OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF UGANDA

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF NWOYA DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE 2017

OFFICE OF THE AUDITOR GENERAL UGANDA

1

TABLE OF CONTENTS

List of Acronyms ..................................................................................................................................... 2

Basis for Opinion ..................................................................................................................................... 3

Key Audit Matters ................................................................................................................................... 3

Medicines and Health Supplies ..................................................................................................... 4

Medicines and Health Supplies Accountability. .......................................................................... 4

Stock outs ........................................................................................................................................ 5

Expired Medicines ........................................................................................................................... 5

Understaffing ................................................................................................................................... 5

Other Matter ............................................................................................................................................ 6

Failure to Implement Budget as approved by Parliament ........................................................ 6

Lack of Storage Facilities for medicine and Health Supplies .................................................... 7

Management’s Responsibility for the Financial Statements ............................................................. 7

Auditor’s Responsibilities for the Audit of the Financial Statements ............................................... 7

Appendix I: Un-accounted for medicines and health supplies at Anaka Hospital ....................... 10

Appendix II: Drug stock outs at Anaka Hospital .............................................................................. 10

Appendix III: Expired Medicines at Anaka Hospital ........................................................................ 11

Appendix IV: Inadequate Staffing at Anaka Hospital ...................................................................... 12

Appendix V Budget Performance ........................................................................................................ 14

2

List of Acronyms

Acronym Meaning

DLG District Local Government

DMO District Medical Officer

EMHS Essential Medicines Health Service

HC IV Health Center Four

ICT Information Communication Technology

ISSAI International Standards of Supreme Audit Institution

LGFAM Local Governments Financial and Accounting Manual 2007

LGFAR Local Governments Financial and Accounting Regulations 2007

MoESTS Ministry of Education Science and Technology and Sports

MoFPED Ministry of Finance Planning and Economic Development

NMS National Medical Stores

OPD Out Patients Department

PFMA Public Finance Management Act 2015

PPDA Public Procurement and Disposal of Assets

RDT Rapid Diagnostic Test

UGX Uganda Shillings

URA Uganda Revenue Authority

VAT Value Added Tax

WHT Withholding Tax

MMHSA Management of Medicines and Health Supplies Manual

YLP Youth Livelihood Programme

UWEP Uganda Women Empowerment Programme

NUSAF Northern Uganda support Action Fund

3

REPORT OF THE AUDITOR GENERAL

ON THE FINANCIAL STATEMENTS OF NWOYA DISTRICT LOCAL GOVERNMENT

FOR THE YEAR ENDED 30TH JUNE, 2017

THE RT. HON. SPEAKER OF PARLIAMENT

Opinion

I have audited the financial statements of Nwoya District Local Government which

comprise the Statement of Financial Position as at 30th June 2017, and the Statement of

Financial Performance, Statement of Changes in Equity and statement of Cash flows

together with other accompanying statements for the year then ended, and notes to the

financial statements, including a summary of significant accounting policies.

In my opinion, the financial statements of Nwoya District Local Government for the year

ended 30th June 2017 are prepared, in all material respects in accordance with section 51 of

the Public Finance Management Act, 2015 and the Local Government Financial and

Accounting Manual, 2007.

Basis for Opinion

I conducted my audit in accordance with International Standards for Supreme Audit

Institutions (ISSAIs) and the National Audit Act 2008. My responsibilities under those

standards are further described in the Auditor’s Responsibilities for the Audit of the Financial

Statements section of my report. I am independent of Nwoya District Local Government in

accordance with the Constitution of the Republic of Uganda (1995) as amended, the

National Audit Act 2008, the International Ethics Standards Board for Accountants’ Code of

Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that

are relevant to my audit of the financial statements in Uganda. I have fulfilled my other

ethical responsibilities in accordance with these requirements and the IESBA Code. I believe

that the audit evidence I have obtained is sufficient and appropriate to provide a basis for

my opinion.

Key Audit Matters

Key audit matters are those matters that, in my professional judgment, were of most

significance in my audit of the financial statements of the current period. These matters

were addressed in the context of my audit of the financial statements as a whole, and in

forming my opinion thereon, and I do not provide a separate opinion on these matters. I

4

have determined the matters described below as key audit matters to be communicated in

my report;

Medicines and Health Supplies

The Management of Medicines and Medical Supplies Manual indicates that Medicines

and Health Supplies form the second biggest expenditure in the health sector after

human resources. The security of medicines must be ensured at all levels to prevent

theft, abuse, misuse and wastage. Consequently in the course of auditing the District’s

financial statements, I considered the utilization of medicines and medical supplies as an

area of focus.

The audit focused on the procedures, processes, tools and documentation used to

manage Medicines and Medical Supplies which included;

Involving external expertise in identifying the sample of tracer Medicines and Health

Supplies, and developing data collection tools.

Selecting medicines and Health Supplies to trace their utilization in the hospital.

Analysing the delivery cycles, balances on stock cards and order levels to ascertain

stock-outs.

Obtaining and checking the records relating to the expired medicines and also

inspecting the storage practices.

Establishing the availability of key human resource personnel to ensure that

medicines and medical supplies are not wasted as explained in the Management of

Medicines and medical Supplies Manual.

I obtained the approved structure and compared it with the list of existing staff.

I considered a preselected sample involving Anaka District Hospital and made the

following observations at the health facilities;

Medicines and Health Supplies Accountability.

Medicines and Health Supplies worth UGX.161,676,689 from Anaka Hospital stores were

not accounted for as stock cards balances did not tally with the physical count figures

contrary to the Management of Medicines and Health Supplies Manual (MMHSM) as

shown in Appendix I.

The Accounting Officer acknowledged the observation and undertook to review the

stores establishment and make regular updates of the stock cards and registers.

5

I advised the Accounting Officer to expedite the implementation of the necessary

improvements.

Stock outs

I observed that 3 (three) items out of the 11 (eleven) selected indicator EMHS

experienced stock outs within the audit period. Noticeably mama kits were out of stock

for 262 days and Determine for 44 days as shown in Appendix II.

The stock out may be a result of failure by NMS to supply drugs in the quantities ordered

by Health centers and lack of reliable information on drugs usage and stocking positions.

The stock outs; erodes patient confidence in the health sector which leads patients to

explore alternative and inappropriate and expensive alternative health care.

The Accounting Officer attributed the stock outs to the delay by National Medical Stores

(NMS) to deliver ordered stocks.

The Accounting Officer is advised to liaise with NMS to ensure continuous optimum stock

of medicines and supplies.

Expired Medicines

I observed that a number of medicines had expired and stayed for over six months

without destruction as shown in Appendix III. The expiry of the drugs may be a result

of excess stocking of slow moving drugs. The cost of destruction of expired drugs is high

and there is a risk of them getting redistributed back to the market.

The Accounting Officer explained that arrangements were underway to recruit a

pharmacist to manage the stores and ensure that drug stocking was done at an

appropriate level.

The entity is advised to liaise with NMS to ensure that expired or damaged stock is

destroyed in accordance with the regulations.

Understaffing

I obtained the approved structure and compared it with the list of existing staff.

It was observed that out of 190 approved positions at Anaka Hospital; only 94 (%) posts

were filled, leaving 96 (%) positions vacant as shown in Appendix IV.

Among the vacant positions, the position of a Pharmacist and Dispenser are the critical

positions relating to medicines management.

6

Understaffing overstretches the available staff beyond their capacity, creates job-

related stress to the fewer staff and negatively affects the level of public service

delivery to the community. The Accounting Officer indicated that arrangements are

underway to have all the staffing gaps filled.

Other Matter

I consider it necessary to communicate the following matter other than those presented or

disclosed in the financial statements:

Failure to Implement Budget as approved by Parliament

Section 45 (3) of the Public Finance Management Act, 2015 states that “ An Accounting

Officer shall enter into an annual budget performance contract with the Secretary to the

Treasury which shall bind the Accounting Officer to deliver on the activities in the work

plan of the vote for a Financial year, submitted under section 13 (15)” of the said Act.

Consequently, I developed specific audit procedures which included the evaluation of the

financial and annual physical performance by analysing government releases, testing

consistency of planned outputs with the approved budget and verifying the accuracy and

completeness of the reported actual outputs.

I observed that out of the budgeted revenue of UX.16, 154,136,723 the district received

UGX.13,271,715,722 (82%) resulting into a shortfall of UGX.2,882,421 (18%). Routine

mechanized maintenance of 3 district roads and Imprest for repair of equipment were

not implemented as shown in Appendix V.

Failure to implement activities denies service to the beneficiary communities and defeats

the purpose for which budgeting and budgetary controls are instituted. The failure to

implement all the planned activities may have been a result of lack of capacity and

inadequate releases or may be an indication of inefficiency.

According to the Accounting Officer, this was due to unrealised funds from Uganda Road

Fund, YLP, UWEP and NISAF3.

7

The Accounting Officer was advised to engage the relevant authorities and ensure that

budget deficiencies are addressed so that all the allocated funds are released and all

activities are implemented according to the budget as approved by Parliament.

Lack of Storage Facilities for medicine and Health Supplies

Inspection of Anaka District Hospital revealed that the Hospital lacked proper storage

facilities for medicines and Health supplies. As a result drugs and other medical supplies

were stored under unfavorable conditions which could easily lead to the destruction.

The Accounting Officer explained that the hospital was undertaking construction of new

store during financial 2017/18.

The matter requires urgent attention.

Management’s Responsibility for the Financial Statements

Under Article 164 of the Constitution of the Republic of Uganda, 1995 (as amended) and

Section 45 of the Public Finance Management Act, 2015, the Accounting Officer is

accountable to Parliament for the funds and resources of the district.

The Accounting Officer is also responsible for the preparation of financial statements in

accordance with the requirements of the Local Governments Financial and Accounting

Manual, 2007 and Public Finance Management Act 2015 and for such internal control as

management determines necessary to enable the preparation of financial statements that

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

In preparing the financial statements, the Accounting Officer is responsible for assessing the

district’s ability to continue delivering its mandate, disclosing, as applicable, matters related

to affecting the delivery of the mandate of the district and using the Local Governments

Financial and Accounting Manual, 2007 and the Public Finance Management Act 2015 unless

the Accounting Officer has a realistic alternative to the contrary.

The Accounting Officer is responsible for overseeing the district’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

My objectives are to obtain reasonable assurance about whether the financial statements

as a whole are free from material misstatement, whether due to fraud or error, and to issue

an auditor’s report that includes my opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will

8

always detect a material misstatement when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of these

financial statements.

As part of an audit in accordance with ISSAIs, I exercise professional judgment and maintain

professional scepticism throughout the audit. I also:

Identify and assess the risks of material misstatement of the financial statements,

whether due to fraud or error, design and perform audit procedures responsive to

those risks, and obtain audit evidence that is sufficient and appropriate to provide a

basis for our opinion. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit 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 district’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast significant doubt on the district’s

ability to deliver its mandate. If I conclude that a material uncertainty exists, I am

required to draw attention in my auditor’s report to the related disclosures in the

financial statements or, if such disclosures are inadequate, to modify my opinion. My

conclusions are based on the audit evidence obtained up to the date of my auditor’s

report. However, future events or conditions may cause the district to fail to deliver its

mandate.

Evaluate the overall presentation, structure and content of the financial statements,

including the disclosures, and whether the financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

I communicate with the Accounting Officer regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant

deficiencies in internal control that I identify during my audit.

9

I also provide the Accounting Officer with a statement that I have complied with relevant

ethical requirements regarding independence, and to communicate with him/her all

relationships and other matters that may reasonably be thought to bear on my

independence, and where applicable, related safeguards.

From the matters communicated with the Accounting Officer, I determine those matters that

were of most significance in the audit of the financial statements of the current period and

are therefore the key audit matters. I describe these matters in my auditor’s report unless

law or regulation precludes public disclosure about the matter or when, in extremely rare

circumstances, I determine that a matter should not be communicated in my report because

the adverse consequences of doing so would reasonably be expected to outweigh the public

interest benefits of such communication.

John F.S. Muwanga AUDITOR GENERAL

KAMPALA

9th December, 2017

10

Appendix I: Un-accounted for medicines and health supplies at Anaka Hospital

MAIN STORE

Drugs & Commodities - A

Health Facility Records

Received from NMS/JMS

Health Facility Records / stock

Variance

Opening stock at the time of the audit – B

Quantity Ordered – C

Positive adjustment

Quantity on Delivery notes - E

Quantity Entered on Stock Card - F

Total Quantity issued out – G

Closing stock card balance - H

Physical count - I

Variance btn I &H

Unit price

Total amount

MRDT 12,475

00 250 17,850

16,050

16,050

8,250 7,700 550 634.8 349,140

Oxytocin

1,110

4,500 00 4,700 2,200 2,080 4,000 3,197 803 205.27 164,831.81

Gloves 2,500

20,900

1,450 25,500

23,000

19,900

3,050 3,400 350 838.9 293,615

Total 807,586.81

Departmental Stores

Tracer medicine - A

Department –

B

Beginning stock for the audit

- C

Quantity Received

- D

Quantity Dispense

d - E

Physical count - F

Closing stock card

balance - G

Variance

(C+D-E-F)

Unit price

Total amount

Coatem OPD 92,880 539,280 196,584 36,846 30,600 398,730 260.1 103,709,673

Mama kits

Maternity

34 184 185 35 35 -2 21,346

42,692

Oxytocin Maternity

00 1,750 1,474 82 0 194 205.27

39,822.38

Determine

Lab 2,700 50,600 13,753 19,100 19,100 20,447 2,786 56,965,342

Gloves Theatre 150 2,350 2400 233 0 -133 838.9 111,573.7

Total 160,869,103.

Appendix II: Drug stock outs at Anaka Hospital

EHMS (TRACER)

Stock Out Period Quantity

Stock out Duration (days)

Starting (date when the stock balance is NIL)

Ending (Stock being replenished)

Quantity

11

Appendix III: Expired Medicines at Anaka Hospital

EHMS (Tracer) Source

(GoU, TPT, other)

Expiry date Quantity

Insulin syringes NMS 6/16 3500 Pcs

Glucose infusion 500g/l NMS 7/17 108 Bottles

Dextose 50% NMS 7/17 127 Bottles

Niverapine 200mg tabs NMS 4/17 300 Packs

Dexamethasone injection

8mg/2ml

NMS 8/17 1600 Pcs

Nalidixic acid 500mg tabs NMS 9/16 8000 Tabs

Determine NMS 11/16 300 Pcs

Mama Kits 12/12/2016 1/9/2017 262 200

Surgical gloves 7.5

21/2/2017 24/2/2017 3 2,500

Determine 7/9/2016 13/9/2016 6 33

Determine 14/2/2017 23/2/2017 8 15

Determine 10/5/2017 24/6/2017 44 161

12

Appendix IV: Inadequate Staffing at Anaka Hospital

Category Approved Filled Vacant

Medical officers 0 0 0

Principal Medical Officer 1 0 1

Medical Officers Special Grade (Community) 1 0 1

Medical Officers Special Grade (Obstetrics and Gynecology)

1 0

1

Medical Officers Special Grade (Internal

Medicine)

1 0 1

Medical Officers Special Grade (Surgery) 1 0 1

Medical Officers Special Grade (Pediatrics) 1 0 1

Senior Medical Officers 1 1 0

Medical Officer 4 2 2

Dental 0 0 0

Dental Surgeon 1 1 0

Public Health Dental Officer 2 1 1

Dental Attendant 1 1 0

Pharmacy 0 0 0

Pharmacist 1 0 1

Dispenser 2 1 1

Nursing 0 0 0

Principal Nursing Officer 1 0 1

Senior Nursing Officer 5 5 0

Nursing Officer (Nursing) 17 12 5

Nursing Officer (Midwifery) 3 3 0

Nursing Officer (Psychiatry) 1 1 0

Public Health Nurse 1 0 1

Enrolled Psychiatric Nurse 2 0 2

Enrolled Nurse 46 15 31

Enrolled Midwife 25 6 19

13

Nursing Assistant 15 13 2

Allied health professionals 0 0 0

Senior Clinical Officer 1 1 0

Health Educator 1 1 0

Senior Laboratory Technologist 1 1 0

Psychiatric Clinical Officer 1 0 1

Ophthalmic Clinical Officer 1 0

1

Clinical Officer 5 4 1

Health Inspector 1 0 1

Assistant Entomological Officer (Medical) 1 1 0

Radiographer 2 1 1

Physiotherapist 1 1 0

Occupation Therapist 1 1 0

Orthopaedic Officer 2 1 1

Assistant Health Educator 1 0 1

Anaesthetic Officer 3 1 2

Laboratory Technologist 1 1 0

Laboratory Technician 2 1 1

Laboratory Assistant 1 1 0

Anaesthetic Attendant 2 0 2

Administrative and other staff 0 0 0

Senior Hospital Administrator 1 0 1

Hospital Administrator 1 0 1

Personnel Officer 1 1 0

Medical Social Worker 1 0 1

Nutritionist 1 1 0

14

Appendix V Budget Performance

Source of funding (A)

Initial Approved Amount UGX (B)

Revised Approved Budget UGX ( C)

Actual amounts realized UGX (D)

Variance UGX (C)-(D)

%age of variance to budget (C)-(D) /(C)

Management explanation

Remarks

Conditional Government grants

11,262,144,740 11,404,851,900 10,587,562,004 819,289,986 7% Unrealised wage, NWR &URF

Shortfall

Other government transfers

1,535,336,984 2,969,360,465 1,320,616,046 1,648,744,419 55% Unrealised NUSAF, UWEP and YLP

Shortfall

Donor funding

- 994,079,597 335,454,122 658,625,475 66% Unrealised UNICEF and IFAD funds

Shortfall

Local revenue

752,792,200 783,844,671 1,043,466,421 -259,621,750 -33% Land fees and miscellaneous income

Surplus revenue

Total 13,550,273,924

16,154,136,723

13,271,715,722

2,882,421,001

Supplies Officer 1 0 1

Senior Accounts Assistant 1 1 0

Stenographer Secretary 1 0 1

Officer Typist 1 0 1

Stores Assistant 2 1 1

Records Assistant 2 2 0

Accounts Assistant 2 0 2

support staff 0 0 0

Dark room Attendant 1 1 0

Mortuary Attendant 2 1 1

Driver 2 2 0

Cook 3 2 1

Askari 2 2 0

Artisans' Mate 3 2 1

Total 190 94 96

15