OFFICE OF TELEPHONE THE AUD1iOR GENERAL APOLLO KAGAIA ROAD, GFJ'Iffal U110S: 1226 11 7326000 I072 Aui tor General: 1256 - 41 - 7336004 Soc. P.O. B 703, KAMPALA. FAX: +256 - 41 - 4345674 Email: info@oag.go.ug THE REPUBLIC OF UGANDA Websile: w0woag.go.ug VISION: "To be an effective and efficient Supreme Audit Institution (SAl) in pomnoting effective public accountability" MISSION: "To Audit and report to Padianent and thereby make an effective contibution to improving public accountability and value for Money Spent" IN ANY CORRESPONDENCE ON THIS SUBJECT PLEASE QUOTE NO:.................VFM 84/259/01 24th December, 2018 The Rt. Hon. Speaker of Parliament 3 1 DEC 2018 Parliament of Uganda Kampala REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT (PROJECT NO. 125590; LOAN NO. 54340) FOR THE YEAR ENDED 30TH JUNE, 2018 In accordance with Article 163, (4) of the Constitution of Uganda 1995 (as amended), I forward herewith audited Financial Statements of North Eastern Road Corridor Asset Management Project) (Project No. 125590; Loan No. 54340) for the period ended 30th June 2018 together with my re r and opinion thereon. Jofn FS. Muwanga AUDITOR GENERAL Copy to: The Hon. Minister of Works and Transport The Hon. Minister of Ethics and Integrity The Inspector General of Government The Permanent Secretary/Secretary to the Treasury Ministry of Finance, Planning and Economic Development The Permanent Secretary, Ministry of Works and Transport The Executive Director, UNRA .W Country Director, World Bank Project Manager, North Eastern Road Corridor Asset Management-Project) KPMG, Certified Public'Accountants Member of the international Organisation of Supreme Audit Institutions (INTOSAI) Member of the Africa Organisation of Supreme Audit Institutions (AFROSAI) 1- THE REPUBLIC OF UGANDA REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT (PROJECT No: 125590; LOAN No.54340) FOR THE FINANCIAL YEAR ENDED 30T" JUNE 2018 OFFICE OF THE AUDITOR GENERAL UGANDA TABLE OF CONTENTS REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT FOR THE YEAR ENDED 30TH JUNE, 2018 .......3 O p in io n .................... ..n................................... .. .. Basis fo O pinion ..................................... for.Opin . Key A udit M atters.......................................... .. Em phasis of M atter..............................................* -- - -. O ther M atter............................................. Responsibilities of management for the financial statements .............................. Auditor's Responsibilities for the Audit of the financial statements REPORT OF THE AUDITOR GENERAL ON THE STATEMENT OF SPECIAL DESIGNATED ACTIVITY ACCOUNT OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT (NERAMP) 7 O p inionn.............................................---....... Basis for O pinion ............................... Key Audit Matters.............................. Emphasis of Matter....................... Responsibilities of management for the Statement of Special Designated Activity Account..... Auditor's Responsibilities for the Statement of Special Designated Activity Account.................... 2 REPORT OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT FOR THE YEAR ENDED 30TH JUNE, 2018 THE RT. HON. SPEAKER OF PARLIAMENT oinion I have audited the financial statements of the North Eastern Road-Corridor Asset Management Project (the "Project"), which comprise the statement of fund balance as at 30th June 2018, statement of receipts and payments, and notes, comprising significant accounting policies as set out on pages 12 to 17. In my opinion, the accompanying financial statements of the North Eastern Road-Corridor Asset Management Project for the year ended 30 June 2018 are prepared, in all material respects, in accordance with the accounting policies and guidelines of NERAMP described in Note 10.1. Basis for Opinion I conducted my audit in accordance with International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the financial statements section of my report. I am independent of the Project in accordance with 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, and I have fulfilled my other ethical responsibilities in accordance with these recluirements. 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. I have determined that there are no key audit matters to communicate in my report. 3 Emphasis of Matter I draw your attention to Note 10.1 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the project in complying with the financing agreement financial requirements and the accounting policies on note 10.1. As a result, the financial statements may not be suitable for another purpose. My opinion is not modified in respect of this matter. Other Matter I consider it necessary to communicate the following matter other than those presented or disclosed in the Financial Statements: Section 7.5.1 of the Project Implementation Plan stipulates that the following bank accounts will be maintained in Bank of Uganda for the purposes of implementing the project; i. Designated Account (DA): Denominated in US dollars; disbursements from the IDA Credit will be deposited on this account. ii. Project Account: This will be denominated in local currency; Counterpart funds, other, donors and transfers from the Designated Account (for payment of transactions in local currency) will be deposited on this account in accordance with project objectives. However, I noted that the project only maintains one bank account denominated in United States Dollars with Bank of Uganda. This may result in foreign exchange exposures. I advised management to open a Uganda shillings account with Bank of Uganda in line with the provisions of the project implementation plan. Responsibilities of management for the financial statements Management is responsible for the preparation of the financial statements in accordance with the provisions of the accounting policies and guidelines of NERAMP described in note 10.1, and for such internal control as management determine is 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, management is responsible for assessing the project's ability to continue as a going concern, disclosing, as applicable, matters related to 4 going concern and using the going concern basis of accounting unless management intend to cease project operations, or have no realistic alternative but to do so. 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 auditors' 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 ISAs will 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 ISAs, I exercise professional judgment and maintain professional skepticism 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 my 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 project'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 the managements' 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 project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditors 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 auditors report. However, future events or conditions may cause the project to cease to continue as a going concern. 5 I communicate with management and those charged with regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significa efi cies in internal control that I identify during my audit. John F.S. Muwanga AUDITOR GENERAL KAMPALA 24th December, 2018 6 REPORT OF THE AUDITOR GENERAL ON THE STATEMENT OF SPECIAL DESIGNATED ACTIVITY ACCOUNT OF NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT (NERAMP) opinion I have audited the Statement of Special Designated Activity Account of the North Eastern Road-Corridor Asset Management Project (the "Project") for the year ended 30th June 2018 set out on page 21 of the Financial Statements. In my opinion, the Statement of Special Designated Activity Account of the North Eastern Road-Corridor Asset Management Project is prepared, in all material respects, in accordance with the accounting policies and guidelines of NERAMP described in Note 10.1. Basis for Opinion I conducted my audit in accordance with International Standards on Auditing (ISAs), My responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Statement of Special Designated Activity Account section of my report. I am independent of the Project in accordance with 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, and I. have fulfilled my other ethical responsibilities in accordance with these requirements. 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 Statement of Special Designated Activity Account of the current period. I have determined that there are no key audit matters to communicate in my report. Emphasis of Matter I draw your attention to note 10.1 to the financial statements, which describes the basis of accounting. The Statement of Special Designated Activity Account is prepared to assist the project in complying with the financing agreement financial requirements and the accounting policies on note 10.1. As a result, the Statement of Special Designated Activity 7 Account may not be suitable for another purpose. My opinion is not modified in respect of this matter, Responsibilities of management for the Statement of Special Designated Activity Account Management is responsible' for the preparation 'of the Statement of Special Designated Activity Account in accordance with the accounting policies and guidelines of NERAMP described in note 10.1, and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Statement of Special Designated Activity Account, management is responsible for assessing the project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management intend to cease project operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Statement of Special Designated Activity Account My objectives are to obtain reasonable assurance about whether the Statement of Special Designated Activity Account as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 ISAs will 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 this Statement of Special Designated Activity Account. As part of an audit in accordance with ISAs, I exercise professional judgment and maintain professional skepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the Statement of Special Designated Activity Account, 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 my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud 8 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 project'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 the managements' 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 project's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditors' report to the related disclosures in the Statement of Special Designated Activity Account 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 auditors report. However, future events or conditions may cause the project to cease to continue as a going concern. I communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in intern ntrol that I identify during my audit, John F.S. Muwanga AUDITOR GENERAL KAMPALA 24th December, 2018 9 APPENDIX I FINANCIAL STATEMENTS 10 UGANDA NATIONAL ROADS AUTHORITY NORTH EASTERN ROAD-CORRIDOR ASSET MANAGEMENT PROJECT FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 TABLE OF CONTENTS 1. PROJECT INFORMATION 4 1.1. PROJECT ADDRESS: 4 1.2. THE JNRA BOARD OF DIRECTORS: 4 1.3. PROJECT [MPLEMENTATION TEAM 4 1.4. BANKERS 4 1.4.1. Auditors For and on behalf of the Auditor General: 4 2. INTRODUCTION 5 2.1. BACKGROUND 5 2.2. SCOPE OF WORKS OF THE OPRC-TORORO-MBALE-SOROTI-LIRA