOPE - (cont'd) Geographical coverage of the assignment The coverage of the assignment was as follows: - Project office of Private Sector Foundation Uganda, CEDP Coordination Unit, Plot 43 Nakasero Road, P.O.Box 7683, Kampala, Uganda location for all accounting records of the project where the audit was conducted. 43 AUDIT APPROACH (METHODOLOGY) We designed our audit approach in accordance with International Standards on Auditing in order to achieve the audit objectives. The following audit procedures were undertaken during the course of the audit: * Held initial entry meeting with management of the Project on 2nd September 2016. The meeting was to agree on a detailed plan about how the audit was to be conducted; * Performed audit procedures to ensure that the financial statement provided to us by the management reflected the operations relating to the conduct of the project's activities; * Performed audit procedures on transactions relating to the project's activities to ensure that they were eligible expenditure and that they were property authorized and adequately supported; * Performed audit procedures to check the validity of the funds received from IDA processes and reflecting these in the bank account, and cash and bank balances existing as at the date of audit. * Requests for confirmations were sent to confirm bank balances and the amounts received from the World Bank (IDA); * Reviewed the internal control structure of the project and the extent to which financial management and reporting was adhered to by all parties: * Requested and reviewed progress reports, contract agreements and other important correspondences. * Examined the bank statements and cash books to determine that the funds were properly controlled and accounted for; investigated any unusual reconciling items in the bank reconciliations reviewed and in the cash book. vm-me- -mmmm COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 4.0 AUDIT OBJECTIVES, SCOPE, AUDIT APPROACH AND RESULTS 4.3 AUDIT APPROACH (METHODOLOGY) - (cont'd) * Carried out a detailed review of procurement transactions to ensure adherence to control procedures required by the funder. * Assessed completeness of records and inquired from project management any changes during the period * Reviewed and assessed compliance with applicable laws, regulations and procedures. * Carried out verification of the expenditure incurred during the period and obtained an understanding of the project accounting system, assessed its adequacy as a basis for the preparation of the project financial statements and established whether adequate records were maintained. Paid particular attention to establish whether; * All Bank funds have been used in accordance with the conditions of the financing agreement, with due attention to economy and efficiency and only for the purposes for which the funds were provided; * Government contribution have been provided and used in accordance with the conditions of the funding agreement, with due attention to economy and efficiency and only for the purposes for which they were provided; * Goods, works and services financed have been procured in accordance with the funding agreement and in accordance with the Bank's rules and procedures; and have been properly accounted for; * Appropriate supporting documents, records and books of accounts relating to all project activities have been kept and clear linkages exist between the books of accounts and the financial statements presented to the Bank: In particular the accuracy and propriety of expenditures withdrawn under IFR procedures were reviewed to provide assurance that the Project had maintained adequate supporting documentation to support claims for reimbursement of expenditures incurred. * Designated Account has been maintained in accordance with the provisions of the financing agreement and in accordance with the Bank's disbursement rules and procedures * The financial statements have been prepared by project management in accordance with applicable accounting standards mentioned above and give a true and fair view of the financial position of the Project as at the year end and of its receipts and expenditures for the period ended on that date; * Comprehensive assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures and other financial transactions and ensure safe custody of project-financed assets and that they are being used for the intended purposes * Project fixed assets are real, properly evaluated and project property rights or related beneficiaries' rights are established in accordance with loan conditions; and * Ineligible expenditure identified during the audit will be reflected in a separate paragraph of the audit report and if material, the point should be reflected in the auditor's opinion. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID PI 30471 Audit Report for the year ended 30 June 2016 4.0 AUDIT OBJECTIVES, SCOPE, AUDIT APPROACH AND RESULTS 4.4 RESULTS OF THE AUDIT 4.4.1 Summary of audit results (i) Financial statements a) Statement of Income and Expenditure Below is a summary of funds disbursed to Competitiveness and Enterprise Development Project (CEDP) Component 2-5 and expenditure incurred during the year ended 3011 June 2016. STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 30TH JUNE 2016 FY 2015116 FY 2014115 Actual Actual Actual Actual Notes (Ugx) (USD) (Uqx) (U SD) Income received Fund balance at 01-07-2015 4,554,077,786 1,381,376 IDA 7.5.2 34,421,489,427 10,110,000 6,785,760,060 2,328,136 Counterpart transfers from GOU 7.5.3 800,000,000 234,970 800,000,000 274,473 Other Income 7.5.4 24,515,800 7,201 2,000,000 686 Foreign exchange difference (Gains) 98,156,075 - 467,550,463 - Total funds available 39,898,239,088 11,733,547 8,055,310,523 2,603,295 Operating expenses Employee costs 7,5.5 201,607,787 59,215 1,155,139,595 396,318 Goods and services consumed 7.5.6 10,727,488,618 3,155,284 1,993,609,365 703,464 Consumption of property, plant and equipment 7.5.7 3,923,246,474 1,152,304 382,732,258 131,312 Total expenses 14,852,342,879 4,366,803 3,531,481,218 1,231,094 Excess of funds over expenditure for the Year 25,045,896,209 7,366,744 4,523,829,305 1,372,201 Note: Exchange gain of shs 98,156,075 arose as a result of rising currency exchange rates between Uganda shilling and US Dollar. Funds denominated in US Dollar at the time of receipt were translated into more UGX equivalent due to a higher exchange rate (3,404.70/$1) as compared to the same amount in US dollars translated into a lower UGX equivalent when the exchange rate (3,399.86/$1) had dropped by balance sheet date. The same amount in US dollars does not have any gain. 1 1 1 # Э # 1 1 1 i t 1 1 1 Э } # I 1 COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (1 DA C red it Agreem ent C R 52690-U G) Project I D P1 30471 Audit Report for the year ended 30 June 2016 4,0 AUDIT OBJECTIVES, SCOPE, AUDIT APPROACH AND RESULTS 4A RESULTS OF THE AUDIT - (cont'd) 4.4.1 Summary of audit results - (contd) (i) Financial statements - (contd) b) Statement of Financial Position STATEMENT OF FINANCIAL POSITION 2015116 201W15 ASSETS Notes U9X US$ Ugx US$ Non-current assets Fixed assets 7.5.1.(c) - Current assets Cash and cash equivalents 7.5.8 25,431,166,701 7,480,063 4,554,077,786 1,381,376 Total assets 25,431,166,701 7,480,063 4,554,077,786 1,381,376 REPRESENTED 13Y Fund balance 7,510 25,015,647,729 7,357,846 4,523,829,306 1,372,201 Current liabilities Payables 7.5,11 415,518,972 122,217 30,248,480 9,175 Total funds and liabilities 25,431,166,701 7,480,063 4,554,077,786 1,381,376 j J I j J J I J j COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 4.0 AUDIT OBJECTIVES, SCOPE, AUDIT APPROACH AND RESULTS 4.4 RESULTS OF THE AUDIT - (cont'd) 4.4.1 Summary of audit results - (contd) (i) Financial statements - (cont'd) c) Results on revenue and costs * Reach an opinion as to the validity of the statement of income and expenditure, statement of financial position and Designated Account (DA) activity statement The statement of income and expenditure, statement of financial position and Designated Account (DA) activity statement as at 30 June 2016 are fairly stated. d) Identify, evaluate and report on the internal control structure. Project management has established a functional system of internal controls. Internal control weaknesses identified which have been discussed in sections 8.2 of this report in details and now summarised below: We have set out issues identified during the course of our normal audit work and have not attempted to indicate all possible improvements which a special review might develop. Ranking The issues have been ranked as high, medium or low using the criteria described below: High: This indicates an issue we consider high risk and is critical. The project management should pay particular attention to this area to ensure that the issue is given high priority to be addressed and resolved. Medium: This indicates a medium level of risk, where we felt there is some scope of a material misstatement in this area and therefore the responsible manager should review it carefully. Low: Any issues in this area are regarded as having a low level of risk. Whilst not critical, the responsible manager should be aware of this issue and monitor it to ensure it does not become medium or high risk. Ref Summary of the issueslweaknesses Priority (high/mediumlow) 8.2.1 VVrong computation of per-diem Low e) Reach an opinion as to whether or not the audit complied in all material respects with terms of financing agreement and applicable laws and regulations. PSFU complied in all material respects with applicable laws and regulations. (ii) Follow up on prior year (2014/15) audit issues Establish whether the prior year audit recommendations were actioned. Prior year audit recommendations were all actioned. ■ 밍 『－ PIM+CO PrimeGlobal Certified Public Accountants COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 5. 0 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS Report on the Financial Statements We have audited the financial statements of the Competitiveness and Enterprise Development Project (CEDP) Component 2-5, (IDA Credit Agreement CR.5269-UG), for the year ended 301h June 2016 set out on pages 32 to 37 These financial statements comprise of the statement of financial position, statement of income and expenditure and statement of cash flows for the year ended which have been prepared on the basis of the accounting policies set out on page 38- Project Management's Responsibility for the Financial Statement As stated on page 18, management of the Project is responsible for the preparation and presentation of these financial statements in accordance with the Project's accounting polides. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial staternents are free of material misstatement, An audit involves performing procedures to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design the audit procedures that are appropriate for 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. We believe that the audit evidence we have obtained was sufficient and appropriate to provide a basis for our audit 25 AUDITMG, ACCOUNTiNG, TAX & BUSINESS ADVISORY SERVICES 1()th Floor, Uganda House, Plot 8-10 Kampala Road, RO-Box 866, Kampala, Teli+256-414-345116, Fax.+256-414-234553 E.maii.pimcoapimcoug.com, pirn.company(?Pyahoo-com Website: www.pimcoug.com ( f t i i I I I I i COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 5.0 INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Competitiveness and Enterprise Development Project (CEDP) Component 2-5, as at 30 June 2016 and its financial performance and cash flows for the year then ended. in accordance with the terms of the agreements and in conformity with the basis of accounting poiicies described in paragraph 75.1 of the report. Report on other Regulatory requirements Section || B.2 of the Project Agreement between IDA and the Government of Uganda requires that the Project Implementing Entity shall have its financial statements audited by independent auditors acceptable to the Association, in accordance with acceptable consistently applied auditing standards. In carrying out our audit, we have considered and report to you, on the following matters, a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit b) In our opinion, proper books of account have been kept by the project, so far as appears from our examination of those books: c) The Projects Financial Statements are in agreement with books of accounts PIM + CO. Certified Public Accountants Kampala Date 4i I Z(2) Certt ed xi c Ac0ounajt PIM+CO PrimeGlobal Certified Public Accountants COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 6.0 INDEPENDENT AUDITOR'S REPORT ON THE IDA DESIGNATED ACCOUNT STATEMENT Report on the IDA Designated Account Statement We have audited the IDA Designated Account Statement of the Competitiveness and Enterprise Development Project (CEDP) Component 2-5, for the year ended 30' June 2016 set out on page 35 - 37 which has been prepared on the basis of the accounting policies set out in note 7.5.1. Project Management's Responsibility for the Designated Account Statement Management of the Project is responsible for the preparation and fair presentation of the Designated Account Statement on the basis of cash deposits and withdrawals for the purpose of complying with the Credit Agreement. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the Desgnated Account Statement that are free from material misstatement, whether due to fraud or error: selecting arid applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on the Designated Account Statement based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Designated Account Statement is free of material misstatement. An audit nvolves performing procedures to obtain evidence about the amounts and disclosures in the Designated Account Statement. The procedures selected depend on the auditors' 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 internal control relevant to the entity's preparation and fair presentation of the Designated Account Statement in order to design the audit procedures that are appropriate for 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 Designated Account Statement. We believe that the audit evidence we have obtained was sufficient and appropriate to provide a basis for our audit opinion. 27 AUDITING, ACCOUNTING, TAX & BUSINESS ADVISORY SERVICES 10th Floor, Uganda House, Plot 8-10 Kampala Road. P.O.Box 866, Kampala, TeL+256-414-345116, Fax:+256-414-234553 E.mail pimco@pimcoug.com, pim.company@yahoo-com Website: www.pimcoug com d•m-re COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 6.0 INDEPENDENT AUDITOR'S REPORT ON THE IDA DESIGNATED ACCOUNT STATEMENT Report on the IDA Designated Account Statement - (contd) Opinion In our opinion, IDA Designated Account Statement for the Competitiveness and Enterprise Development Project (CEDP) Component 2-5 give a true and fair view of operations of the Project for the year ended 30 June 2016 in accordance with the terms of the agreement and in conformity with the basis of accounting described in paragraph 7.5.1 of the report. PIM + CO. Certified Public Accountants Kampa1- - ate: Uj n1./ •-a-e 4---rm h-.+w COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.1 STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 30' JUNE 2016 FY 2015/16 FY 2014/15 Actual Actual Actual Actual Notes (Ugx) (USD) (Ugx) (USD) Income received Fund balance at 01/07/2015 4,554,077:786 1,381,376 IDA 75.2 34,421.489,427 10110,000 6,785,760,060 2.328.136 Counterpart transfers from GOU 7.5.3 800,000,000 234,970 800,000,000 274,473 Other Income 7.5.4 24,515,800 7,201 2,000,000 686 Foreign Exchange difference (Gains) 98,156,075 - 4167,550,463 Total funds available 39,898,239,088 11,733,547 8,055,310,523 2,603,295 OPERATING EXPENSES Employment costs 75.5 201,607,787 59,215 1,155,139,595 396,318 Goods and services consumed 7.5.6 10,727,488,618 3,155,284 1,993,609,364 703,464 Consumption of property, plant and 7.5.7 equipment 3,923,246,474 1,152,304 382,732,258 131,312 Total expenses 14,852,342,879 4,366,803 3,531,481,217 1,231,094 Excess of funds over expenditure for the year 25,045,896,209 7,366,744 4,523,829306 1,372,201 The financial statements were approved by CEDP management on - ----- - and signed on their behalf by: Executive Director Project Coordinator Financial Mana ement Specialist The accounting policies and notes on 35 to 1 form carl of these financial stateme PCU-O1 i r E j j j j j J j J J j I J j j I COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7,2 STATEMENT OF FINANCIAL POSITION AS AT 30" JUNE 2016 2016 2015 ASSETS Notes Ugx us$ Ugx US$ Non-current assets Fixed assets 7.5.1 (c) - - Current assets Cash and cash equivalents 7.5.8 25,431,166,701 7,480,063 4,554,077.786 1,381,376 Total assets 25,431,166,701 7,480,063 4,554,077,786 1,381,376 REPRESENTED BY: Fund balance 7.5-10 25,015,647,729 7,357,846 4,523,829r306 1,372,201 Current liabilities Payables 7.5.11 415,518,972 122,217 30,248,480 9,1(5 Total funds and liabilities 25,431,166,701 7,480,063 4,554,077,786 1,381,376 The financial statements were approved by CEDP management on [a LtlU and signed on their behalf by: Executive Director Project Coordinator Financial Management Specialist The accounting policies and notes on 35 to 41 form part of these financial st ( O, FFIC "t X0, COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (lDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.3 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30T JUNE 2016 2015118 2014115 Ugx US$ Ugx US$ Excess funds over expenditure for the year 25,045,896,209 7,366,744 4,523,829,306 1,372,201 Increase In payables 385,270,492 113,319 30,248,480 9,175 Cash and cash equivalents at 30-06-2016 25,431,166,701 7,480,063 4,554,077,786 1,381,376 melm- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID PI 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.4 IDA DESIGNATED ACCOUNT STATEMENT FOR THE YEAR TO 30 m JUNE 2016 7.4.1 IDA Designated Account FY2015/16 FY2014115 *Cumulative Expenditure Us $ us $ US$ Balance at 1st July 2015 1,353,356.42' - - Designated account receipts during the year 10,110,000.00 2,328,135.52 12,438,136 11,463,356.42 2,328,135.52 12,438,136 Business registration and business licensing reforms Civil works - 108,370.11 108,370 Consultant's services 223,564.23 42,799.99 266,364 Training/workshops/study tours 262,022.43 255,706.01 517,728 Goods, vehicles equipment 826,447.28 81,989.45 908,437 Operating costs 155,528.40 - 155,528 1,467,562.34 488,865.56 1,956,428 Tourism competitiveness development Civil works - - Consultant's services 71,892.41 - 71,892 Training/workshops/study tours 7,038.71 12,940.18 19,979 Goods, vehicles equipment 766,884.39 - 766,884 Operating costs 6,866.53 - 6,867 852,682.04 12,940.18 865,622 The closing balance of US$ 1,353,356.42 reflected in IPR includes amount from Ug. Shillings account recorded at an exchange rate used at the ime of transfer This amount give rise to exchange difference when translated using exchange rate of shs 3,399.86 at the balance sheet date. This is in accordance witi accounting policy on exchange rates in Note 7.5. 1(d). Э 1 1 1 Э 1 � i 1 1 1 1 1 1 1 1 1 1 Э COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project I D P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.4 IDA DESIGNATED ACCOUNT STATEMENT FOR THE YEAR TO 30TH JUNE 2016 7.4.1 IDA Designated Account FY2015116 FY2014115 Cumulative Expenditure Us$ us $ us $ Matching Grant Facility Civil works - - Consultant's services 174,251.40 60,690.20 234,942 Train ing/workshops study tours - - - Goods, vehicles equipment 471,635.68 - 471,636 Operating costs 15,138.60 576.61 15,715 Total 661,025.68 61,266,81 722,292 Project Implementation Civil works - - - Consultant' s services 488,343.63 260,358.13 748,702 Trainingiworkshops/study tours 26,879.67 - 26,880 Goods, vehicle equipment 489,819.42 37,864.68 527,684 Operating costs 42,889.99 113,484.22 156,374 Total 1,047,932.71 411,707.03 1,459,640 Sub-total 4,029,202.77 974,779.58 5,003,982 Cumulative adjustments (IFIR June 30, 2016) 1,971,792 - Total expenditure from Designated Account 4,031,1 L4.56 1,353,356.42 Bank balances as at 301h June 2016 7,432,181.87 1,353,356.42 BOU IDA Ugx Account No. 000080086000227 330,823-643 129,704.35 BOU IDA US $ Account No. 000080088400043 7,101,358,23 1,223,652.07 7,432,181-87 1,353,356.42 Amount of $1,971.79 related to payment from the designated account awaiting documentation and claim of replenishment. The balance reflected in )FR includes of$330,823.64 translated from Ug, Shillings account recorded at an exchange rate used at the time of transfer. This amount gives rise to exchange difference when translated using exchange rate of shs3,399.86 as at the balance sheet date. This is in accordance with accounting policy on exchange rates in Note 7.5. 1(d). ゾーーノ・ りー COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 TO FINANCtAL STATEMENTS 7.4 IDA DESIGNATED ACCOUNT STATEMENT FOR THE YEAR TO 30TH JUNE 2016 - (cont'd) 7.4.2 IDA Designated Account and Direct Payments from IDA FY2015116 FY2014115 *Cumulative Expenditure us $ us S us $ Total expenditure from IDA Designated Account 4,029,202,77 974,779.58 5,003,982 Direct Payments from IDA during the year ended June 2016 Cumulative adjustments (IFR June 30, 2016) 1,971.79 - 1,971-79 Total Project Expenditure 031,174,56 1,353,356.42 5,005,953.79- CIA-> - ---------------- ---------- --------- Executive Director Project Coordinator Financial Management Specialist The accounting policies and notes on 35 to 41 form part of these financial statements.. 4m" COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID PI 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS 7.5.1 Accounting policies a) Basis of accounting The financial statements are prepared on a modified cash basis. The day today transactions are recorded on a cash basis. Adjustments are made at the end of the accounting period including outstanding accounts payable and receivable. b) Receipts and payments The receipts are recorded when physically received and payments recorded when actually paid. c) Fixed assets Fixed assets are expensed in full in the year of purchase. No depreciation is charged in the accounts. A memorandum record / fixed assets register is maintained for the record and safeguard of assets acquired for the project. d) Reporting Currency Funds from the IDA are translated into the reporting currency (UGX) using the Bank of Uganda ruling rates on the respective dates of transactions. Payment transactions in foreign currency are translated in reporting currency at BOU transfer rate to which the transactions relate. Bank account balances denominated in foreign currency are translated into reporting currency using the Bank of Uganda rates at which the transfers were made. Exchange differences are realized in the Statement of Comprehensive Income in the year in which they arise. e) Reporting Currency The financial statements are prepared in Uganda Shillings, but also indicating the equivalent in US dollars. The IDA Designated Account is maintained in US dollars and Project Account into which transfers from DA are made is maintained in Uganda Shillings. f) Foreign currency rate Average exchange rate Shs 3,404.70/US$ 1 Closing exchange rate (BOU) Shs 3,399.86/US$ I COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (contd) 7.5.2 Loans and grants from foreign Governments and Agencies FY 2015116 FY 2014115 Budget Actual Actual Donor -IDA Ugx (Ugx) us (Ugx) uss Receipts During the Year 34,421,489,427 10,110,000. 6,785,760,060 2,328,136 Total 34,421,489,427 10,110,000 6,786,760,060 2,328,136 7.5.3 GOU Counterpart funding Transfers to Project counterpart Account - 800,000,000 234,970 800,000,000 274,473 - 800,000,000 234,970 800,000,000 274,473 7.5.4 Other income Sale of Bidding Documents - 17,558,800 5,157 2,000,000 686 Miscellaneous receipts/income 6,957,000 2,044 - - 24,515,800 7,201 2,000,000 686 7.5,5 Employment costs Contract Staff Salaries 207,384,310 201,607,787 59,215 1,155,139,595 396,318 207,384,310 201,607,787 59,215 1,155,139,595 396,318 г i � t 4 с г t � s � i г � i г i � ы COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) C om ponent 2 - 5 (IDA C redit Ag reement C R 52690- U G) Proj ect. 10 P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (contd) FY 2015116 FY 2014115 Budget Actual Actual 7.5.6 Goods and services consumed (Ugx) (Ugx) (USD) (tjgx) (USD) AdvertIsIng and public relatlons 245,400,000 229,239,330 67,330 194,722,656 66,808 Workshops and seminars 1,600,274,670 1,529,316,650 449,178 396,328,100 135,977 Allowances (For Activity Facilitation) 119,080,000 117,966,642 34,648 57,958,740 19,885 Staff training 700,600,000 698,636,127 205,198 - - Recr0rnent expenses - - - 21,811,400 7,483 Computer supplies and communication 267,700,000 262,679,719 77,152 33,453,843 11,478 Printing, stationery and photocopying 314,000,000 312,237,013 91,708 123,674,043 42,431 Telecommunications 8,700,000 8,601,291 2,526 1,512,000 519 Postage and courier services - - 437,785 150 Information and communication technology 1,339,500,879 1,321,901,871 388,258 710,146,739 243,645 Electricity 16,300,000 16,200,220 4,758 Water 7,500,000 7,281,646 2,139 Rental 380,826,637 380,270,670 111,690 171,227,230 58,747 General supply of goods and services 124,400,000 123,574,768 X296 14,394,396 4,939 Consultancy services - Short term 774,584,518 749,405,222 220,109 138,234,800 47,427 Consultancy services - Long term 3,435,620,720 3,428,782,450 1,007,074 86,524,989 29.686 Insurance 173,900,000 136,387,556 40,059 7,312,715 2,509 Travel inland - Travel abroad 260,000,000 253,558,020 74,473 Sub-total ctfwd 9,768,387,324 9,576,037,195 2,812,596 1,957,739,436 671,683 -rm-I- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2- 5 (IDA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (cont'd) F'Y 2015116 FY 2014/15 Budget Actual Actual 7.5.6 Goods and services consumed (Ugx) (Ugx) (USD) (Ugx) (USO) - (cont'd) Sub-total b/fwd 9,768,387,324 9,576,037,195 2,812,596 1,957,739,436 671,683 Small office equipment 12,000,000 11,450,480 3,363 8,819,200 3,0256 Fuel, oils and lubricants 27,304,000 24,459,700 7,184 14,468,200 4,964 Maintenance - Buildings 17,500,000 17,371,388 5,102 Maintenance - Vehicles 59,000,000 27,477,524 8,071 7,372,900 2.530 Maintenance - Equipment 27,000,000 26,974,870 7,923 680,000 233 Maintenance - Other 27,400,000 2,309,520 678 4,107,000 1,409 Other Government units to enterprises 1,100,000,000 1,028,640,156 302,124 Bank charges - 12,767,785 3,750 422,628 145 Foreign Exchange difference (loss) -4,493 19,474 11,038,591,324 10,727,488,618 3,155,284 1,993,609,365 703,464 7.5.7 Consumption of property, plant and equipment Buildings office accommodation - - Machinery and equipment 3,117,635,366 2,600,065,696 763,670 311,596,976 106,906 Transport equipment 1,226,428,800 1,223,751,527 359,430 38,270,875 13,130 Furniture 100,200,200 99,429,251 29,204 32,864,407 11,276 4,444,264,366 3,923,246,474 1,152,304 382,732,258 131,312 t([ ( ( [ (I| I f f COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (DA Credit Agreement CR 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (contd) FY 2015116 FY 2014115 7.5.8 Cash and cash equivalents Notes (Ugx) (USD) (Ugx) (USD) BoU - IDA Designated Account 7.5.9(a) 24,143,623j92 7,101,358 4,034,099,435 1,223,652 BoU - IDA Operations Account 7.5.9(b) 1,106,370,194 325,417 403,882,498 122,509 BoU - GOU Contribution Account 7.5.9(c) 181,172,715 53,288 116,095,853 35,215 25,431,166,701 7,480,063 4,554,077,786 1,381,376 7.5.9 Reconciliation of cash and bank (a) Designated Account IDA Credit 52690 - UG Account No. 000080088400043 Depository Bank Bank of Uganda Currency US Dollars FY 2015111 FY 2014115 (Ugx) (USD) (Ugx) (USD) Receipts Balance at 01-07-2015 4,034,099,435 1,223,652 - - Receipts during the year 34,421,489,427 10,110,000 6,785,760,060 2,328,136 Exchange gain - 467,550,463 - 38,455,588,862 11,333,652 7,253,310,523 2,328,136 Payments Total direct expenditure (7,132,184,482) (2,123,637) (1,178,938,088) (404,484) Transfer to IDA (7,490,334,000) (2,200,000) (2,040,273,000) (700,000) 23,833,070,380 7,010,015 4,034,099,435 1,223,652 Add payables at 30-06-2016 310,553,412 91,343 - - Balance at 30-06-2016 24,143,623,792 7,101,358 4,034,099,435 1,223,652 � г � � � г � г г r г г г � � г г г г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Compon ent 2 - 5 (1 DA C redit Ag reement C R 52690-UG) Project I D P1 30471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (contd) 7.5.9 Reconciliation of cash and bank (b) Designated Account IDA Credit 52690 - UG Account No. 00008008800027 Depository Bank Bank of Uganda Currency . UGX FY 2015116 FY 2014115 Receipts (Ugx) (USD) (uqX) (USD) Balance at 01 -07-2015 403,882,498 122,5094 - Miscellaneous reGeiptS 6,957,000 2,043 Funds transferred 7,490,334,000 2,200,QOO 2,040,273,000 700,000 7,901,173,498 2,324,552 2,040,273,000 700,000 Payments Total direct expenditure (6,891,540,864) (2,024,126) (1,636,390,502) (561,431) Exchange difference (3,463) (16,060) 1,009,632,634 296,963 40 -82,49-8 (122,509) Add payables 96,737,560 28,453 - Balance at 30-06-2016 1,106,370,194 325,417 403 882,498 122,509 (c) Government of Uganda Account No. 00008008800022B Depository Bank Bank of Baroda Currency : UGX FY 2015116 FY 2014115 Receipts (Ugx) (USD) (Ugx) (M) Balance at 01-07-2015 116,095,853 35,215 - - Funds frorn GoU 800,000,000 234,969 800,000,000 274,473 Miscellaneous income 17,558,800 5,157 2,000,000 686 933,654,653 275,341 802,000,000 275 159 Payments Total expenses incurred (730,461,458) (214,545) (716,152,627) (245,706) Exchange difference - (3,451) 3,413) 203,193,195 (57,345) 85,847,373 26,040 Add payables at 30-06-2016 8,228,000 2,420 30,248,480 9,175 Less previous year payables paid (30,248,480) (6,477) - - Balance at 30-06-2016 181,172,715 53,288 116,095,853 35,215 The closing balance of US$ 1,353,356.42 as of 30 June 2016 refiected in IFR includes amount of $35,215 translated from U9. Shillings account recorded at an exchange rate used at the time of transfer. This arnount gives dse to exchange difference when translated using exchange rate of shs 3,399.85 as at the balance sheet date. This is in accordance with accounting policy an exchange rates in Note T5, 1(d), i r I II rI I r r i i i r COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.5 NOTES TO THE FINANCIAL STATEMENTS - (contd) FY 2015116 FY 2014115 7.5.10 Fund balance (Ugx) (USD) (Ugx) (USD) Balance at 01-07-2015 4,523,829,306 1,372,201 - Excess funds for the year transferred 25,045,896,209 7,367,021 4,523,829,306 1,372,201 Adjust bank balances at 01-07-2015 (4,554,077,786) (1,381,376) - Balance at 30-06-2016 25,015,647,729 7,357,846 4,523,829,306 1,372,201 FY 2015/16 FY 2014115 7.5.11 Payables (Ugx) (USD) (Ugx) (USD) Computer Point Ltd - 26,828,480 8,138 Computer Shopping Center - - 450,000 136 Recruitment costs - - 650,000 197 PSC meeting expenses - - 2,320,000 704 Staff costs 101,259,569 29,784,00 - - Tourismusschulem Salzberg 284,017,505 83,538.00 Swanair Travel & Safaris Uganda Ltd. 11,124,342 3,272,00 - Uganda Association of Consulting Engineers 3,059,874 900.00 - - Unity Investment Ltd 1,120,000 329.43 - - New Vision Printing &Publishing Co. Ltd. 4,207,682 1,237.60 - Hotel Africana Ltd. 2,632,000 774.15 - MB Bbaale Engravers 3,920,000 1,152.99 - TPS Uganda Ltd. 2,834,000 833.56 - Brand Momentum 1,344,000 3 9 5 .3 1 - 415,518,972 122,217 30,248,480 9,175 immmelm Immbde. -mmmm- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.6 BUDGET PERFORMANCE 7,6.1 Analysis of budget performance a) Income Account Account details Budget Actual Variance Variance code shs shs shs Percentage IDA funds 16,330,000,000 34,421,489,427 18,091,489,427 111% b) Expenditure Account Account details Budget Actual Variance Variance code shs shs shs Percentage 211102 Contract staff salaries 207,384,310 201,607,787 5,776,523 3% 211001 Advertising and public relations 245,400,000 229,239,330 16,160,670 6% 221002 Workshops and seminars 1600,274,570 1,529,315650 70,958,920 4% 211103 Facilitation allowance 119,080,000 117,966,642 1,113,358 1% 221003 Staff training 700,600,000 698,635,127 1,964,873 0.3% 221007 Books, periodicals 13,960,000 - 13,960,000 100% 221008 Computer supplies and 262,700,000 262,679,719 20,281 - communications 221011 Printing, stationery and photocopies 314,000,000 312,237,013 1,762,987 0.5% 222001 Telecommunication 8,700,000 8,601,291 98,709 1% 222003 Information and communication 1,339,500,879 1,321,901,871 17,599,008 1 % technology 222005 Electricity 16,300,000 16,200,220 99,780 0.6% 222006 Water 7,500,000 7,281,646 218,354 3% 223901 Rental 380,826,637 380,270,670 555,967 0.1% 224002 General supply of goods and 124,400,000 123,574,768 825,232 0.7% services COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690.UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7.0 FINANCIAL STATEMENTS 7.6 BUDGET PERFORMANCE - (cont'd) 7.6.1 Analysis of budget performance- (contd) b) Expenditure - (contd) Account Account details Budget Actual Variance Variance code shs shs shs Percenta ge 225001 Consultancy services - short 774,584,518 749,405,222 25,179,296 3% term 225002 Consultancy services 3,435,620,720 3,428,782,450 6,838,270 0.2% 226001 Insurances 173,900,000 136,387,556 37,512,444 2,2% 227002 Travel abroad 260,000,000 253,558,020 6,441,980 2% 221012 Small office equipment 12,000,000 11,450,480 549,520 5% 227004 Maintenance - fuel, oil and 27,304,000 24,459,700 2,844,300 10% lubricants 228001 Maintenance - buildings 17,500,000 17,371,388 128,612 1% 228002 Maintenance - vehicles 59,000,000 27,477,524 31,522,476 53% 228004 Maintenance - others 27,400,000 2,309,520 25,090,480 92% 263104 Other Government units 1,100,000,000 1,028,640,156 71,359,844 6% 231002 Residential buildings 630,800,000 - 630,800,000 100% 231004 Transport equipment 3,117,635,366 2,600,065,696 517,569,670 17% 231005 Machinery and equipment 1,226,428,800 1,223,751,527 2,677,273 0,2% 231006 Furniture and fittings 100,200,200 99,429,251 770,949 1% 228003 Maintenance equipment 27,000,000 26,974,870 25,130 0.1% Bank charges - 12,767,785 (12,767,785) (100%) Total 16,330,000,000 14,852,342,879 1,477,657,121 IIi I I I I I COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 7,0 FINANCIAL STATEMENTS 7,6 BUDGET PERFORMANCE - (cont'd) 7,6.2 Explanations/Comments on the budget performance (a) Expenditure versus budget Except as explained below, planned activities were fully executed and their expenditure were within the budget, showing minor positive variances which were due to estimates in USD made at higher exchange rates than the exchange rates eventually used for effecting payments. However, there were two budget lines/activities that had material variances as shown below: i. Transport equipment - variance of shs 517,569,670 This is due to planned activities not undertaken, namely the procurement of trip vehicles and buses. ii. Office accommodation - variance of shs 630,000,000 This was due to the planned construction of the URSB office which was not undertaken due to delayed procurement process. (b) Substantial bank balances at year-end The project had bank balances totaling to shs 25,431,166,701 at the end of the financial year. This was due to the fact that US $ 5,000,000 was received in May 2016 and was meant to cover the period April to September 2016. This, therefore, included money meant for subsequent budget period. The above explanation also covers the substantial bank balances brought forward from the previous year. aimed PIM+CO PrimeGlobal Certified Public Accountants COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.1 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL We have audited the financial statements of Competitiveness and Enterprise Development Project (CEDP) Component 2-5 for the year ended 30 June 2016, and have issued our report on it dated .¼'- . . . 2016. We conducted our audit in accordance with International Standards of Auditing. The standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement. The management of Competitiveness and Enterprise Development Project (CEDP) Component 2-5 is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by the management are required to assess the expected benefits and related costs of intemal control policies and procedures. The objectives of internal control structure are to provide the management with reasonable, but not absolute, assurance that the assets are safeguarded against loss from unauthorized use or disposition; transactions are executed in accordance with management's authorization and in accordance with the terms of the agreements; and transactions are recorded properly to permit the preparation of the statement in conformity with the basis of accounting described in section 7.5.1 as notes to the statement. Because of inherent limitations in intemal control, errors or fraud may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. in planning arid performing our audit of the financial statements of Competitiveness and Enterprise Development Project (CEDP) Component 2-5 for the year ended 30 June 2016, we obtained an understanding of internal control. With respect to internal control, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on intemal control. Accordingly, we do not express such an opinion. We noted certain matters involving internal control and its operation that we consider to be reportable conditions under standards established by the International Standards on Auditing. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the recipient's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statement. 45 AUDITING, ACCOUNTING, TAX & BUSINESS ADVISORY SERVICES lath Floor, Uganda House, Plot 8-10 Kampala Road, PO. Box 866, Kampala, Tel: +256-414-345116, Fax:+256-414-234553 E mail:pimco@pimcoug.com, pim.company@yahoo.com Website: www.pimcoug.com -a--i- •mm • COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.1 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL- (cont'd) A material weakness is a reportable condition in which the design or operation of one or more of the specific internal control elements does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the financial statement may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control would not necessarily disclose all matters in internal control that might be reportabe conditions and, accordingly would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. The results of our tests disclosed an internal control issue which is a reportable condition and is of material weaknesses as described in more details in section 8,2 of this report as now summarised below: * Wrong computation of per diem PIM + CO. Certified Pubi A' \ Kampala, Uganda Date: 0 aime -=I-- COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project 10 P1 30471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.2 FINDINGS AND RECOMMENDATIONS ON INTERNAL CONTROLS 82.1 Wrong computation of Per Diem Observation We noted that an equivalent of US $ 1,724 in respect of per diem was paid in Uganda Shillings using an incorrect exchange rate of shs 3,393.43 instead of shs 3,339.43 which translated into shs 5,850,273 instead of shs 5,757,177. Therefore, the computation error resulted into an over payment of shs 93,096. There seems to have been an oversight in checking with regard to the computation. Risk/Implication Wrong computation may result into incorrect amount being paid. Recommendation Management should ensure that payment documentation is subjected to adequate checking prior to effecting payment. Management comments The auditors' observation on the error is correct. There was a transposition error in the exchange rate figure. The over-paid amount was recovered and a copy of the receipt and bank deposit slip were filed with the project accounting records. i с г г г г � г � � i � � � г t � г { г COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Com ponent 2 - 5 (1 DA C red it Agreement C R 52690-UG) Project ID P1 30471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.3 FOLLOW UP OF PREVIOUS YEAR 2014/15 AUDIT ISSUES Observation Recommendation status 8.3.1 Discrepancies were noted between Project manage ent should Action was taken. amount paid as per payment ensure that payment Documentation was reviewed voucher and amount requisitioned for payment documentation is adequately and updated accordingly checked before payments are made, 8.3.2 Discrepancies were noted between Project management should Action was taken. The over amount as per bank transfer and ensure that payment payment of USD 10 was amount as per payment voucher documentation is adequately recovered from the subsequent checked before payments are payment. made. 8.3.3 Internal audit function not fully constituted The internal audit function of the Consideration for carrying out Action was taken. The internal project was supported by the Internal internal audit and preparing audit department became Audit department of the Ministry of internal audit reports should be functional during the current Finance Planning and Economic evaluated so that it can add financial year under review when Development (MoFPED) lin absence vaiue to the varlous components the Internal Auditor was of a full time Internal Auditor and by under Project This will enhance appointed and assumed office. the component internal audit the internal control systems of departments. Reports for respective the project audits were available and confirmation checks were kept of findings. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.3 FOLLOW UP OF PREVIOUS YEAR 2014/15 AUDIT ISSUES - (cont'd) Observation Recommendation Status 8.3.4 Delays in the Recruitment of Staff As per project agreement Section1 A- The project management should * Addressed. The Environment Institutional arrangements; Project ensure that the contract is and Social Safeguards Coordination Unit, the project followed as per terms of the Specialist was appointed implementing entity shall, not later contract to avoid delay in project during the financial year ended 30' June 2016. than three (3) months after the implementation. end of Oe 2016 effective date (6h June 2014) the Tourism and Hotel appoint, in accordance with the Development Specialist had provisions of section Ill of schedule 2 not yet been recruited. to the Financing Agreement, and thereafter maintain at all times Management response Project implementation, a civil engineer, a monitoring and evaluation reruement prss for recruitment of a tourism and specialist, a financial management hotel development specialist specialist, an environmental and was unsuccessful and no social management specialist, a eligible candidate was Matching Grants specialist and a identified to fill the position. Tourism and Hotel Development However, the project engaged Specialist. the Tourism School Salzburg, Austria that is playing the role. However, it was noted that the Rather than an individual, the following staff had not yet been school provides an array of competencies and skills set recruited by the time field work was which the individual would not finished on 2nd September 2015. provide. * Environmental and Social Safeguards Specialist * Tourism and Hotel Development Specialist 8.3.5 Discrepancy between PAYE as per payroll and PAYE as per URA return Discrepancies were noted between The Project should ensure that a Action taken. Subsequent period PAYE as per payroll and PAYE as URA PAYE return with total PAYE deductions were agreed to per return forms. I amount deducted is filled to returns filed with URA. URA. rewr" COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (IDA Credit Agreement CR 52690-UG) Project ID PI 30471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.4 FOLLOW UP OF WORLD BANK REVIEW RECOMMENDATIONS It was noted that the agreed upon actions were attained, except the following. Agreed action Status Management comments 1. PSFU to finalize the procurement of Not applicable. Roll out differed due to proposed changes in] the Smart Card system for UWA technical specifications for a more robust system. The system was abandoned in favour of another. 2. Establish a banking counter at the Not attained. A Memorandum of understanding has been MLHUD headquarters to collect entered between MLHUD and Diamond stamp duties and all fees. Trust Bank for establishment of a banking counter. COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (1DA Credit Agreement CR 52690-UG) Project ID P130471 Audit Report for the year ended 30 June 2016 8.0 INTERNAL CONTROL STRUCTURE 8.5 VERIFICATION EXERCISE 8.5.1 Verification of equipment The verification exercise covered a sample picked from the following locations. a) PSFU Office A sample of equipment items selected from the Fixed Assets Register were inspected and existence and ownership verified. The assets were found to be operating efficiently. This included office furniture, equipment and motor vehicles, b) URSB Office A sample of equipment items selected from the Fixed Assets Register were inspected and existence and ownership verified. The assets were also found to be operating efficiently. The installed URSB equipment is operating well. This has resulted into the establishment of the electronic registration and licensing of businesses thus reducing on the lime taken to register and obtain a licence for a new business. 8.5.2 Verification of MGF clients A sample of MGF clients in and around Kampala shown below was selected and visited. 1. Platinum Tours and Travel Agencies - La Bonita Theatre Building 2. Great Lake Safaris Ltd. - Mutungo - Port Bell 3. Cheetah Safaris Ltd. - Pope Paul Community Centre - Rubaga 4. D. Mark Company - Plot 109, Kira Road, Kampala 5. True African (U) Ltd. - Spear House, Kampala 3rd Floor 6. Hostaline Ltd. - Kanjokya Street, Kamwokya, Kampala 7. Digida FM Ltd. - Plot 3A - 3B, Bukoto, Kiwanuka Street The objective of the visit was to evaluate the impact of the grant on their business through the answers to a designed questionnaire. The result was that all MGF clients visited talked positively about the MGF, especially in boosting their turnover. � f Е i 1 i f ( I { [ f f ( f f f 1 f Е PIM+CO PrimeGlobal Certified Public Accountants COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) Component 2 - 5 (1 DA C redit Ag reement C R 52690-UG) Project I D P1 30471 Audit Report for the year ended 30 June 2016 9.0 COMPLIANCE WITH FUNDING TERMS, APPLICABLE LAWS AND REGULATIONS We have audited the finandal statements of Competitiveness and Fnterpr se Development Project (CEDP) Component 2-5 for the year ended 30 June 2016, and have issued our report on It dated ....... ...2016, ',PJe conducted our audit in accordance with Internafional Standards on Auditing, Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement resulting from violations of agreement terms and laws and regulations that have a direct and material effect on the determination of the Financial Statements amounts- Compliance with agreement terms and laws and regulations applicable to Competitiveness and Enterprise Development Project (CEDP) Component 2-5 is the responsibility of its management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of Project management compliance with certain provisions of agreement terms, laws and regulations. However, our objective was not to provide an opinion on overall compliance with such provisions, Accordingly, we do not express such an opinion. Material Instances of non-compliance are failures to follow requirements or violations of agreement terms and laws and regulations that cause us to conclude that the aggregation of misstatements resulting from those failures or violations is material to the financial statements. The results of our tests disclosed no non-compliance with the relevant laws and regulations. 'Ole considered material Instances of non-compliance in forming our opinion on whether Competitiveness and Enterprise Development Project (CEDP) Component 2-5 financial statements are presented fairly, In all material respects, in accordance with the terms of the agreements and in conformity with the basis of accounting described in Note 7.5.1 to the f 1 nand a I state me nts, and this report does not aff ect our report on the fi n a ncial stateme nts dated . 2 0 16. Wth respect to Item not tested, nothing has come to our attention that caused us to believe that the Project management had not conrpl ed In all material respects with those provisions. PIM + CO. Certified Public Accountants Kampala Date: AUDITING, ACCOUNTING, TAX & BUSINESS ADVISORY SERVICES 1 oth Floor, Uganda House, Plot 8-10 Kampala Road, P.0, Box 866, Kampala, Tel-, +256-414-345116. Fax:-256-414-234553 E,rnaWpirri_ogpimcoug com, pim,company(gpyahoo,corn Website www.pimcoug.com