Implementing an External Audit Reform Program  A country case study Uganda

1. Implementing an External Audit ReformProgramA country case studyUganda Presented by: John F. S. Muwanga Auditor General of Uganda May 24, 2003 Addis Ababa

2. The Ideal World IFAC Intosai Office of the Auditor General World Bank Audit Entities Parliament

3. 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

4. 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

5. External Impetus • Parliamentary oversight • Accountability • Funding tied to improvements in the external audit function

6. 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

7. 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

8. 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

9. 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

10. Existing structure Auditor General Dir Projects Admin/training Dir Central Government Dir Statutory Corporations Dir Local Government Principal Auditors (2) Principal Auditors (2) Principal Auditors (3) Principal Auditors (2)

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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.