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Shs600 billion swindled in 10 deals

By Independent Team

Audit shows most corrupt government offices

Up to Shs 1.6 trillion or about 20 percent of all the money spent by various government departments in the 2011/12 Financial Year was either stolen, misused, or not properly accounted for, according to extracts from a just released Auditor General’s report. To complete the double whammy, the AG report released at the end of June says the main supervisors of government expenditure, the Ministry of Finance and the Treasury, do not know on how many accounts the government actually keeps its money.

The report of finding for the year ended June 30, 2012 notes: “The current Monitoring and Evaluation arrangements in government are weak and inadequate. Monitoring and supervision is characterised by fragmentation, duplication, weak coordination, and lacks a clear result chain”.

On the Treasury the report notes: “The Treasury has no proper cash management system and database of government operated accounts. This renders determination of the aggregate cash position of the government at any


one time difficult.

As a result, the report says, the government Mid-Term Expenditure Framework, which is the main budget appropriation instrument used by the Ministry of Finance is not aligned to the requirements of the National Development Plan. This, the report says, leads to wasteful expenditure, failure to manage cash, and unwanted supplementary expenditure of up to 27% in some cases.

In four sample cases by the Auditor General in the Ministry of Agriculture, Animal Industry and Fisheries alone, up to Shs 16.4 billion was lost in one year; Shs 9 billion meant for vaccination of cattle and poultry was released but accountability was poor, Shs 4.4 billion was released for the Soroti Fruit Factory but nothing was done on the ground, Shs 2.6 billion allocated for Cotton Seed Distribution was lost, and Shs 340 million for the Luweero Fruit Drying Factory was also lost.

Even programs like the traffic police’s Express Penalty Scheme (EPS) that were designed to improve service and raise revenue are failing due to inadequate management. The report notes that although tickets worth Shs 43 billion were issued for 766,134 offences, up to Shs 19 billion or 45% of the money went missing.

But the biggest offender on the budget indiscipline list, according to the AG report, appears to be the government itself. According to the AG, the government entered 13 new loans equivalent to Shs 1.3 trillion without parliamentary approval as required by law.

Another Shs 256 billion was `mischarged’; meaning the money was either diverted or spent using wrong budget codes or without following laid-down procedures. In some ministries and departments, such diversions consumed up to 81% of the budget.

As a result, up to Shs 600 billion is reported to have been either stolen or not properly accounted for in 10  deals in several ministries and departments including the  Office of the Prime Minister (OPM), Shs 58 billion, Public Service Shs165 billion, Shs 47 billion in overpayment in the Uganda National Roads Authority (UNRA), Shs 25 billion advances to various officials, Shs 27 billion in cash withdrawals,   Shs 15 billion meant to compensate former Internally Displaced Persons (IDPs) in Lira and Gulu, and Shs 2.4  billion misappropriated from the Presidential Initiative for Market Vendors.

Other money feared either lost or about to be lost includes Shs 12 billion moved from the Ministry of Justice and Constitutional Affairs Case Backlog Account to be used on the Heritage Oil Case. Only Shs 190 million was spent on the Heritage Arbitration.

Up to Shs 33 billion purportedly spent on foreign investments was done without plans or approvals and another Shs 27 billion purportedly spent on investments in ventures with Private Sector players is not backed by evidence or supporting share certificates.

Questionable projects

The AG report highlights developments on three projects whose progress will be worth watching as the FY 2013/14 progresses and in the 2012/13 Auditor General’s Report; the projects include developments on the NSSF land in Temangalo; the Kireka Estates Ltd case involving the National Housing Corporation, and the infamous Bank of Uganda compensation to city tycoon Hassan Basajjabalaba’s Haba Group of Companies that remains un paid by the Ministry of Finance.

According to the AG, although the National Social Security Fund (NSSF) acquired an estimated 464 acres of land at Temangalo in Busiro from Prime Minister Amama Mbabazi in 2010 at Shs 16 billion, a recent valuation of the land that ended on June 30, 2012 places its fair value at Shs 12 billion.

The recent valuation done on behalf of NSSF notes that up 67 acres or 14 percent of the Temangalo land is in a swamp and the rest is encumbered by squatters.

When this case first surfaced three years ago, these issues came up as the Prime Minister was accused of selling the land to NSSF at an inflated price and using his office to influence NSSF to pay the high price. The allegations of influence peddling made their round through the Public Accounts Committee of Parliament and the Prime Minister was exonerated and the issues of inflated cost of land quickly dismissed because, it was argued, the value of land “always appreciates”.

The current 25 per cent depreciation in the value of the Temangalo land could prove a major talking point as NSSF, which planned to construct a housing estate on the land, either remains stuck with an unviable project or attempts to sink more good money after the bad by buying out the squatters and reclaiming the swamp.

The case will be interesting because as of June 30, 2012, the NSSF position was that Mbabazi and company are, under the sale agreement, obliged to settle the squatters and hand over the land without encumbrances.   However, the AG report notes, Mbabazi and company have instead offered to give NSSF alternative land which position has been rejected by the Ministry of Finance. The matter is now up for arbitration.

The other case that should prove interesting and involves land and a housing estate building entity is the case between the Kireka Estate Ltd and the National Housing and Construction Corporation (NHCC). Details indicate that NHCC leased 250 acres of land in Kireka, a low income Kampala suburb, from Kireka Estate Ltd for 99 years from January 1966 and another 42.6 acres for 49 years from September 1968.

In 2003, however, Kireka Estates Ltd sued NHCC for breach of terms of the agreement including failure to pay ground rent, change in user for residential estate, and lack of protection of land occasioning degradation.

On December 5, 2011, court ruled in favour of Kireka Estates Ltd and ordered NHCC to pay it Shs 13 billion. NHCC paid. This sum is interesting because, according to the AG report, the land is currently valued at Shs 16.23 billion. Effectively, NHCC was paying to indemnify a lease for land it could have purchased outright.

The other issue of contention is that the land is currently encumbered by squatters, including the swathe of low income villages called “Acholi Quarters” and the same land has been earmarked for redevelopment by the government under the Kireka Slum Upgrading Project.

“Under the circumstances, there is uncertainty as to whether the company (NHCC) will eventually take possession of the said land,” the AG report notes.

In the case of tycoon Hassan Basajjabalaba’s Haba Group of Companies, the AG report recommends that Bank of Uganda collects interest on the money given out by the Ministry of Finance.

Basajjabalaba obtained Shs 142 billion from the government as compensation for a decision to reverse leases he had been awarded by then-Kampala City Council for three city markets; Nakasero, Shauriyako, and St. Balikuddembe (Owino) and the Constitution Square. Under the arrangement, the ministry of Finance entered an agreement with the Central bank to pay off Basajjabala and be compensated by the ministry.

The case became controversial after it emerged that Basajja allegedly forged the compensation documents.

In the ensuing fray, then- Attorney General Khiddu Makubuya and then-Finance Minister Syda Bbumba were forced out of office over their handling of the case.

On Jan. 18, Basajjabala was released on bail in a related case involving the Uganda Revenue Authority.

According to prosecution, Basajjabalaba and his younger brother, Muzamir Basajjabalaba, the director of HABA Group, between 2010 and 2011, conspired to prevent or defeat the execution or enforcement of tax laws, evading taxes amounting to Shs20 million which arose from the compensation by the government to his company.

The prosecution also alleges that on October 6, last year, he forged a consent judgment purporting to have been entered into between his company HABA and the Attorney General, agreeing that the payment of Shs142 billion would not be subjected to any taxes.

The AG report is silent on the case, but recommends that BoU starts charging the Ministry of Finance Interest on the outstanding debt.

“The payment made by Bank of Uganda could be interpreted to mean a temporary advance to the government of Uganda under section 33 of the Bank of Uganda Act,” the AG notes, “Consequently, BOU should be charging interest on the outstanding balance.”

In the past, the AG Office has been criticized for providing a bird’s eye view of the corruption in government and failing to pinpoint specific cases of corruption. The criticism emerged after the AG failed to detect massive fraud in the Office of the Prime Minister that was exposed in 2011 and led to prosecution and conviction of the former principal accountant, Godfrey Kazinda.

The other case of fraud that was not highlighted by the AG’s office was the Pension Sector scam in the Ministry of Public Service. In this case, the former Permanent Secretary Jimmy Rwamafa, the former principal accountant, Christopher Obey and his assistant, David Oloka allegedly concocted details of pension beneficiaries and skimmed off the fund. These cases were highlighted by whistleblowers and yet, critics say, the Auditor General’s Office should have caught them. The same could be said of this report.

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