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Implementing an

External Audit Reform

Program

A country case studyUganda

Presented by: John F. S. Muwanga

Auditor General of Uganda

May 24, 2003 Addis Ababa

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The Ideal World

Office of the Auditor General

IntosaiIFAC

Parliament

AuditEntities

World Bank

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INTOSAI

• Intosai has established a Code of Ethics intended to serve as a foundation for the National Code of Ethics of each SAI

• The Code of Ethics sets out the following requirements

Trust, Confidence and Credibility

Integrity

Independence, Objectivity and Impartiality

Political neutrality

Conflict of interest

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IFAC

• International Federation of Accountants

Sets the international guidelines of auditing

Sets the international guidelines for accounting

• Intosai recommends that these guidelines be adopted by all the SAIs

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External Impetus

• Parliamentary oversight

• Accountability

• Funding tied to improvements in the external audit function

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EXISTING SITUATION IN UGANDA

• Lack of independence

Ministry of Finance controls the budget

Ministry of Public Service controls staff

• Draft legislation to give further independence to AG

The AG reports directly to parliament

AG is not under the direction of any person or authority

The executive cannot dismiss the AG

AG can appoint and dismiss staff

AG has right of access to all information and documents required to carry out a proper audit

AG audits all public sector revenue and expenditures including classified expenditures

AG has complete autonomy in deciding what to audit and when

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EXISTING SITUATION IN UGANDA

• Lack of professionalism in staff

Financial auditors should be members of a recognized accounting body

Value for money auditors should be members of their respective professional bodies, ie: engineering, economist, etc..

• Lack of management tools

No office wide planning system

No time reporting system

No database of all audits and the time required to do them

• Budget cuts

23% cut in budget this year

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EXISTING SITUATION IN UGANDA

• Difficulty in accessing information

Unjustified delays in producing financial statements

Lack of cooperation on the part of auditees

Refusal to respond to audit observations and queries

• Poor quality of audit

The audit files are poorly documented

No properly universally adopted standard audit programmes

Not very clear what if any work has been done on a particular topic

Not clear how much supervision was exercised by the supervisor and what review if any has been done

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EXISTING SITUATION IN UGANDA

• Inadequate structure of the Office

Auditor General does not have an deputy

The Office is compartmentalized

The staff structure is not flexible

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Existing structure

Auditor General

Dir CentralGovernment

Dir StatutoryCorporations

Dir LocalGovernment

Dir ProjectsAdmin/training

PrincipalAuditors (2)

Principal Auditors (2)

Principal Auditors (3)

PrincipalAuditors (2)

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UGANDA’S APPROACH TO REFORM

The reforms undertaken to improve the effectiveness of the Office centre on three aspects

• Human resources

– Professional training programme

– Restructuring of the Office

Once the human resources have the necessary professional qualifications, than we can tackle the next step in the reform process.

• Technical reform

– Improving the planning process

– Improving the quality of audits

– Build up Value for money audit capability

– Introduce IT audit techniques

• Management information system

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INITIATIVES FOR IMPROVEMENT

• Interim Reorganization

The Ministry of Public Service has allowed the Office to create some additional positions pending the passage of the legislation giving the office full independence

4 new assistant directors

• They will reduce the pressure on the existing directors

• 9 senior principal auditors

• They will take on a more managerial role in the audit process and allow the senior principal auditors to improve the management of their various audit groups

18 Principal auditors

• They will be directly responsible for audit supervision. The increased number will ensure that they can devote an appropriate amount of time to the audit chores while the senior principal auditors take on more of the administrative chores

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EXISTING SITUATION IN UGANDA

• Public Accounts Committee (PAC) indifference

Reports can be politically misrepresented

Some members of the committee need financial management /appraisal skills

There is a backlog of audits to clear

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INITIATIVES FOR IMPROVEMENT

• OAG 2000

Financed by DFID

Draft legislation to reform the OAG

Audit training

Value for money training and manual

Personnel database

System to manage the issue of warrants

• The project has had a limited success primarily because it was designed without the input of the Office

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INITIATIVES FOR IMPROVEMENT

• WORLD BANK

EFMP II• This is a project to improve financial management in the Government of

Uganda. It is introducing a computerized accounting system and one of the components is the strengthening of the OAG.

• Engaged two professional auditors, one specialized in financial and value for money auditing and the other in IT auditing

• Professional training of staff

– 26 auditors have already qualified and another 60 are going to qualify in the next 3 years

• DFID

Agreed to finance the cost of a costed 3 year corporate plan that covers

• Manpower requirements

• Training needs

• Management Information system

• Equipment needs

• Long range financial forecast

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INITIATIVES FOR IMPROVEMENT

• Revision of audit manual

Existing manual was written in 1995

Was not well received because it was written in isolation from the users

• Current approach

Staff were consulted before the revisions were started

A committee of 4 audit staff (auditors and supervisors) was formed to review the draft revised manual and provide input

The revisions will be tested in the field before they are accepted

The objective is to give the auditors using the manual a degree of ownership. As well, the group doing the review of the draft manual should later be in a position to update the manual as required by changing circumstances

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INITIATIVES FOR IMPROVEMENT

• Value for money auditing

Currently, we have one audit that will be going to Parliament before the end of May. This is the result of an AFROSAI initiative

Planning to have 2 audits done during the next financial year and 4 each year after that

A group of Value for Money auditors is being trained by the consultant who is acting as advisor to the audit group

The Value for Money manual will be updated based on the experience gained while performing the VFM audits

• IT Auditing

With the implementation of the computerized accounting system, the Office is creating an IT audit group

The IT consultant is working directly with the group in identifying the training requirements

IT audit manual will be produced

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CONSTRAINTS

• Audit of Sub-counties

Government of Uganda has created approximately 1,000 new entities called sub-counties that I am required to audit

No additional budgetary resources

Possible approaches

• Rotating audits

• Look at the bank account only

• Special teams to audit specific districts

• Restrict audits to sub-counties which exceed a minimum monetary volume

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CONSTRAINTS

• Resistance from some ministries

Public Service

• Very difficult to reward or discipline staff

• Cannot transfer staff to make the best use of resources

• Wants to retain control over the Office staff and are resisting the changes that the Legislation giving the Auditor General his full independence

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SUCCESS OR FAILURE

• In terms of human resources development, we are on track.

– New interim structure is in place

– On our way to having at least one third of audit staff professionally qualified within the next 2 years

• Technical strengthening is in the preliminary stages

– Audit manual revisions are also on track

• The audit planning process will be implemented before the end of 2003 as planned

• New office wide procedures relating to audit file documentation will also be introduced by the end of 2003.

• Quality review of work is going to be revamped and introduced in mid-2004

• Management information system

– This is dependent on finding a source of funding.

• Needs analysis has been carried out

• A suitable system has been identified.