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AG queries sh2b 'inflated' cost for Cancer ward
Publish Date: Jan 16, 2014
AG queries sh2b 'inflated' cost for Cancer ward
Auditor General John Muwanga
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By Mary Karugaba

The Auditor General has raised a red flag over the procurement and construction of the Cancer Ward, questioning the suspected inflated costs of sh2.1b.


A report to Parliament on the audited financial statement of the Uganda Cancer Institute, the Auditor General, John Muwanga, noted that in 2011, the Institute contracted Ambitious Construction Company to construct a 5-level Cancer Ward at the initial sum of sh5.7b but a review of the contract documents indicate that the amount was revised to sh7.9b without necessary approval.

Procumbent regulations provide that a contract amendment shall not be issued to the provider prior to obtaining approval from the contracts committee or from any other concerned bodies including the Solicitor General.

The auditors further argued that the rules stipulate that no individual contract amendment shall increase the total contract price by more than 15% of the original contract price without the approval of the procurement body, the Public Procurement and Disposal of Public Assets (PPDA).

“When the contracts documents were reviewed, it was discovered that the works were varied by sh2.1b representing 38% of the original contract price without necessary approval. The variation was therefore done in total disregard of the PPDA regulations.

The auditors further noted that despite the revised budget, seven months after the due completion date, works were still uncompleted by the time of audit in January 2012.

“Despite the apparent delays, there was no evidence that management had followed this matter with the contractor, including application of liquidated damages as provide for under the contract,” he said.

 Cancer Institute Director Dr. Jackson Orem although did not explain why he did follow procurement guidelines, he explained that the variance was as a result of change of the original construction site by the ministry of health to a new one after the contract had been signed and the site handed over to the contractor.

He further said, the contractor was asked to halt the work until an agreement was reached with Mulago Hospital which decided to allocate a new piece of land for the project.

“The new site was then evacuated and additional works were deemed necessary since a soil test found the new site soils weaker. This addition however, despite the cost, increased the range of services in the building as a mortuary, nuclear medicine and X-ray facilities were designed to utilize this additional space that was not part of the original plan,” he explained.

Orem said the circumstances at the time could not enable the institute approve the variation since it had no board. “A long the way, we got a board as an autonomous institution and the process regularized,” he said.

He attributed the delay to change of site especially consultations. However, the building was completed and has been handed over, he said.

Meanwhile while appearing before the Public Accounts Committee yesterday, Dr. Orem was grilled for diverting funds meant to fund major institute activities to other areas such as salaries, laundry and food.

During the meeting, MPs discovered that the Institute diverted over sh600m without authority, suffocating major activities such as the purchase of Echo and ECG equipment used in cancer treatment and outreach centers for cancer sensitization. The equipment cost sh92m.

MPs Kassiano Wadri, Alex Byarugaba and Jack Wamanga complained that although parliament has been advocating for the Institute’s increased budget, the money has not been used for major activities such as purchase of vital machines.

“I am extremely disappointed that rather than spending the little you have on major activities, if you diverted it to other use even without permission from Finance. When I look through your books of accounts, issues of financial management seems to be too heavy for you. We don’t feel comfortable with the way you are handling money issues,” Kassiano said.

Orem said, in some cases permission was rejected but he said he had put most of the finances to proper use.

 

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