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Posta MD’s job at stake

By Joan Akello

Finance minister halts renewal of contract, orders special audit

A rift between members of the board of Uganda Posts Ltd (UPL) commonly known as Posta has left the re-appointment of the managing director in a balance. Mr James Arinaitwe’s contract expired on March 31 and was purportedly renewed by the board but the Ministry of Finance wants the re-appointment to be put on hold until his management is cleared by a new special audit.

A source close to the board says that while supporters of the managing director – mainly the chairman, and some representatives of the Ministry of Information, Communication and Technology – want him to stay on, those from the Ministry of Finance are against it, citing mismanagement, fraud and poor corporate governance.

Though it is the board that has the mandate to appoint the MD, the government, through the Ministry of Finance, Planning and Economic Development – the majority shareholder – and the ICT ministry, also have a stake. There are indications that Maria Kiwanuka, the Finance minister, is keen on the company changing its management which will usher in new reforms.

Indeed, a source close to the board told The Independent that the Ministry of Finance, Planning and Economic Development want Arinaitwe out.  They say his five-year tenure did not yield the expected results, so he should be replaced. While restructuring the company was a key target handed down to Arinaitwe when he was appointed in 2008, the financial reports for his tenure do not vary much from those of his predecessors.

On Feb. 6, Kiwanuka wrote to Ruhakana Rugunda, her counterpart in the ICT Ministry a letter that appears to summarise the government’s frustration about what she described as the organisation’s “consistent poor performance, poor compliance with statutory reporting requirements, lack of appropriate systems and controls indicative of poor governance, poor accountability and general lack of innovation.”

She adds that her ministry is cognizant of Posta’s national role to provide postal services across the Uganda which may result in unprofitable operations for some locations especially for remote areas.  According to Kiwanuka, Posta should be able to mobilize and harness the benefits from its vast resources or asset base and diversification opportunities at its disposal to run sustainable operations across the entire country.

“Instead,” she continued,  “the net worth  of the  company continues to  dissipate,…plunge into  more debt, service delivery remains a challenge , …in gross contravention  of its statutory  reporting  obligations  and is unable to resolve grave  audit queries  raised by the auditor general.”

She was referring to the company’s audit report of 2009/2010 in which the Auditor General, John F.S Muwanga, made a disclaimer of opinion. “ I do not  express an opinion  on the financial  statements  of Uganda Post Ltd for the year  ended 30th June  2010,” because, Muwanga added,  “I have not been able to  obtain sufficient  appropriate  audit evidence  to provide  a basis  for an audit. ”

However, Arinaitwe appeared to dismiss this claim as evidence of poor performance on the part of management. “A disclaimer of opinion can mean that he did not get information or the information given was not exhaustive,” Arinatwe told The Independent.

So which one did Arinaitwe’s team do? Both, according to the auditor general, who hired two private auditing firms TMK and Johnson & Johnson but both failed to finalize their audits.  Arinaitwe and his top managers were reportedly uncooperative. But on July 9, 2012, Muwanga released the damning audit report.

Arinaitwe responded to the audit queries on April 8, ten months later, reportedly after receiving a letter from Kiwanuka over the issues raised in the report.

However, Arinaitwe said the response was delayed because they were still gathering supporting documents for their response.

The auditor’s queries included the variances in the company’s books, understatement of inventory balance; prior year adjustments and; poor record keeping and the possibility of fictitious expenditures.

For example, the auditor general cites the company’s failure to account for a grant of US $ 61,400 (about Shs 150m) from the International Posts Union, which was for expanding the Posta branch at Clock Tower. Muwanga says there is a risk that the funds may not have been put to proper use and could affect the relationship with the donor community thereby affecting the image of the country.

However, management responded that for this particular grant, the project was still in progress at the time of the audit but “has since been completed, and certified by the project board in Berne, Switzerland.”

Arinaitwe admitted that the audit report “revealed very significant deficiencies in book keeping. Fraud was clearly shown as fraud.” But,” he added,” accounting allows you to correct mistakes.”

However, uncertainty persists as to whether he will be given another chance. While Arinaitwe says that the board has renewed his contract for the next three years, a source close to the board told The Independent that he was given only three months pending the outcome of a new special audit.  In her letter to Rugunda,  Kiwanuka said, “in pursuance of this ministry’s oversight mandate….I request  for the assistance of the  Office of the Auditor General to undertake a special audit  of the management  and operations of UPL to facilitate the reform and restructuring  of the company to enable it deliver  its mandate efficiently.”

But given the outcome of the earlier audit and vibes from the Finance ministry, Arinaitwe’s job is definitely on the line and more so as the findings of the new special audit for 2010, 2011 and 2012 are expected not to be any less flattering of his five-year tenure.

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