Today S Accountant Magazine April June 2013 PDF

The Magazine for The Institute of Certified Public Accountants of Uganda (ICPAU)
APRIL-JUNE 2013
The Fiscal and

Tax Challenges
ahead of Ugandas Upstream Oil Sector
GRANTS MANAGEMENT
Concepts and their Applicability
HR INSIGHT: DOS AND

DONTS OF JOB INTERVIEWS
Why we need to be mindful

of Public Funds
APRIL 20
JUNE 13
Contents
Internal Auditing in
Local Governments:
Evolution and
Current Challenges
Reinsurance:
Is it a Worthy
Venture
21
Interview
in
progress
HR Insight: Dos
and Donts of Job
Interviews
17
30
23 25
December 2012
Examinations
Results released
Pass Card to
Business Policy,
Part 14
Effective IT Project Avenues of Business

Financing:
management
Options In Uganda
Impact of population growth

on Ugandas economy
Pictorial
Overview
of Students
Performance in the
December 2012
Examinations
29
28
Accountants Bill,
2011 passed
12 36 42
10
Taxation of Transfers
of Oil Assets
39
Helping SMEs Face

Their Challenges and
Seize Opportunities
43
Why we Need to be
Mindful of Public
Funds
46
Establishing and
A Readers
Managing
Review of Todays
Relationships at the
Accountant
workplace
magazine
Technical Issues in a
question & answer form
56
48
Exploring Rural
Uganda:
A Visit to West Nile
71
66 68
Trusts and their

taxation in Uganda
The Fiscal and Tax

Challenges ahead of
Ugandas Upstream
Oil Sector
51
d
an n
ts atio
us
Tr r tax nda
i ga
e
th n U
i
GRADUATES PROFILE
Grants
Management:
Concepts
and their
Applicability
64 69
MEMBERS PROFILE
58
Students
Disciplinary
Corner
75
Todays Accountant Magazine is published by Golf100 Magazines on behalf of The Institute of Certified Public Accountants of Uganda ( ICPAU)
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4
| Todays Accountant APRIL- JUNE 2013
READERS COMMENTS
Accounting Standard for Oil and Gas, Grants Management, Planning for Retirement, most popular in January-March issue
Information Systems Audit was very insightful
Dear editor,
Thank you for the very insightful information, expertise and experience. The magazine
is a rich knowledge sharing platform and has tremendously improved in the quality of
research. The article on Information Systems Audit provides knowledge and insight
into the best practices for IT and information systems, which is a critical area for
accountants. May you continue to serve our professional needs for many years to
come.
Amos Ayebazibwe,
ISACA Kampala Chapter
Article on retirement will help me make better plans
Dear editor,
I particularly found the article on Retirement Planning very insightful. As I pursue my
CPA course and strive to be a professional, I hope to use the advice therein to make
better decisions for a better future.
Herman Karugaba,
Student
I now have more insight into the double entry system
Dear editor,
I am so grateful for having received Todays Accountant magazine. I appreciate
the relevant articles like Planning for Retirement, Insurance Contracts and
Understanding the Double Entry System. I have had problems with the double
entry system, but the article has definitely given me more insight into the topic. The
magazine has improved again. It is very inspiring to me as an ATC student. I look
forward to the June 2013 sitting. Long live ICPAU!
Okalasa Michael,
Entebbe
I Hope to contribute to Oil and Gas Financial Reporting
Dear editor,
I would like to thank the editorial team for the good work that they are doing. I had
the opportunity to read the recent magazine for Jan-March and I was impressed with
the element of oil and gas. This is because the mineral was discovered in my district.
You never know one day I may contribute in its Financial Reporting.
Moses Onen,
Student
In love with Diana Nambis articles
Dear editor
I love articles by your PR person who was studying at the Leeds University.
Livingstone,
Brand Active Limited
My Leisure time is so much better!
Dear editor,
Thanks to Todays Accountant magazine, I can now spend my leisure reading some
constructive literature.
Gerald Kasumba,
Student
My business was on the brink of insolvency!
Dear editor,
I personally found the Magazine so helpful in regards to Business plan Implementation.
I run a small business but was at the risk of closing it. I guess if I followed a few helpful
tips, I can successfully move on. East African integration, especially the common
currency and common market will serve to help the current unemployed individuals
filling the street to benefit and compete favourably without limits. For the regional
integration, it would be of utmost importance for the East African citizens to embrace
the Swahili language in order to compete favourably. For me this magazine is not just
a print of words on a piece of paper. I always look forward to the next issues while
holding on dearly to the already received Copy. It is a great publication. Keep up the
good work and many thanks to you for the fact that we do not have to pay for such
valuable information.
Richard Egesa,
Student
TA has been relevant in my legal practice
Dear editor,
I am a CPA graduate and a finalist at the School of Law of Makerere University. I am so
grateful for the knowledge that I have obtained from the magazine. This knowledge
has been of great relevance in my practice. Thank you people and may the good lord
give you more wisdom as you pass it over to us. It is my very humble prayer that the
institute grants me a quarter-page of the magazine for me to always have

a word on the legal issues. This will help my fellow learned accountants to
have legal knowledge on what we do in practice. Thanks and I pray that my
request is granted.
Katirimba Rogers,
LLB, Makerere University
TA should carry progressing articles
Dear editor,
The articles are well researched and edited. However, we need to have
continuous lessons on specific topics. For example, if the January issue has
Grants management I, the April-June should have Grants management 2,
and so forth. In that way readers can get comprehensive knowledge on
topical issues. Otherwise, topics are short lived at the moment, as each
issue carries new topics.
Denis Muwanguzi,
CPA student
Magazine cover, not very impressive
Dear editor,
The January-March magazine was not very impressive. The cover was not
artistic. I think that of October-December 2012 was superb and you could
improve. I also suggest that as ICPAU you hint on the prevailing status of
affairs in Uganda, like the Bills in parliament; Homosexuality bill, Marriage
and Divorce Bill and state your stand since the organisation is recognised to
comprise of a large portion of intellectuals.
Byron lubega,
Student
We need an article on ISA Employment Benefits
Dear editor,
I request that the next issue carries an article on the ISA 19, Employment
benefits.
Ssekitooleko Jonathan
We need experts to train students on critical topics
Dear editor,
You are doing a great job to uplift Todays Accountant magazine. The
truth is that the last magazine was just good and timely because Uganda
is in need of accountants and auditors to manage the latest industry of
everyones focus, that is, the energy/oil Industry. Besides, we depend a lot
on grants but is the management of these grants satisfactory? How then
can we bring on board specialists in these fields to train ICPAU students and
those who completed the course?
Sharon Akwii,
Student
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Todays Accountant APRIL- JUNE 2013 |
APRIL 20
JUNE 13
CONTRIBUTORS PROFILE
Joseph Sanjula Lutwama
CPA John Bosco Obore
Joseph Sanjula Lutwama is an Economist by profession, with a Masters

Degree in Economic Policy and Planning from Makerere University. He is
currently a Research and Policy Manager at the Capital Markets Authority
(CMA) where he undertakes research in various topical issues in the
domestic, regional and international capital markets. Mr. Lutwama is also
a regular contributor to the Capital Markets Journal, a leading resource on
capital markets development in Uganda, published by CMA. Lutwama
has 10 years experience in economic policy research and 7 years in capital
markets research covering a wide range of issues in the East African
region and international markets. Before joining the CMA, he worked as a
business analyst at UMACIS Consulting (now DCDM Advisory Services (U)
Ltd) where he was involved in a number of consultancies for government
and international organizations like the World Bank.
CPA John Bosco Obore is the Institute Bursar at the Uganda Management
Institute, a position he took up in February 2013. John Bosco previously
worked with the National Forestry Authority as the Internal Audit Manager.
He holds a Masters Degree in Business Administration from the University of
Birmingham, UK, and a Bachelors Degree in Commerce (Accounting) from
Makerere University. He is passionate about public finance management.
Aguma Mpairwe
Aguma Mpairwe is the Head of Internal Audit at the East African Development
Bank. He is a Certified Information Systems Auditor (CISA) and a Certified Internal
Auditor (CIA). He graduated from the University of Lincoln in the United Kingdom
with a Bachelor of Arts Degree in Business Accounting.
CPA Stephen Nyanzi

Stephen Nyanzi is a Senior Auditor at BMR Associates Certified Public
Accountants and a lecturer with Team Business Institute. He is a
member of the Institute of Certified Public Accountants of Uganda.
Flavia Mpagi
Flavia Mpagi is an Inspection Officer (Life) at the Insurance Regulatory
Authority of Uganda, a position she held from 2012. Previously, Flavia
worked with East African Underwriters Limited from 2007 2011, as a
Management Trainee. She holds a Bachelors Degree in Science from
the Rhodes University, South Africa. Flavia is a Chartered Insurer and an
alumna of Gayaza High School. She enjoys keeping fit and healthy, as well
as reading inspirational books.
CPA Obed Bampe Tindyebwa

Obed Bampe Tindyebwa is an accomplished accountant and
consultant, with more than 13 years experience in the profession.
He is a partner at Grand & Noble. Obed holds a Bachelors Degree
in Economics. He is a member of the Planning and Development
Committee, and the Taxation and Economy Sub Committee of
ICPAU. He is also a member of the Panel of Experts at the Daily
Monitor.
CPA Peter Kyambadde

Peter Kyambadde is a Senior Tax Manager at KPMG Uganda, with over
18 years experience in tax advisory, training and administration. Peter
worked with the Uganda Revenue Authority before joining KPMG. He
is a member of ICPAU.
CPA Noah Matovu

Noah Matovu is an Accountant in the Finance & Grants Management
department of Uganda Virus Research Institute International AIDS
Vaccine Initiative HIV Vaccine Programme. Noah has performed the same
role at MEDAIR Emergency and Relief and Cornerstone Development,
Uganda. He is also a lecturer at Global Professional Solutions. Noah has
a Bachelors Degree in Commerce (Accounting) and a Masters Degree
in Project Management. He has done extensive training in Grants
management with Infectious Diseases Institute IDI and Kenya Medical
Research Institute/Centre for Diseases Control and Prevention KEMRI/
CDC. Noah is a member of ICPAU.
CPA Denis Kakembo

Denis Kakembo is a Tax Manager with Deloitte in Tanzania.
Denis is qualified both as a Lawyer and a Chartered
Accountant. He oversees indirect tax matters and he is a
member of Deloittes oil and gas team. Denis is also a member
of ICPAU.
Lilian Bagambe
Bernard Sanya
Bernard Sanya is an Oil and Gas professional at Ernst & Young
Uganda. He is a UK trained Oil and Gas accounting and tax
specialist. He holds a Masters Degree in Oil and Gas Accounting
(with Distinction) from Robert Gordon University, Scotland, UK.
CPA DMO Mulagwe

CPA DMO Mulagwe is the Practitioner, DMER Associates. He holds a
Masters Degree in Management and Organisational Development.
DMO Mulagwe has over 30 years experience in industry, audit and
consultancy, in Uganda, Kenya and the United Kingdom. He is a
member of ICPAU.
CPA Innocent Orone

Innocent Orone is an Examinations Officer at ICPAU. Previously, Innocent worked with Masaka S.S,
initially as a teacher and eventually as Director of Studies. He holds two Masters Degrees; Business
Administration, and Commerce, from the Uganda Martyrs University, Nkozi, and Makerere University,
respectively. Innocent has a Degree in Education from Makerere University.
Godfrey Neema
Godfrey Neema is the Senior Administrative Officer at the Institute of Certified Public Accountants of
Uganda. He previously worked with Mengo S.S. Mr. Neema joined Mengo S.S as a teacher and steadily
sailed through the ranks. By the time he left the school, he was Dean of Students (Senior School). He
has a Bachelor of Literature and Social Administration and a Post graduate Diploma in Management.
Lilian Bagambe is the Founder, Director and Managing Consultant at

FlexiConsult Ltd, a Human Resource (HR) and Management consulting
firm. Her current areas of focus include but are not limited to; recruitment,
HR audits and diagnostics, organizational development, assessment centres,
transition assistance for retirees and retrenches, and occupational health and
safety. She has a wealth of industry experience in HR management, financial
management and audit services. She has worked with various multinationals
including Barclays Bank, Lafarge East Africa (Hima Cement and Bamburi
Cement) and PricewaterhouseCoopers (PwC). Lilian is a Rotarian from the
Rotary Club of Kampala South. She is also the Director and Treasurer of
the Board of Directors, MEMPRO, an NGO whose mission and purpose is to
mentor and empower young women in Uganda.
CPA Al Hajj Nnume Yasin Abubaker

CPA Al Hajj Nnume Yasin Abubaker is the Head of the Internal Audit
department, Jinja Municipal Council and a partner at MDJ & Partners
Certified Public Accountants. He is the Chairman of the Board of Directors of;
the Local Governments Internal Auditors Association, Uganda Cooperative
Savings and Credit Union [UCSCU] Ltd, and the Jinja Municipal Council
SACCO. Al Hajj Yasin is a Certified Public Accountant (CPA) and a Certified
Internal Auditor(CIA). He holds a Masters Degree in Management Studies,
a Bachelors Degree in Business Studies (Accounting) from the Islamic
University In Uganda (IUIU), and a Post Graduate Diploma in Management
from the Uganda Management Institute.
LETTER FROM THE PRESIDENT

has been shortened and the exams diets re-aligned to offer equal time for students
to prepare them. 89 professional accountants from the December 2012 sitting will be
graduated in August this year. Still in the jubilant mood, I am proud to inform you that
the cry for professionalism is now being heeded, with membership numbers growing
all year round.
CPA Naru Thakkar

ICPAU President
elcome to Todays Accountant magazine! It gives me

great joy to usher our readers into this great publication
that has undoubtedly progressed remarkably.
The end of a term of service is an extraordinary phase

in a leaders regime. It is often approached with mixed
feelings, depending on how the leader views his/her mandate. For a tenure well
administered, this phase brings immense delight and contentment, whereas the
reverse is true for other leaders. Accountability is the core function that drives the
routine operation of any organisation. Without a proper accountability framework
in place, an organisation cannot sustainably flourish. Serving at the helm of the
accountancy regulator in Uganda, is therefore no minor feat. We have had our
challenges, no doubt, but overall, we have accomplished the bulk of the goals that
we set out to achieve.
An Indian by decent, but born and bred in Uganda, and with a profound fondness for
this great country, I was deeply honoured when the mantle of ICPAU leadership was
conferred upon me, on 5 July 2010, having worked as a professional accountant in the
country, since 1965. My tenure now draws to an end and in keeping with the tradition
of the Institute the mantle will be handed over to the Vice President in June 2013. I
must commend my predecessors for their distinguished service to the Institute.
A solid legal framework is central to the efficacy of accountants, given that the effect
of the actions and decisions that accountants make is felt in every department of
an organisation. The Accountants Bill, 2011, which has been in the making for the
past eleven years, was finally passed on 6 February 2013. Those who are conversant
with the drawbacks of the Accountants Act, 1992, and those who were passionately
involved in the struggle to have the Bill amended can appreciate this accomplishment
with awe and contentment. Several years of aggressive research, consultation, and
petitioning, and finally our efforts have paid off! We now wait in great anticipation
for the President to confer his approval of the Bill, then we can fully applaud ourselves
for a job well executed, but that will just be the beginning of ensuring greater sanity
in the profession.
I am delighted to inform you that for the first time in the history of the Institute of
Certified Public Accountants of Ugandas (ICPAU) examinations process, regional
examinations centres were operationalised, the time to release results for examinations
The Mutual Recognition Agreement (MRA) with the other East African Community
Institutes of Accountants (EACIAs); Ordre of Professional Accountants of Burundi (OPC),
Institute of Certified Public Accountants of Kenya (ICPAK), Institute of Certified Public
Accountants of Rwanda (ICPAR) and the National Board of Accountants and Auditors
of Tanzania (NBAA) in place, we can now expand our influence to broader horizons,
as CPAs work jurisdiction is no longer limited by Ugandas territorial boundaries. On
a sad note, however, the death of Hon. Eriya Kategaya, who presided over the signing
of the MRA in September 2011, is a huge setback to the profession. The fallen patriot
will forever be held in high regard by the EACIAs for this great function. May his soul
rest in eternal peace.
In drawing attention to our achievements, I must mention the launch of our stunning
logo on 24 January 2011, a function that has remarkably transformed the corporate
image and identity of ICPAU. ICPAU has also shown grand generosity in the field
of Corporate Social Responsibility, with the organisation of a charity walk to raise
funds for the construction of a dormitory at the Katalemwa Cheshire home, and the
donation of a state of the art operating table and mattresses to Entebbe Hospital,
thanks to generous contribution from members.
As mid year approaches, may I remind you of two key events in our calendar; the
International Federation of Accountants (IFAC) SMP Forum, scheduled for 4-6 June
2013, and secondly, ICPAU will play host to the 1st CPA Economic Forum, scheduled
for 24-26 July 2013. The SMP Forum is an international event that draws together
players from other Professional Accountancy Organistations (PAOs) to deliberate on
issues that affect SMPs/SMEs. These are unique events with excellent opportunities
for professional growth and networking. Please plan to attend.
We are aware that it takes a team to build a reputable organisation of ICPAUs stature.
As I wind up my term of office, I must therefore offer my utmost gratitude to all the
stakeholders with whom we have worked tirelessly to accomplish our goals. Special
thanks goes to the ICPAU Council members, past Presidents and Secretaries, our
patron Minister, Hon. Maria Kiwanuka (incumbent) and Hon. Syda Bumba (former),
ICPAU members, students, the Secretariat, and all stakeholders. We are extremely
grateful for the financial, intellectual, physical and spiritual support that you have
rendered to the Institute, right from its inception and we hope that your efforts will
be rewarded immensely.
Finally, having commended ourselves for our great accomplishments, we are often
tempted to relapse into comfort zones. However, as we know, accountancy is a highly
dynamic profession with fast changing trends. As CPAs, we should uphold and abide
by our professional Code of Ethics. There should be a marked difference between a
CPA and an ordinary worker. Corruption, therefore, must know no dwelling in our
dealings. As the accounting standards evolve annually, we should be swift enough to
adopt and apply them as they are released, lest we risk becoming obsolete. We should
endeavour to attend Continuing Professional Development seminars, so that we are
continually equipped with relevant knowledge and skills to serve organisations with
due diligence. Let us pool efforts together to pioneer a new generation of accountants
who uphold the tenets of professionalism with fervor and reverence.
For God and my country!
CPA Naru Thakkar,

ICPAU President
CEOS COMMENTS
otherwise you end up, say with several lawyers practicing different
laws or doctors each administering medicine according to his/
her will. Professional Membership of all individuals in responsible
positions is useful for homogeneity in a countrys development of
a profession and accountancy is not different. When passing the
Accountants Bill, the Parliament of Uganda recognized this aspect
and passed a bill which when enacted will give the Institute more
powers to effectively carry out its mandate. We believe that a more
empowered ICPAU together with other regulators and employers
will go a long way in curbing corruption.
On 28 June 2013, the Institute will hold its 19th Annual General
Meeting (AGM) in Kampala. I encourage all members of ICPAU in
good standing to attend this meeting. A key activity at this years
AGM will be the election of Council members.
CPA Derick Nkajja

Secretary/ CEO, ICPAU
Prior to the AGM, the Institute will host the International Federation
of Accountants (IFAC) Small and Medium Size Practices Forum (IFAC
SMP Forum), in collaboration with the Pan African Federation of
elcome to another issue
Accountants (PAFA), on 4 & 5 June 2013. This is an international
of
Accountant.
event and its being held in Uganda is a sign of the confidence that
The second quarter of
the international accountancy fraternity has in ICPAU, Uganda and
2013 begins with ICPAUs
East African economies.
Todays
renewed
determination
to partner with different
Examinations for the June 2013 diet will be conducted from 4
stakeholders to realize its mission, which is To develop
10 June 2013, at the four examinations centres operationalised
and promote the accountancy profession in Uganda and
last year which include, Kampala and three regional centres; Gulu,
beyond. The accountancy profession is a stewardship
Mbale and Mbarara.
profession and because the public understands it that way,

the expectation is that accountants should do a better job
The recent tax gains/wins reported by Uganda Revenue Authority is
in safeguarding the public resources. It is in this respect that
a sign that Uganda is not short of human capital that can think and
the Institute has stepped up its voice towards regulators
do right. We, however, would like to see more entities/individuals
and employers, for them to ensure that individuals in
brought into the net for tax purposes. ICPAU has been at the
top financial positions for public interest entities are fully
forefront of submitting budget proposals for each budget year as
registered members of ICPAU. This is the only way the
part of our role. In order to grow this role, plans are being finalized
accountancy profession will be able to play its rightful role
to have a platform or centre of excellence for tax issues, also as
in the development of Uganda.
part of our mandate to educate. We encourage our members to

participate in the process / plans once called upon.
We, however, note arguments and counter arguments

about variety, to which I can say that you cannot do that
CPA Derick Nkajja,
in professional regulation for developing economies,
Chief Executive Officer
APRIL 20
JUNE 13
Impact of population growth

on Ugandas economy
countrys population has various

un-expected
connections
with a number of factors that
act as economic drivers of a
countrys economy. One may
not talk about a countrys population growth
and fail to talk about matters like economic
development, environmental degradation and
climatic change, human civilization, nutrition
and health.
By CPA Stephen Nyanzi
Senior Auditor,
BMR Associates Certified
Public Accountants
10
The population growth rate in Uganda was

estimated at 3.2% per annum, according to the
World Bank report published in January 2012.
This growth rate has remained constant for
45 years, since 1967, though efforts of control
through family planning have been in place.
Population experts in their 2011 report by
Population Action International (PAI) claim that
high population growth rates in developing

countries are a result of high fertility rates
among the young people and limited access
to contraception. On the contrary, Ugandas
Gross Domestic Product (GDP) growth rate
average is 1.2% per annum, according to the
Uganda National Bureau of Statistics report,
January 2012, which implies that population
growth rate is more than twice as much as
the measureable economic growth rate. The
World Bank report, 2011, indicates that the
average GDP per capita for Uganda was 247.7
USD and growing at a rate of 39% per annum.
The figures for GDP per capita may appear
reasonable for a patriotic Ugandan but that
performance is just 3% of the worlds expected
standard and in reality an average Ugandan
earns less than 1USD a day.
Is the Threat due to Population Growth Rate Real?

Indicators on the ground tend to assent to the above question. The demand for sufficient political
representation at all levels has actually created a significant impact on the national economy. Very
many new districts have been created and there is still demand by the locals for more. This has created
an extra pressure to the central government to meet the financial demands and maintenance of the
local government. Ugandas Parliament and the cabinet have grown too big, partly for the reason of
ever growing demands for sufficient political representation.
There is demand for more social services and infrastructure because of the growing population
pressure. Privatization policy was a very wise decision by the government to mitigate this problem
but we have to remember that an investors decision is mainly influenced by profit maximization.
Considering that an average Ugandan earns less than 1USD a day many of our people may not
afford the social services at market price, so public hospitals, Universal Primary Education (UPE) and
Universal Secondary Education (USE) schools shall remain crowded for some time. On the other hand,
some investors have taken advantage of this situation to cheat the locals by selling them counterfeit
products that can serve the same purpose but with an economic useful life of only three days. The
demand for electricity has substantially escalated because of population pressure so the policy of
rationing by load shedding may prevail until new power dams have been completed.
Land population pressure has sparked off misguided migrations and land disputes among the locals
and at worst, land grabbing or other methods of uncivilized human settlement. The disputes between
the Bafuluki vs Bagungu, in Masindi and the Balaro pastoralists in Buliasa were a secondary effect of
population explosion in those areas.
Excessive human activity and settlement on the Mt. Elgon ranges in Bududa district has led to
catastrophic landslides. The fight against encroachment on national forest reserves, restricted
wetlands and poaching in game parks has become rather expensive for the government and resulted
in unprecedented political confusion.
Environmental management has become a big problem in Uganda; the rural urban migration caused
an increased demand for charcoal leading to dangerous levels of depletion of trees and forests in
rural areas. This has led to low soil productivity due to soil erosion, deforestation which may in the
end result into global warming. There may not be too many industries in Uganda to cause a risk of
air pollution but we have to remember the cumulative effect of the numerous motorcycles that ply
the city and other urban areas as BodaBoda. The demand more market stall in city markets has led
to urban authorities to establish markets and semi-permanent structures in former green belts of
Kampala. The city has extended beyond former renowned boundaries and without proper planning
because of increasing demand office space and accommodation. New slums that have no sanitation
facilities have cropped up in Kampala and the demand for refuse disposal has become un-manageable
in some areas of the city because of population pressure.
What would be the intervention to mitigate these problems?

What we should remember is that fighting population growth rate may
not be the only remedy for this problem. At times large population comes
with its own compensations because some nations that have had high
population growth rates still have relatively high economic growth rates.
This may be because of increased demand for goods and services, hence
large market potentials. High population growth rates may also increase the
economic production potential of a nation whose resources are abundant
because of a big talent base of skilled and unskilled man power and a wider
tax base in economies which survive more on direct taxes. Some Asian
countries like China and India have taken advantage of their large population
by developing home based small scale production up to export level. This
has been because these nations have realized that the cumulative effect
of human population can create extra capacity. The real issue here is not
setting prohibitive measures towards population growth but putting more
effort on creating economic self sustenance at grass root levels. Practically,
our government should put more emphasis on technical education and
promoting research in improved methods of small scale production. It
would actually be a good idea if in addition to UPE and USE, there was also
Universal Technical Education (UTE).
Good work has been done by the Family Planning Association of Uganda
towards controlling the population growth rate, however, this has been
more effective among married couples. Family planning has got a cost effect
among the poor, and sensitization is still insufficient among the less educated
youth, and in some societies in Africa contraception still encounters cultural
resistance. This therefore means more sensitization is required at grass root
levels.
Government has done well to fight against child mortality through national
immunization programmes against child killer diseases, the fight against
malaria and against the spread of AIDS, EBOLA and Marburg, but we should
remind ourselves that a healthy population is always accompanied by an
accelerated population growth rate. This therefore implies that a healthy
nation needs a healthy economic development plan to sustain its people.
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Effective
IT
Project Management
D
By Aguma Mpairwe
Head of Internal Audit,

East African Development
Bank
12
uring the lifetime of todays finance

professional it is more likely than not that
one will be involved in, or take the lead
in managing the implementation of new
Information Technology (IT) systems.
The days of manual financial transaction recording and
reporting are long gone and most organisations right from
Non-Governmental Organisations (NGOs) to corporate or
public sector entities and their finance departments will
have to deal with automation and the challenges brought,
in particular, by the implementation of such systems.
This article considers the challenges presented by
implementation of IT systems which I will refer to as IT
Projects. IT project management could be defined as,
the series of actions designed to bring a disciplined
approach to the planning, organizing, and management
of organizational resources to ensure successful
implementation of IT initiatives. Those that have been
involved in such projects may be familiar with the long
working hours, detailed analysis of organisational and
system requirements, internal anxieties and corporate
politics that characterise such projects, only to end up,
in many instances, with partially successful outcomes after

so much effort.
As most organisations are involved in economic activities
whose impact has to be recorded, measured and analysed
for statutory reporting or decision making, planning and
corporate control, the accountant or Chief Finance Officer
(CFO) will often be a key player in implementation of IT
projects and it is important that they are comfortable in
such roles as Project Manager or Project Sponsor and will
be able to deliver successful automation to the organisation
whenever this is required.
Facts of IT Projects
IT projects are varied in scope and complexity and could

range from a simple project such as a finance department
migrating from one off-the-shelf solution to another,
to the more complex implementation of Enterprise
Resource Planning (ERP) systems such as SAP or ORACLE,
Core Banking systems such as Finacle or Flexcube or
implementing public financial management IT systems
such as the Internal Financial Management System (IFMS)
project. Such projects will often involve not only setting
up accounting and financial management systems but
may also involve integrating existing systems from other
functional areas of the organisation, for example, inventory
management systems or even Human Resources systems,
depending on the level of integration required.
Defining Success
of an IT Project
IT project success is defined

by
some
as
achieving
implementation of the project in
line with 3 key parameters; time,
cost and scope. Other models
include a fourth dimension of
quality, as another parameter.
If therefore the project is
executed as intended, in terms
of planned scope, on time, within
budget and in line with quality
specifications, this would then be
considered a successful project.
The focus of this article is the approach to managing

implementation of the more complex systems though
many of the principles we set out will be applicable to the
implementation of the simpler projects referred to above.
Statistics show that in spite of the knowledge gained over
the years and use of some of the best skills, consultants
and financial resources, most IT implementation projects
are unsuccessful! While the exact failure rate may be
difficult to quantify, research from reputable sources such
as Gartner and KPMG have revealed project failure rates of
over 50% with other sources quoting failure rates as high
as 70%.
The Organisational
Context
It is important to put the

organisational
context
within
which such projects are introduced
into perspective. Many IT projects
may be driven by a desire by the
management of an organisation
to improve business efficiency,
improve the quality and timeliness of
financial and management reporting
or analysis and also improve the
general state of automation within
the organisation, so as to deliver a
better service (especially for service
industries). Significant resources
will normally be required for such
projects, which in many instances
will cost in excess of USD 1 million,
and would have to be delivered
within fairly short timelines. The
organisations Board of Directors or
Trustees would normally give the
go-ahead, approve the resource
to be spent and wait for periodic
updates on progress until final
implementation.
Common Mistakes in IT Project Management
Several common mistakes in IT project management have been identified over the years
and two things will be interesting to note:
1.
Many of the common causes of IT project failure have nothing to do with

technical IT (Databases, Networks, Operating Systems or applications design and
deployment) but have more to do with the management aspects of the project.
2.
In spite of the public knowledge of the common mistakes, most organisations keep
making these mistakes anyway, with their stakeholders or taxpayers having to pay
the costs and face the consequences!
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The Chief Information Officer (CIO) magazine has identified the following as some of the common mistakes made:
Failure to choose the right

personnel: One common
failure is the failure to assign
a dedicated team of core
staff (a tiger team) available
full time to the project
without having to do their
routine jobs. The demands of
complex projects are onerous
and may require complete
dedication and long working
hours, over an extended
period.
Inexperienced project
managers: The CIO
magazine observes
that the right project
manager should have
technical knowledge
of the solution being
deployed, but also the
ability to manage people,
meetings and risks, and
budget effectively.
Failure to adopt
a formalised
project
management
methodology.
Failure to track changes in the

scope of a project: We earlier
highlighted the fact the project scope
is one metric of success. Often, extra
requirements, functionalities or work
a rounds will be required to fit the
specific needs of the organisation, and
this gradually leads to changed scope.
Such requests for change need to be
formally documented, reviewed by the
project committee and assessed for
implications on time and cost of the
project and approved. Scope creep
is one factor mentioned in some of
the worlds most expensive IT project
failures.
The Chief Information Officer (CIO) magazine
Inadequate
information on
project status:
We all appreciate
the saying you
cant manage what
you dont know.
Basic management
practices such as
regular meetings,
status reports, action
tracking and proper
assignment of follow
up responsibilities is
critical to the success
of any project.
14
Ignoring
problems:
Problems
identified
during project
implementation
should be properly
documented,
reported and
escalated to
the right level
of project team
management or
organisational
management for
attention.
Failure to
appreciate
dependencies:
Dependencies
often exist
in project
management
and it is critical
to identify what
cannot proceed
if a particular
deliverable or
milestone cannot
happen as
planned. These
dependencies
may exist within
or even outside
the project
(in the wider
organisation).
Inefficient change
management: Given
the potential for IT
enhancements to create
changes to processes
and activities and
automate previously
manual or semi-manual
tasks, there is anxiety
among staff that
they may lose jobs or
influence as a result of
the project. This anxiety
need not only be at
the level of operational
staff but it may also
affect managers who
may feel their influence
may wane as a result
of having fewer staff as
compared to peers. All
these anxieties must be
addressed. Potential
for re-deploying staff
should be discussed and
properly planned, and
communication used as
a tool to deal with these
anxieties.
Ineffective
communication:
Communication is a key
aspect of good internal
control and good project
management. A positive
and honest message about
the project, any delays,
revision in timelines helps
manage expectations. It
is also important for senior
management to honestly
communicate any bad
news such as delays or
cost creep to the Board
and get objective approval
for changes rather than
claim to be able to deliver
the project within original
timelines and push staff
internally to get the project
over and done with!
Structured Methodology
The use of a structured methodology in implementation of IT projects is
extremely important. Such an approach helps the thought process, breaks
up the project into clear phases which often (though not always) will be
sequential and may allow for the assignment of the different phases to
particular individuals. The project should only proceed to the next phase
once formal documented approvals and signoffs have been obtained for
the preceding phase. Several methodologies exit which I will not delve
into for the sake of brevity but I would suggest that whichever approach
to implementation is chosen, drawing from my experience as well as
practices proposed by the US based Information Systems Audit and Control
Association (ISACA) in the past (CISA Review Manual 2003, and the Cobit
Framework), a methodology involving the following steps covering the
entire project should prove effective:

Feasibility Assessment: In this phase the project should pass

a strategic, business, technical and financial viability assessment.
Benefits in these areas should be objectively documented and
assessed. One key question that needs to be asked though is whether
strategic and business benefits could still be achieved with the current
technology, in which case the new technology project would not
be required! I admit that this may be more easily said than done,
for example, technical viability may not always have been tested.
Applications may be designed to operate for the first time in complex
new environments and the level of integration with existing systems
may not have been tested elsewhere before.
Requirements Definition: This phase involves identifying and

specifying requirements for the specific systems chosen following the
feasibility phase above. This must be user driven. It mainly wishes
to hear from the user on matters such as expected functionality, how
users will interact with the system (both hardware and software),
information criteria the system should meet, for example; availability,
reliability, compliance, integrity, confidentiality, efficiency and
effectiveness. It also considers how user requirements should be
converted into system requirements (screen look and formats).
Requirements must be documented in a structured format and
be complete, unambiguous, verifiable, modifiable, testable and
traceable. This avoids scope creep and costly modification in later
development phases. System security requirements and provision
for audit trails and reports should not be forgotten. Specifications
should be made for the entire system not just key applications but
also hardware, software, networking and operating systems design
and technical specifications.
Vendor Selection and Software Design or Acquisition: A

detailed Request for Proposals (RFP) based on the requirements
identified above will need to be prepared and sent to prospective
vendors in line with the organizations or financiers procurement
policies. Failure to comply with procurement policies may lead
to significant project delays in particular organisations or projects
financed by parties such as the World Bank. Responses to the RFP will
then be obtained and scrutinized by the Project team. Concurrent
users of similar solutions could be contacted to assess vendor
reliability, commitment to training, provision of adequate system
documentation and reliability of vendor enhancements or fixes.
Contract stage: A formal contract should then be signed with the
selected vendor(s) covering matters such as specific deliverables and
costs, dates for delivery of documentation allowance for a software
escrow agreement if source code is not a deliverable, provision for an

adequate acceptance testing period, maintenance agreements, and a
payment schedule linked to actual delivery dates.

Software Acquisition, Design and Customisation: Software for

the solution could be designed in accordance with the requirements
specifications mentioned above or procured off the shelf and
customized to meet the needs of the organisation. Clear and workable
systems design has often been cited as a main cause of project failure.
Off the shelf software may need significant customisation to meet the
needs of the particular organisation. Specifically designed application
software may require the use of systems analysts and programmers
converting user requirements into programme code.
User Training: Initial general user training can take place at this
stage as the vendor will have obtained some knowledge about the
organisation and some customisation could have been done. The core
project team could have received training earlier.
Testing: This phase will involve validation of the system to be

implemented as well as any component subsystems to ensure they
perform the functions expected and specified in the requirements
15
APRIL 20
JUNE 13
definition phase. Various testing approaches include; unit testing

(of a module or program), interface testing, system testing including
recovery testing, security testing, and stress testing, regression testing,
integration testing (with other systems), and final acceptance testing
during the implementation phase. Tests will be user designed and
performed and must be properly documented beforehand
with the identification of any critical success parameters or show
stoppers. Test scripts must be approved by the project team prior
to commencement of testing. Relevant and adequate resources
should be available to conduct the testing and test results should be
properly documented. Test results will be submitted to the vendor for
issue resolution and following this phase, if all key acceptance criteria
have been met, regression tests could be carried out to ensure
changes to the program code have not introduced new errors. At this
stage, external parties such as regulators or IT auditors could give an
opinion to management as to whether the system should be put into
production.

The plan should contain specific procedures including specific back

out procedures in case problems are experienced during the cutover.
Final commissioning tests may be carried out in the live environment,

but care must be taken to remove such test transactions from
production databases or files. Such test transactions may be of nominal
amounts to minimize the risk of fraud or misstatement of customer
transactions.
Following a successful implementation phase necessary signoffs will be

documented by the project manager and his team of the achievement of
the project deliverables. Management signoff will also be obtained.

Complex projects
Implementation: Following successful user testing of the system,

necessary modifications by the vendors and appropriate signoffs by
management, data must be migrated to the live environment. By
this stage, user procedures manuals should have been developed.
This may not necessarily be the responsibility of the vendor as they do
not know your business; any initial manuals they may have prepared
may not have taken into account the extensive customisations that
normally take place during such projects. Successful Data conversion
must also be achieved before closure. Care must be taken to
screen the data being brought into the production environment from
legacy systems to take care of errors and omissions. It has been stated
that the data conversion phase itself may be a project within a project.
Project Governance: The Role of the Board and

Steering Committee
Planning for final implementation cutover should take place early in

the project cycle and a formal implementation plan documented. This
will be revised as the project progresses.
In managing complex projects such as integrating several separate

information systems following a merger of two organisations, each with their
own legacy systems and subsystems, it may be advisable to follow a phased
approach to implementation with adequate timelines allowed rather that
view this as one project.
Every IT project requires an appropriate IT governance structure to support

its implementation and ensure the project will add value to the organisation
and that the risks arising from the project are properly identified and
managed. This will normally come in the form of a Board Committee charged
with IT systems oversight, say, an IT Strategy Committee and a Management
Committee charged with day to day management of IT projects such as the
IT steering Committee. The members of the Board should not perceive IT as
too technical and fear to ask probing questions to management. As pointed
out at the outset of this article, most causes of IT project failure arise from
non-technical, but rather general management issues.
Use of Consultants or Vendor Staff

Most projects will involve organisations having to deal with a number of
consultants or vendor staff. Some organisations may not have dealt with
such outsiders before, over long periods. Some advice is, therefore, necessary.

In selecting consultants to assist with the implementation, it is very

important to ensure that the lead consultant should have had previous
experience in the type of implementation you are planning to carry out
including, if possible, the specific applications and level of integration
and complexity. It will also be necessary to get external references of
their performance as consultants on prior projects.
Consultants may appear very friendly and supportive at the outset

of projects but you need to realise that they work for themselves first
before they work for you.
In delivering complex projects that have a core IT solution together

with other interconnected subsystems delivered by other vendors, you
will need to manage multiple vendors effectively. It is often important
16
Post Implementation review: This will take place and will usually
involve an independent party that was not part of the project
implementation. Key objectives for review will include whether user
needs and management objectives have been met and whether new
systems have proven superior performance over set parameters than
the systems they replaced.
User re-training: All key system users could undergo further training
on the system at this stage, as various aspects of customization or
design modification may have taken place following the acceptance
testing period which may have changed particular functionalities.
A date is normally set for system migration. Key points to note:

if possible to structure the project to have a lead vendor who will be

responsible for delivering the project and thus responsible for ensuring
performance of other subsidiary vendors.

Timelines will not be endless if your organisations management or

project management is weak. There will be time lost on the project
and a point will be reached when the consultants/vendors staff will
shift their attention from working on your project to returning home
to be with their families!
One commentator has stated, when you look at the reasons for IT project
failure, it is like a top 10 list that keeps repeating itself all over again. The costs
of IT project failure are often very high and include not just financial loss if a
project has to be abandoned but also lost time from project delays or users
waiting for fixing of defective IT systems, lost efficiency, and reputation risks.
As an accountant/CFO or key member of a management team in charge of a
failed IT project, you may expose yourself to the suspicion (in this part of the
world) that you must have eaten something on the project. Do not become
another statistic!
HR Insight:
By Godfrey Neema
Senior Administrative
Officer,
ICPAU
DOS AND
DONTS OF
JOB INTERVIEWS
Todays
Accountant
January
2013 |
Todays
Accountant
APRIL- JUNE
2013- March
| 17
17
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JUNE 13
HR INSIGHTS: DOS AND DONTS OF JOB INTERVIEWS
job interview is a process in which a potential

employee is evaluated by an employer for
prospective employment in an organization. This
process is aimed at determining whether or not
the applicant is suitable for the job, in line with the
job specifications. Interviews are usually preceded
by the evaluation of submitted Curriculum Vitae
(CVs) from interested candidates, and shortlisting
successful candidates who are then invited for the interview.
An interview can be in form of a telephone interview, a handwritten
interview, a face to face interaction, or a combination of two or three of the
above. Once all candidates have been interviewed, the employer selects the
most desirable candidate and begins the negotiation of a job offer.
1.
Categories of Job-relevant Attributes
In the interview process, the interviewer studies the applicants attributes

that are specifically relevant to the job for which the person is applying. The
job-relevant applicant attributes that the questions purportedly assess are
thought to be necessary for one to successfully perform, on the job. These
can be classified into three categories; general traits, experiential factors
and core job elements. The general traits category refers to relatively stable
applicant traits. The experiential category refers to the job knowledge
that the applicant has acquired over time, whereas the core job elements
category refers to the knowledge, skills and abilities associated with the job.
General traits

Mental ability: Applicants capacity to learn and process information.

Personality: Conscientiousness, agreeableness, emotional stability,
extroversion, openness to new experiences.
Interest, goals, and values: Applicants motives, goals, and person-
organization fit.
Experiential factors

Experience: Job-relevant knowledge derived from prior experience.

Education: Job-relevant knowledge derived from prior education.

Training: Job-relevant knowledge derived from prior training.
Core job elements:

18
Declarative knowledge: Applicants learned knowledge.

Procedural skills and abilities: Applicants ability to complete the tasks
required to do the job.
Motivation: Applicants willingness to exert the effort required to do

the job.
2.
Interviewee Performance
Interviewer evaluations of applicant responses can be influenced by how an

applicant behaves during the interview. Applicants, without realizing it may
engage in behaviour that influences their performance. This behaviour can
be acquired through training, or from previous interview experience. These
are classified into three categories; social effectiveness skills, interpersonal
presentation, and personal and situational factors.
Social effectiveness skills:

Impression management: Applicants attempt to make sure the interviewer forms a positive impression of them.
Social skills: Applicants ability to adapt his/her behaviour according to
the demands of the situation, to positively influence the interviewer.
Self-monitoring: Applicants regulation of behaviour to control the
image presented to the interviewer.
Relational control: Applicants attempt to control the flow of the
conversation.
Interpersonal Presentation:

Verbal expression: Pitch, rate, pauses.

Nonverbal behaviour: Gaze, smile, hand movement, body orientation.
Personal/contextual factors:

Interview training: Coaching, mock interviews with feedback.

Interview experience: Number of prior interviews.
Interview self-efficacy: Applicants perceived ability to do well in the
interview.
Interview motivation: Applicants motivation to succeed in an interview.
The bulk of the job interview process will entail the interviewers asking the
candidate questions about his or her job history, personality, work style
and other factors relevant to the job. Interviewers may also ask about the
weaknesses of the candidate. This is to acknowledge the fact that they
are not perfect. However, the interviewer is not really interested in their
weaknesses but how they may make up for them. It also displays the skill of
self-reflection and the pursuit for self-improvement.
HR INSIGHTS: DOS AND DONTS OF JOB INTERVIEWS

In light of the above, the candidate for the interview must be aware of the
under mentioned dos and donts:

Dress appropriately for the

occasion. Your personal grooming
and cleanliness should be
outstanding. Your first impression
matters.
Know the exact time and location
of your interview; know how long
it takes to get there, park, find a
rest room to freshen up, etc.
Arrive early; 10 minutes prior to

the interview start time [or earlier
if the event or employer instructs
you to do so].
Treat other people you encounter,

with courtesy and respect. Their
opinions of you might be solicited
during hiring decisions.
When in the interview room,

offer a firm handshake, maintain
eye contact, and have a friendly
expression when you are greeted
by your interviewer.
Listen carefully to be sure you

know your interviewers name
and the correct pronunciation.
Address your interviewer by their

title (Ms., Mr., Dr.) and last name,
until invited to do otherwise, even
when your interviewer gives you
a first and last name.
Sit still and upright in your seat;

avoid fidgeting and slouching.
Respond to all questions and back

up your statements about yourself
with specific examples whenever
possible. Be thorough in your
responses, while being concise in
your wording.
Ask for clarification if you do not

understand a question.
Treat the interview seriously and as

though you are truly interested in
the employer and the opportunity

presented.

Exhibit a positive attitude. The

interviewer is evaluating you as a
potential co-worker. Behave like
someone you would want to work
with.
Have
intelligent
questions
prepared, to ask the interviewer.
Having done your research about
the employer in advance, ask
questions which you did not find
answered in your research.
Evaluate the interviewer and the

organization she/he represents.
An interview is a two-way
street. Conduct yourself cordially
and respectfully, while thinking
critically about the way you
are treated and the values and
priorities of the organization.
Expect to be treated appropriately.

If you believe you were treated
inappropriately or asked questions
that were inappropriate or made
you uncomfortable, discuss this
with a Career Services advisor or
the director.
Make sure you understand the

employers next step in the hiring
process; know when and from
whom you should expect to hear
next. Know what action you are
expected to take next, if any.
When the interviewer concludes

the interview, offer a firm
handshake, while maintaining
eye contact. Depart gracefully.
After the interview, make notes

right away so you do not forget
critical details.
Write a thank-you letter to your

interviewer promptly.
19
APRIL 20
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Interview
in
progress
Interview DONTs

Do not make excuses. Take responsibility for your decisions and your
actions.
Do not make negative comments about previous employers or

professors (or others).
Do not exhibit frustrations or a negative attitude in an interview, in

spite of whatever frustrations you have faced in your job search.
Do not falsify application materials or answers to interview questions.
Do not treat the interview casually, as if you are just shopping around
or doing the interview for practice. This is an insult to the interviewer
and to the organization.
Do not go to extremes with your posture; do not slouch, and avoid

sitting rigidly on the edge of your chair.
Do not assume that a female interviewer is Mrs. or Miss. Address her

as Ms. unless told otherwise. (If she has a Doctor of Philosophy (PhD)
or other doctoral degree or medical degree, use Dr. [lastname] just
as you would with a male interviewer. Marital status of anyone, male
or female, is irrelevant to the purpose of the interview.
Do not chew bubble gum or smell like smoke.
Do not allow your cell phone to sound during the interview; if it does,
apologize quickly and ignore it. Do not take a cell phone call. Do not
read or look at a text message.
Do not take your parents, your pet (an assistance animal is not a pet in
this circumstance), spouse, fiance, friends or enemies to an interview.
They can certainly visit your new city, at their own expense, but
cannot attend your interview.
Do not give the impression that you are only interested in an

organization because of its geographic location.
Do not give the impression you are only interested in salary; do not
ask about salary and benefits issues until the subject is brought up
by your interviewer.
Do not act as though you would take any job or are desperate for
employment.
Do not make the interviewer guess what type of work you are
interested in; it is not the interviewers job to act as a career advisor
to you.
Do not be unprepared for typical interview questions. You may not
20
be asked all of them in every interview, but being unprepared will

not help you.
All said and done, I wish you the best in your quest for that dream job!
Reinsurance:
Is it a Worthy Venture?
By Flavia Mpagi
Chartered Insurer,
Insurance Regulatory
Authority
ust as figures are a sixth sense to accountants, one could say

assessing risk comes naturally to insurers. When it comes to the
business of risk, insurers are your people; be it calculating the
possibility, mitigating its occurrence, or pricing of a risk. There are
essentially two types of risks insurers deal with; those faced by their
clients, and those faced by the insurance companies themselves.
In dealing with the risks faced by their clients, insurance companies use the
Law of Large Numbers derived from probability theory to determine the
chance of an event occurring. If the chance of someone having a car accident
is one in one hundred (1/100), then insurance companies collect premiums
from 100 people to pay the claim that one driver will incur. This is known as
spreading the risk. It is important for insurance companies to meticulously
gauge the hazards (items that increase the chance of loss) of a risk before
insuring it. Should they fail to conduct the appropriate research into ones
business practices or determine an individuals living habits, resulting in a
wrongful prediction, the insurance company could lose money. If they do
this often enough then the company suffers.
Essentially then, the Law of Large Numbers means, the larger the number
of risks (cars or homes, others) that an insurance company insures, the
closer they will be towards predicting the actual results of the chance of an
accident occurring. Of course it is still up to chance, but past experience is a
good indicator of the future.
The business of insurance, therefore, relies on probabilities, to derive

calculated prices of insurance premiums. The total premium paid is always
lower than the amount that would be payable by the insurer in case the
insured event occurs. Therefore, insurance companies always rely on the total
insurance premiums collected from all their clients being sufficient, to cover
claims, management costs, and reinsurance costs, as well as being enough
for profit realization.
Sometimes insurance companies do not get the calculation of premiums
right and other times they may not get as many clients as needed to pay
all the claims incurred in a given period. These are some of the risks faced
by insurance companies. In an effort to mitigate these risks, insurance
companies are required by law to always retain sufficient capital. This is
called the minimum paid-up capital. In Uganda, the minimum paid-up
capital for either life or non-life insurance companies is one billion shillings,
and two and a half billion for reinsurance companies. With the growing
development of the industry, the Insurance Regulatory Authority of Uganda
(IRA) has proposed an increase in these amounts to three billion, for life
insurance companies, and four billion, for non-life insurance companies.
Insurers are expected to invest some of this capital. However, to ensure
insurance solvency and sufficient liquidity to enable companies pay claims
as and when they arise, the Insurance Act (Cap. 213), Laws of Uganda, 2000,
and the Insurance Regulations, 2002, specify the definitions and calculations
21
APRIL 20
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of assets and liabilities, the margin of solvency expected of insurance

companies, the reserves insurance companies are expected to hold and
how insurance funds should be invested. For example, Section 48(2) of
the Act specifies that life insurance funds should be invested as follows;
30% in government securities and 70% in other such investments, as shall
be approved by the Commission (IRA). The Authority ensures that insurers
uphold and enforce these laws and regulations.
Further to handling the risks faced by insurance companies and protecting
the capital they hold, insurers are required to insure with other insurance
companies. This is called reinsurance, and it also enables the principal
insurer to pay claims as they arise. Reinsurance is thus the practice of
insurers transferring portions of their risk portfolios by purchasing insurance
policies from either another insurance company or reinsurance companies.
This is done in order to reduce the likelihood of having to pay a large
obligation resulting from an insurance claim. Like individuals, insurance
companies access their own level of risk, and take out insurance policies
payable by insurance premiums. Companies that accept risks from other
insurance companies are called reinsurance companies or reinsurers. Most
insurance companies will need reinsurance. It could ultimately mean the
difference between survival and failure.
Reinsurance offers the following benefits;

Reduction of an insurers exposure to any particular risk, to an amount

which he could retain on his own account. This will be his net
retained line.
Reduction of the insurers acceptance of a doubtful or undesirable

risk.
Increased market capacity by spreading the risk over the international

market.
Levelling out fluctuations to iron out the peaks and troughs in the
profit margin of the original underwriter.
Obtaining reciprocity; exchange of business for comparable business

from another underwriter. This enables insurers to participate in risks
which are not otherwise available to them, leading also to further
spread of risks.
22
Securing protection against catastrophe losses when a major share

of these is offloaded to a reinsurer.
Like anywhere else in the world, insurers in Uganda are highly dependent
on reinsurance services. In 2011, the premium ceded on account of life and
non-life insurance increased to UShs 115.99 billion, accounting for 39.12%
of total gross written premium income. Compare this to UShs 93.08 billion
that accounted for 38.79% of total premium written in 2010. This scenario
can be attributed to low capitalization which results in low retentions and
high demand for reinsurance.
An important ratio to consider in the business of insurance is the
reinsurance retention ratio. This is the net premium (Gross premium
collected Reinsurance premium) expressed as a percentage of the gross
premium. The retention ratio is thus a measure of how much of the risk is
being carried by an insurer rather than being passed to reinsurers.
According to statistics, the classes with the highest retention ratio included
motor (91.95%), burglary (77.98%) and workers compensation (72.99%)
which collectively accounted for around 47.39% of total premium income
written. In effect, insurers retained more from classes that had low risk
exposure and ceded more to reinsurance companies from classes that had
a high risk exposure to protect their portfolios.
When Peter replaced the shock absorbers on his car, he could not believe
the improvement in comfort he derived. Experts agree that vehicle shock
absorbers, although invisible to bystanders, will reduce the effect of
travelling over rough ground thus leading to improved ride quality and
increased comfort.
Reinsurance has often been compared to the shock absorbers on a car.
While they do not make the road smoother by any means, passengers feel
the bumps less because these are absorbed by the devices fitted to the car.
Similarly, reinsurance does not reduce losses, but merely smoothens out
the negative effects that these losses place on the insurer.
Assessing clients risks and advising them on how to mitigate these would
not make insurers experts in this field if they could not mitigate their
own risks. The vehicle the industry uses to accomplish this is reinsurance.
Simply put, it is that safety net that provides an insurer peace of mind, thus
allowing them to better develop and grow their product. The net result of
which is a stronger and better appreciated industry.
Internal Auditing in Local

Governments:
Evolution and Current Challenges
By CPA Al Hajj Nnume Yasin

Abubaker
Head, Internal Audit
department,
Jinja Municipal Council
Special
investigations
Revenue
collection
Stores
audit
Assets
utilization
Payroll
accounting
verification
The Importance of Delving into the Past

We study history in order to learn what happened, why and how it happened in order
to understand the current events. If mistakes happened in the past, we learn to avoid
them. We also appreciate the past events that shaped the current ones.
The Evolution of Local Government Internal

Auditing
Until 1993, internal auditing in Local Governments in Uganda was a section in the
finance department. This was part of the colonial legacy that was left behind at the
time this country attained its independence in 1962. The practice then was that the
internal audit function reports to the Treasurers (the then heads of finance). Internal
auditors audited and compiled reports to the treasurer.
Within this arrangement, internal auditors performed several functions and provided
some kind of assurance to the treasurer. In case of payments, no voucher was paid
without going through the internal auditor who checked for matching of details on the
requisition and those on the voucher to confirm that the payee was genuine, the item
being paid for was budgeted for, and that the right expenditure item was charged. In
case one cheque was to be used to pay several vouchers, the internal auditor did the
arithmetic check to confirm that the amounts on the individual vouchers added up
to the amount on the cheque. The internal auditors initials on the vouchers and the
audit trails on the cheques assured the treasurer that everything was in line with the
laid down procedures. This had popularly come to be known as prepayment audit and
consumed a considerable amount of the time of internal auditors.
Concerning revenue collection, internal auditors helped the treasurer in monitoring
revenue collection. Internal auditors ensured that revenue collectors accounted for all
the money collected and all the used receipts. Before the main cashier received cash
from the revenue collectors, the internal auditor had to first verify and confirm the
amount being handed over. They also regularly assessed revenue centres to establish
the minimum collectable amount. Internal auditors monitored revenue collection to
ensure that all revenue budgeted for was actually collected. They further ensured that
all cash received by the main cashier was banked intact.
Stores audit: Internal auditors witnessed all deliveries to the various stores [stationery,
mechanical, medical]. Deliveries were verified in their presence and delivery notes
signed, certified correct. At regular intervals, internal auditors verified the usage of the
goods, by the user departments, in an effort to find answers to the question: How well
have the goods delivered to the stores, as witnessed and verified by ourselves, been
put to good use?
23
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JUNE 13
Assets utilization: Deployment of council plants, machinery and motor vehicles,
servicing records, parking of vehicles at parking yards at the prescribed time were
some of the concerns of internal auditors.
Verification of payroll accounting: This involved the following:

Confirming the numbers of staff on the payroll

Fishing out ghost employees
Confirming that the hourly rates used to compute wages for support staff was
commensurate with the standing orders.
Respective heads of section/department authorized overtime and checked the

arithmetic accuracy of the grand total that was transferred from the payroll to the
salary/wages cheque.
Internal auditors, when the situation warranted,
carried out special investigations which manifested
in two major areas; suspected misuse of stores and
impropriety in revenue collection.
Regarding schools, the main concern for internal
auditors was school fees collection and the
expenditure of the collected fees, whereas for
hospitals and health centers, the utilization of drugs
and other medical supplies were among the key
issues of concern.
Internal auditors performed all these in recognition
of the then definition of internal auditing; an
Independent appraisal function established within an
organisation to examine and evaluate its activities, as
a service to the organisation. The objective of internal
auditing is to assist members of the organisation in
the effective discharge of their responsibilities. To this
end, internal auditing furnishes organisations with
analyses, appraisals, recommendations, counsel and
information concerning the activities reviewed. The
audit objective involves promoting effective control
at a reasonable cost.
The enactment of the Local Governments Act, 1997, introduced some changes.
The Law then required each district, city, municipal or town council to provide for
an internal audit department. It also required reporting direct to the council, and
introduced the Local Governments Public Accounts Committees to consider both
internal and external audit reports and make recommendations to council. However,
the Financial and Accounting Regulations, 1997, that were issued to operationalise
the Act maintained prepayment audit as part of the statutory duties of the head of
internal audit. This has remained the status under the current Local Governments
Act Cap. 243, with the exception that internal auditors are no longer doing preaudit of payments but instead they are required to adopt risk based auditing. It is
worth appreciating that despite the challenges faced by local government internal
auditors in this country, the level at which it is now is regarded as the best in the East
African Community. This is based on the fact that, over and above the improved
reporting level, independence and legal recognition, the Local Governments
Internal Audit Manual, 2007, that generally guides
internal auditing in local governments heavily
draws from the International Professional Practice
Framework [international Internal Auditing
Standards, Position Papers, Practice Advisories
and Guides]. This implies that internal auditing
in local governments is steadily moving towards
fully adopting the current definition of internal
auditing. For ease of reference, internal auditing
is currently defined as an independent objective
assurance and consulting activity designed to add
value and improve an organisations operations. It
helps an organisation to accomplish its objectives
by bringing a systematic disciplined approach
to evaluate and improve the effectiveness of risk
management, control, and governance processes.
The objective of
internal auditing is to
assist members of
the organisation in the
effective discharge of
their responsibilities.
The nature of work and reporting arrangement made internal auditors deeply
involved in the implementation process and their independence, as reflected in the
above definition, was questionable. Questions were being raised as to what moral
authority they (internal auditors) had to query payments which they had passed at
the prepayment audit stage in case such payments later turned out to be fraudulent.
What has been the driving force behind local

government internal audit metamorphoses? Two
factors have been cited.

The ubiquitous corruption at the advent of decentralisation necessitated

strengthening the internal audit activity in local governments by making
the function independent from that of finance and improving the reporting
arrangement.
The adoption of decentralisation had promotion of good governance (read

good corporate governance) as one of its objectives which globally recognized
internal audit as one its four pillars.
The Effect of Decentralisation

The adoption of decentralisation as a system of governance marked the beginning
of the change in internal audit in Local Governments. The Local Governments
(Resistance Councils) Statute, 1993, required each district, city and municipal
council to provide for internal audit. It is important to note that while provision for
internal audit was made a statutory requirement, the wording of the statute required
providing for internal audit but not an internal audit department, which, by implication
was the intention of section 27. The Statute, however, changed the reporting
arrangement; from being responsible to treasurers, internal auditors thence reported
to the Resistance Council. Internal auditors empowered the finance committees to
consider internal audit reports, but not the Local Governments Accounts Committee
which was only mandated to consider Auditor Generals Reports. It should be noted
that even with the enactment of the Local Governments (Resistance Councils)
Statute, the nature of work virtually remained the same as stated above.
Despite the shortcomings in the laws as highlighted above, making the establishment
of internal audit a statutory requirement was a stepping stone towards improving
internal auditing in local governments to a level which is currently being seen as the
best in the East African Community.
24
The Current Challenges

Despite the efforts by the Ministry of Local Government to provide

basic tools and techniques to make internal audit more vibrant,
there are issues that require urgent attention to further enhance
performance of the internal audit function. The Auditor Generals
report for the financial year 2010/2011 to Parliament observed that
some internal audit departments are weak, while others are poorly
staffed and financed. The full adoption of risk based auditing is yet
to be achieved. There are still challenges in full adoption and use of
the internal audit manual. The quality of the Local Government Public
Accounts Committees (equivalent of audit committees) at the districts
who examine the reports is wanting in some aspects. Embracing
risk based auditing is the responsibility of all stakeholders but most
stakeholders think it is the role of the internal auditor. Several factors
underlie these challenges, but that discussion is beyond the scope of
this article.
Overview of Students Performance

in the December 2012 Examinations
By CPA Innocent Orone,
Examinations Officer,
ICPAU
s part of its mandate to regulate and maintain the standard

of accountancy Uganda, ICPAU conducts examinations for
the Certified Public Accountants of Uganda (CPA(U)) and
the Accounting Technician Certificate of Uganda (ATC(U))
courses. This function is executed by the Public Accountants
Examinations Board (PAEB) on behalf of the Council.
The examinations comprise computational, essay/discursive, multiplechoice and scenarios questions. The markers are required to prepare
comments on each question and ultimately each paper.
General observations on candidates performance
We have noted some factors that have impacted the performance of our
candidates and we are calling upon candidates to take keen interest in these
aspects. These include the following among others:
Preparation for examinations. This is evidenced in areas
11
like:
i) Registration. Candidates have ample time to register for
examinations from date of release of examinations results up to
the closure of registration for examinations, which is almost a
duration of three months. Candidates who register early enough
get adequate time to cover the syllabus, do assignments,
engage in adequate discussions and make consultations. Such
candidates have always performed well. Some candidates,
however, register for studentship and examinations at the close
of registration. By this time, some of them have not started
reading yet they only have two months to examinations. In most
situations, they begin panicking and lose focus.
ii) Reading culture. Good reading culture is significant for good
performance. Candidates who have made the best use of
recommended reading materials have excelled in examinations
and a good number of them have consistently received prizes.
Candidates who depend on handouts only, ignoring the
recommended textbooks and current issues in the environment
have tended to exhibit shallow knowledge when answering
questions.
For instance, for Audit Theory, question 2 (a) most of the
candidates did not perform well. They exhibited ill-preparation
and general lack of knowledge in payroll details.
iii) Continuous Assessment. These assessments expose candidates to
their areas of weakness and they work on them early enough.
Continuous assessment builds candidates confidence and
prepares them psychologically for examinations.
Reports from different tuition providers show that candidates are
not willing to do assignments and tests. On average, less than
25% of the candidates attempt mock examinations. Therefore,
candidates cannot detect their areas of weakness early enough
and work on them. They prefer to die once by waiting for the
final examinations.
Candidates who have sought our guidance, done exercises and
mock examinations have performed well.
2
2
3
3
Use of past papers. Past paper questions guide candidates

when revising. They help candidates to remove fear and gain
confidence but not to act as substitutes to textbooks and other
reading materials. Candidates who have read widely tend to
make the best use of these past papers since they are able to
try out what they have read and fill the missing gaps during
their reading. They simply act as an eye opener leading to good
performance. Concentrating on past papers in anticipation
that some of the questions will re-appear in examinations
makes candidates perform poorly. They read retrospectively by
first going to past papers and then notes later. The danger of
this is that a narrow part of syllabus is covered and yet these
questions may not be set again in the same way.
Attitude towards computational questions. Candidates who
are good at computations have always excelled in such areas.
They, however, need also to concentrate on theory to show
that they know what they are computing, and have ability to
interpret their figures and attach meanings. For instance, in CPA
6: Management Accounting and Finance; Question 2 Part b (i),
(ii) & (iii) of the question required candidates to demonstrate
knowledge on contract costing. Majority of candidates correctly
prepared the contract account but failed to explain why profits
should be computed on incomplete contracts and included in
financial statements.
Candidates who have poor attitude towards computational
25
APRIL 20
JUNE 13
questions tend to perform poorly. They exhibit high levels of

inability in answering computational questions and yet these
carry many marks. For instance, CPA Paper 5, Quantitative
Techniques, Question 1 was popular. 81% of the total candidates
attempted it but only 21% scored above 10 marks out of the 20
allocated to it.
Most candidates identified examples of quartiles, but could not
compute sample standard deviation, determine the percentage
in the required given interval and obtain the control limits
required.
In CPA paper 16, - Integration of Knowledge, question B5, was
the worst attempted part of the entire examinations. Less than
20% of the candidates attempted the question, yet of these only
10% scored a pass. Candidates demonstrated limitations in
knowledge of financial project evaluation.
4 4
Syllabus coverage. ICPAU examinations are set from the entire

syllabus. In CPA Paper 11; Taxation, candidates endeavoured
to cover the syllabus, leading to a marked improvement in
performance in the November 2012 examinations compared
to June 2012 diet. Most candidates attempted the required
number of questions and were able to give relevant advice where
necessary.
For papers where the syllabus coverage was inadequate,
candidates performance exposed this. For instance, CPA paper 6:
(Management Accounting and Finance), the Finance part is given
less coverage and in ATC 12: Introduction to Financial Reporting,
the candidates were ill- prepared in the area of public sector and
the accounting standards.
questions. This behavioural trend puts the candidates at a

disadvantage.
6 6
Inadequate syllabus coverage is also result of candidates attempt

to spot examinations. Preparation for examinations needs a
wide coverage of the syllabus as well as ability to articulate issues.
Candidates who take this approach perform well since they have
a broader view of the subject content and ability to apply issues
as required. For instance, In CPA 10: Management Decision
and Control; Question 2 Part (b) required candidates to explain
why managers should be involved in setting of their budgets.
This part was very well done by the candidates and they explained
the reason adequately. Part (c) required candidates to explain the
difference between flexible and fixed budgets. Candidates were
able to adequately state the differences. Of the candidates that
attempted this question, 78 obtained above 10 marks.
Some candidates however, have a tendency of trying to spot
the likely questions to come in a given examinations diet from
day one of their lectures. Consequently, they do not cover the
syllabus adequately which makes them out spotted.
5 5
26
Time management. Good time management facilitates

early preparation for examinations, reduces stress and makes
a candidate generally ready for examinations. Candidates
who have observed this have performed well. Unfortunately,
there are some candidates who have not observed this. This is
evidenced by candidates not attempting the required number of
questions, registering for examinations on the last day, arriving
late for examinations and some candidates waste time rewriting
Interpreting questions. Understanding the terminology used

in examinations is the gateway to good question approach and
performance. Candidates who have mastered this technique tend
to excel and minimize cases of misfiring. It is unfortunate to note
that there are cases where the candidates do not understand the
requirements of the question. For example, whereas question
1 of CPA 12: Corporate Financial Management, required
candidates to make a projection for four years and develop a
pro-forma statement of comprehensive income and statement
of financial position, some candidates produced eight financial
statements for each individual year, which was time wasting.
Also in CPA Paper 8, question 3, 83.8% of the candidates
attempted it and registered a pass rate of 38.24%. 90% of the
candidates could not interpret the question correctly and
instead explained the requirements with regard to the central
government business transacted by the national parliament and
not necessarily with regard to local governments.
40% of the candidates confused commitment control system
for cash accounting system and therefore lost the marks for this
section and expressed lack of awareness of the local government
public accounts committee or knowledge of its roles.
In CPA 15: Auditing and Other Assurance Services;
Question 3 was the least popular among all the questions in
these examinations. Indeed, the very few who attempted it
demonstrated a lack of understanding of the question and how
to audit opening balances hence performing very poorly.
Candidates mistook auditing opening balances for substantive
audits. In most of the cases candidates were giving the
substantive audit tests for all the balance sheet items which
the examiners did not ask for. This is an indication that some
candidates did not understand the key words of the questions
like explain, discuss, assess, elucidate, provide a solution,
report, list, briefly explain, and so on, leading to poor question
approach.
Knowing the level of skills being tested at each Level of
the syllabus. Level I of CPA tests knowledge whereas level III

and IV test knowledge, technical and conceptual skills. The way
candidates should present their work in examinations should
exhibit this. For instance, CPA 16: Integration of Knowledge,
Question A2 required candidates to comment on how CSL
could attract more customers in the face of competition as the
growth of the economy slows.
It was a very well attempted question, with most candidates
proposing good strategies that can be used to attract more
customers. Candidates demonstrated maturity and high level
of analytical skills. Good reference was made to the case study.
However, some candidates have failed to know the level of skills
being tested at each level of the syllabus. Some of our candidates
are only good at regurgitating book knowledge. For CPA Paper
14, Business policy and Strategy, a good number of candidates
exhibited poor analytical skills and inability to apply theory to the
case studies, in both the December and June 2012 examinations
diet. Some candidates still discussed the concepts generically as
opposed to using the concepts to analyze the case studies. This
was especially noted in the compulsory question.
8 8
9 9
Observing instructions. Good observation of the given

instructions enables candidates to make the right choice of
questions, plan their work well, number it and complete within
the time allotted. However, some candidates answer more
than the required number of questions, preventing them from
concentrating on the required questions. For instance, in ATC 3:
Business Mathematics and Statistics; and CPA 2: Economic
Environment of December 2012.
Listening skills. Good listening skills facilitate accurate receiving
of messages during the communication process. It facilitates
understanding and ensures no communication breakdown
occurs. It ensures good relationship between candidates and

invigilators and no party can easily become frustrated or irritated.
Some candidates, however, do not follow what they are told in
the examinations room. For instance, fastening answer booklets,
in case a student has used more than one, stopping to write when
it is time up, and standing up but not leaving the examinations
room until they are told to so. Failure to listen has resulted in some
candidates leaving the examinations room without indicating
the numbers they have attempted and generally displaying very
disorganized work, hence poor performance.
10
10
Overload. Some candidates tend to overload themselves. For

example, registering for six or seven papers at level I, or all the
five papers at level II. This overstretches them, leading to failure
to adequately prepare for examinations.
11
11
The tendency of some candidates to undermine some

Papers like Business law, Audit Theory, Professional Ethics &
Values and so on. Some candidates feel that these papers are
theoretical and demand less time of concentration yet these
papers demand candidates to demonstrate and apply a good
level of technical knowledge and current issues. Candidates
are reminded that current issues are crucial to these papers and
questions on topical matters will be regularly tested as well as
display of thorough understanding of the content of the papers.
Candidates in some cases are technically incorrect. They respond
to the questions in the papers as if it is a general paper, forgetting
that each paper has its own language. For instance, candidates
tend to mix Audit Theory and Professional Ethics and Values.
Training as an Accounting Technician or a Certified Public
Accountant requires a lot of hard-work. It takes time, effort and
determination. It needs one to be focused, committed and
informed, with a clear strategy.
27
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JUNE 13
Pass Card to Business Policy
Part
14
The Marketing Environment

The marketing environment does not significantly differ from the normal business environment. Just like the latter, it
comprises of both the internal and external aspects. External variables include:

The macro factors that affect the economy as a whole. These variables can generally be assessed with the guidance
of the PESTLED model (recall what was discussed in part three of these series under scanning of the environment).
The internal environment aspects which are generally controllable by an entity (see part four of the series).
This article shall focus on the environmental variables that specifically relate to marketing aspects and less attention shall be
paid to the general environmental variables noted above.
Whats in it for the Marketer?

The role of the marketer is to understand the marketing environment so as to identify areas for improvement, key challenges
as well as opportunities that could be exploited. In other words, a review of the marketing environment should lead to a
marketing SWOT analysis, which is eventually followed by the generation of strategic interventions.
Our discussion of the environment shall be split into the internal and the external marketing environment.
The External Marketing Environment

As noted already, this relates to the variables that are
outside the organisation. Key players in this area include the
consumers, customers, competitors and suppliers, each with a
varying degree of influence on marketing decisions.
28
| Todays
Todays
Accountant
Accountant
APRIL- JUNE
January
2013- March 2013
Customers Vs Consumers
Customers make the purchase decision while consumers are the end users of
the product. The implication for the marketer is that he must understand the
target group so that appropriate marketing messages can be designed. It is
also important to distinguish between organizational and individual buyers
since each of them have their own characteristics. For example, organizational
buyers buy in bulk while individual buyers usually buy in small quantities.
Organisational buyers have formal purchase decision making processes while
individual buyers often buy on impulse. Consequently, a price reduction
strategy may work for individual buyers, say, during the Christmas festivities,
but this is unlikely to work for an organizational client.
The distinction between customers and consumers can also be demonstrated
by an advert for childrens play items. You are unlikely to get good results by
targeting the message to adults. Instead, such a message should be targeted
to the children (consumers) who in turn will ask their parents (customers) to
buy for them the items.
Equally important is the need to understand that customers are of different
types, depending on how fast they make their purchase decision. Everett
M. Rogers classified customers into five groups depending on how quickly
they adopt a new product; the innovators, early adopters, early majority, late
majority and the laggards. Following one another, the above groups reflect
the duration that customers take in making a purchase decision following
receipt of information about a new product. The innovators (sometimes
called brand switchers) are usually the first to purchase a product soon after
its introduction, followed by the early adopters and the early majority as the
product grows and the late majority as the product matures. The laggards
are the last to make their purchase decisions about a product, with some of
them doing so as the product declines. Laggards are individuals who may, for
example, wait for a clearance sale so as to buy a product.
As a marketer, knowledge of the consumer characteristics is important so that
appropriate marketing communications are designed.
Competitors/Suppliers
Competitors have a major influence on a companys marketing
operations. This is mainly manifested through pricing strategies,
distribution mechanisms and quality of output. Suppliers, on the
other hand, affect the availability, quality and pricing of inputs.
Suppliers are critical to the value creation process because they are
the source of inputs.
In the next article, we shall look at some of the tools that can be used to analyse the external marketing environment.
December 2012 Examinations

Results Released
he Public Accountants Examinations Board

(PAEB) of the Institute of Certified Public
Accountants of Uganda (ICPAU) released the
results of the December 2012 examinations
on 7 January 2013. This was in response
to a request by tuition providers to equalize the
examinations diets. PAEB has been widely applauded
for this achievement. While releasing the results, CPA
Patrick Kagoro, the Chairman of PAEB encouraged
accountancy training institutes to utilize the ample time
available to adequately prepare students for the June
2013 examinations. Following the requests from training
institutions, we have released the examinations results
early so that they have ample time to prepare for the next
examinations diet scheduled for June 2013, CPA Kagoro
said. Kagoro also expressed gratitude to examiners,
moderators, markers, invigilators and the Secretariat for
their respective roles in the December 2012 examinations.
The December 2012 examinations results show improved
performance in CPA(U) papers. The pass rate for
December 2012 was 46.8% compared to 44.5% in the

June 2012 examinations. 89 candidates completed the
CPA(U) course. The Chairman of PAEB noted that although
there was a decline in the performance of ATC(U) papers,
it still remained good. The overall pass rate was 54.5% in
December 2012 compared to 57.2% in June 2012. 45
candidates completed the course.
The December 2012 examinations were held at four
regional examinations centres; Kampala, Gulu, Mbarara
and Mbale. The Institute took services nearer to the
students with a hope that training institutions will emerge
where the examinations centres are located.
PAEB has gone a long way in conducting examinations.
The pioneer CPA(U) students sat their first examination in
December 1997. The first person to complete the course
did so in 2000. So far, 1,046 professional accountants
have been produced by ICPAU. On the other hand, the
Accounting Technician course was established in 2001.
A cumulative total of 1,382 have completed the course.
29
Students
activities
1
riting exams
A candidate w
1, 2,3& 4. Candidates
writing their exams at the
Northern region examinations
centre in Gulu.
WHAT:
December 2012 Exams
WHERE:
Gulu, Mbale, Kampala
WHEN:
26 November - 1 December 2012
5.Candidates at
the Eastern region
examinations centre in
Mbale.
5
30
Students
activities
6
Mr. Simon
Oola, the G
overnance
over the in
and Relati
vigilation of
ons Mana
the examin
ger at ICPA
ations at th
U presided
e Eastern
region cen
tre.
6. IT practical exams
at the Northern region
exams centre
7. Theoretical exams at
the Northern centre.
8. Candidates at the
Eastern region centre.
9. IT practical exams
at the Kampala
examinations centre.
9
31
Accountancy
Trainers
Workshop
1
)
ICPAU (R
s Manager at
e Examination
th
e,
ar
ga
an
o Nt
e workshop.
Mr. John Bosc
point during th
emphasizes a
WHAT:
Accountancy Trainers
Workshop
WHERE:
Grand Imperial Hotel
WHEN:
29 January 2013,
27 February 2013
1. Mr. Simon Oola

(L) and CPA Derick
Nkajja, the ICPAU Chief
Executive, listen intently.
2. Some accountancy
trainers listen intently.
3. Trainers note down
salient points during the
workshop.
4. Some accountancy
trainers at the workshop.
Mr. Joseph
Kibuuka, the
Executive
Director of Top
Performance
Ltd, presenting a
paper on training
approaches and
methodologies.
4
32
Exams
Release
WHAT:
December 2012 exams
release press conference
WHERE:
Hotel Africana
WHEN:
7 January 2013
1. L-R: CPAs Henry Lwetabe

(ICPAU Council member), Derick
Nkajja (CEO) and Naru Thakkar
(ICPAU President).
2. CPAs Naru Thakkar (L) and
Patrick Kagoro (ICPAU Vice
President) display the December
2012 examinations results.
3&4. Delegates at the press
conference.
3
33
CPD
Seminars
WHAT:
West Nile CPD seminar,
Internal Auditors seminar,
Taxation seminar and
Financial Management
for SAACOs seminar
WHEN:
January March 2013
WHERE:
Desert Breeze Hotel
(Arua), Hotel Africana
(Kampala)
tation
livered a presen
o SAACO (L) de
nd
ale
az
er at
W
on
er,
titi
ac
anag
s Nabende, a pr
ukye, General M
t is CPA Nichola
CPA Pius Twim
gh
Ri
.
Os
AC
rting for SA
eteme & Co.
on financial repo
Nabende, Nabw
1.Some participants at the West

Nile region CPD seminar during the
tea break.
2. CPA Ronald Akankwasa
of Destiny Consult (L) receives
a certificate in honour of the
presentation he delivered at the
Taxation seminar.
34
3. Some participants at the

Internal Auditors seminar.
4. Participants chat with
CPA Honourable Nandala
Mafabi, Leader of Opposition in
Parliament, after his presentation
at the SAACOs seminar.
CPD
Seminars
WHAT:
Practitioners
seminar, Financial
Management for
SAACOs seminar
WHEN:
February 2013
WHERE:
Hotel Africana
CPA Honourable Nandala Mafabi

(L) receives a certificate in honour
of his presentation on Building
Successful Cooperative Societies.
1. Some practitioners at the

practioners seminar.
General Manager, Jubilee

Insurance.
2. Mr. Earl Steyn, Managing Director,

Data Prime Solutions delivering a
presentation on Improving Audit
performance.
4. Jubilee Insurance were

sponsors at the Practitioners
seminar.
3. CPA Mark Omona, the Technical

Manager ICPAU (L) sets the laptop
for Mr. Punet Chawla, the Assistant
35
APRIL 20
JUNE 13
Avenues of Business Financing:

Options In Uganda
C
By Joseph Sanjula Lutwama
Research and Policy
Manager,
Capital Markets Authority
apital is the most talked about word for

anyone thinking of starting a business or
someone already in business. You can always
hear any Ugandan businessman saying that
capital is one of those things hard to come
by in Uganda. For the most part of last year, it was almost
next to impossible to get a loan from a commercial bank
in Uganda. The interest rates charged on loans were very
high, in the range of 29-35%. It would almost be suicidal
to take out a loan at such high interest rates. No wonder
most banks tightened their credit taps making it difficult
for anyone to get a loan or else they would be certain to
default. The conditions have since changed but at 19% or
20% the interest rates are still considered very high for a
typical business in Uganda.
With such high interest rates, how then can businesses in
Uganda navigate the challenges of raising capital? There
are many opportunities for raising capital that Ugandan
businessmen and budding entrepreneurs can exploit.
The challenge is that we are reluctant to explore these
opportunities. We are either looking at accumulating our

savings or dashing to the bank for loans to finance business
start-up or growth. Lately the moneylender has also
become a popular source of business financing although
many Ugandan business persons and entrepreneurs will
tell you that finance from moneylenders has cost them
their businesses and properties. Moneylenders, unlike
banks provide quick access to funds but this comes at a
very high cost. In certain instances, a typical moneylender
will charge you an interest as high as 20% per month, which
comes to 120% per annum when annualised. It only takes a
miracle to survive losing your assets to the moneylender at
such high interest rates.
We do not have to rely only on moneylenders, banks or
even on our often not enough savings to build sustainable
businesses that will stand the test of time. We can exploit
many other funding options available in Uganda. However,
care must taken to use the appropriate funding option for
the different stages of business development. Different
stages of development call for different funding options.
Types of Business Financing Options & Stages of Business Development
Internal Financing
Lease Financing
Bank Debt Financing
Corporate Bond Financing

Equity Financing
36
There are five broad options of

businesses financing in Uganda;
Internal Financing, Bank Debt
Financing,
Equity
Financing,
Corporate Bond Financing and
Lease Financing. Each of these
business financing options has
unique characteristics (See table
1) which will inform the financing
strategies of any businessperson
or intending entrepreneur at the
different levels of development of
their business (See figure 1).
Table 1: Characteristics of the Different Business Financing Options in Uganda

Internal Financing
Bank Debt
Financing
Lease
Financing
Corporate Bond
Financing
Equity Financing
Description
Sourced from retained These are loans

earnings or business
advanced by
savings
commercial
banks, Credit
Institutions,
Micro-Deposit
Taking Institutions and
Micro-Finance
Institutions
An agreement
in which one
party gains a
long-term rental
agreement and
the other party
receives a form
of secured longterm debt
These are loans

advanced from the
public (especially by
institutional investors
such as the National
Social Security Fund),
through the Uganda
Securities Exchange
(USE)
This is financing
through sale of
shares (equity
ownership)
through Private
Equity Funds
or the Uganda
Securities
Exchange
Cost
Retained Earnings
Interest
Interest
Interest
Dividends
Suitable Business
Growth Strategy
Short-term
Short-Term to
Medium-Term
Medium-Term to
Long-Term
Medium-Term to LongTerm
Long-Term
Risk to Business
Low
High
Medium
Low
Low
Ownership by
Financing Provider
Not Required
Not Required
Not Required
Not Required
Required
Involvement in Business Not Required

by Financing Provider
Not Required
Not Required
Not Required
May be
Required
Security
Required
Required
Not Required
Not Required
Not Required
Figure 1: Business Financing & Stages of Business Development

Stages of Business Development
Conception
Start-Up Phase
Growth
Maturity
Decline
Funding
(Ush)
Sales
Cash Flow
Profits
Time
Personal Savings
Friends
Family
Government
Business Angels
Conception
1
USE Growth Enterprise Market Segment
USE Main Investment Market Segment
Personal Savings
Friends
Family
Business Angels
Government
Bank Debt
Private Equity
Business
Angels
USE GEMS1
Leasing
Bank Debt
USE MIMS2
Corporate Bonds
Leasing
Bank Debt
USE MIMS
Corporate
Bonds
Leasing
Avenues of Business Financing in Uganda
37
APRIL 20
JUNE 13
Conception
This is the stage in the business development cycle when the business idea is conceptualised. At this stage, funding options are available mainly from family,
friends, business angels and personal savings. In some instances, government can provide research and development support at this stage as is the case
with the Uganda Industrial Research Institute (UIRI). UIRI promotes innovation and product development.
Start-Up Phase
Maturity Phase
In the Start-Up phase, the entrepreneur is certain of the business concept

and what they require is funding for production capacity and sales. At
this stage, the entrepreneur will still rely on family, friends, business angels
and personal savings, as they have not yet developed a good track record
to access external financing from commercial banks or even the capital
markets. A bank in most cases will require collateral and a track record
that clearly shows that the business has sufficient cash flows to meet their
interest obligations. Yet in the start-up phase, the business is yet to generate
any cash flows.
It is in the maturity phase that the business now has stable sales, strong
profits and a substantial market share. Such businesses are the favourites for
Banks as they are less risky and the probability of default is very small. Banks
usually provide these businesses capital at very favourable interest rates.
These companies can also be able to access long-term capital either in the
form of equity or corporate bond offerings through the Uganda Securities
Exchange. These can be Initial Public Offerings (IPOs) or Secondary Offerings.
Most of the companies that are currently listed on the Uganda Securities
Exchange fall in this category.
However, business angels who are keener on the growth potential of the
business concept will be in position to provide business financing at this
stage. While business angels are more organised in the more developed
countries and thus easily accessible, in Uganda they operate more informally.
It takes one to be in their network to access their funding.
Decline Phase
Growth Phase
In the growth phase, the business is now established and looking for capital
to fund growth and expansion. The business is now in position to access
bank financing since it has some cash flow track record and assets it can
pledge as collateral in the bank. The business at this stage can also access
equity financing from the Uganda Securities Exchange Growth Enterprise
Market Segment (GEMS), which provides an opportunity for long-term
financing for businesses that may not have a profit track record but with a
potential for growth.
Private Equity Funds can also provide risk equity capital or mezzanine finance
(a combination of equity and debt financing) at this stage to businesses with
a growth potential. Unfortunately, there are not many Private Equity Funds
in Uganda. Nevertheless, there are East African Private Equity Funds mainly
based in Kenya that can provide such financing to Ugandan businesses
especially those that have growth prospects beyond Uganda.
38
At this stage of business development, the sales of the business begin to

fall and profits decline as competition levels increase. The business thus
needs to reposition or reinvent itself to survive in the market. The business
can venture into a new line of business organically or through mergers
and takeovers. These it can finance through bank debt or through IPOs or
Secondary Offerings at the Uganda Securities Exchange.
The framework of business financing and business development is not as
distinct as presented in real practice. Some of the stages overlap and in
some cases, businesses skip some of the stages. However, the framework
helps us understand that it is critical for any entrepreneur to know the level
of development at which their business is and source for the appropriate
type of financing.
Finally, irrespective of the source of funding any entrepreneur needs to
adhere to best practices in corporate governance and financial reporting.
Corporate governance and financial reporting are critical indicators of
transparency and sustainability. They enable any financier, whether family,
friends or an established financial institution to make proper assessment
of the viability of the business before providing funding. Unfortunately
many businesses in Uganda are not very keen on adopting best practices in
corporate governance and financial reporting.
Taxation of Transfers
of Oil Assets
This article will run in two parts;
Part I will discuss the various approaches commonly used in the oil and Gas industry, in regard to the taxation of transfers of oil assets and the policy implications of each alternative.
Part II will critically examine the approach adopted in Uganda, in regard to the taxation of
licence interest transfers.
Part 1
By Bernard Sanya
Oil and Gas professional,

Ernst & Young, Uganda
The sale of oil and gas assets provides one of the

highest returns for an exploration and production (e&p)
company especially when the disposal is made in the
period immediately following successful exploration
efforts. For instance, Heritage Oil Plc, one of the firms
first licensed to explore for oil and gas in Uganda sold
its assets at USD 1.45 billion1 in a farm out transaction
having spent up to USD 150 million on exploration
activities prior to the disposal, registering a return of
USD 9 for every USD 1 invested.
Heritage, indeed, deserved such a huge return given
the risk it took to venture into a green field with virtually
no exploration record at a time when Fina Exploration
B.V, an e&p firm, which had been licensed to explore for
oil in the entire Albertine Graben had relinquished its
licence declaring Uganda as a no oil zone.
The confirmation of commercial reserves in 2006,
following Heritage and Tullow Oil Plcs successful
exploration efforts, put Uganda in the spotlight as a new
oil frontier in the region, and in Africa. It also attracted
a lot of public interest and raised great expectations
in the exploration and production activities in the
Albertine Graben.
The magnitude of the gains on disposal, as
demonstrated above, makes it almost impossible for the
firms to conclude the transactions without attracting a
lot of public interest especially in a new oil region like
Uganda, with often very high public expectations.
More so, transfers of such assets normally require the
approval of the host government.
The key issue that arose in the Heritage farm out
transaction was whether the gains were subject to any
taxes in Uganda. Uganda Revenue authority (URA)
taxed the transaction while Heritage argued that no

tax was due on the transfer of the licence interests.
Heritage appealed to the Tax Appeals Tribunal (TAT)
against the assessment and TAT ruled in favour of
URA. The merits of this case are outside the scope of
this article and shall not be explored any further. The
transaction, however, underlined the importance and
need for clarity in the policies that govern the taxation
of transfers of oil assets.
The policy option adopted by the government in regard
to the taxation of transfers of license interests has a
bearing on the ability of the host government to attract
investments in the development of its oil fields. Policy
options that increase the cost of transactions could
frustrate government efforts in attracting competent
players in the industry.
A good starting point is the industry best practice.
However, there seems to be no international best
practice or industry standard on the tax treatment of
disposals of oil and gas assets. Research indicates that
various countries adopt different approaches.
Broadly, there are three approaches commonly used
in the industry in regard to the taxation of transfers of
licence interests. These include:
a) Ignore the gains/losses on disposals of licence
interests for tax purposes.
b) Tax the gain on disposal but allow equivalent
tax deductions to the purchaser.
c)
Tax the gains on the seller but restrict deductions on the purchaser.
Heritage Oil Plc press release of 27th July 2010

39
APRIL 20
JUNE 13
ensure that inefficient firms easily exit to create room for competent
players, thus enabling efficient field development and production.
Tax the gain on disposal but allow equivalent tax
. deductions to the purchaser
Under this option, the gain on disposal is taxed on the seller and
corresponding deductions are allowed to the purchaser of the asset.
Illustration - Kingfisher Plc
Kingfisher Plc acquired an exploration and production license, having
paid a signature bonus amounting to $200,000. The company
discovered oil reserves and confirmed commerciality after spending
$200 million on exploration and appraisal activities. To raise finances
and enlist expertise in developing the field, Kingfisher Plc farmed
down 50% of its license interests to another upstream company for a
consideration of $1 billion. Let us assume that gains attract tax at 30%.
Kingfisher would be subject to tax amounting to $299,970,000 on the
gain on disposal. The gain on disposal is the consideration received less
the cost base of the asset disposed, which ordinarily is the signature
bonus. In this case, the gain amounts to $999,900,000 ($1bn - (50 %*
200,000)). Exploration expenditure for which no tax relief has been
received does not form part of the cost base of the asset as it is
inherited by the purchaser and claimed as deductions, as though the
disposal never occurred. Certain tax jurisdictions specifically disallow
deductions of any costs incurred which are recoverable under any
insurance, contract or indemnity.
Each of these approaches is discussed below.
. Ignore the gains on disposal
Here, transfers of licence interests are ignored for tax purposes. This
is, perhaps, the most preferred option for oil companies. It has no tax
implications on both the seller and the purchaser. The entities are
therefore in position to negotiate the real commercial value of the
licence interests without worrying about any tax exposures.
In economic terms, the consideration paid should represent the
present value of future earnings that would accrue to the seller from
the interests, had the disposal not occurred. Therefore, provided the
government is guaranteed a fair share of future revenues, through the
taxation of field activities, it does not need to worry about taxing the
transfers.
This option is administratively convenient and enables firms with
resources and expertise to farm in and develop the resources efficiently.
This, however, may not be tenable especially in new oil provinces
like Uganda where stakeholder expectations are often very high and
unrealistic.
Norway and Botswana are some of the countries that adopted this
policy option. Apparently, both countries have benefitted from their
oil resource wealth. Although analysts have attributed this success to
transparent management practices adopted by these countries in the
management of their natural resources, policy choices such as these
40
Under this approach, the purchaser is allowed deductions for

$999,900,000 (the amount of the sellers gain on disposal) as well as
the $100 million (50%*$200m) exploration expenditure for which no
tax relief was granted to the seller. The purchaser, therefore, obtains
deductions amounting to $1,099,900,000 which result into tax savings
of $329,970,000 (30%*$1,099,900,000).
The seller ends up receiving $700,030,000 ($1bn - $299,970,000) for
an asset they had valued at $1bn while the purchaser effectively pays
$670,030,000 ($1bn -$329,970,000) for the transaction. Clearly, the
deal, if implemented in this form, is tilted in favour of the purchaser.
To remove the effect of tax, the seller may adjust the selling price of
the asset to a level that will ensure that it retains the intended value
of the asset ($1bn) as though the disposal was not subject to tax. To
achieve this, Kingfisher will have to set the price of the 50% license
interest at $1,428,528,571, thus increasing the cost of the transaction
by $428,528,571. This is likely to discourage licence transfers which
could limit the ability of the host government to attract players with
competences necessary for efficient field development.
In addition, while the government receives taxes amounting to
$299,970,000, from the seller, it ends up paying $329,970,000 to the
purchaser, over a period of time. It appears as though the purchaser
grants government a loan which it pays overtime, with the excess
accounting for the interest on the loan!
Unfavourable as it may appear, this option creates significant cash flow
advantage to the government as the tax on the seller is immediate,
while deductions to the purchaser are spread over a period of time. The
cash flow advantage is even more severe where the disposal is made
during exploration or development, as deductions are not normally
permitted until commencement of commercial production.
Tax the gains on the seller but restrict deductions
.on the purchaser
Under this approach, the sellers gain is taxed while little, if

any, tax relief is granted to the purchaser.
In our example above, while the seller (Kingfisher) pays taxes
amounting to $299,970,000 on the gain on disposal, only
restricted deductions are allowed to the purchaser of the
asset.
Uganda appears to have adopted this option; under the
Ugandan tax law, the purchaser is allowed deductions for
the exploration costs attributable to the asset at the time of
disposal, for which no deductions were allowed to the seller
($100 million), as well as deductions for the depreciation of
any allowable capital expenditure attributable to the asset
at the date of disposal on the same basis as the seller, had
the disposal not occurred. In this case, there were no capital
expenses at the time of disposal.
This option, the transferor is taxed but no deductions are
allowed to the transferee for the gain that is taxed on the
transferor, as is the case under option 2 above.
This policy option is particularly attractive to host
governments, as it generates more taxes than all the other
options. It could, however, also provide fertile ground for
the industry players to seek other tax efficient options of

transferring the interests without necessarily exposing
themselves to tax.
The decision on the most appropriate option for the host
government to adopt is often not an easy one, yet it is critical
in attracting competent players who can develop the fields
efficiently.
The best approach for host governments is to adopt options
which provide sufficient revenues, without necessarily
discouraging the sector players from undertaking
transactions as and when they deem appropriate, without
worrying about the tax exposures. A good option should
provide a balance between the often conflicting objectives
of government and the sector players. It should meet
governments need for revenues but also cater for the
interests of the investors in the sector. Therefore, an option
that provides the government with an upfront piece of the
pie, without necessarily discouraging the transactions with
excess taxes would be ideal for a new oil zone.
In part II of this article, we shall critically discuss the taxation
of transfers of licence interests in Uganda.
The views expressed in this article are those of the writer and do
not necessarily reflect those of Ernst & Young.
41
APRIL 20
JUNE 13
Accountants Bill,
2011 passed
Before the 1990s, there was no legal framework regulating the accountancy profession in Uganda. Those training in accountancy
courses had to either pursue the United Kingdom (UK) or Kenyan courses. In 1969, a process to enact an indigenous law to govern
the accountancy profession was initiated. This culminated into the enactment of the Accountants Act No. 5, in 1970. However, due
to the political upheaval of the time, the Act did not attain Presidential assent and therefore it never materialized into law. With the
stabilization of the political climate in the late 1980s, the process for a legal framework was restarted, and the Accountants Act, Cap.
266 was enacted in 1992, thus creating the Institute of Certified Public Accountants of Uganda (ICPAU) and its governing Council.
However, the 1992 Accountants Act was not without flaws, and in 2001, efforts to amend some sections of the Act were initiated.
In May 2001, ICPAU reviewed the Act and proposed amendments to the Minister for Finance. The Minister then forwarded the
proposed amendments to the Uganda Law Reform Commission (ULRC), which held a meeting with ICPAU in December 2001, to
form a task force that would execute the mission. The task force comprised representatives from the ICPAU Council and Management,
representatives from the Ministry of Finance, the Parliamentary Committee on Finance, Planning and Economic Development,
ICPAU members in Parliament, the Auditor General, ULRC, as well as experts from other public/private sector entities. With intensive
research and study, involving comparison with the accountancy law in other countries, and coupled with consultation with ICPAU,
recommendations were made in the sections that had been highlighted for amendment, hence the Accountants Bill, 2004.
Several amendments were made to the 2004 Bill, which saw the formation of the Accountants Bills; 2007, 2010, and finally, the
Accountants Bill 2011, which was read in Parliament, for the first time, on 7 February 2012, and thereafter referred to the Parliamentary
Committee on Finance, Planning and Economic Development, for scrutiny. The 2011 Bill, however, featured a contentious clause
which ignited rigorous lobbying by stakeholders of the profession. The clause in question, excluded all accountants except those
in public practice, from being subject to the Act. This would have limited ICPAU membership to the few accountants in public
practice. Significant in the struggle to have the clause amended were, the Minister for Finance, Hon. Maria Kiwanuka, Minister of
State for Finance (General Duties), Hon. Fred Omach, Minister of State for Finance (Planning), Hon. Matia Kasaija, the Auditor General,
CPA John Muwanga, the Accountant General, CPA G.O.L. Bwoch and his technical team, Hon. Timothy Lwanga, ICPAU members in
Parliament: Honourable CPAs; Nandala Mafabi, Henry Musasizi, David Bahati, and Sempala Mbuga, the Parliamentary Committee on
Finance, Planning and Economic Development, and the ICPAU governing Council and management. After several consultations,
meetings, and further lobbying, the clause was finally adjusted to provide for all accountants in the various sectors of the economy.
With the clause adjusted along with several others, the Parliamentary Committee on Finance Planning and Economic Development
presented its recommendations to Parliament on 14 December 2012 and secured Parliaments approval on the amendments. The
Bill was finally debated and passed in Parliament on 6 February 2013, and now awaits Presidential assent.
With graft crippling our country and undermining accountability, the passing of the Accountants Bill is timely. As accountants, we
can now be confident that once the Bill becomes law, we can have a firm grip on the financial management processes in Uganda.
ICPAU is grateful to all accountants and other stakeholders who played a vital role in the passing of this Bill. May I reiterate our
special thanks to the Minister for Finance, the Ministers of State for Finance, the Auditor General, Accountant General and ICPAU
members in Parliament, for a job well done!
CPA Naru Thakkar,
ICPAU President
42
Helping SMEs
Face
Their Challenges and

Seize Opportunities
By CPA Obed Bampe Tindyebwa
Managing Partner,
Grand and Noble
n Ugandas economy,
Small and Medium
Sized Enterprises (SMEs)
play a very crucial role
especially in terms of
jobs and wealth creation.
There is no universal definition
of SMEs but efforts have been
made to contextualize what
constitutes SMEs. According
to a Business in Development
(BiD)
Network
report,
Investing in Small and
Medium Sized Enterprises
in Uganda, 2008, a small
enterprise is an enterprise
employing a maximum of 50
people, annual sales/revenue
turnover of maximum, Ushs
360 million, and total assets of
maximum, Ushs 360 million,
while a medium enterprise
is an enterprise employing
more than 50 people, annual
sales/revenue turnover of
more than Ushs 360 million
and total assets of more than
Ushs 360 million.
43
APRIL 20
JUNE 13
According to the Organisation for Economic Co-operation and Development

(OECD) Policy Brief, June 2000, Small & Medium-sized Enterprises: Local
Strength, Global Reach, SMEs account for over 95% of firms and 60%-70% of
employment and generate a large share of new jobs in OECD economies. They
have specific strengths and weaknesses that may require special policy responses.
As new technologies and globalisation reduce the importance of economies
of scale in many activities, the potential contribution of smaller firms is
enhanced. However, many of the traditional problems facing SMEs;
lack of financing, difficulties in exploiting technology, constrained
managerial capabilities, low productivity, regulatory burdens
become more acute in a globalised, technology-driven
environment.
Despite the obvious challenges/constraints
experienced by SMEs, the main ones
highlighted above, SMEs have several
advantages which make the sector
very strategic. The following
advantages
have
been
mentioned in the existing
literature on SMEs.
Innovativeness: Though they are less likely to carry out research and
development, compared to large firms, SMEs are innovative. They create
or re-engineer products to meet new market demands and adopt new
approaches to increase productivity. SMEs easily build relationships with
their customers, enabling them to better understand their markets, and
customers tastes and preferences, thereby offering better customer service.
Flexibility: SMEs have lean and less rigid structures than big companies,
hence response time is short. There is quick decision making and increased
flexibility, generally, as well as increased worker commitment, arising from
workers ability to contribute to the decision making process. This makes
workers feel more useful, which also contributes to increased worker
productivity.
Due to their flexibility, SMEs can easily adapt to changing market conditions,
and are best suited to withstand business cycles, especially downturns,
which have undesirable effects. With economic uncertainties and other
related challenges associated with business slumps, big companies have
been badly affected whereas small firms seem to be very resilient. SMEs are
many and are spread out across the country, which facilitates distribution of
income/wealth. Many start-ups will come up as SMEs and some graduate
to become big companies, while others tend to remain small due to
several factors, the majority in this category being owner-managed shops
and services firms. In Uganda, SMEs therefore form the backbone of the
economy, as they provide a reasonable number of locally made products,
greatly contribute to employment and wealth creation, and act as a training
ground (incubation facility) for upcoming entrepreneurs. It is important to
emphasize that SMEs thrive in a situation where they co-exist with larger
companies which create opportunities through forward and backward
linkages, and where governments provide a conducive environment that
enables favourable competition and easy market access. With a fast
growing economy and prospects for commercial oil production
in the near future, Uganda avails great opportunities for SMEs,
especially in the expansion of market size.
So how can SMEs be

helped to meet their
challenges and seize
opportunities?
There are two approaches to the above situation. SMEs
need to undertake internal transformative changes
to ensure that they address managerial, technological
and information gaps. In this digital era, SMEs can no
longer afford to remain indifferent to the above important
attributes. There is need for SMEs to embrace continuous
improvement in management. Management of a business
encompasses a number of activities like planning, organizing,
controlling, directing and communicating. The cardinal rule
of SMEs business management is to know exactly where the
business stands at all times. However, it has been noted
that most business, for instance, do not practice any form
of planning. If you do not know where you are going,
you will surely never get there. The high rate of business
failures in Uganda has been attributed more to poor
management than to any other factor.
44
Improvement in management skills: This can be attained through

personal study, group learning and other schemes like mentorship. The quest
for more knowledge, skills and experience has never been as important as it
is in todays business world. SMEs must start to appreciate the importance
of professionalism in different aspects of business management. For
instance, most businesses have serious challenges when it comes to issues
of financial management and human resource management. Whereas
professional services may at times be considered expensive, SMEs need to
explore possibilities of engaging cost effective models like out-sourcing or
contracting affordable external professionals to address some of the above
issues.
Embracing Technological Changes: SMEs should make sure that they
keep abreast with technological changes and information requirements. It
is a fact that changes in technology usually take a faster pace. Technology
changes have the capacity of, for instance, rending a whole sector irrelevant
- things like floppy discs are now history; creative ways of conducting
business, like e-commerce have take precedent. Many business processes
and functions have been computerized and SMEs must cope with this reality.
For instance, most banks have embraced e-banking, with e-statements.
Uganda Revenue Authority (URA) adopted e-tax and almost all tax returns
and other processes are now done online, while the Lands Ministry is in the
process of computerizing land titles. Marketing has also been given a new
face with increased use of social media platforms like facebook, twitter,
LinkedIn and others.
What this means is that SMEs must step up efforts to cope with such changes.
This calls for continuous review of business processes and informational
requirements to keep pace with such changes. Learning should therefore
be continuous and SMEs must wake up to this reality and adopt structured
learning as part of their routine business activities. The above trend surely
creates great opportunities for Information Technology (IT) companies,
professional firms and professionals, generally to position themselves, to
help SMEs cope with the existing challenges in the above areas.
The family business model: Whereas family businesses face challenges,
with attitude change, family business model can make wonders. The model
can enhance capital and human resources mobilization. There is need for
attitude change such that graduates and professionals can work in their
family businesses for a pay instead of being on the streets or working for
others. They should be made to understand that working for their family
business is strategic in the long run as it adds to their family wealth, though
it may look unattractive in the short run. This would greatly enhance the
management capacity of SMEs, when entrepreneurs mix with young blood,
equipped with knowledge albeit with limited experience. The business
focus of such graduates can be improved and proper succession and
survival of many SMEs will be ensured, among other benefits. There would
also be fewer incidences of fraud and other financial vices, under normal
circumstances.
Improving SMEs access to finance, information, key infrastructures

and international markets:
Government should provide an enabling environment to allow
entrepreneurship to flourish. It should be clearly understood that whereas
innovative firms can flourish without much government help, sustainable
development of SMEs sector needs strong government intervention to be
able to realize meaningful contribution.
1.
2.
Roads and Power. There is need for stable and cheap sources of
power to promote SMEs. Whereas Uganda appears to have come out
of severe load shedding problems, power tariffs are so high that they
are stifling any meaningful business for both SMEs and big companies.
The government must look into the issue of power tariffs if SMEs are
to survive and realize their full potentialities. The other main issue is
the road network. Our road network is underdeveloped and most of
the roads including those in towns and municipalities where most
SMEs are located are pathetic. This makes transport a big challenge
thus resulting into increased transport costs. The government should
make more efforts in fixing our road network for SMEs to flourish.
Access to finance: Whereas the number of banks has increased,
their penetration is still not encouraging. Lending to SMEs is still
not appreciated due to perceived risks by banks, according to their
lending policies. Whereas microfinance institutions have tried to
bridge the gap, the interest rates they charge are too high yet SMEs
need cheap finance to enable them grow. Even bank interest rates
are still too high for most businesses to be able to make profits.
No wonder, the rate of loan defaults is reportedly increasing,
especially following the economic hard times we are emerging from.
Government must put in place mechanisms of regulating interest
rates not only through Central Bank Rate (CBR) but also through
interest rate capping. This way, SMEs can have chance of accessing
money at a lower cost. Government should enhance capital raising
mechanisms to promote venture capital schemes and to popularize
SMEs listing. In Uganda the idea of listing on the stock exchange,
as way of financing companies, has not been given due attention.
Many big companies, mainly owned by foreigners, have not been
enthusiastic regarding listing on the stock exchange. The companies

have limited local ownership and repatriate most of the profits hence
as a country, we do not benefit from them a lot. If most of them were
listed, SMEs would possibly follow suit, for those that could qualify
under simplified rules.

Government needs to come up with laws limiting the amount of

shareholding that can belong to foreign shareholders for subsidiaries
of foreign companies operating in Uganda. Firms in strategic
industries like banking, telecommunications, power, pensions, and
insurance should have a certain percentage, for example, 40%, listed
and offered to Ugandans, to broaden corporate ownership. Such
a policy would be a plus for local investors and the SMEs sector,
specifically.
3.
Taxation: SMEs face challenges complying with required regulation.

The Companys Act requirements usually seem enormous for
small companies. The taxes imposed are so many and extremely
burdensome for startups. In respect of accounting, the International
Financial Reporting Standards (IFRS) for SMEs was developed to
address the complex reporting requirements, though in Uganda, its
rate of adoption needs to be assessed. Government needs to come up
with a comprehensive policy targeting SMEs as this is a crucial sector.
A policy to grant SMEs start-ups a 5-year grace period from income
taxes, for instance, would be a good relief and very worthwhile.
The SMEs sector has not been given due and deliberate attention
by government, despite its significance to the countrys economic
development. Government seems to have mainly focused on big investors,
mainly foreign investors, who have been pampered with tax holidays, free
land allocations and several concessions, yet the most local investors
including SMEs have not benefited from the government investment
incentive schemes. We need to appreciate that most of the successful
businesses start small and grow with time and it is for this reason that a
policy to deliberately nurture start-ups should be formulated to encourage
local entrepreneurship and the SMEs sector in general. Such a policy would
yield great benefits for Uganda especially in the medium and long term.
45
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Why we Need to be
Mindful of Public Funds
T
By CPA John Bosco Obore
Institute Bursar,
Uganda Management Institute
o begin with, let us understand what we

mean by public funds. Public funds
refers to money that has been appropriated
by Parliament and consented to by the
President for use in each financial year. It
includes all government reserves and any other money
that is in the government coffers. It is usually money that
government collects through the tax system, any other
budget support and/or donor funded projects. Public
funds also include all money received by government
from any other legitimate sources for the benefit of its
citizens and society as a whole.
In each government financial year, which usually runs
from 1st July to 30th June of the subsequent year,
government prepares a budget which is basically
estimates of income and expenditure and work plans
for purposes of delivering services to its citizens. This
budgeting process is bottom up and in the case of
Uganda it is output-based. All key stakeholders get
involved in the budgeting process by providing their
wish lists to relevant organs of government. Budget
conferences are held and sector review meetings
are conducted. Budget framework papers are then
discussed and sector priorities identified. Once priorities
have been agreed upon in a particular financial year, then
these become key deliverables/output that government
must deliver on. All these processes are performed at
all levels of governments including local governments,
municipalities, town councils and/or boards. In so doing,
citizens get empowered to determine how to allocate
resources to what is critical in specific financial years.
Because of this level of participation, government,
therefore, becomes accountable to its citizens, for
those agreed upon deliverables/output for which
Parliament appropriated funds. It is at this point that
the appropriated funds become public funds because
whatever is going be done with the funds is to the
benefit of all the citizens and/or the public, hence the
terminology, public funds. And, besides, when
government levies taxes, fines, penalties and all other
sources of government revenue, it is always done under
the cover that government shall provide services to its
citizens to justify such levies and the need for government
participation in nation building.
Again, since government raises its revenue from the
public, based on appropriate laws and given the fact
that government provides services for the benefit of
its citizens who are generally the public, all the funds
46
mobilized/raised and utilized by government become

public funds. You should not, however, forget the fact
that governments exist because of public interest. It
is the public and/or citizenry that desire that there be
government so as to have an organized society and
therefore whatever government does is and should
be in the interest of the public that desired that the
government should exist. Government therefore exists
in trust for the citizens.
From the above analysis, we therefore realize that public
money is important because:
i.
Virtually all government activities require some

money.
ii. There is not enough of it, the reason why activities have to be prioritized, through participation.
iii. It has often been taken compulsorily from citizens through taxation.
iv. It is managed by people to whom it does not
belong.
It therefore becomes apparent that resources are scarce
and demands for resources always exceed the amount
available, hence the need to understand that in the
public sector:
a. Money is a constraint (the amount available is
limited).
b. There are multiple objectives, a majority of
which are welfare related.
c. There is diverse ownership.
Governments world over are very big institutions with
a multitude of objectives. This problem is aggravated
when governments are elected for a particular period of
time. Some of these elected governments develop their
manifestos, some of which may not necessarily be in
conformity with national development priorities. In such
a circumstance, there will be conflicting priorities. When
such a situation arises, government manifestos take
precedence over national priorities and consequently
stifling national development. An elected government
will want to fulfill some of its promises made during
campaigns and this is likely to cause postponement
of national priorities. It is because of this that money
becomes a key input and a constraint at the same time.
Since parliament appropriates funds for respective
financial years, these funds may not be enough to handle
both national priorities and manifesto promises.
It therefore becomes a constraint.

According to modern bureaucracy, there are three key
relationships that evidently exist in as far as public
funds are concerned namely;
1.
The principal, who in this case is the public.
2.
The agent, who in this case is the civil servant.
3.
The authority delegated, which in this case

is service delivery.
The public is the principal because it is the

reason why government exists and it was from
the public that government raised its revenue.
Also, the services that government delivers
are for the public, who are entitled to quality
services. The public is the principal because they
are the electorate and it is their power which
government holds in trust for the citizens. Any
government world over fears to be given a vote
of no confidence.
The agents, on the other hand, are employees who
perform duties for which government was set up,
for a consideration called salary. The salary comes
from revenue which was raised from the public and
therefore the public has a right to hold civil servants
accountable for their actions because they are paid for
the services they render and, besides, they entered into
a performance contract.
Sometimes, principals have a number of reasons for
seeking agents to exercise some of their authority. These
include the burden of time involved in the function, a desire to
avoid particular sorts of activity, and the lack of required skills or
knowledge. A number of factors show that this may not be an easy
relationship.
As professional accountants in the public sector, who fall in the category of
agents, it is imperative that we understand the above contractual relationship
very clearly. Failure to grasp the issues embedded in the above concepts results
into lack of accountability. Accountability is defined to include the responsibility
for carrying out a task but crucially includes the requirement to report, explain
and justify ones actions. In addition, accountability implies some ability by
those to whom the account is presented, to take action, such as replacing a
poorly performing manager or not re-electing an unsatisfactory politician.
As professional accountants and in light of the above issues, we need to
exercise maximum care while performing our duties as custodians of
public funds. Ethical conduct must be at the very back of our minds while
we exercise our duties. Otherwise, we will fall prey to being replaced
because we will not have upheld the definition of accountability.
47
APRIL 20
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Graduates Profile
CPA SETH NAHABWE

As a student, humility
was a virtue that he carried
along in everything he did.
He accepted to learn and
listen to lecturers advice.
Q. Who is Seth Nahabwe?

A. Seth Nahabwe is a CPA graduate.
I work with the Uganda Revenue

Authority (URA) as a Tax Auditor, Domestic Taxes Department, where I
have been for the past four years. Previously, I was a Teaching Assistant at
Kyambogo University, where I worked for one year. I recently established
Nahash, a CPA training centre, and business consultancy firm. I am married with one child.
Q. You started a training centre 7 months after you completed

CPA. What inspired you to start the centre?
48
A. I developed a strong passion for teaching from my first job at Kyambogo University where I worked as a Teaching Assistant. In addition to filling the training gaps existing in the current professional training system
in Uganda, teaching requires me to do constant research and this keeps
me up to date in recent developments in the accounting profession. I
also have a desire to make a foot print in as many peoples hearts as possible and I feel a lot of joy when a candidate calls to say they have made
it in the exams because of me. I am glad to inform you that at Nahash,
of the first 3 Business Policy students that we handled, 2 were sitting the
paper for their last time and they passed. Each time a student call me
and says, If it were not for you, I wouldnt have made it, I get even more
inspired to continue offering training and mentoring them.
Q. What process did you go through to establish Nahash?

A. Initially, I called a few friends whom I knew were doing the course, to
attend classes. I then embarked on the registration process, which I did concurrently with the training, and in September 2012, I obtained the Certificate
of Incorporation. I am yet to submit the company profile to ICPAU. We currently have 5 lecturers and we are located at Old Kampala S.S.
Passing Integration of Knowledge involved a lot of hard work, having

confidence and thinking strategically.
I also give credit to my trainers, who guided us. I specifically had one
very good tutor who gave me a lot of guidance through administering tests, which I willingly did. I sat for my first test during my first
lecture. Because of this I gained a lot of confidence and a lot of positive
criticism from my lecturer, which helped me to correct many of my
mistakes, in terms of question approach and solutions to questions. As
a result, I gained confidence in myself and I was able to correct my mistakes, unlike in the past, when we went into the exam and got shocks
head on. Tests also helped to prepare us in time management, and
therefore training institutes should be encouraged to administer tests.
As a student, humility was a virtue that I carried along in everything I

did. I accepted to learn and listen to lecturers advice.
I also took examiners comments seriously and worked on correcting

my mistakes, a thing many students ignore.
Knowing the learning outcomes and working towards achieving them

also guided my learning.
Q. How did the centre perform in the November 2012 examinations?
A. For the December 2012 sitting, we had 7 students, most of whom were
doing more than one Paper. 3 students sat for Financial Accounting (Paper
1); 2 passed, one failed. 3 sat for Quantitative Techniques (QT) and all passed.
All the 3 students who sat for Business Policy passed.
Q. What mechanisms do you have in place to ensure the quality of
your lecturers?
A. I insist on hiring only qualified facilitators; we all embrace time management and syllabus coverage. Having been in the system, I already knew
some people who were good at the job. For example, I had taught with
my colleague who teaches QT, while at the University. We roll out Papers as
and when we get very good facilitators. We have actually not had the other
Papers at Level 2 Advanced Financial Accounting and Professional Ethics &
Values, because we have not yet identified the right trainers for those Papers.
Q. Entrepreneurship is a field that many young adults are hesitant
to venture into. How would you advise students and current CPAs to
look into this seemingly scary yet lucrative venture?
A. My current job at URA involves checking out the compliance of several

businesses to the relevant tax laws. I have discovered that most businesses
are doing pretty well and each time I attempt to discuss with proprietors
about how they have made it, most of them reveal that they started small
but their level of growth rate cannot be matched with that of someone in
employment. Therefore we must engage in some business if we need real
life success. The biggest step in becoming a successful entrepreneur is in
starting. People should not shelve their bright ideas and talents as they wait
for enough capital to start. Let them start small, use what they have today
to get what they need tomorrow. Once you have started something, along
the way, you must find a way to progress. Your biggest challenge at the start
may be to create demand from even the first client for your product but
one year later, your biggest challenge will be meeting the overwhelming
demand from the clients. For instance, I started the consultancy branch of
Nahash with one client and I was the only employee, while I was still doing
CPA, but now I have been compelled to hire other people because of the
bulk of the work after only 2 and a half years. It is also important to build
relationships with clients, through trustworthiness and excellence in service.
Q.
You were the top student in Integration of Knowledge, during

the December 2011 sitting. How did you achieve this?
A. Integration of Knowledge in my opinion is the easiest Paper because it

is application. However, I also had the privilege of doing most of the Papers,
which most students do not have; I was exempted from only two Papers,
and therefore did all the rest. I had a good foundation; everything I did in
Level II and III was revision, so I was simply building on what I had already
learnt. The assumption of, I covered this at the university did not affect me.
Q. How would you advise students against the misconception that

CPA is very hard to pass?
A. Students have to believe in themselves. The perception that CPA is hard
should be erased from their minds. The problem is that students do not want
to attend class and yet it is from class that one gets these concepts from the
practical aspect, that is, what the examiner requires. In my opinion CPA is
like any other course, except that students do not give it the time and effort
that it requires.
Q. How has your exceptional performance in the CPA course contributed to your professional growth and development?
A. My exceptional performance has enabled me to build pride and confidence in myself. But also, after excellence comes a sense of responsibility.
People look up to you and expect you to excel even higher. As a top student
in Integration of Knowledge I feel motivated to keep the banner high, so as
not to disappoint the profession. The other benefit that comes along with
excellence is that people believe in you. Everywhere you go people have
trust and confidence in you to perform. As a result of the skills that I acquired
from my training, I am very efficient at my work place. Even in my consultancy, all the brilliant ideas I have sprung from the knowledge I obtained while
doing CPA. Practical skills have helped me a great deal. If you can apply at
least 5% of what you learn in class, at your job, you can be sure to succeed.
Q. Have you accumulated any other accolades?

A. Yes I have. At Bachelors level, I received Certificates of recognition from
the Vice Chancellor, for all the years I was at the University, given that I attained a Grade Points Average (GPA) of above 4.6, in all semesters. I also
received a Certificate of Recognition for being the best candidate in my
Masters class.
Q. In light of the fraud that has been unearthed in the various public entities, and given that you are employed in the public sector, as
a CPA graduate, how do you plan to promote financial discipline and
accountability?
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APRIL 20
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A. My training sessions involve counseling to students and I have always

emphasized the fact that the costs of lack of integrity are much greater than
the misconceived benefits. I do not wait for the professional ethics class to
be able to say this. I encourage them to use their wisdom for the right things
and in the right way. During my work, I also receive several offers for bribes
especially from non compliant tax and for most of them the liability arises
from use of incompetent tax consultants. However, I have always encouraged them to pay and thereafter hire competent consultants and follow the
right procedure so that they do not find themselves in situations where they
feel compelled to offer bribes.
Q. Given your busy schedule, what do you do to achieve a work-life
balance?
A. I finish work at 5.00pm and I switch off to take on other duties, such as
A. Yes, I am a member of ICPAU. I registered in July 2012.

Q. There are a number of graduates who are reluctant to register for
membership. What inspired you to become an ICPAU member even
before you graduated?
A. ICPAU membership comes with several benefits; a lot of communication

from the Institute, networking opportunities, and continuing professional
development opportunities, but most of all, like I said earlier, I now carry myself as an accountant, and therefore, I needed to take all the necessary steps
to become a professional accountant.
Q. Where do you see yourself 10 years from now?
A.

I see myself as a top manager of an organisation with a regional influence. I cannot wait to apply this wealth offinancial accounting, analysis
and reporting expertise at a strategic level. With CPA(U),I am now an
all roundprofessionalwhose expertise isjust optimal to create value
anywhere but more easily and greatly where I am also in the driving
seat. This I am confident I will achieve whether in URA or outside URA.
I see myself running a vibrant audit firm, and tax consultancy will definitely be one ofour products. I would like to see Nahash Accountancy
and Management Training Ltd at the level where it can operate and
add value in the accounting and management training world without
me.
I have a great passion for the manufacturing sector and within 10 years,
I hope to be running a successful cosmetics manufacturing firm.
Overall, I would like to make history as a successful professional accountant, educationist, and industrialist ofmy generation.
family or Nahash. I also take advantage of weekends when I am free to spend

time with my family and friends. Sometimes I drive together with my family
to meet a client, depending on the profile of the client.
Q. Give us a brief account of your education background and other

qualifications.
A.
I studied both my O and A levels at Munteyera High School, between

1997 and 2002. At A level, I took History, Economics, Geography and Divinity
(HEG/D). Thereafter, I pursued a Bachelors Degree of Arts in Economics from
Kyambogo University and attained a First Class. While in my second year at
Kyambogo University (2004), I enrolled for a Diploma in Transport Management, from Makerere University and completed it in 2006 with a First Class
too. In August 2009, after I had worked with URA for about 6 months, I enrolled for a Master of Science in Development Economics, at Uganda Martyrs
University, Nkozi. In the same year I enrolled for CPA, which I completed at
the same time with the Masters, in 2011.
Q. What inspired you to join the Accounting profession?

A. Initially my ambition was to be an economist. However, the nature of my
job made me realize that accounting skills were a mandatory requirement
for me. I realized that I needed the skills if I was to be efficient at my job and
enrolled right away. Right now, I carry myself as an accountant.
Q. What influenced your decision to pursue the CPA(U) course, over
other professional accountancy courses?
A. In the beginning it was the cost because it was much cheaper than
the other professional courses available. However, as we progressed in the
course, I discovered that the course content for CPA and that of other professional accountancy courses was basically the same, as we were following the
same International Accountancy Education Standards guidelines, but most
importantly, CPA content was more localized and therefore more relevant.
Q. Are you already a member of ICPAU, if not what is hindering you
and when do you expect to register?
50
Q. What word of advice do you have for the current and future CPA
students?
A.
As students go to class they should think about how they can apply
whatever they are learning immediately they leave the class.

Students should be hardworking. They should love CPA and even

when they fail, they should not be discouraged.
They should also not undermine going to class; students should swallow their pride and listen to their trainers.
They should take tests when administered by lecturers, since the more
tests they take, the more confidence they build in themselves. Through
tests, students are also able to discover their mistakes and correct them
before they go into the final exam.
Most importantly, students should not undermine the syllabus content and examiners comments. All Papers have learning outcomes,
therefore students should have these at the back of their minds, as they
study, so that they go to the exams knowing what is expected of them.
Trusts and their

taxation in Uganda
By CPA Peter Kyambadde
Senior Tax Manager,
KPMG Uganda
What is a trust?
In common legal systems, a trust is a relationship where property (real or personal,
tangible or intangible) is held by one party, for the benefit of another. Under the
Income Tax Act (ITA) section 2 (www) a trust means any arrangement affecting
property in relation to which there is a trustee.
A trust conventionally arises when property is transferred by one party, to be held
by another party, for the benefit of a third party, although it is also possible for
a legal owner to create a trust of property without transferring it to anyone else,
simply by declaring that the property will henceforth be held for the benefit of
the beneficiary.
A trust is created by a settlor who transfers some or all of his property to a trustee,
who holds that trust property for the benefit of the beneficiaries.
According to Section 2(xxx) of the ITA a trustee to includes:
a. Any person appointed or constituted as such by act of the parties, by
will, by order or declaration of any court, or by operation of the law.
b. An executor, administrator, tutor, or curator.
c. A liquidator or judicial manager.
d. Any person entrusted with the administration or control of property
subject to a trust.
e. Any person acting in fiduciary capacity.
f. Any person having either in a private or official capacity, the possession,
direction, control or management of any property of a person under a
legal disability;
g. Any person who manages assets under a private foundation or other
similar arrangement.
ir
he
t
d
an n in
s
t tio
a
us
Tr taxa and
g
U
Note: A trustee may be either a natural person, or an artificial person (such as a company or a public body), and there may be a
single trustee or multiple co-trustees. There may be a single beneficiary or multiple beneficiaries. The settlor may himself be a
beneficiary.
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APRIL 20
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In the case of the self-declared trust, the settlor

and trustee are the same person. The trustee
has legal title to the trust property, but the
beneficiaries have equitable title to the trust
property (separation of control and ownership).
The trustee owes a fiduciary duty to the
beneficiaries, who are the beneficial owners of
the trust property. The trust is governed by the
terms under which it was created. The terms of
the trust are usually written down in a trust deed.
The terms of the trust must specify what property
is to be transferred into the trust (certainty of
subject matter), and who the beneficiaries of
that trust will be (certainty of objects). Terms
may also set out the detailed powers and duties
of the trustees (such as powers of investment,
powers to vary the interests of the beneficiaries,
and powers to appoint new trustees). The trustee
is obliged to administer the trust in accordance
with both the terms of the trust deed and the
governing law.
of Uganda: provides particularly for

testamentary trusts.
d.
Taxation of Trusts in Uganda

The principles of taxation of trusts are highlighted
under section 71 of the ITA and these are:
1.
Subject to principle (5) below, the income

of a trust is taxed either to the trustee or to
the beneficiary of the trust.
2.
Separate calculations of chargeable trust

income shall be made for separate trusts,
regardless of whether they have the same
trustee or not.
3.
Income derived or expenditure or losses

incurred by a trust retain their character as
to geographic source and type of income,
expenditure, or loss, in the hands of the
beneficiary.
4.
A trust is required to furnish a trust return of

income within six months after the end of
the year of income of the trust.
5.
A settlor or a qualified beneficiary trust:
Types of Trusts
There are two basic types of trusts, living trusts
and testamentary trusts.
a.
A living trust or an inter-vivos trust

is set up during the persons lifetime.
b.
A Testamentary trust is set up in a

will and established only after the
persons death, when the will takes
a.
Is not treated as an entity separate

from the settlor or qualified
beneficiary, respectively.
b.
The income of such a trust is taxed

to the settlor or qualified beneficiary
and the property owned by the trust
is deemed to be owned by the settlor
or qualified beneficiary, as the case
effect.
Living trusts can be either revocable or
irrevocable. An irrevocable trust is a trust that
cannot be modified or terminated without
the permission of the beneficiary. The grantor,
having transferred assets into the trust, effectively
removes all of his or her rights of ownership to
the assets and the trust.
The Law on Trusts in Uganda

There are various laws that have been set up to
regulate trusts in Uganda.
These laws include:
may be.
6.
The trustee of an incapacitated persons

trust is liable for tax on the chargeable trust
income of the trust.
Section 70 (d) of the ITA defines a qualified

beneficiary as:
i.
52
a.
Trustees Incorporation Act, Cap. 165,

of the laws of Uganda; specifically
provides for the incorporation of
trusts.
b.
Trustees Act, Cap. 164, of the laws of

Uganda; provides for investment by
trustees.
c.
Succession Act, Cap. 162, of the Laws
Income Tax Act, Cap. 340, of the Laws

of Uganda: provides for taxation of
trusts and trustees.
trust in relation to which a person,

A
other than a settlor, has a power solely
exercisable by that person, to vest the
corpus or income of the trust in that
person; or
ii. A trust whose sole beneficiary is an
individual or an individuals estate or
appointees, but does not include a trust
whose beneficiary is an incapacitated
person.
Resident Trust defined
Rates of Income Tax Charged
According to section 11 of the ITA, a trust is resident trust for a year of income if:
Section 8 (1) of the ITA provides that a trustee of a trust is charged to tax at
the corporate tax rate - currently 30% on the chargeable trust income for
the year of income.
a.
The trust was established in uganda;
b.
At anytime during the year of income, a trustee of the trust was a

resident person; or
c.
The trust has its management and control exercised in Uganda at

any time during the year of income.
In effect, where any of the three listed aspects does not appear in the
structure of the trust, such trust is treated as a non resident trust and is
charged tax on incomes from sources in Uganda only.
Section 8 (2) of the ITA provides for a trustee of a trust which is an estate of
a deceased taxpayer, who at the time of death was a resident individual to
be charged to tax at the individual tax rates.
Section 8(3) of the ITA provides for the taxation of a trustee of an
incapacitated person and it is to the effect that such a trustee is charged
tax at the individual tax rates.
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Current resident individual tax rates

Annual chargeable income
Rate of tax
Not exceeding Ushs 2,820,000
Nil
Exceeding Ushs 2,820,000 but not exceeding Ushs 4,020,000 10% of the amount by which chargeable income exceeds
Ushs 2,820,000
Exceeding Ushs 4,020,000 but not exceeding Ushs 4,920,000 Ushs 120,000 plus 20% of the amount by which chargeable
income exceeds Ushs 4,020,000
(a) Shs 300,000 plus 30% of the amount by which chargeable income exceeds Shs 4,920,000; and
Exceeding Ushs 4,920,000
(b) where the chargeable income of an individual exceeds Shs

120,000,000, an additional 10% charged on the amount by
which chargeable income exceeds Shs 120,000,000.
Income Tax rates for non resident individuals
Annual chargeable income
Not exceeding Ushs 4,020,000
Rate of tax
10%
Exceeding Ushs 4,020,000 but not exceeding Ushs Ushs 402,000 plus 20% of the amount by which chargeable in4,920,000
come exceeds Ushs 4,020,000

(a) Shs 582,000 plus 30% of the amount by which chargeable
Exceeding Ushs 4,920,000
income exceeds Shs 4,920,000; and

(b) where the chargeable income of an individual exceeds Shs
120,000,000, an additional 10% charged on the amount by
which chargeable income exceeds Shs 120,000,000.
Chargeable Trust Income
Taxation of trustees and beneficiaries
Chargeable trust income is defined under section 70 of the ITA to mean:
Section 72 of the ITA provides for the taxation of trustees and beneficiaries. It provides that;
i.
The gross income of the trust

for that year calculated as if the
trust is a resident tax payer; less
ii. The total amount of deductions allowed under the ITA for
expenditures or losses incurred
by the trust in deriving that
income;
The allowable deductions are provided
for under sections 22-38 of the Income
Tax Act.
54
Any amount derived by a trustee for the immediate or future benefit of any
ascertained beneficiary, other than an incapacitated person, with a vested
right to such amount is treated as having been derived by the beneficiary for
the purposes of this Act.
Where any amount to which the above provision applies is included in the
gross income of the beneficiary for the year of income, the beneficiary shall
be allowed a deduction in accordance with the ITA for any expenditure or
losses incurred in that year by the trustee in deriving that income.
A trustee of a trust that is a resident trust for the year of income is liable for tax on the
chargeable trust income of the trust for that year.
A trustee of a trust that is non-resident for the year of income is liable for tax on so much of
the chargeable trust income for that year as attributable to sources in Uganda.
Taxation of estates of deceased persons

Section 73 provides for taxation of estates of deceased persons. It provides
among others that;
Any amount derived by a trustee as executor of the estate of a deceased person
shall, to the extent that the commissioner is satisfied that such amount has been
derived for immediate or future benefit of any ascertained heir or legatee of the
deceased, be treated as having been derived by such heir or legatee for the purposes of the ITA.
Where any amount referred to above is included in the gross income of the heir
or legatee for the year of income, the heir or legatee shall be allowed a deduction
in accordance with the ITA for any expenditure or losses incurred in that year by
the trustee in deriving that income.
The trustee of an estate of a deceased person is responsible for the tax liability of
the deceased taxpayer arising for any year of income prior to the year of income
in which the taxpayer died.
Responsibility for the Tax liability

Section 71 (7) of the ITA provides that:
Trustees are jointly and severally liable for a tax liability arising in respect of chargeable trust income that is not satisfied out of the assets of the trust.
Further section 71 (8) of the ITA provides that:
Where a trustee has paid tax on the chargeable trust income of the trust under sections 72 and 73, that income shall not be taxed again in the hands of the beneficiary.
An irrevocable trust meant for charity is exempt organisation. Section 2 (bb) of
the Income Tax Act provides that:
Exempt organisation means any company, institution or irrevocable trust:
i) which is:
(A). An amateur sporting association
(B). A religious, charitable (emphasis ours), or educational institution of a public
character (emphasis ours), or
(C). A trade union, employees association, an association established for the purpose
of promoting farming, mining, tourism, manufacturing, or commerce and industry
in Uganda; and
ii. Which has been issued with a written ruling by the commissioner currently in force
stating that is an exempt organisation; and
iii. None of the income or assets of which confers, or may confer, a private benefit
on any person.
55
APRIL 20
JUNE 13
TECHNICAL ISSUES
IN A QUESTION & ANSWER FORM
The ICPAU Technical Staff receives a number of inquiries from members and the general public on
various accountancy matters. Compiled below are some of the recent questions posed and responses
provided by the technical team.
Congratulatory Message
Our long time client has requested us to submit a congratulatory message to be published in the press. The message
is not aimed at marketing our firm but instead is a show of support to our client. Please let us know whether we should
proceed to publish this message in the newspaper supplement where all other stakeholders are going to do the same?
Accountants are forbidden from advertisement of their professional services. The ICPAU Code of Ethics also discourages
any action by members of the Institute aimed at bringing their names (or their firms) to the notice of the public in a
way tending to reflect adversely on the profession. Statement 6 of the ICPAU Code of Ethics describes some acceptable and
non acceptable means of publicity. Congratulatory messages are not specifically described under this statement. However,
the ICPAU Disciplinary Committee has in the past ruled that such messages bring undue attention to the firm & its professional
services.
Practice Management Course
I am preparing to apply for a Certificate of Practice for 2013. I am informed that ICPAU has introduced a Practice
Management Course that is mandatory for all practicing accountants. What do you mean by the ICPAU Practice
Management Course? Where is it offered?
The Practice Management Course will be conducted by ICPAU. The Course will cover: the regulatory environment
governing accountancy practice; it will introduce key aspects of practice management; and explain how a firm can be
managed as a business. The course is aimed at preparing accountants for their audit practice roles and responsibilities. The
dates for the Practice Management Course will be announced during the course of the year.
Preparation of Accounting Records
Can an auditor provide both accounting and audit services for its audit client?
A self-review threat is created if an auditor provides an audit client with accounting and bookkeeping services (such as
preparing accounting records or financial statements) and subsequently audits the financial statements. An auditor
may not provide any accounting and booking keeping services for any public interest clients. The auditor may, however,
provide accounting and bookkeeping services to an audit client that is not a public interest entity, where the services are of a
routine or mechanical nature, so long as appropriate safeguards are in place and the self-review threat created is reduced to an
acceptable level. The ICPAU Code of Ethics also cautions that, in all cases in which a practice is concerned in the preparation
of accounting records of an audit client, particular care must be taken to ensure that the client accepts full responsibility for
such records and that objectivity in carrying out the audit is not impaired.
56
Job Adverts in the Newspapers
We are in the process of developing a newspaper advert, to be published in the local press, for positions at our
audit firm. Would you please advise us of any requirement by ICPAU regarding such adverts?
A. We draw your attention to the paragraph 4.6 (xiii) of the ICPAU Code of Ethics which states that Particular care
is necessary in preparing advertisements for staff which are to appear in the non-professional press, otherwise
such notices can often be criticized as constituting an advertisement of the member or his firm and/or of their professional
services he provides. The following guidelines should therefore be observed:
a. The name of the member or firm should not appear with undue prominence or frequency;
b. The duties to be performed may be described in reasonable detail but should not be capable of being regarded
as constituting an advertisement of the services provided by the member or his firm.
Mandatory Rotation of Audit Firms
One of the authorised audit firms has been our external auditors for the last three years and their contract is
coming to an end. We are about to begin the process of identifying an audit firm to be appointed as our external
auditors for the next three years and we seek your professional advice as to whether the current auditors are eligible for
appointment.
The subject of auditor rotation has been explored and discussed by the Institute for some time now. The
disadvantages of mandatory auditor rotation are that it may result in increased costs for the incoming auditor to
learn the business and it puts limited incentive for the auditor to make long-term investments in a client, in terms of
developing specialized skill set for the nature of clients business. All of this results in a higher risk and audit fees for the
client. It is even suggested that a number of audit failures occur in the first two years of the auditors period of service
due to the learning curve required to understand the clients industry. However, it is also argued that if audit firms remain
with the same client for too long, their independence comes under threat from too much familiarity with their client. The
IFAC (IESBA) Code of Ethics requires the audit firms to change engagement partners every seven years, but the firm can
serve for periods longer than seven years (if reappointed by those charged with governance). Within the present
regulatory framework, your current auditors are eligible for re-appointment..
Who is an Accountant?
Our organisation is in the process of recruiting an individual for the position of Financial Accountant. One of the
requirements for the position was that the individual should be a fully qualified accountant. Some of the
applicants for the position had completed professional accountancy courses but had not registered as ICPAU members
(they did not hold membership certificates). We request for your advice as to whether these are fully qualified
accountants or whether they should be shortlisted as per the above requirements.
The Accountants Act, 1992, defines an Accountant to mean a Certified Public Accountant or an Associate
Accountant registered under the Act. A Certified Public Accountant is a person enrolled as a full member (of
ICPAU) under section 6 and registered under section 8 of the Act. ICPAU encourages employers to recruit members of
ICPAU for finance positions in their organisations. This is not only good practice but a measure of sound risk management
by an entity. Being a professional accountant is not just about passing accountancy examinations, but requires an
individual to display a commitment to behave as expected of their profession. This can only happen if one is a member
of a professional body, for which ICPAU is one for all accountants in Uganda.
For any technical inquiries or advice, please email the ICPAU Technical Staff at technical@icpau.co.ug.
57
APRIL 20
JUNE 13
Grants Management:
Concepts and their Applicability
By CPA Noah Matovu
Accountant,
Uganda Virus Research Institute
The initial stage of grants management

is important to ensure adequate
implementation and/or proper monitoring.
To form a sound foundation, grants should
have clear and strong objectives prior to
soliciting applications.
All participants
in the grant have to share a common
understanding of the projects purpose and
expectations. However, participants often
have different interpretations which prevent
project objectives from being implemented.
Therefore, project objectives need to be
developed in a timely manner to focus
on the effort of all participants and clarify
expectations.
Getting Started
In line with the focused direction, grantees must
be aware of the following grants management
concepts and their applicability: cofunding,
Budgets, Prior Approvals, Sub-granting,
Maximizing Cost Recovery and Financial
Sustainability, No - Cost Extension and Progress/
Performance Reports.
58
Co-funding
This is where the total sum of funding for the grant does not come from one donor. Some projects may require grantees to share the cost of the
project, whereas for others grantees may share voluntarily. In some instances applicants submitting proposals for funding are required to apply
for cofunding from other parties to promote integration and synergy in research. Cofunding can be in cash or in kind and can be through the
donor institution or directly to the project. Each donor has its cofunding rules which the grantee should comply with. In circumstances where
the donor deals directly with the grantee then the beneficiary must disclose this to other donors when such cofunding has been secured. It is
critical that its expenditure items are correctly and separately identifiable from the costs incurred and funded from other donors. This is to ensure
that there is no risk that any of the budgeted expenditure items are reported twice to different donors. Where such multiple funding exists in
a project, it should be discussed with the donors on how best to manage the situation across the project so as to minimize the risk of double
accounting.
Types of Co- funding
Cash through Donor: In this type

of cofunding, the donor institution
receives funds from different sources
and allocates them to grantees
in line with the set requirements.
Cash through donor co-funding is
administered and audited by the
donor institution that disburses the
funds to grantees.
Cash Paid Directly to Grantees: Here,

the donor institution provides cash funding
directly to the grantee. In such circumstances
donors like European & Developing Countries
Clinical Trials Partnerships - EDCTP will apply
the following policies:
a- The head of the organization must
submit to EDCTP a signed letter from
the other donor institution stating
the amount committed to the grant,
the duration of this support and the
activities supported.
b- These values are included in EDCTPs
annual member states certificates
that are submitted to the European
Commission.
c-
Grantees are not required to submit

financial reports to EDCTP on the
use of cash received directly from
non EDCTP sources.
d- The obligation to audit funds from

this type of cofunding rests with
the donor institution (these funds
will be outside the scope of EDCTP
audit).
Changes to the Level of Cofunding

The head of organization is required to inform the project funders of any changes in the level of co
funding by providing a letter from donor institutions attesting to the amended amounts. The donor
whose level of funding has not changed is not obligated to cover any deficits resulting from a failure
by the grantee in securing the co funding stated in their application.
In-kind Contribution Directly to

Project: In this type of cofunding, the
donor or an interested party makes a non
cash contribution directly to the project.
Examples of non cash contribution include
staff time and effort, office space or use
of existing machinery for a new grant etc.
The EDCTPs policy in relation to this type
of cofunding is :a- These contributions will only be
considered if they can be attributed specifically to the cofunded
project. General contributions
that are not linked to specific
identifiable activities in the co
funded project will not be eligible
as cofunding.
b- In-kind contributions that are
used at the discretion of management or used for purposes other
than the cofunded project will
not be eligible.
c-
Grantees must complete and

send to EDCTP the blue tab budget worksheet supported by a
signed letter from the other cofunding donors stating the fair
value of the contributions.
d- The obligation to audit inkind

contributions rests with the other
donor institution (these funds will
be outside the scope of EDCTP
audit).
At times the cofunding requirement is published in the funding opportunity announcement or

continuation guidance, and will specifically state the percentage or amount of project costs that an
organization contributes in order to be eligible for funding.
A co-funded proposed budget must mention specific costs or contributions that will meet the co
funding requirement, the source of the cost or contribution and how the valuation was determined.
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APRIL 20
JUNE 13
Valuation of Inkind
Contribution
The Grantees Financial Reference
Guide for Managing United States
Centers for Disease Control & Prevention (CDC) grants states that:For project volunteers, their rates must
be consistent with established rates
paid for similar work by the grantee or
sub- grantee for contracted employees. If the grantee or subgrantee
does not have employees performing similar work, rates used must be
consistent with rates paid for similar
work in the labour market in which
the grantee competes for the kind
of services involved. In either case, a
reasonable amount of fringe benefits
may be included in the valuation.
When an employer other than the
grantee or subgrantee or costtype
contractor furnishes free of charge the
service of employee in the employees
normal line of work, these services
shall be valued at the employees
regular rate of pay. If a third party donates supplies, the contribution shall
be valued at the market value of the
supplies at the time of donation.
Valuation of Equipment,
Building and Land Donated by
Third Party
If a third party donates the use of
equipment or space in building but
retains titles, the contribution shall
be valued at the fair rental rate of the
equipment or space. If a third party
donates equipment, buildings or land
and the title passes to the recipient,
the treatment of donated property
depends upon the purpose of the
grant or sub grant as follows:
a) If the purpose of the grant
or subgrant is to assist the
recipient in the acquisition of
property, the market value of
that property at the time of
donation may be counted as
cost sharing.
b) If the purpose of the grant
or subgrant is other than
to assist in the acquisition of
property, upon donors approval, the market value of
the equipment at the time
of donation and fair rental of
land will be counted as cost
sharing.
BUDGETS
In grants management, a budget is a quantitative statement prepared

for the purpose of attaining given objectives. Budgets concern targets
relating to income and expenditure, but may also concern planned
activity levels, for example, the number of samples to be tested in the
laboratory or the number of study patients to be recruited.
In this entire process, different parties will have different objectives.

For example, the donors main concern will be cost effectiveness, paying for value delivered, and compliance, while the grantees will mainly be concerned with full cost recovery and the intangible benefits.
Budgetary control
Effective Budget development

Before preparing a budget, it is best practice to know the funders
rules and cost principles, in addition to being aware of the budget
risks, such as inflation, exchange rate fluctuations and salary increments, and manage them where possible. In developing a budget, it
is wise to start with proposals and work plans.
Typical elements in budget development include; determining the
activities and their frequencies, the people who will do these activities, their salaries and related fringe benefits, research subject costs,
and institutional charges, among others. Overhead costs like recruitment, advertisement, taxes and shipping must be identified and budgeted for as well.
60
The first requirement of a good budgetary control system is to set up

accounts for data collection on inputs and outputs at the lowest distinct level of activity. These accounts are called cost centres. Individual managers will be responsible for one or more of these cost centres
and together such costs form a responsibility centre. Responsibility
centres provide the basis for budgetary control by defining the area
of responsibility of individual managers. These individual managers
are often referred to as budget holders and are made responsible for
achieving their budget objectives.
A budgetary control feature within a financial management system
allows for the comparison of actual expenditure against budget at
any time. When a comparison of planned and actual budget is made
at periodic intervals, they will provide an early warning mechanism
for areas where supplementary funds may need to be sought. An accepted level of variance will be agreed upon but any excessive variance
(positive or negative) should be investigated. Identifying the cause of
variation will allow the grants management team to take timely and
appropriate action. It should also be noted that some variances like
increased cost resulting from a rise in interest rates and/or inflation may
be unavoidable outside the organizations control.
Budgetary control reports must be prepared to provide sufficient information to enable budget holders to isolate the nature of variance
from the budget, but must not contain so much information that may
overwhelm the recipient. At the lowest level of responsibility centre,
the individual manager will require information on either each grant
element or detailed activity that makes up the overall project, such as
salaries, project consumables and others.
Virement of funds
The process of meeting overspendings in one area by underspending
from another is known as virement. The need for virement is derived
from the recognition that some degree of flexibility will be required to
deal with unexpected events during the project implementation phase.
Overspending may be a result of increased demand for products/services or increased costs of project consumables.
Different donors have different rules regarding virement of funds. Some
donors give the head of the project the power to move funds between
the different budget headings without prior approval whereas other
donors permit the head of the project to move funds only after prior
approval.
Virement of funds occurs for reasons such as; absorption of surplus from
savings made in some budget heads to ensure that resources across
every part of the organization are fully utilized.
Prior Approvals
In most cases, grantees need to request and report deviation from budget and organizations plans before revisions are made. The primary
reasons for prior approval are; to ensure that post award changes retain
a close connection with the project, as approved by the donor, and to
avoid inappropriate costs which may be disallowable. Grantees shall
obtain prior approval from the donor for change in scope of work,
transferring substantive programmatic work to a third party and carryover of unobligated funds from one budget period to another within an
approved grant period. Other prior approvals may be required by the
terms and conditions of the award and specific organizational legislation or regulation. Failure to obtain prior approval when required may
result in reputation risk for the organization.
Sub-granting
Sub-granting involves a formal agreement transferring a portion of the
project work to another organization under a sub-grant or collaboration. This plays an important role in meeting project objectives. At
any point during your award, you may need to involve collaborators
with core competences who will play an active role in your project.
Sub-granting allows another organization to perform some activities
for your grant under your supervision. They enable collaborations between a grantee and the sub-grantee. There is need to have an agreement in place before paying a sub grantee using donor funds, because
the grantee is fully responsible for all actions of the sub-grantee related
to the award, and all contacts with the donor
As a grantee, you (not the sub grantee) are accountable to the donor
for the; overall project performance, spending of grant funds by all parties, reporting requirements, human subjects assurances, and all other
obligations for the grant. If there is a problem with a sub-grantee, the
donor will expect the grantee to take care of it. A subgranting agreement will describe each partners responsibilities and how everyone
will meet the core project objectives, the administrative, financial, and
reporting requirements of the grant. The grantee should ensure that
the objectives are smooth and that there is orderly collaboration.
Key areas that must be addressed in the subgranting agreement include the following:
Name of organization head and the list of responsibilities for

other project personnel responsible for the grant activities.
Conflict of interest of the collaborating organization.
Rules for owning and handling project data.
List of donor requirements and compliance documents.
Plans for managing the project; reimbursing sub-grants costs, foreign

exchange rates, payment schedules, accounting methods, handling
travel reimbursement, salaries, and fringe benefits, and sharing inventions and patents, should be taken into account. Usually, the donor
does not cover costs associated with currency fluctuations after the
initial award.
Basic rules to keep in mind include:

The grantee determines the sub-awards budget.
Sub-awards have the same allowable and unallowable costs

as the grantee.
Your sub-grantees cannot enter into sub-contracts with any

third parties, but they can make purchases and hire consultants who do not affect the direction of your project.
Sub-grantees do not have any budget authority that donor

has not provided in your Notice of Award.
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APRIL 20
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Changing a Sub-award
Changes to a sub-grant follow the same rules as changes to your grant. If
the change request needs donor approval, ask the responsible staff to send
the following information to the donor in time: new grant number, name
of the head of the project, title of the project, name of the organization,
and contact information, reason for the change and whether it results in a
change in scope or specific aims.
In the process of making sub-awards, it is always advisable for the grantee
(the prime) to identify red flags in the sub-granting organizations. These red
flags will help in determining whether the sub-grant should be approved. In
addition to identifying red flags, you may also need to arrange for an annual
audit if your institution sends a significant amount to the subgrantee.
Vetting sub-award applications may include questions such as:
Will funds be deposited in a separate bank account?
Are there written accounting procedures?
Is there an inventory system in place?
Can the accounting system separate or track all drawdowns and grant
expenditures?
What performance measures are in place to determine if the grant

objectives are being met?
What data will be collected to measure progress in meeting

performance measures?
Is there a management risk assessment process to identify & mitigate

potential risk?
What is the records retention policy?
Does the potential sub-grantee maintain timesheet documentation for

personnel costs?
Risk and Mitigation in Sub-granting

Granting agencies should fully utilize an effective risk assessment model so
that they can properly monitor of donor funds. The risk assessment should
investigate red flags such as inadequate separation of cash related duties,
inadequate internal controls, inadequate financial management systems,
prior grant mismanagement and prior fraud. At times this can be achieved
by carrying out an onsite assistance or onsite review to sub-grantees with
risk factors. If a sub-grantee is designated as high risk, the grantee will require
periodic submission of supporting documentation for reported expenditures
and achievements verification.
A funds recovery clause should be included in the grant agreement. This
clause usually states that all transactions that violate laws pertaining to
fraud, compliance, conflict of interest, bribery, or similar misconduct of
donor funds, will lead to these funds becoming disallowable and therefore
refunded to the donor.
Maximizing Cost Recovery and Financial Sustainability

implications and their actions.
Full cost recovery is a common challenge in grants management mainly

because of lack of capacity. Full cost documentation is a complex process
that often requires a high standard of financial management and reporting
skills. To achieve maximum cost recovery, it is wise to do the following:

Analyze and understand your cost structures, (which items/

departments/activities are cost centers and which ones are actual
revenue centers or both).
Build a business-like attitude within your grants management team.
Build a cost recovery awareness plan into all decision making processes
and transactions.
Educate and inform other departments about cost recovery
62
Build an institution rather than a project oriented view of cost across

all staff.
Diversify your funding sources because some funders support more of

certain costs than others.
Strike a balance between volume (which often creates economies of

scale) and cost recovery (which create sustainability).
Take budgets very seriously; know your drivers of cost recovery, find
a place for them in the budget and defend them before the donor as
much as possible.
Financial sustainability can be achieved through carefully managing donor

funds and complying with all donor and national regulation. Where possible,
an organization can provide fee-based services, such as, training courses,
data fax services, IT services and clinic use fee. These will generate revenue
for the organization.
Introduce employees to the concept of time sheets and make them aware
of how critical they are in staff cost recovery and sustainability. Devote
resources and develop tools for quantifying and tracking potential versus
actual salary recovery, both in terms of time and in financial gain or loss, at
individual and department level.
An organization should maintain a portion of unrestricted net assets to
sustain operations in case of unanticipated financial shortage (either less
revenue or more costs than anticipated). This will help the organization
to avoid cash flow stress which may lead to bad crisis-based decisions,
distraction from your mission, disruption of programmes, and inability to
react fast to crises.
No-cost Extension
Progress/ Performance Reports
A no-cost extension gives the head of the project

extra time to complete the scope and objectives
of the project without additional funds being
provided by the donor. While donors expect the
head of the project to complete the project by
the stipulated end date, occasionally extra time is
needed. However, requests should not be made
for the sole purpose of spending remaining funds
during the nocost extension period. In the event
that a request is not approved, costs incurred after
the end date would not be allowable. Individual
donors have different requirements for nocost
extension, so it is wise to submit your request in
time. This will give donors
time to review and
Grantees are required to submit progress/

performance reports either annually, semiannually or quarterly. The grant agreement
will stipulate the frequency of the report to be
submitted. Progress reports should generally
contain a comparison of actual accomplishment
with the goals and objectives established for the
period, reasons why established goals were not
met, and appropriate analysis and explanation
of cost overruns or high units costs. When a
performance report is submitted to the donor,
the donor performs an analysis of the fiscal and
technical/programmatic information to ensure
that the overall grant objective is met. At this
point, donors are also interested in making
compliance and completeness tests. The donors
may withhold the last installment of funds due
to felonious reports, failure to show satisfactory
progress, inadequate stewardship of donor funds,
or failure to meet the terms and conditions of the
award.
process your request before the end date of

the project.
Unobligated Cash Balances. This is a portion of

funds awarded by donors, which has not been
obligated by the grantee at the close of the budget
period. At the point when the grantees are required
to submit a report of expenditure, unobligated
funds may be carried forward to the budget period
immediately following the one in which the annual
financial status report is due. The carryover may be
used as an offset (reduction) on the new funding
(for example, the budget and activity for the
budget period remains as previously approved);
or addition to the full level of previous approved
funding (activities remaining from the prior budget
are added to those of the current budget period
and the budget is increased accordingly).
The fact that funds remained at the

expiration of the grant is not, in itself,
sufficient justification for an extension
without additional funds. Valid reasons for
requesting for a nocost extension may
include; additional time needed to assure
completion of the original approved project
scope and objectives, additional time
needed to repeat tests to obtain results,
and recover time lost due to illness/injury
of key project staff, among others. At times
the terms and conditions of the award
may prohibit project extensions.
Most requests for nocost extension
require the following:
Proof that work in the approved
proposal is not completed
The requested new expiry date
Reasons why the work was not
completed during the original award
period
Grant management concepts provide a solid

foundation for a successful grants management
process.
If they are well applied, they
demonstrate the importance of carefully planning,
documentation and playing by the rules to
ensure that the goals of the grant are met and are
satisfactory to all stakeholders.
This article is based on:
i.
Guidelines for financial management in

European & Developing Countries Clinical
Trials Partnerships (EDCTP) grants.
ii.
Grantees financial reference guide for

managing Centre for Diseases Control
and Prevention (CDCP) grants & cooperative agreement.
Balance of unobligated funds

A budget for work to be completed
during the extended period, including the
percentage to be funded by the donor
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APRIL 20
JUNE 13
Members Profile
CPA KATIMBO-MUGWANYA EDWARD:
An accomplished accountant prepared to
approach retirement with poise and contentment,
assured of comfort and bliss upon exit from
formal employment
Retirement is one of those phases in life that many

people do not want to contemplate. The prospects
of retirement send a shiver down some peoples
spines while others cringe at the mere mention
of the word, because of failure to recognize the
inevitability of it, and plan in advance.
CPA Katimbo-Mugwanya Edward, an accomplished
accountant, who sailed through the ranks in the
profession to become one of Centenary Banks
finest Finance Managers, however, is one of those
few people who have approached retirement with
poise and contentment, assured of comfort and bliss
upon exit from formal employment. Having served
as a professional accountant, for over 38 years,
with diligence, steadfastness and hard work, CPA
Katimbo is prepared to take his leave from formal
employment.
64
A devout member of the Buganda Kingdom and Minister in charge of Projects,

CPA Katimbo-Mugwanya is passionate about farming. He therefore plans to retire into full time farming, maintaining his service in the Buganda Kingdom, and
sitting on the Board of Directors of Nsambya Hospital. CPA Katimbo has well
established mixed farms of; cows, sheep, chicken, pineapples, cassava, potatoes, bananas, coffee, and trees like eucalyptus and pine, in two places, Kakinga
and Bussi island on Lake Victoria. The veteran accountant acknowledges that
income from farming is not often lucrative but he is determined to pursue the
trade assiduously. You do not hope to become a billionaire out of farming.
Some do, but with the levels of mechanisation that we have, it is difficult to
earn supernormal profits. However, it keeps you busy, it is interesting, its good
exercise, and gives you some money, CPA Katimbo affirms.
Preparedness for retirement requires a blend of a host of factors, from educational, to employment, personal initiative, and external stimulus, among others.
CPA Katimbo mastered these attributes to not only perform satisfactorily, but
excel in all his tasks, and now boasts of a career well pursued.
CPA Katimbo-Mugwanyas career in accountancy dates as far back as the 1970s
when he enrolled for a Bachelor of Commerce at the University of Nairobi, Kenya. Despite the fact that professionalism in accountancy had not yet gained
ground in Uganda, at the time, CPA Katimbo felt that his University Degree was
not sufficient to enable him further his career to boundless levels. Therefore,
in 1975, having worked for 6 months in Uganda, with Gill and Johnson, he enrolled with Deloitte in London as a student accountant, studying for the qualification of the Institute of Chartered Accountants of England and Wales (ICAEW).
As a student accountant, he was engaged in rigorous training, coupled with
plenty of private study and progressive assessment.
After completing the course, and having worked with Deloitte, London for one
year, as a qualified accountant, CPA Katimbo longed to return home, having
been in a foreign land for over 4 years. However, the prevailing political situation in Uganda at the time, marred by anarchy and strife, did not favour his
wishes.
When the political turmoil did not abate, CPA Katimbo decided to return to Nairobi, where he worked with Deloitte-Kenya, in the hope that calm would return
to Uganda. When the instability in Uganda persisted, CPA Katimbo resolved to
return to England in 1984. While in England, he worked as a temporary accountant for 5 months, meanwhile seeking permanent employment.
In October 1985, as luck would have it, CPA Katimbo was offered a job in the
National Audit office of England, as Senior Auditor. He later returned to Uganda,
the political upheaval having stalled, and was hired by Bank of Uganda as Deputy Chief Accountant. While at the Central Bank, CPA Katimbo sailed through the
ranks to become Chief Accountant, Executive Director - Banks, and ultimately,
Executive Director - Finance, at the time of leaving the Bank. CPA Katimbo recollects two major contributions to Bank of Uganda, at the time. In his words,
he found a big accountability challenge at the Bank; there were no accounts
for 5 years. His foremost task, therefore, was to get the Banks accounts up to
date, with the help of the Chief Accountant, a role he diligently executed. He
was also at the core of streamlining the regulation of banks and micro-finance
institutions.
In 2005, CPA Katimbo joined Centenary Bank as General Manager, Audit, a position he held up to 2010, when he was transferred to the Finance Department,
still holding the same rank. As General Manager, Finance, he was expected
to give guidance and leadership, manage the Banks resources and budgets,
participate in key decision making processes, and most importantly, work with
the Chief of Treasury to ensure that the Banks liquidity position remained stable
and robust.
Central to his tasks as General Manager, Finance, was his role in Centenary
Banks exceptional performance in the Financial Reporting (FiRe) Awards, which
were inaugurated in 2011, to promote the best practices of financial reporting,
in compliance with International Financial Reporting Standards (IFRSs); Centenary Bank has attained 2 accolades in the Awards; the Gold Award and the
Silver Award, in 2011 and 2012, respectively. CPA Katimbo attributes the Banks
success in the Awards to good planning, teamwork, determination to abide by
the tenets of good financial reporting, an excellent financial reporting framework due stringent regulation by the Central Bank, remarkable presentation attributes, and compliance with IFRSs. He attributes his personal success to hard
work, relevant training, and continuous learning. In the social aspects of life,
CPA Katimbo has built himself, acquired several assets, educated all his children
through the best education systems, and established lucrative investments.
Although CPA Katimbo is a renowned proficient accountant, he confesses to
having a different childhood ambition. I never set out to be an accountant in
the first place. I always wanted to be an engineer. In A level, my focus shifted
to Medicine, because I thought it was a better profession; doctors are people
who are well respected. However, in S.5, when we started dissecting rabbits
and frogs I got disoriented, and given the numerous years of training in Medical
School, accountancy seemed more lucrative. The prospects for doctors were
also not very good. Accountants were role models. I was inspired by people
like the lake Ssebagereka, CPA Katimbo narrates. CPA Katimbo describes accountancy as a unique profession whose skills pervade every facet of business,
finance and management. Accountancy gives you a good profile and offers
good practical management skills. It imparts skills relevant in employment,
management, and in personal endeavours; nobody is not affected by business
in any way, so financial skills are crucial, CPA Katimbo asserts.
Having been groomed within the parameters of strict discipline and professionalism and having exuded utmost integrity and outstanding performance
at work, CPA Katimbo implores the Institute of Certified Public Accountants
ICPAU to manage the reputation of accountants. He advises that all accountants should be made ICPAU members, who must abide by the Code of Ethics,
and impunity be wiped out totally. According to CPA Katimbo, ICPAU should
work with government to ensure that the professions nomenclature is streamlined and does not give a false impression of what it is; thus there should be a
clear-marked distinction between professional accountants and clerks, cashiers,
among others. We should address this nomenclature problem. ICPAU should
ensure that CPAs project the right image. We have the numbers. Now we must
concentrate on the quality. We must ensure that the quality of CPAs is maintained at international standards, CPA Katimbo advises.
CPA Katimbo attended St. Marys College, Kisubi for his O and A levels. His
priorities for work each day include; securing the needs of his family, getting
acquainted with current affairs, maintaining favourable working relations with
colleagues, and, continuously interacting with friends.
With such a rich profile, there is no doubt that CPA Katimbo-Mugwanya is ready
for retirement, a prospect we must all prepare for.
Todays Accountant
APRIL- JUNE
| 65 |
Todays
Accountant
April2013
- June 2013
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Establishing and Managing

Relationships at the workplace
By Lilian Bagambe
Managing Consultant,
FlexiConsult Ltd
relationship is simply defined as the way two or more people

behave towards each other. This implies that the behavior
could be either healthy or unhealthy. Business exists to satisfy
consumer needs. Healthy relationships have become a license
to do successful business in todays world. It therefore makes
business sense to invest in an environment that promotes good relationships
at the workplace. Indirectly, the consumer needs get satisfied, business is
successful and the cycle goes on. Good and strong relationships are based
on trust in any facet of life, and the workplace is no exception.
The consumer (customer/client/patient) today is demanding for more than
just a quality product/service and now requires a relationship with their
service provider, based on trust. Can you deliver consistently and on the
terms promised? Are you flexible with payment terms? This relationship
management process is a chain which begins with the relationships at the
workplace, and is the engine which then drives the other relationships in
66
the business chain. Although rarely seen by the customer, workplace

relationships do impact significantly on the level of service delivery at the
front, and therefore, business performance.
Let us use the analogy of a bank. The back office operations support the
front office delivery of service to the consumers. Without the back-office,
the front office cannot deliver on even the most sophisticated products.
The back-office, therefore, is the engine for the banking operations. These
must be efficient and effective. If, for example, new products have been
introduced and launched into a market, and the back-office processes have
gaps in what they can support, there will be a product disaster! Customers
lose confidence and we all know what that means in business. Workplace
relationships are not any different. The relationships with customers and
suppliers are greatly hinged on the workplace relationships. Where these
are healthy, the workforce is highly motivated and able to deliver excellent
service and be innovative, which directly impacts business performance.
Employee to Employee
N
MA
MANAGING
AGI
GIN
NA
MA
Subordinate/Manager Relationships
NG
lationsh
re
s
ip
Workplace
Manager/Subordinate Relationships
This, from the business perspective, is the single most important case for
why business must invest in relationship management at the workplace.
Some of the basic ways of doing this are; creating good communications
channels which are open or having training in this area, including team
building exercises, and the list goes on.
From the people perspective or the staff, typically relationships at the
workplace are either up/down and vice versa (manager/subordinate) or
lateral (employee to employee). Healthy relationships at the workplace
enhance workflow, reduce stress and are great for career progression and
generally good for employee motivation. A few reasons to establish and
manage workplace relationships:
Manager/Subordinate Relationships
At managerial level, the key competence required is getting things
done through people and less of the technical expertise. For this to
happen there must be some level of trust which is the foundation of
the relationships. Trust is earned through consistency, transparency
and allowing contributions from the team for overall success. It cannot
be demanded. The pay-off of establishing and managing such healthy
relationships with your subordinates is one of the most powerful
retention strategies for your team.
Research has shown that employees leave people, and not necessarily
organizations, like we have been made to believe. Therefore, the rate
of staff turnover in your department is an indicator of how you manage
your relationships and therefore the impact you have on a business as a
Manager. You may want to check and invest wisely. Talk to them, listen,
take on board their views and be seen to be doing something about

them.
Surbordinate/Manager Relationships
On the other hand, if you are the employee, healthy relationships with
your managers/leaders are fundamental for your career growth, less
stress at work and general motivation. Again trust is the foundation. Can
your manager trust you to deliver consistently, trust you with information
or even trust you to step in for him in his absence?
As an employee, be careful not to burn your bridges. Many of us think it is
justifiable to behave badly and insubordinately because the manager has
done something not acceptable to us. The reality is you are the net loser
because the same manager determines your progress in your career. He
either determines your promotion or even if you decide to leave, this very
manager will be asked for a reference on you. Therefore, make sure you
are on good terms. It costs very little to be polite and civil to people even
when you have to be firm.
Employee to Employee
For harmony and peace at the workplace, relationships must be nurtured.
The people with whom you have created relationships with will always
have your back. Also, when you need favours, it helps to have had a
healthy relationship.
In summary, man is not an Island. However, be careful to forge the right
relationships that are constructive at the workplace.
67
A Readers Review of Todays Accountant magazine
By CPA DMO Mulagwe,

Practitioner,
DMER Associates
It is quite a while ago since I last had a break to look at literature in

depth and detail. Because of its attractive presentation and looming
challenges to the profession, I literally studied Todays Accountant
magazine of October-December 2012.
vacillatingly to remove the same from the list of members? The

Institute should find a way of convincing the public that it is out to
produce and regulate professionals that are not aiding theft as Mr.
Ofwono Opondo is alleging.
The main objective was to see if the magazine really addresses

the current challenges facing the accountancy profession. My
simple observation is that, yes the magazine has very good
academic articles some, and others are probably work experiences.
After reading, I first wondered as to who benefits most from all
these articles. Is it the student, the, practicing or the general
accountant? That apart, how does a non-accountant benefit from
a magazine of an institute of professionals so important in society?
Going back to the magazine, the president referred in-passing to

the 17th Annual Seminar which I was fortunate to attend. Surely,
is this all that the public should know about what took place in
that seminar? The lead article, of the magazine, The 17th Annual
Seminar: Political and Monetary Integration of East African
Community (EAC): A Reality or a Dream is summarized in five
paragraphs. To me, this is not doing justice to the keynote address
of the seminar and the views raised in the discussions that followed
this presentation. This, being a topical current matter, the Institute
and the accountancy profession would have gained a lot from
informing the public more of the views that were raised on this
matter.
I must say that I respect all those that take time to write for this
magazine. But to achieve my objective, I looked at the writings
of our dear President and the Chief Executive Officer (CEO) of the
Institute. Their messages are very good summaries of the current
situations they wrote about but, are they focusing on the challenges
in the profession?
While the president rightly congratulates Uganda on the 50th
independence anniversary, the CEO reflects on the Institutes
developments in the last 50years. The CEO says that with about 10
professional accountants in 1962 Uganda had a very poor culture of
accountability and a very low level of professionalism, but that, as
we close the first 50 years of independence Uganda has over 1600
accountants registered and a substantial number of unregistered
accountants. Unfortunately, the CEO forgets to contrast the
prevailing high level of stealing public funds in almost every sector
of the economy with the situation that was almost free of public
funds thieves, in the 1960s.
As an accountant, the CEO wishes to see the profession developing
in line with the expected growth of the economy resulting from
the expected oil revenues and to see the budgets of public sectors
being dully executed under the watch of eagles eyes of members
of ICPAU. The CEO concludes by wishing to see the accountant
playing a more involving role in the economy of the country; a
role that will make the accountancy profession visible and lead
to growth of the profession. The president, on his part, calls upon
all sectors of the economy to embrace professional accountants if
Uganda is to move forward. All these are very good wishes for the
profession but, are we, as accountants, living and making ourselves
and the profession positively visible in society?
In an article titled, OPM (Office of the Prime Minister) The axe
should fall hard and fast article in the Sunday Vision of December
23rd 2012, Mr. Ofwono Opondo says:
For starters, it is the finance ministry, particularly the treasury
department, that posts all accountants, internal auditors and
procurement officers to ministries and government departments,
and they are the ones who have been conniving to cover each
others backs. These officers are answerable and report to the
treasury. The Auditor Generals office is not as innocent either as it
first appears because, its officers have been closing the loopholes
for the thieves in the ministries, while annually issuing near-clean
financial bills of health. Strong words indeed.
Now, this is a very serious threat to the accountancy profession;
especially so when the Institute appears to be paying a deaf ear
to all that goes on in society, in respect of corruption, which I call
theft of public funds. Is it really enough for the Institute to wait
for the courts of law to send its members to jail and then come
68
Added to the keynote address were other very important topics

that were covered in the seminar. Issues on oil, environment,
medical insurance and benefits from regular health checks are but
a few issues that one would wish to see in the magazine if it is to
attract readership beyond the accountants.
In the same Sunday Vision of December 23rd 2012, Dr. Solomon
Nkesiga the Vice Chancellor of Bishop Stuart University wrote about
the oil curse. He believes that Uganda is not moving away from this
curse that has befallen a number of African oil producing countries.
I remember the seminar had a good debate on the oil issue with
very interesting revelations which would bring the accountancy
profession in the public eye if properly reported. I therefore wish
to see the accountancy profession in Uganda addressing itself to
the public issues of the day, sensitive or political as they may appear
to be.
At the end of the seminar an idea was floated to see how the views
generated in an assembly of over seven hundred top most CPAs
should be followed up to make the seminar of national importance
and go beyond the personal gain of CPD hours given to participants.
I would love to ask, whom does the accountancy magazine
address? There is no mention in the magazine of what has been
worked on as a result of ideas that were generated in the seminar.
I even wonder who of us have put in practice what we covered in
the seminar. If this has not happened, then this is a national loss
of over 700 x 3 x 8 very expensive man hours by the country. I am
sure that something will be done to salvage the situation before the
18th Annual Seminar.
Let me end on a positive note. I thank CPA Charles Lutimba,
Technical Officer ICPAU, for a good accountability of the teams visit
to Scotland. How I wish you had done the same for the 17th Annual
Seminar. However, you forgot to tell the readers the benefits of the
visit to the members of the Institute. Anyway it is never too late;
maybe we will know that later. Thank you too CPA Obed Bampe
Tindyebwa. Land matters in Uganda are very poorly handled.
Some people are seeing land as a time bomb that may explode
anytime. I think land value taxation and political pronouncements
may not be a solution to land grabbing (stealing) which should be
dealt with in courts of law like all other crimes.
Editors comments: ICPAU has been consistent in the messages about

who an accountant is and how public interest entities must employ
members of ICPAU if the accountancy profession is to curb corruption.
The Fiscal and Tax Challenges
ahead of Ugandas Upstream Oil Sector
By CPA Denis Kakembo,
Tax Manager,
Deloitte Consulting Limited
n international business magazine recently published a

commentary drawing comparisons between Ugandas and
Ghanas upstream oil sectors. The commentary noted that
though Ghana and Uganda made commercial discoveries
of hydrocarbons at nearly the same time in 2006, Ghana
had already joined the class of oil producing countries by the end of 2010.
Ugandas upstream oil sector is presently grappling with various challenges
which cast doubt regarding whether the country would have produced its
first commercial barrel of crude oil by the end of 2015. A lot of work in terms
of establishing the physical, regulatory and fiscal infrastructure to support
the oil sector remains to be done. The hold up in the progress of Ugandas
upstream sector has been costly. For example, many multinational oil field
service support companies that intended to make Uganda their regional
hub to serve the oil and gas industry in the region have reconsidered their
position and fixed their headquarters in Dar es Salaam and Nairobi. Uganda
has therefore lost out on the employment opportunities and capital injection
into the economy, which would result from such investment.
In this article, I focus on the fiscal challenges that have the potential to further
disrupt the operations of the upstream oil sector in Uganda. Unless these
challenges are addressed and tax laws and processes aligned to normal oil
and gas industry practices, the anticipated investment in Ugandas oil sector
may further be delayed.
Managing Public Perception and Expectations

Some Civil Society Organizations (CSOs) have predicted gloom and doom.
Reports have been published insinuating that the terms of the oil contracts
between the Government and the oil companies are disproportionately
favourable to the oil companies. Whether the findings of these reports
have been benchmarked against the best practices of upstream oil and gas
industry, is not clear, which is nonsense. Contrary to the published reports,
however, it is, in fact, likely that approximately 80% of the profits from oil
projects will pass to the Government. This, however, has encouraged mistrust
and suspicion to the extent some Ugandans believe crude oil is already
being covertly produced and exported from Uganda. All stakeholders in
the upstream oil and gas sector, including the Government, CSOs and oil
companies, have a duty to address Ugandans responsibly, to manage their
perceptions and expectations.
The expectation of accelerated economic growth as a result of oil production
must be moderated by some dose of reality. The message to the population,
by the Government and other stakeholders involved in the upstream oil
sector, must emphasize that Ugandas economy will not be transformed
overnight as a result of oil production. The population must be sensitized,
encouraged to work hard and empowered to tap into the various business
opportunities created by the upstream oil industry.
Ugandas oil and gas resources belong to the state. However, they cannot
be exploited without the participation of experienced and well capitalized
companies such as Tullow Oil, Total or China National Offshore Oil
Corporation (CNOOC). These companies will not invest unless they can be
certain of fair and predictable returns. Ill-informed public opinion in other
parts of the world has encouraged governments to assert control over their
natural resources, through abnormal tax increases and other confiscatory
measures, in a bid to generate more revenues to match the unreasonably
high expectations of the population. Abrupt tax increases and other
measures taken by the governments to assert greater control over natural
resources often derail investment in the sector.
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Precedence of Oil Contracts and Local Tax Legislation
Taxation of Expatriate Workers
The Production Sharing Contracts (oil contracts) signed between the

Government and the oil companies provide tax incentives and exemptions
that are not always recognized by the Uganda Revenue Authority unless
the same are replicated in the local tax legislation. There is urgent need
for Government to define the legal status of the oil contracts, in relation to
the national tax legislation, to enable investors take concrete investment
decisions on the basis of a firm and definite tax regime. Investors are
reluctant to invest billions of dollars in the sector unless they have clear and
firm parameters for appraising their investment, which in part is enabled by
certainty in the tax regime.
Foreign workers are a common feature of the upstream oil industry which
demands high levels of expertise and experience not yet available in Uganda.
They are often assigned to local oil companies by international placement
or employment agencies. They may, for example, work for 14 days or 28
days on an oil field and have an equal amount of time off to spend in their
home countries. This is a customary practice in the upstream oil industry, in
part to manage the scarcity of skilled labour required in the industry. Many
times the individual required may be unwilling to relocate to the country
on a permanent basis but is willing to work on the basis of the commuting
arrangement as described above. The income tax, social security and
immigration laws do not directly address the peculiar circumstances of such
commuters. To facilitate operational planning for the oil companies there
is need to align these laws to the customary oil and gas practices or issue
administrative practice notes to specifically cater for the upstream oil sector.
Managing Value Added Tax aspects for the Upstream Oil

and Gas Industry
The upstream oil and gas sector is characterized by peculiar features presently
not addressed specifically by the Value Added Tax (VAT) legislation. The VAT
legislation, for example, does not provide explicit guidance on how the
various activities within the upstream joint operations must be addressed
for VAT purposes. Oil companies have recently been deregistered for issues
regarding non compliance with VAT. This implies that all the VAT expenses
incurred in their set up operations must be absorbed as a cost by the oil
companies. While it may be argued that most of these costs are recoverable
by the oil companies when oil production commences, the inability to
recover VAT incurred during the set up operations will significantly affect the
cash flows of the oil companies and may even impact the viability of long
term capital intensive projects, such as, pipeline and refinery construction.
The inability to recover excess input VAT immediately amounts to an interest
free loan to the government and the cost of financing this will significantly
erode the investors returns.
Importation Taxes on Subcontractor Equipment

Oil companies rely heavily on subcontractors who undertake most of the oil
field activities and services. The subcontractors use sophisticated equipment,
most of which is imported. Though the customs law provides exemption
to oil companies on most of their imports for exploration, development
and production activities, the law does not explicitly guide whether this
exemption is extended to the subcontractors as well. Subcontractors will
transfer the cost of the importation taxes to the upstream oil companies if
their equipment for exclusive use for upstream oil activities is not exempted
from importation taxes. This again has the potential to erode the investors
returns.
70
Tax Incentives to Promote Local Content

Governments of oil producing countries usually look beyond the revenues
that are generated from the sale of crude oil. They also aim to maximize
national value creation through the employment of locals and engagement
of local companies to provide services to the oil companies. This is the
key part of Ugandas strategy for the industry and is exclusively supported
by the international oil and gas companies in Uganda. Rather than only
contemplate legislation to compel the oil companies to expedite production,
governments can also consider the option of providing tax incentives to the
oil companies that promote local content.
While progress is presently seen to be made on the front of establishing the
regulatory infrastructure to control the upstream oil sector, it is not the same
case with tax matters. It will be very absurd to realize that even after the long
wait to produce the first commercial barrel of oil, the tax issues bedeviling the
sector will not have been addressed. Indeed continuing uncertainty is likely
to delay development further. This is the time to start giving comprehensive
considerations to some of the tax issues highlighted in this article to reach a
win-win position for all the stakeholders, ensuring that the tax rules result in
fair and predictable shares for both the Ugandans and the international oil
and gas companies who are taking massive financial risks. There is need to
avoid procrastination and ensure that critical matters are addressed before
the last minute.
The views expressed in this article are those of the author, not necessarily those of
Deloitte Consulting Limited.
Exploring Rural Uganda:

A Visit to West Nile
By Diana Naisuna Nambi
Relations Officer,
ICPAU
ack in the days, Village life is better than Town life was a popular motion
during primary school debates. Pupils in favour of village life cited the
availability of food and fuel in form of wood, as the key attraction to rural
areas. On the other hand, the opposers of this motion fronted easy access
to markets for commodities, a good transport network, security and social
amenities such as hospitals and schools. On a recent visit to the West Nile region, I could
not help but recall the primary school days due to the difference between life in Kampala
and that in the districts that I went to.
One must cross the River Nile before getting to Maracha, Koboko and Yumbe districts. But
the three districts have something else in common; the fact that life there is pretty slow.
The slowness is exhibited in the Hospitality, Energy, Water and Education sectors, with
Transport and Business developing at a faster pace.
Hospitality
The nature of service in hotels and restaurants across the three districts requires that
patrons have sufficient time at their disposal. Orders take more than fifteen minutes to be
delivered. After prompting the waiters/waitresses to speed up in vain, the logical thing
to do is to sit, relax and wait. Fortunately, the food is often well-prepared, thus, one can
easily disregard the long wait.
In Yumbe district, accommodation is a big problem, since the best hotels are way
below acceptable standards. Regardless of this, the staff here happily go about their
work. Moving into Koboko, there is a marked improvement, as the number of hotels
increases and the quality of service improves. While one would assume that every district
in Uganda has at least one hotel, it is shocking to find out that in Maracha district, there
is none. Apparently, the only hotel, which operated without a registered name got out
of business last year. As a result, visitors have to reside at the Maracha district hospital or
move to Arua, which is about an hours drive away. Alternatively, they can drive for an
hour and a half to Koboko district then return to Maracha the next day. While the absence
of hotels in Maracha district is bad news for travellors, it presents a great investment
opportunity in the hospitality industry.
The restaurants in Yumbe and Koboko offer a variety of food sweet potatoes, rice,
matooke, yams, millet bread, goat stew, chicken, beans and groundnuts, among others.
These are served generously, as per the needs of local patrons. Many visitors, however,
will eat half of the food, much to the surprise of the waiters/waitresses. Cooking oil is a
major ingredient of the food. Accordingly, all foods are overly fried, despite the fact that
today, several people fancy boiled foods for health reasons. During the early hours of
lunch, one is more likely to be served the top layer of the sauces, which is usually dilute
and contains the most oil. To give the locals an aura of other cultures, some restaurants
have taken on names like Buganda.
It is nearly impossible to find basic items such as serviettes at the restaurants. When a
patron insists on having some, however, they can get a few that are sliced half-way. At
a restaurant in Koboko, though, a waitress casually informed us that serviettes would be
purchased during the following week. Unknown to her, some patrons would be out of
that district by then.
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Transport
Thanks to the ongoing road works
commissioned by the Uganda National Roads
Authority, Yumbe, Koboko and Maracha
districts have an impressive road network. The
highways under construction are wide enough
to accommodate about four lanes. As motorists
speed off, clouds of dust engulf the air,
inconveniencing pedestrians, other motorists
and people with settlements by the roadside.
At some point, motorists must drive with full
lights on lest they collide with caterpillars
or knock people crossing the road. Orange
trucks branded CICO are conspicuous since
they move quite fast while sprinkling water
onto the road or transporting construction
materials from one place to another. At
sections where the road is almost complete,
the men and women at work, a combination
of Ugandans and Chinese, bigheartedly apply
layers of tarmac, which is an assurance that the
highways will last several years before pot holes
encroach on them. By the roadside, materials
that include stones and culverts are deposited
for easy reach by the constructors.
The West Nile region is blessed with a number
of rivers such as Kochi, Kaya and Kechi. As
a result, the road construction company
(CICO) has had to assemble massive bridges
along the Maracha-Koboko-Yumbe highway.
Indisputably, the amount of materials
apportioned to a single bridge could be

sufficient to thoroughly repair several roads in
Kampala. With some sections of the highway
being inaccessible to motorists, human
traffic lights control the flow of vehicles. It is
common to see a woman or man waving a
green or red flag, signaling motorists to drive
on or stop, respectively.
Away from the highways, the feeder roads
across the districts are generally in good
condition, with firm, graded surfaces. Despite
the fact that most drivers literally fly along
the roads, there will still be chicken or goats
gracefully crossing over, perhaps oblivious of
the danger that they are exposed to. In some
areas, such as the stretch to Kei town at the
Yumbe-Juba border, the road gets bumpy
and impassable using small-bodied vehicles.
Getting a flat tyre is a reality due to stones,
bones and other sharp objects along the feeder
roads. As the motorists fix their tyres, children
in the area gather to witness the event, as they
chew on mangoes or fight over empty mineral
water bottles. Some bridges are undergoing
repair, having broken down due to heavy rains.
While pedestrians and cyclists may be able to
maneuver through the repair works, motorists
have no choice but to use alternative routes,
which increases a journey of three kilometers
to over ten. In extreme cases, one is required
to drive around Ojapi hills or Mt. Liru before
getting to their destination.
Business
Across the three districts, business booms in the trading centers while
the countryside is relatively quiet. Traders can be seen taking their
produce to the market, at the back of pickups or trucks. As the drivers
of these carriages over-speed, the traders are often uncomfortable, some
threatening to fall off. Nonetheless, they can afford to giggle with their
72
peers, which possibly makes the journey less hectic. On Wednesdays and
Saturdays, traders converge at Nyadri livestock market in Koboko district
to exchange goats, chicken, sheep and cattle.
Savings and Credit Cooperatives (SACCOs) have firmly established
themselves in the region, with some catering for specific groups such as
teachers and the disabled. These institutions have modest offices, with
about two to five staff. Centenary and Stanbic banks have a presence in
Koboko district but are yet to extend to Yumbe and Maracha. Customers,
therefore, have to travel to Koboko and Arua in order to access banking
services. These commercial banks are overseen by the Bank of Uganda
currency centre in Arua yet despite this, some crafty people have managed
to sneak counterfeit notes into the region. At a grocery shop in Maracha,
a trader had on display, punched counterfeit notes held together by a
string. Surprisingly though, this same man intentionally or accidentally
issued a counterfeit 5,000/= note to a customer who had purchased a
box of mineral water. When the customer asked for a replacement, the
trader quickly provided a genuine note without complaint. In places
such as Oraba, at the Uganda-Southern Sudan border, it is possible to
get foreign currency from the traders seated under large umbrellas, right
before the Uganda Revenue Authority check point.
Fuel is a commodity sold by many people, due to cheap supplies from
border areas. Its dealers only have to display a few litres in mineral water
bottles, which signals availability to potential buyers. As one of the locals
revealed, this fuel is much cheaper than that sold at real fuel stations.
Water
Much as the West Nile region has several rivers, it
faces scarcity of fresh water. Communal boreholes
are popular water sources, often lined with jerricans
throughout the day. Water is usually fetched by
women, who have to perform other chores too.
Thus, a number of jerricans remain unattended at
the boreholes, especially in the mornings. At sunset,
the women can be seen walking back home in pairs,
with their water. Due to water scarcity, some facilities
like hotels have dry taps yet requisite equipment
have been installed. Such hotels have taken a
strategic decision to pump and treat water from the
rivers. While this water is brown in colour after being
treated, the hotel managers give patrons assurance
of its safety.
Energy
People
Hydroelectricity is so far a dream for people in Yumbe, Koboko and

Maracha districts, yet this has not stopped them from engaging in simple
and complex businesses alike. The owners have adapted to the situation,
which defines the kind of service offered to customers. For example,
radio stations charge a high price for talk shows because they have to
fuel their generators. In hotels, eggs and bread are offered for breakfast
because they do not necessarily need to be refrigerated. Additionally,
power is carefully rationed, with generators running from 7:00pm
11:00pm each day. Solar power also prevails as evidenced by several
panels charging under the hot sun. The panels vary in size and are found
at different places, including offices, shops and the smallest homesteads.
Large panels are sophisticated; they can change direction depending on
where the sun is facing. The locals are optimistic that when a dam is
constructed on River Kochi in Yumbe district soon, their power woes will
belong to the past.
Across the three districts, people are very courteous. They smile warmly
and for them, greeting is never complete without a handshake. These
people like to keep life simple; therefore, on a good day, women and men
will wash clothes or bath in the same rivers from which they draw water
used to cook food. Despite their courtesy, these people get infuriated
and can fight when provoked. For visitors to these districts, it is easy
to conclude that women are the beasts of burden because they are
engaged in a cocktail of chores daily.
As the men make merry with their friends, the women have to clear
plantations, fetch water, collect firewood, prepare food and sweep the
compound, among other duties. As I learnt, a man in West Nile cannot do
chores such as fetching water. Women in other parts of Uganda may not
tolerate this lifestyle but those in West Nile have accepted their position in
society and life goes on.
73
APRIL 20
JUNE 13
Education
In Yumbe, Koboko and Maracha districts, secondary schools
register a low turn up of students at the beginning of first term.
While the majority of schools administer beginning of term
examinations that account for 50% of the first term marks, students
will still not show up. This worrying trend, teachers attribute to
the students unwillingness to clear school compounds, which are
normally bushy after a long holiday. Additionally, most parents
lack school fees as the term starts, because they are civil servants
whose salaries are often delayed. When they eventually report, the
students will arrive at school at about 9:00am in the morning, to
sit on their tiny desks and benches. At assembly time, they will
sing the national and school anthems very slowly, as though they
are almost running out of breath. The national anthem is standard.
However, the school anthems vary, with some heaping praise on
the founders of the schools and others highlighting the motto and
core values.
Patriotism is vividly expressed as all schools have the Uganda
flag flying alongside a school flag. Notably, specific students
74
are assigned the duty of hoisting the flags in the mornings and
removing them in the evenings, as a safety measure. It is a tradition
for guests to register in a visitors book. Even the humblest of
schools usually has this book, kept in the head teachers office. This
office has several other items a box of chalk, reams of paper, text
books, motto, vision and mission statements, teaching timetables
and charts of staff responsibilities for the year. As well, parents
walk in to enquire about admissions as new students fit on their
uniforms.
Some of the schools are located by the roadside, with others
being deep in the village. One must drive several kilometers to
get to them. Additionally, there is a contrast between structures
at different schools. Some buildings were purposely constructed
to facilitate training of students but others have been conveniently
converted into classrooms. Therefore, it is possible to find teachers
conducting lessons in shop-like structures. In the same vein, while
some schools can afford plastic carpets for administrative offices,
others have mud and wattle floors. On this mud and wattle note,
I will end my story and further reflect on the motion, Village life is
better than Town life.
STUDENTS DISCIPLINARY CORNER
JOYCE ACHELAT DE-REGISTERED FOR IMPERSONATION

The Public Accountants Examinations Board (PAEB) revoked the ATC(U) certificate, ATC(U) Results Notification and de-registered Joyce Achelat Reg.
No 03529 from the CPA(U) course. We were informed that her actual
name was Hellen Awiat.
Hellen Awiat alias Joyce Achelat registered for the ATC(U) course in 2002
as a government sponsored student under Tororo District Local Government.
She completed the course in December 2005. She went on to register for
the CPA(U) course in 2006.
She was invited together with the real Joyce Achelat, owner of the documents, to respond to the complaint. She acknowledged that she used
Joyce Achelats papers to register for ICPAU courses.
The PAEB decided to cancel Joyce Achelats (Reg. No. AT/00513) final
ATC(U) Results Notification Serial No. AT122500111 issued on 06-022006 and the ATC(U) Certificate No. A00245.
Additionally, Joyce Achelat Reg. No. 03529 has been de-registered from
the CPA(U) course ceased to be a student of the Institute.
FRANC KAMYA DE-REGISTERED FOR FORGERY

Franc Kamya- Reg. No. CP/07569 registered as CPA(U) student on 13
July 2010. He sat for Level one examinations in December 2011 and
thereafter never sat examination again.
He forged an Examinations Results Notification where he purported to have
started the CPA(U) course in June 2010 and completed it in June 2012.
Kamya used the forged document to obtain employment in an audit firm.
His conduct and performance did not demonstrate that he had completed
the CPA(U) course. The firm approached the Institute to confirm his status.
Kamya has consistently failed to appear before the students disciplinary
committee.
PAEB decided to de-register Franc Kamya from the CPA(U) course and thus
he is no longer a student of the Institute.
75
Institute of Certified Public Accountants of Uganda

Members admitted between December 2012 February 2013
S/NO
NAME
MEMBERSHIP REG.NO.
ADMISSION DATE
1.
Judith Kyomugisha
FM1821
27 FEBRUARY 2013
2.
Ben Beverton Nahabwe
FM1822
27 FEBRUARY 2013
3.
George David Ochieng
FM1823
27 FEBRUARY 2013
4.
Stephen Nyanzi
FM1824
27 FEBRUARY 2013
5.
Christine Mayengo
FM1825
27 FEBRUARY 2013
6.
Andrew Kayomba
FM1826
27 FEBRUARY 2013
7.
Deborah Mirembe
FM1827
27 FEBRUARY 2013
8.
Ntuhe Betty Bainomugisha
FM1828
27 FEBRUARY 2013
9.
Florence Ajarova
FM1829
27 FEBRUARY 2013
10.
Margaret Kobusinge
FM1830
27 FEBRUARY 2013
11.
Faridah Namubiru
FM1831
27 FEBRUARY 2013
12.
Winnie Akware
FM1832
27 FEBRUARY 2013
13.
Steven Ssesanga
FM1833
27 FEBRUARY 2013
14.
Catherine Akello
FM1834
27 FEBRUARY 2013
15.
Tonny Kisitu Muwanga
FM1835
27 FEBRUARY 2013
16.
Rogers Katirimba
FM1836
27 FEBRUARY 2013
17.
Jeffrey Bangirana
FM1837
27 FEBRUARY 2013
18.
Collins Jackson Muhwezi
FM1838
27 FEBRUARY 2013
19.
Charles Kakooza
FM1839
27 FEBRUARY 2013
20.
Denis Turyamureeba
FM1840
27 FEBRUARY 2013
21.
Godfrey Lukenge
FM1841
27 FEBRUARY 2013
22.
Robert Lubega
FM1842
27 FEBRUARY 2013
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The Magazine for The Institute of Certified Public Accountants of Uganda (ICPAU)

The Fiscal and

HR INSIGHT: DOS AND

Why we need to be mindful

Effective IT Project Avenues of Business

Impact of population growth

Helping SMEs Face

Trusts and their

The Fiscal and Tax

| Todays Accountant APRIL- JUNE 2013

institute grants me a quarter-page of the magazine for me to always have

INSTITUTE OF CERTIFIED PUBLIC

GOLF100 MAGAZINE LTD

DESIGN & GRAPHICS

Todays Accountant APRIL- JUNE 2013 |

Joseph Sanjula Lutwama

CPA John Bosco Obore

Joseph Sanjula Lutwama is an Economist by profession, with a Masters

CPA Stephen Nyanzi

CPA Obed Bampe Tindyebwa

CPA Peter Kyambadde

CPA Noah Matovu

CPA Denis Kakembo

CPA DMO Mulagwe

CPA Innocent Orone

| Todays Accountant APRIL- JUNE 2013

Lilian Bagambe is the Founder, Director and Managing Consultant at

CPA Al Hajj Nnume Yasin Abubaker

LETTER FROM THE PRESIDENT

CPA Naru Thakkar

elcome to Todays Accountant magazine! It gives me

The end of a term of service is an extraordinary phase

CPA Naru Thakkar,

CPA Derick Nkajja

elcome to another issue

Accountants (PAFA), on 4 & 5 June 2013. This is an international

The second quarter of

the international accountancy fraternity has in ICPAU, Uganda and

2013 begins with ICPAUs

East African economies.

to partner with different

Examinations for the June 2013 diet will be conducted from 4

stakeholders to realize its mission, which is To develop

10 June 2013, at the four examinations centres operationalised

and promote the accountancy profession in Uganda and

beyond. The accountancy profession is a stewardship

Mbale and Mbarara.

profession and because the public understands it that way,

The recent tax gains/wins reported by Uganda Revenue Authority is

in safeguarding the public resources. It is in this respect that

the Institute has stepped up its voice towards regulators

do right. We, however, would like to see more entities/individuals

and employers, for them to ensure that individuals in

top financial positions for public interest entities are fully

forefront of submitting budget proposals for each budget year as

registered members of ICPAU. This is the only way the

accountancy profession will be able to play its rightful role

to have a platform or centre of excellence for tax issues, also as

in the development of Uganda.

part of our mandate to educate. We encourage our members to

We, however, note arguments and counter arguments

CPA Derick Nkajja,

in professional regulation for developing economies,