OFFICE OF THE AUDITOR GENERAL

THE REPUBLIC OF UGANDA

MINISTRY OF PUBLIC SERVICE

REPORT AND OPINION OF THE AUDITOR GENERAL ON THE FINANCIAL

STATEMENTS OF THE MINISTRY OF PUBLIC SERVICE

FOR THE FINANCIAL YEAR ENDED 30TH JUNE, 2015

OFFICE OF THE AUDITOR GENERAL

UGANDA

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TABLE OF CONTENTS

LIST OF ACRONYMS .................................................................................................. iii

REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF MINISTRY OF

PUBLIC SERVICE FOR THE YEAR ENDED 30TH JUNE, 2015............................................ 1

1.0 INTRODUCTION ............................................................................................. 4

2.0 BACKGROUND INFORMATION .......................................................................... 4

3.0 ENTITY FINANCING ........................................................................................ 4

4.0 OBJECTIVES OF THE MINISTRY OF PUBLIC SERVICE ......................................... 4

5.0 AUDIT OBJECTIVES ........................................................................................ 5

6.0 AUDIT PROCEDURES PERFORMED ................................................................... 6

7.0 AUDIT FINDINGS ............................................................................................ 6

8.0 FINANCIAL STATEMENTS .............................................................................. 19

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LIST OF ACRONYMS

ACRONYM MEANING

A/C Account

Bn Billion

GoU Government of Uganda

IFMS Integrated Financial Management System

IPPS Integrated Personnel & Payroll System

MoFPED Ministry Of Finance Planning And Economic Development

MoPS Ministry of Public Service

NTR Non Tax Revenue

PFAA Public Finance and Accountability Act, 2003

PSRP Public Service Reform Programme

PV Payment Voucher

TAI Treasury Accounting Instructions

UCF Uganda Consolidated Fund

UGX Uganda Shillings

URA Uganda Revenue Authority

USD United States Dollars

VAT Value Added Tax

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REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF

MINISTRY OF PUBLIC SERVICE FOR THE YEAR ENDED 30TH JUNE, 2015

THE RT. HON. SPEAKER OF PARLIAMENT

I have audited the financial statements of Ministry of Public Service for the year ended

30th June 2015. These financial statements comprise of the statement of financial position

as at 30th June 2015, statement of financial performance, statement of changes in equity,

cash flow statement together with other accompanying statements, notes and accounting

policies.

Management Responsibility for the Financial Statements

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

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

accountable to Parliament for the funds and resources of the Ministry of Public Service.

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

accordance with the requirements of the Public Finance Management Act, 2015 and the

Financial Reporting Guide, 2008, and for such internal control as management

determines is necessary to enable the preparation of financial statements that are free

from material misstatement whether due to fraud or error.

Auditor’s Responsibility

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

1195 (as amended) and Sections 13 and 19 of the National Audit Act, 2008 is to audit

and express an opinion on these statements based on my audit. I conducted the audit in

accordance with International Standards on Auditing (ISA). Those standards require that

I comply with the ethical requirements and plan and perform the audit to obtain

reasonable assurance whether the financial statements are free from material

misstatement.

An audit involves performing audit procedures to obtain evidence about the amounts and

disclosures in the financial statements as well as evidence supporting compliance with

relevant laws and regulations. The procedures selected depend on the Auditor’s judgment

including the assessment of risks of material misstatement of financial statements

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

internal control relevant to the entity’s preparation and fair presentation of financial

statements in order to design audit procedures that are appropriate in the circumstances

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but not for purposes of expressing an opinion on the effectiveness of the entity’s internal

control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management as well as

evaluating the overall presentation of the financial statements.

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

basis for my opinion.

Part ‘‘A’’ of this report sets out my opinion on the financial statements. Part “B” which

forms an integral part of this report presents in detail all the significant audit findings

made during the audit which have been brought to the attention of management and

form part of my Annual Report to Parliament.

PART “A”

Basis for Qualified Opinion

Unsupported Adjustments in the Cash Flow statement

Included in the Ministry’s Cash Flow statement are adjustments in respect of:

increase in domestic arrears (UGX.48,213,776), transfer to treasury

(UGX.200,000), EFT’s unapplied (UGX.2,834,276) and others (UGX.107,039,999).

These adjustments were not supported and could therefore not be verified during

the audit. Accordingly, I am unable to establish the authenticity of the

adjustments made by the ministry.

Qualified Opinion

In my opinion, except for the possible effects of the matters described in the Basis for

Qualified Opinion paragraph, the financial statements of the Ministry of Public Service as

at 30th June 2015 are prepared, in all material respects, in accordance with Section 51 of

the Public Finance Management Act, 2015, and the Financial Reporting Guide, 2008.

Emphasis of matter

Without qualifying my Opinion further, I draw your attention to the following matter,

which has been included in the ministry’s financial statements;

Pension Mischarges - UGX.14,657,510,377

An analysis of the pension payment file and GOU chart of accounts revealed that

out of pension payments amounting to UGX.284,338,103,274 paid during the

year, UGX.14,657,510,377 was charged on account codes which do not reflect the

nature of the expenditure described in the GOU chart of accounts.

3

Outstanding Commitments – UGX.200,252,608,998

The statement of outstanding commitments on page 17 reflected

UGX.200,252,608,998 as a cumulative ministry debt as at 30/6/2015. The bulk of

this amount (UGX.199,255,907,539) comprises of gratuity and pension arrears

which continue to accumulate uncontrollably. This has been attributed to

inadequate budgetary provisions over the years.

Payment of pensioners beyond the Pensionable Period –

UGX.11,038,936,918

I noted that UGX.11,038,936,918 was paid to pensioners who had exceeded the

pensionable period of 15 years yet no life certificates were availed as proof of

continued existence. Absence of evidence of continued existence in form of life

certificates to support pension payments may imply that payments were made to

non-existent pensioners.

John F.S. Muwanga

AUDITOR GENERAL

KAMPALA

21st December, 2015

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PART "B"

DETAILED REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS

OF MINISTRY OF PUBLIC SERVICE FOR THE FINANCIAL YEAR ENDED 30TH JUNE,

2015

This Section outlines the detailed audit findings, management responses, and my

recommendations in respect thereof.

1.0 INTRODUCTION

Article 163 (3) of the Constitution of the Republic of Uganda, 1995 (as amended)

requires me to audit and report on the public accounts of Uganda and all public

offices including the courts, the central and local government administrations,

universities, and public institutions of the like nature and any public corporation or

other bodies or organizations established by an Act of Parliament. Accordingly, I

carried out the audit of the Ministry of Public Service, to enable me report to

Parliament.

2.0 BACKGROUND INFORMATION

The Ministry of Public Service is located on Plot 12 Nakasero Hill Road, Kampala. The

Ministry was created under the legal instrument of the Public Service Act, 1969. The

Act mandates the Ministry to develop, manage and administer human resource

policies, management systems, procedures and structures for the Public Service. This

mandate is implemented by nine departments which fall under three directorates,

namely; Research and Development, Human Resource Management and Efficiency

and Quality Assurance.

3.0 ENTITY FINANCING

The Ministry was financed by grants from Central Government totalling to

UGX.304,271,140,046. The Ministry also collected UGX.200,000 in miscellaneous

revenue, bringing total revnue to UGX.304,271,340,046. The grants revenue of

UGX.304,271,140,046 constituted 88.4% of its approved budget estimates of

UGX.344,151,011,400.

4.0 OBJECTIVES OF THE MINISTRY OF PUBLIC SERVICE

The Ministry has the following objectives;

a) To manage the administration of Terminal Benefits and the Pension scheme.

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b) To initiate, formulate and plan policies on the management of Human

Resource functions for the entire public service.

c) To develop and review management and operational structures, systems and

productivity practices that are responsive to efficient and effective service

delivery of public services.

d) To promote compliance with policies, standards, rules, regulations and

procedures in order to enhance the efficiency and effectiveness of the

Ministry’s Departments and Agencies (MDA) and Local governments.

e) To ensure that the Ministry has standardized office facilities and services for

effective service delivery

5.0 AUDIT OBJECTIVES

The audit was carried out in accordance with International Standards on Auditing and

accordingly included a review of the accounting records and agreed procedures as

was considered necessary. In conducting my reviews, special attention was paid to

establish whether;

a. Whether the financial statements have been prepared in accordance with the

requirements of the Public Finance Management Act 2015 and the

regulations, and fairly present the income and expenditures for the year and

of the financial position as at the end of the year.

b. Whether all Ministry funds were utilized with due attention to economy and

efficiency and only for the purposes for which the funds were provided.

c. Whether goods and services financed have been procured in accordance with

the PPDA Act.

d. To evaluate and obtain a sufficient understanding of the internal control

structure of the Ministry, assess control risk and identify reportable

conditions, including material internal control weaknesses

e. Whether management of the entity funds was in compliance with the

Government of Uganda financial regulations.

f. Whether all necessary supporting documents, records and accounts have

been kept in respect of all activities, and are in agreement with the financial

statements presented.

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6.0 AUDIT PROCEDURES PERFORMED

The following audit procedures were undertaken;

a. Revenue

Obtained all schedules of all revenues collected and reconciled the amounts to the

Ministry’s cashbooks and bank statements.

b. Expenditure

The Ministry payments 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.

d. Procurement

Reviewed the procurement of goods and services under the Ministry during the

period under review and reconciled with the approved procurement plan.

e. Fixed Assets Management

Reviewed the use and management of the Ministry assets during the period under

review.

f. Financial Statements

Examined, on a test basis, evidence supporting the amounts and disclosures in the

financial statements; assessed the accounting principles used and significant

estimates made by management; as well as evaluated the overall financial statement

presentation.

7.0 AUDIT 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;

No Category Description

1 High

significance

Has a significant / material impact, has a high likelihood of

reoccurrence, and in the opinion of the Auditor General, it

requires urgent remedial action. It is a matter of high risk or high

stakeholder interest.

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Accordingly, the table below contains a categorized summary of the findings that

follow in the subsequent paragraphs of the report;

Table showing categorized summary of the findings

No Finding

Significance

7.2 Unsupported Adjustments in the Cash Flow statement High

7.3 Pension Mischarges - UGX.14,657,510,377 High

7.4 Outstanding Commitments UGX.200,252,608,998 High

7.5 Payment of Pensioners beyond the Pensionable Period –

UGX.11,038,936,918

High

7.6 Discrepancies between IFMS & IPPS Data Files – UGX.2,607,106,533

High

7.7 Multiple Payments to Beneficiaries – UGX. 1,161,382,909 High

7.8 Understaffing Moderate

7.9 Staff in Acting Positions Moderate

7.10 Non-Implementation of Audit Recommendations Contained In The Audit Report on the Government Payroll

High

7.11 Amount Over released on Arrears of Gratuity –

UGX.1,057,316,417

Moderate

7.12 Migrated Pensioners not identified at respective Votes Moderate

7.13 Doubtful Payment of Pension Benefits – UGX.60,806,690 Low

7.14 Over Payments - UGX.20,157,353 Low

7.15 Lost/Untraceable Pensioners Moderate

7.16

Status of Previous Years’ Audit Observations Low

7.2 Unsupported Adjustments in the Cash Flow statement

Included in the Ministry’s Cash Flow statement are adjustments in respect of:

increase in domestic arrears (UGX.48,213,776), transfer to treasury (UGX.200,000),

EFT’s unapplied (UGX.2,834,276) and others (UGX.107,039,999). These adjustments

were not supported and could therefore not be verified during the audit. It was

further noted that the adjustments led to a negative cash position of

UGX.(417,559,778) which was also reflected in the Statement of Financial Position as

at 30th June 2015. However, given the Treasury Single Account (TSA) arrangement,

this scenario should not be expected, as entities cannot be allowed to spend when

2 Moderate

significance

Has a moderate impact, has a likelihood of reoccurrence, and in

the opinion of the Auditor General, it requires remedial action. It

is a matter of medium risk or moderate stakeholder interest.

3 Low

significance

Has a low impact, has a remote likelihood of reoccurrence, and in

the opinion of the Auditor General, may not require much

attention, though its remediation may add value to the entity. It

is a matter of low risk or low stakeholder interest.

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the TSA has no funds. Accordingly, I am unable to establish the authenticity of the

adjustments made by the ministry.

In their response, Management stated that numerous challenges were encountered

in the reconciliation process due to large numbers of unapplied EFTs, and that efforts

were being made to produce a fully reconciled statement. However, by the time of

writing this report, this had not been provided by management.

I advised the Accounting Officer to ensure that all amounts reflected in the financial

statements are always properly supported. In the meantime, I await the outcome of

the ongoing attempts to have a proper reconciliation by the ministry.

7.3 Pension Mischarges - UGX.14,657,510,377

The GOU Chart of Accounts defines the nature of expenditure for each account code,

with the intention of facilitating better and consistent classification of financial

transactions and tracking budget performance per expenditure item. An analysis of

the pension payment file and GOU chart of accounts revealed that out of pension

payments amounting to UGX.284,338,103,274 paid during the year,

UGX.14,657,510,377 was charged on account codes which do not reflect the nature

of the expenditure described in the GOU chart of accounts.

Audit attributed the above scenario to improper budgeting for the pension obligation

as well as relaxation of the budgeting controls on the IFMS, which would allow

payments on items without sufficient funds. For example, scrutiny of the pension

budget provisions revealed the following;

Certain pension budget items had no funds provided for in the IFMS system,

but payments were made. They included; Pension Arrears for Defense, Local

Governments, Civil service, and Teachers.

Certain pension budget items had a lot of funds provided for on the IFMS

system, than they would actually need. For example; Emoluments paid to

former Presidents and VIPs, and gratuity expenses. This resulted into under

or over budgeting in some pension items with an overall under budgeting of

UGX.5,673,003,274.

The above implies that the pension budget may not have been properly compiled.

In response, management admitted the mischarges, and attributed them to

inadequate budgeting for the various items, and the reduction in the Ministry budget

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to support MDAs/LGs budgets to facilitate the decentralisation process for pension

and gratuity.

I advised the Accounting Officer to strengthen the budgetary processes so as to

ensure that realistic budgets are compiled and funded, and that all expenditures are

charged on the approved budget lines during budget execution.

7.4 Outstanding Commitments – UGX.200,252,608,998

It was noted that the Financial Statements reflected an amount of

UGX.200,252,608,998 as a cumulative ministry debt as at 30th June, 2015. It was

noted that the bulk of this amount (UGX.199,255,907,539) comprised of gratuity and

pension arrears which have continued to accumulate uncontrollably (2014:

UGX.108,681,159,047). I further noted that the ministry does not have a

comprehensive stock of all potential claimants/retired employees as well as an

indication of future retirees, to enable it establish the funds that would be needed to

sustainably manage the pension liability. This implies that the ministry has to rely on

claims submitted by retired employees for it to establish the amount of resources to

budget for, which eventually leads to under budgeting for gratuity and pension.

In her response, the Accounting Officer explained that her Ministry has no control

over the accumulation of gratuity and pension arrears which forms the bulk of the

arrears due to the inadequate budgetary provisions during the year and the

preceding financial years.

I have advised the Accounting Officer to devise a comprehensive strategy for the

management of gratuity and pension for the entire public service, including a

compilation of a complete stock of both retired and current employees which could

then be used in determining the expected liability over time. In addition, government

could also explore a possibility of establishing a pension fund to guarantee

availability of terminal benefits to civil servants, as and when they retire.

7.5 Payment of Pensioners beyond the Pensionable Period –

UGX.11,038,936,918

Section 18 (1) of the Pensions Act, Cap 286, requires that every pension or other

allowance granted under the Act, should cease upon the death of the person to

whom it is granted. For the avoidance of doubt, it is declared that a pension granted

under this section be payable for a period not exceeding in aggregate fifteen years

from the date of retirement of the deceased pensioner. Pursuant to the above

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therefore, all pensioners must furnish the Ministry of Public service with annual life

certificates after the expiry of their 15 year pensionable periods as proof that they

are still alive.

I noted that UGX.11,038,936,918 was paid to pensioners who had exceeded their

pensionable period of 15 years, yet no life certificates were availed as proof of their

continued existence. This similar observation was made in my previous audit report

and the recommendations therein were not adhered to. Absence of evidence of

continued existence of pensioners in form of life certificates to support pension

payments may imply payments to non-existent pensioners.

Although the Accounting Officer stated that the respective life certificates were

available to justify the amounts paid out, these were however not availed for

verification.

I advised the Accounting Officer to always adhere to the requirements under the Act

and obtain life certificates, before making such payments. In addition, the life

certificates of pensioners in regard to the questioned payments should be obtained

and provided for review.

7.6 Discrepancies between IFMS & IPPS Pension Data Files

The primary source of data for effecting pension payments through the IFMS is the

pension payroll generated from the IPPS. In order to minimize manual intervention,

an IPPS/IFMS interface was deployed. Effective operation of the IPPS/IFMS interface

is highly premised on the requirement that the data from IPPS will be accurate with

minimal or no need of correction by the Accounting Officer. Ideally the two systems

are expected to be consistent.

I however noted that payments to the tune of UGX.2,607,106,533 were made to

beneficiaries who did not have corresponding records on the IPPS pension payroll.

This implies that there could have been manual intervention in between the two

systems that led to payment of the said funds. There is a risk that the payments

were made to non-existent pensioners.

In response, management admitted that UGX.2,607,106,533 was paid out, off the

IPPS, and that these were payments of pension arrears and gratuity, ex gratia,

payments to past leaders and monthly pension processed on the legacy system

before a shift to IPPS. I was however, not availed the relevant documentary

evidence. I have accordingly advised the Accounting Officer to ensure that the IPPS

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is updated to include all pension information including arrears, to avoid the risky

manual interventions on the interface with the IFMS.

7.7 Multiple Payments to Pension Beneficiaries – UGX. 1,161,382,909

An analysis of the payment file and Bank of Uganda bank statements for the Ministry

revealed multiple payments amounting to UGX.1,161,382,909 to various pensioners.

Audit noted that monthly pension payments were made to accounts of pensioners

who had already received their monthly remittances for the particular months. I also

noted particular cases where pensioners were already on the pension’s payroll of the

previous financial year (2013/2014), but were later paid in the current financial year

(2014/2015) categorised as arrears. However, there was no evidence availed to

show that the Ministry owed the same pensioners arrears as they were not on the

pension arrears list in the previous year.

This was due to the practice of payment of monthly pension prior to payment of the

commuted pension gratuity without proper records tracking, and/or due to poor

controls in the process of data capture where pensions staff leave out critical

information on the pensions database for categories including army veterans and

retirees. The above two scenarios present a risk of falsification of pension data/files

as well as double payment of a particular category of pensioners. I noted that less

attention is given to this particular category of files since it is assumed that clerical

work is done at the vote prior to the files being forwarded to the Ministry for

payment.

In response, management admitted the presence of multiple payments totalling to

UGX.1,161,382,909, but added that some of the payments could be attributed to

unpaid monthly pension for several months for the Ministry of Defence beneficiaries

who submitted letters of Administration late during the financial year yet payment

had earlier been suspended. I was however, not provided with any documentary

evidence to this effect.

I advised the Accounting Officer to institute an investigation into this matter and if

confirmed, recovery measures of the amounts irregularly paid out should be initiated,

as well as disciplinary action to whoever is found involved in the practice.

7.8 Under Staffing

The Ministry of Public Service has an approved structure of 264 Staff across the

existing three directorates. Audit revealed that only 215 posts (82%) were filled,

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leaving a staffing gap of 48 posts (representing 18%). Failure to have all the staffing

positions filled affects the ministry’s capacity to have effective service delivery.

Audit noted that this issue was raised during the previous audit and still continues

not to be addressed. I have advised the Accounting Officer to liaise with the

responsible stakeholders in order to have the staffing gaps filled.

7.9 Staff in Acting Positions

Appointment Procedures (A – c) Sec. 9 of the Public Service Standing Orders, states

that “An appointment on acting basis is expected to last not more than six months,

and is subject to direction by the Appointing Authority.

I noted that contrary to the standing orders, the Ministry continues to maintain 18

staff members in acting positions for more than the recommended periods. The risk

of having one person acting in a position where she/he is not qualified for a long

period may compromise the quality of work performed. Although, during the

previous audit, management had indicated that the staffing challenges would be

solved, this however, appears to still be prevalent, despite the assurance by

management then.

I advised the Accounting Officer to liaise with the Public Service Commission to have

those vacancies filled to enable the ministry improve its capacity to deliver on its

mandate.

7.10 Follow up on the Comprehensive Audit report on Government Payroll

7.10.1 Implementation of the Audit Recommendations Contained in the Audit

Report on the Government Payroll

In March 2015, I issued an audit report on the comprehensive audit of the

Government payroll, which I had undertaken following a request from the Hon.

Minister for Finance, dated 7th August, 2013. In that report, critical recommendations

were made key among which, the Ministry was to make use of the validated data

that was provided, as part of the clean-up process of the government payroll.

However, to date, there is no evidence to show that the Ministry made use of the

validated data that was provided as well as implementing the other

recommendations made thereto. This implies that the government payroll continues

to be exposed to a risk of existence of ghost employees which ultimately continues

to lead to loss of government funds. The inability to make use of the validated

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government employees and to address the weaknesses identified on the IPPS system

also imply that the system cannot be relied upon for maintenance of a clean payroll.

In her response, the Accounting Officer attributed the delays to the involvement of

NITA-U which slowed the procurement process for the server that was to be utilised

to read the validated data that was provided.

I advised the Accounting Officer to expedite this process and to also ensure that the

recommendations contained in my said report are fully addressed in order to

guarantee maintenance of a clean government payroll.

7.10.2 Ineligible Payments – UGX.302,179,793

As part of the comprehensive audit of the government payroll, I also undertook an

audit of the salary arrears which had been compiled by the Ministry in preparation

for their settlement. I noted the following from an analysis of the report as well as

the salary arrears that were eventually paid by the ministry;

Duplicate Payments - UGX.16,260,266

The analysis of the bank statements revealed that duplicate payments to teachers

worth UGX.840,000 and UGX.15,420,266 to Civil servants as identified in the report

were paid. These amounts are recoverable.

Rejected but paid salary arrears claims - UGX.161,383,761

Salary arrears claims for teachers worth UGX.73,881,810 and for civil servants worth

UGX.87,501,951 were rejected during the verification, on grounds of insufficient

documentation among other reasons. However, a review of the bank statement

revealed that these payments had been paid by the Ministry. There is a risk that this

was a financial loss to government.

Payments for claims not approved – UGX.124,535,766

Furthermore, salary arrears claims of UGX.37,033,815 for Teachers, and

UGX.87,501,951 for civil servants were found to have been paid without approval

from the respective Accounting Officers. There is a risk that these payments were

sanctioned by the Ministry of Public Service without prior approval of the respective

votes.

In light of the above, a total of UGX.302,179,793 comprising of duplicate, rejected

and un-approved payments were ineligible and irregular.

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In response, management stated that the funds that were subsequently released by

MoFPED after the verification, were not made to the Ministry but to the respective

votes. However, audit found this explanation not satisfactory, since the respective

bank statements showed that the funds were released onto the Ministry account and

paid out during the financial year 2012/13. I advised the Accounting Officer to

consider initiating steps to ensure that the amount irregularly paid is recovered from

the responsible officers.

7.11 Amount Over released on Arrears of Gratuity – UGX.1,057,316,417

The PS/ST informed the Ag. Permanent Secretary that her Ministry had submitted

payments schedules for pension and gratuity arrears for some votes which exceeded

the amounts verified by the respective Accounting Officers of those votes by

UGX.1,057,316,417. The amount had been released to the Ministry as summarized

below;

Table summarizing releases of pension and gratuity in excess of amounts verified by accounting officers

Vote Verified Amount

(UGX)

Amount Released

(UGX)

Variance (UGX)

Yumbe District 177,510,032 487,783,855 310,273,823

Isingiro District 69,048,347 275,111,340 206,062,993

Namutumba District 53,553,815 149,053,132 95,499,317

Masaka MC 41,227,603 312,782,913 271,555,310

Tororo MC 125,600,114 168,152,594 42,552,480

Kasese MC 78,680,190 169,152,594 90,472,404

Total 37,780,100 78,680,190 40,900,090

TOTAL 583,400,201 1,640,716,618 1,057,316,417

Under the circumstances, there is a possibility that the difference of

UGX.1,057,316,417 worth of arrears released was diverted to other payments

without authority.

Management’s explanation that the amount in the letter by PS/ST was erroneously

stated was not supported with relevant documentary evidence. Although the PS/ST

requested for an explanation regarding the above matter, there is no evidence that a

response was provided by the Ministry.

I advised the Accounting Officer to address the concerns of the PS/ST and properly

account for the monies released to those votes.

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7.12 Migrated Pensioners not Identified at Respective Votes

It was observed that the Ministry of Lands, Housing and Urban Development

disowned a list of 106 pensioners out of 256 names migrated from Ministry of Public

Service, as they could neither be identified in the Ministry records, nor at the Ministry

of Public Service (Refer to copy of the Accounting Officer’s letter dated 9th September

2015, ref. ADM/1/34/02).

This implies that the Ministry of Public Service migrated non-existent pensioners in

that Ministry. Further review revealed that these cases appear not to have the

relevant files at the Ministry of Public Service. There is a possibility of existence of

several cases of a similar nature in other MDAs and Local governments as indicated

by the several calls made by Accounting Officers to non-responsive pensioners in the

media.

In response, management stated that the decentralization process of monthly

pension started in July 2015 and various pensioners were submitted to their votes of

retirement. The reported cases were cases of misrouting which affected almost all

votes, and that a number of votes are also writing to claim their bona fide retirees

which MoPS has since re-routed.

I advised the Accounting Officer to reconcile the pension names and amounts

involved with the respective Votes to ensure a proper migration of the pension’s

payroll. In addition, the Ministry should ensure that all pensioners migrated have

relevant files that contain the details regarding the pensioners’ employment records.

7.13 Doubtful Payment of Pension Benefits – UGX.60,806,690

Sections 10 (2-5), 11 and 12 (1) of the Pensions Act describes the circumstances

under which pension may be granted.

A review of the IPPS pension payroll and IFMS payment file for the year ended 30th

June, 2015 revealed that there existed doubtful beneficiaries with incorrect details on

the IPPS payroll. For instance the dates of birth entered into the IPPS are way

beyond the year 2015 that is currently being reviewed. The dates of retirement then

are 60 years after the dates of birth placing them around 2075. This being an

automated system, a possibility that these payments would continue to be paid until

2080 when they would automatically be knocked off is likely. More to this, were the

salary scales which did not relate to the amounts paid. These instances imply that

the IPPS lacks adequate controls to ensure data validity and reliability.

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Management stated that the wrong dates on the IPPS were as a result of data

migration from the legacy system to the IPPS platform configured with different time

zones. I advised to the Accounting Officer to ensure that the data on the IPPS in

respect of pensioners’ records is always validated following its initial capture and to

ensure that the cases identified are corrected accordingly.

7.14 Over Payments of Pension - UGX.20,157,353

The IPPS captures the total income and deductions and computes the net pay due to

an individual pensioner. This net pay is supposed to tally with the amount remitted

to the pensioner’s bank account. A review of both IPPS and the IFMS payment file

revealed over payment to the tune of UGX.20,157,353 to various pensioners. Under

the circumstances, there is a risk that the amount in question was irregularly

expended and is therefore recoverable.

In their response, management stated that these were not over payments but

refunds to the beneficiaries who had earlier been underpaid erroneously. However,

the supporting pay change forms duly filled and approved by the respective officers

were not availed for verification. I have advised the Accounting Officer that in the

absence of the supporting documentation, recovery measures for the amount in

question ought to be initiated.

7.15 Lost/Untraceable Pensioners

Lost pensioners are people who are due for pension from government but have not

made a claim for it (referred to as lost pensioners in this report). These result from

retirees who neglect to apply for a pension, forget that they are entitled to a

pension, or die before they can make a claim for pension. The existing legislation on

pensions is silent on pensioners who do not show up to claim their pension benefits.

As a result, the government is not obligated to inform a pensioner that they are

entitled to a pension. Accordingly, the Ministry has not taken any effort to plan for

such pensioners.

It was noted that the amount reported as pension arrears ignores the pension due to

these lost pensioners. Audit notes that there is a risk that in future, the pensioners or

their beneficiaries may make claims for these pension funds only to find that the

government may not have made sufficient provision for such amounts. This further

implies that pension arrears will likely keep arising, since the Ministry does not have

a comprehensive database of all such employees who retired from public service.

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Management, in their response stated that with decentralization of the pension

payment it is very possible for votes to account for all their retired pensioners and

have them budgeted for without causing unnecessary backlog, and that the onus of

follow up of entitled retirement benefits rests on the retirees.

I advised the Accounting Officer to liaise with the respective votes to establish a

comprehensive database or registry of all government retirees to be able to fully

manage the pension claims and to avoid any future challenges of financing pension

claims. In addition, government should consider enacting legislation or a policy on

what should be done in case of unclaimed pension funds.

7.16 Status of Previous Years’ Audit Observations - Project Accounts

A review of the status of implementation of the previous audit recommendations on

both the project financial statements as well as the Ministry Accounts revealed that

the following matters were still outstanding;

Table summarizing status of prior year audit recommendations

Audit finding Status during current

audit

PROJECT ACCOUNTS

1 Unexplained translation differences

UGX.784,874,279

Not explained

3 Un deducted WHT on Consultants totaling to

USD.67,089

Not addressed

4 Under deduction of WHT foreign contractor, of

UGX.1,173,298,686

Not addressed

5 Long standing advances of UGX 7,233,802 Not addressed

MINISTRY ACCOUNTS

1 Vacant Staffing Posts

A review of the staff records of the Ministry

revealed that although 293 posts had been

approved following the restructuring of the

Ministry, only 233 (79.5%) had been filled at

the time of audit, leaving 58 (19.7%) posts

vacant.

The approved Ministry staff

structure has still remained

not fully filled in the year

under review with key

positions vacant.

2 Pension Payments to Group Associations

– UGX 956,803,416

The above sum was paid to various pension

groups as gratuity and monthly pension. It was

however noted that these groups did not

furnish the Ministry with accountability

records/evidence of acknowledgements to

The practice of paying group

pensioners without

accountability records/

evidence of

acknowledgements has

continued in the year under

review.

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show that the funds reached the bonafide

beneficiaries.

I have advised the Accounting Officer to ensure that all recommendations are fully

implemented, so as to ensure enhanced accountability and better stewardship of the

resources allocated to the Ministry.

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8.0 FINANCIAL STATEMENTS

APPENDIX 1