2bn lost from properties Custodian Board

Jun 15, 2009

SH1.9b was withdrawn under mysterious circumstances from the account of the Departed Asians Property Custodian Board. Another sh1.8b, paid out in compensation to Asians expelled in 1972, has not been accounted for.

SPOTLIGHT

By Mary Karugaba


SH1.9b was withdrawn under mysterious circumstances from the account of the Departed Asians Property Custodian Board. Another sh1.8b, paid out in compensation to Asians expelled in 1972, has not been accounted for.

These are some of the numerous irregularities contained in a May 2009 special report by the Auditor General into the operations of the Custodian Board.

The board was established in 1973 to manage all assets left behind by the 50,000 Asians who were forced out by the late dictator Idi Amin. Under the NRM Government, departed Asians could either repossess their properties or be paid compensation provided they could prove ownership.

As the Custodian Board is being wound up, the Auditor General discovered serious flaws and irregularities in the management of the funds.

In his 30-page report, John Muwanga found that sh1.9b was withdrawn under unclear circumstances from the divestiture account at the Bank of Uganda on February 19, 2001.

“I was not provided adequate supporting documentation for the transaction and neither was authority from the board provided. I was not able to ascertain how the funds were utilised,” Muwanga says, calling the transaction “irregular and possibly fraudulent”.

The divestiture account is where all funds from the sale of Government assets are supposed to be deposited.
The Auditor General does not say who withdrew the money from the Central Bank. He calls upon the management of the Custodian Board to “investigate this transaction further for possible fraud and take appropriate action”.

The report further found that compensation paid to Indians for buildings, machinery, stocks and blocked bank accounts, amounting to sh1.8b, had not been documented.

“The list of the beneficiaries, save for 19 British elderly Asians, were not availed for verification. As a result, I was not able to ascertain how funds were utilised and confirm whether the intended beneficiaries received the funds.”

The report also mentions that sh26m, withdrawn between February 2000 and September 2002, has not been accounted for. Another sh138m was ‘borrowed’ by the finance ministry and has never been refunded. Of this amount, sh91m was used to pay the Whitaker Group and sh7m to meet the burial expenses of a finance ministry staff.

Moreover, the Auditor General found that none of the mechanisms required under the 1973 Assets of Departed Asians Act to manage the properties and proceeds had been established.
The finance minister was supposed to keep a register of all properties or businesses declared by departing Asians.

“However, it was observed that no assets register was maintained. As a consequence, I was unable to verify the properties repossessed (4,063), properties sold (1,676) and properties unsold (3,226) as reported by management,” Muwanga states.

According to the Act, a common pool fund was supposed to be established through which all the money on the accounts of expelled Asians should be managed.

“However, there was no evidence that such a fund was established,” the report says. It quotes the accounting officer as saying that “all bank accounts were frozen and transferred to the defunct Uganda Commercial Bank from where they suffered a currency reform which left the accounts at no value at all”. But the Auditor General adds that he was unable to confirm these assertions.

In addition, the board, which was supposed to meet every month, did not meet once between 1997 and 2008, implying that there was no supervision.
The report further notes that the management sold certain properties that had been rightfully repossessed by former owners, making the Government lose almost sh4b in court cases, and that some members of the management team were involved in the purchase of Asian properties.

Staffing was another problem. There was no accountant or cashier responsible for the preparation and maintenance of the books of accounts and the records, the report reveals.

“The absence of an accountant or cashier resulted into the legal manager handling finances. She could collect and bank revenue, write payment vouchers and authorise payments. In addition, an office messenger was entrusted with banking large sums of money both in cash and cheques.”

The Auditor General accuses ‘high ranking Government officials’ of having influenced certain actions and decisions of the management.

“The decisions of management in some instances were not based on established procedures. As a consequence, properties may have been wrongfully allocated, repossessed and compensated for,” the report says.

“Due to political influence, purchase prices could be reduced below the reserve prices without proper justification. There were also instances of defaulting in payments with no appropriate action taken.”

A total of sh239m for 87 properties remains uncollected, the audit established.

Most stunningly, the report states that receipt books and bank statements for the period 2000 to 2007 could not be found, and that 28 files of properties sold have gone missing.

In addition, there were no bid registers and bid evaluation reports for 77 properties sold, and there were no valuation reports for 39 others.

“I understand that the Government is in the process of winding up the activities of the Custodian Board,” Muwanga concludes. This, he adds, should only be done after the board has accounted for all the money it was entrusted with.

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