NSSF estate deal inflated by sh4b
Nov 16, 2004
THE land for the $225m housing joint venture between the National Social Security Fund (NSSF) and Mugoya Estates (MEL) was overvalued by sh4b
By Felix Osike
THE land for the $225m housing joint venture between the National Social Security Fund (NSSF) and Mugoya Estates (MEL) was overvalued by sh4b.
An audit revealed gross mismanagement of NSSF funds in unviable ventures by the management.
The report, now before President Museveni and MPs, says the project consultant was to be paid $2.5m (sh5b).
The evaluation by the Government put the value of the 843 acres at Nsimbe at sh4.5b opposed to sh8.5b agreed on by the parties.
The November 12 report signed by the Auditor General, John Muwanga, said the over valuation resulted in a loss of sh4b.
The audit was sanctioned by Museveni after receiving an investigative report by Teddy Ssezi Cheeye, the director of economic monitoring at the Internal Security Organisation.
The matter sparked off a furore and the president transferred NSSF from the gender ministry to that of finance.
The auditors reported that Mugoya bought the land from James Mulwana at $700,000.
At the time of the sale, Associated Consulting Engineers, commissioned by Mulwana, put the value at sh2.3b excluding plant, machinery and office furniture.
At the formation of the joint venture, Bageine and Company valued the land at sh8.9b and sh16b respectively.
An independent NSSF valuation by D.M Byokusheka indicated an amount of sh7.15b.
The report said the sh8.5b was unrealistically high. It said unlike other contracts where the roles are handled separately, in the case of Nsimbe, Mugoya was the investor, contractor and the consultant.
The report said sh2b was advanced before the contract was signed on Stanbic Bank cheque number 005001. It said sh4.8b was paid to Mugoya two days after signing the agreement.
Another sh648m was paid to Kampala Advocates and Associates from the joint venture account as pre-incorporation
costs.
A review of the tax invoice showed that sh218m was for the negotiations, sh287m for professional charges for registering Nsimbe Holdings and sh92m for registration and stamp duties.
Records at the Registrar of Companies revealed that the registration fees and stamp duties were, however, not paid.
Kampala advocates represented by Elly Karuhanga was the legal advisor to Mugoya Estates.
The Auditor General’s report said the joint venture meeting of April 13, between NSSF and MEL which lasted only one hour 50 minutes, undertook critical decisions without research.
The report said the project of up to 5,000 housing units targeting 6% of the market in a location less preferred was not feasible.
It said a case of conflict of interest the Managing Director, Leonard Mpuuma, now under suspension sold his land on April 24 to James Isabirye Mugoya, the MEL proprietor.
Nsimbe Holdings was the joint venture company formed between NSSF through its 100% shareholding in Premier Development and Mugoya Estates.
MEL contributed its land purportedly valued at sh8.5b representing 51% shares while PDL 49% contribution was a cash transfer from NSSF account.
The auditors said Onegi Obel who was also the NSSF board chairman was also chairman of Nsimbe holdings and a director of Premier.
The report says the proposal for a joint venture was submitted directly to the NSSF boss in Mugoya’s own name. It said Mugoya estates was not in the construction business.
The first interim payment certificate presented to Nsimbe Holdings by Mugoya Construction Company was requisitioned on July 19 while the contract had only been signed two days before to start on August 13.
The contract should not have been concluded without advice from the Attorney General.
The report said NSSF entered into a mortgage agreement with dfcu bank amounting sh10b to finance the development of mortgage finance business.
Mpuuma, the report said, benefited from these funds with a loan of sh853,719,250.
The report said in April 2004, Mpuuma sold his land in Namanve to Mugoya at $350,000. Obel’s building in Arua town was renovated with mortgage finance from dfcu. It houses the NSSF area branch office. The report said investments by the NSSF worth sh63.3b were irregular since they did not receive approval by the minister.
It was noted that $1m was loaned out by NSSF to Victoria Developments, a joint venture company between Premier and another company, SBI International.
The terms of agreement among others provided for a concessionary interest rate of 3% which is below the government bond rate and a simple corporate guarantee.
The interest offered was low compared to the Treasury bill interest and fixed deposit rates. The Attorney General said the investment loan was not fairly negotiated in the interest of the workers’ funds.
NSSF management also spent sh100,242,597 on donations to various organisations between July 2003 and June 2004 without a clear policy.
It said Mpuuma made decisions on how much and to which organisations to donate.
The audit also discovered an irregular payment of $280 per day as sitting allowance and per diem when board members travelled abroad.
The members are Ssemanda, Nkojjo, Batera M. Ongaba, and Onegi Obel.
Between July 2003 and August 2004, the board and sub-committees sat 40 times and were paid sh197,184,010 for sitting, lunch and transport.
Board members at Nsimbe Holdings were paid sh500,000 per sitting and the chairman paid sh600,000.
The report said line minister Bakoko Bakoru requested for money for travel abroad, which was considered irregular.
NSSF paid $3,000 to one Ephraim Taharana to cater for 10 days per diem allowance.
The report said the corporation which invited the minister, should have met the bill.
It said during the same month, Bakoko and the permanent secretary were sponsored to attend a four-day conference in South Africa at $14,910.
The report said the appointment of Mugoya to construct NSSF regional offices and commercial development in Arua was suspect because the tender was won by Seyani Brothers.
It said the NSSF internal financial control mechanisms were lacking exposing the funds to misuse and misappropriation.
THE land for the $225m housing joint venture between the National Social Security Fund (NSSF) and Mugoya Estates (MEL) was overvalued by sh4b.
An audit revealed gross mismanagement of NSSF funds in unviable ventures by the management.
The report, now before President Museveni and MPs, says the project consultant was to be paid $2.5m (sh5b).
The evaluation by the Government put the value of the 843 acres at Nsimbe at sh4.5b opposed to sh8.5b agreed on by the parties.
The November 12 report signed by the Auditor General, John Muwanga, said the over valuation resulted in a loss of sh4b.
The audit was sanctioned by Museveni after receiving an investigative report by Teddy Ssezi Cheeye, the director of economic monitoring at the Internal Security Organisation.
The matter sparked off a furore and the president transferred NSSF from the gender ministry to that of finance.
The auditors reported that Mugoya bought the land from James Mulwana at $700,000.
At the time of the sale, Associated Consulting Engineers, commissioned by Mulwana, put the value at sh2.3b excluding plant, machinery and office furniture.
At the formation of the joint venture, Bageine and Company valued the land at sh8.9b and sh16b respectively.
An independent NSSF valuation by D.M Byokusheka indicated an amount of sh7.15b.
The report said the sh8.5b was unrealistically high. It said unlike other contracts where the roles are handled separately, in the case of Nsimbe, Mugoya was the investor, contractor and the consultant.
The report said sh2b was advanced before the contract was signed on Stanbic Bank cheque number 005001. It said sh4.8b was paid to Mugoya two days after signing the agreement.
Another sh648m was paid to Kampala Advocates and Associates from the joint venture account as pre-incorporation
costs.
A review of the tax invoice showed that sh218m was for the negotiations, sh287m for professional charges for registering Nsimbe Holdings and sh92m for registration and stamp duties.
Records at the Registrar of Companies revealed that the registration fees and stamp duties were, however, not paid.
Kampala advocates represented by Elly Karuhanga was the legal advisor to Mugoya Estates.
The Auditor General’s report said the joint venture meeting of April 13, between NSSF and MEL which lasted only one hour 50 minutes, undertook critical decisions without research.
The report said the project of up to 5,000 housing units targeting 6% of the market in a location less preferred was not feasible.
It said a case of conflict of interest the Managing Director, Leonard Mpuuma, now under suspension sold his land on April 24 to James Isabirye Mugoya, the MEL proprietor.
Nsimbe Holdings was the joint venture company formed between NSSF through its 100% shareholding in Premier Development and Mugoya Estates.
MEL contributed its land purportedly valued at sh8.5b representing 51% shares while PDL 49% contribution was a cash transfer from NSSF account.
The auditors said Onegi Obel who was also the NSSF board chairman was also chairman of Nsimbe holdings and a director of Premier.
The report says the proposal for a joint venture was submitted directly to the NSSF boss in Mugoya’s own name. It said Mugoya estates was not in the construction business.
The first interim payment certificate presented to Nsimbe Holdings by Mugoya Construction Company was requisitioned on July 19 while the contract had only been signed two days before to start on August 13.
The contract should not have been concluded without advice from the Attorney General.
The report said NSSF entered into a mortgage agreement with dfcu bank amounting sh10b to finance the development of mortgage finance business.
Mpuuma, the report said, benefited from these funds with a loan of sh853,719,250.
The report said in April 2004, Mpuuma sold his land in Namanve to Mugoya at $350,000. Obel’s building in Arua town was renovated with mortgage finance from dfcu. It houses the NSSF area branch office. The report said investments by the NSSF worth sh63.3b were irregular since they did not receive approval by the minister.
It was noted that $1m was loaned out by NSSF to Victoria Developments, a joint venture company between Premier and another company, SBI International.
The terms of agreement among others provided for a concessionary interest rate of 3% which is below the government bond rate and a simple corporate guarantee.
The interest offered was low compared to the Treasury bill interest and fixed deposit rates. The Attorney General said the investment loan was not fairly negotiated in the interest of the workers’ funds.
NSSF management also spent sh100,242,597 on donations to various organisations between July 2003 and June 2004 without a clear policy.
It said Mpuuma made decisions on how much and to which organisations to donate.
The audit also discovered an irregular payment of $280 per day as sitting allowance and per diem when board members travelled abroad.
The members are Ssemanda, Nkojjo, Batera M. Ongaba, and Onegi Obel.
Between July 2003 and August 2004, the board and sub-committees sat 40 times and were paid sh197,184,010 for sitting, lunch and transport.
Board members at Nsimbe Holdings were paid sh500,000 per sitting and the chairman paid sh600,000.
The report said line minister Bakoko Bakoru requested for money for travel abroad, which was considered irregular.
NSSF paid $3,000 to one Ephraim Taharana to cater for 10 days per diem allowance.
The report said the corporation which invited the minister, should have met the bill.
It said during the same month, Bakoko and the permanent secretary were sponsored to attend a four-day conference in South Africa at $14,910.
The report said the appointment of Mugoya to construct NSSF regional offices and commercial development in Arua was suspect because the tender was won by Seyani Brothers.
It said the NSSF internal financial control mechanisms were lacking exposing the funds to misuse and misappropriation.