Govt spent sh38 billion on Munyonyo
The bill for the Commonwealth summit in November 2007 has gone up to sh370b. How was all this money spent? Was there value for money? In the first of a series of articles on the CHOGM expenses, The New Vision looks into the expenditure for the Munyonyo Co
By Vision reporters
The bill for the Commonwealth summit in November 2007 has gone up to sh370b. How was all this money spent? Was there value for money? In the first of a series of articles on the CHOGM expenses, The New Vision looks into the expenditure for the Munyonyo Commonwealth Resort.
The Government spent a total of sh29b on construction works for the Munyonyo Commonwealth Resort, which accommodated the Queen of England and the heads of state.
An additional sh9.5b was paid for hire of conference facilities and advance bookings of accommodation for delegates in both Commonwealth and Speke Resort.
The Government also supplied furniture to Commonwealth Resort worth sh600m, most of which was later taken to State House Entebbe.
Of the sh29b, sh15b was spent on the construction of the resort itself. This was done through a joint venture between the Government and Meera Investments, owned principally by city tycoon Sudhir Ruparelia.
Another sh14b was spent on the parking, driveways and entrance gatehouse, as well as a marina at Lake Victoria meant to provide security for the delegates.
Commonwealth Resort
Under the joint venture with Meera Investments, the Government agreed to contribute 25% of the share capital, estimated at sh75b.
However, the Government instead contributed to the cost of construction, the Auditor General noted.
The Government was made to pay 25% of the materials and works, or sh15b of the total amount of sh60b.
According to the agreement, Meera was supposed to provide the land as its contribution to the venture.
The Auditor General in his April 2008 report stated that the land was never valued.
He also stated that no land titles and share certificates were presented to the auditors.
However, James Mugume, the permanent secretary of the foreign affairs ministry, yesterday presented to The New Vision the share certificates, issued on October 31, 2008, more than two years after the joint venture agreement was signed.
He also showed the land title and valuation report putting the value of the land at sh2.4b by the chief Government valuer, Bwiragura, after it was reviewed from sh1.8b following a dispute.
The land valuation, too, was done long after the agreement had been signed.
“By the time of inspection, construction had started,†said the report of the Government valuer of March 2007, one year after signing of the agreement.
Meera’s contribution
The Auditor General at that time was not able to carry out an audit of the books since he had no mandate to probe the accounts of a private company.
As a result, he was not able to establish the amount Meera Investments contributed and the actual cost of the project.
URA instituted an investigation in February 2008 to ascertain whether the construction items, imported tax free, were not misused.
The URA investigators valued three items of the Commonwealth Resort considered among the most expensive – the tiles, electrical works and curtains.
In the report, the value of the three items was put at sh3.8b.
The URA investigators indicated in their report that no detailed drawings for the resort were availed.
They also stated that no bills of quantities were provided to them “the reason given was many alterations and that the as-built bill was being prepared.â€
Additional works
The Government signed separate agreements for the construction of a parking, pathways and new entrance at the one hand, and a marina at the other hand.
However, both projects were executed on land owned by Meera Investments, not by the joint venture.
The Government risks losing this money since it was not made part of the joint venture, says the Auditor General.
“There appears to be no basis of guidance on how the Government tends to recover the sh13.9b spent on private property. Such expenditure risks being nugatory (wasteful),†the report said.
The Cabinet directed foreign affairs to enter into negotiations with Sudhir to have this money capitalised into shares.
But Mugume said the money for the marina was never supposed to be recovered.
“The marina was part of the security measures. There was need for an evacuation route through the lake. We are attracting a lot more conferences because heads of state feel safe there.â€
He compared the marina to the construction of the Kigo pier and Entebbe access pier. However, both piers were constructed on Government land.
Asked if Sudhir should not be paying rent or compensation since he is benefiting from the security arrangement, Mugume said it was not provided for in the agreement.
Sole bidding
Auditors of the private consultancy firm COWI also raised concerns about the way the sh9b contract for the parking was awarded.
There was no independent consultant. The works ministry’s own staff, headed by the acting commissioner for engineering, handled the consultancy services.
There was also no competitive bidding. Only one company, Dott Services, was allowed to send in a quotation.
This, the August 2008 COWI report noted, was contrary to procurement regulations.
Sole bidding is allowed when only one company can do the job or when there is an emergency as a result of unforeseen circumstances.
“In this case, there were many contractors that were qualified for the works in question,†said the COWI report.
It also noted that the works ministry knew two years in advance that CHOGM was coming. “There were no reasons not to plan and implement CHOGM projects in time to avoid last minute emergencies and the need for direct procurement.â€
Marina
The auditors in their report raised concerns about the “excessive†cost of both projects.
For the sh5b marina, constructed by Spencon Services, they found that the rates applied for most items were high at the time but “given the nature of the works and urgency, the Government had no choiceâ€.
They also noted that sh1b was granted for preliminaries whereas the engineer’s estimate was sh54m.
In addition, their probe found that there was 88 cubic metres of concrete less than claimed, amounting to sh44m, and that there were 506 metres of guard rails less than claimed, amounting to another sh56m. Moreover, the marina was not completed by the time of CHOGM, defeating its very purpose of providing security for the heads of state.
By the time the auditors visited the place on April 25, 2008, work was still ongoing.
“The Munyonyo marina pier did not achieve its immediate intended purpose because it was not complete by the time of CHOGM and its construction was ongoing by the time this audit was completed,†the report said.
It further noted that about 98% of the contract amount was approved for payment “yet a substantial portion of works are still pending completion.â€
Parking
The cost for the parking, too, was considered excessive by the auditors. The final contract sum came to sh8.8b, which was sh2.2b more than the engineer’s estimate.
When doing physical measurements, the COWI auditors found several items in lesser quantities than claimed, amounting to overpayment of sh573m.
They also raised concerns about the high bill for the entrance gatehouse – sh739m for the two structures and over sh1b when including other security features.
The two structures were far above the engineer’s estimate of sh485m and the auditors’ estimate of sh250m.
Court case
The works ministry asked Dott Services to refund the money overpaid for the entrance gatehouse. In response, the company sued the works ministry, the Auditor General and the Attorney General.
“Dott Services wanted to squash the entire audit report,†said a source in the Auditor General’s office.
However, the High Court judge on Friday ruled that according to the National Audit Act, the Auditor General only makes recommendations to Parliament and his reports enjoy parliamentary immunity.
He also pointed out that since the contract sum and the payment certificates were approved by the works ministry, the permanent secretary had to take responsibility and find a way of refunding the money.
Dividends
Having contributed 25% to the Commonwealth Resort, the Government should at the end of every financial year receive a quarter of the profits.
However, despite CHOGM and numerous other conferences which have taken place since, no dividends have been paid out to the Government as of now.
“The auditors for the resort, Deloitte and Touch, have given their first report. The Munyonyo Commonwealth Resort has broken even. Share of dividends is expected next year,†said Mugume.
According to the Deloitte and Touch report, the resort made a net profit of sh260m in its first year of operations, ending December 2008.
“The board recommended that the profit be re-invested into the resort,†he added.
In tomorrow’s paper: Other CHOGM hotels.
The bill for the Commonwealth summit in November 2007 has gone up to sh370b. How was all this money spent? Was there value for money? In the first of a series of articles on the CHOGM expenses, The New Vision looks into the expenditure for the Munyonyo Commonwealth Resort.
The Government spent a total of sh29b on construction works for the Munyonyo Commonwealth Resort, which accommodated the Queen of England and the heads of state.
An additional sh9.5b was paid for hire of conference facilities and advance bookings of accommodation for delegates in both Commonwealth and Speke Resort.
The Government also supplied furniture to Commonwealth Resort worth sh600m, most of which was later taken to State House Entebbe.
Of the sh29b, sh15b was spent on the construction of the resort itself. This was done through a joint venture between the Government and Meera Investments, owned principally by city tycoon Sudhir Ruparelia.
Another sh14b was spent on the parking, driveways and entrance gatehouse, as well as a marina at Lake Victoria meant to provide security for the delegates.
Commonwealth Resort
Under the joint venture with Meera Investments, the Government agreed to contribute 25% of the share capital, estimated at sh75b.
However, the Government instead contributed to the cost of construction, the Auditor General noted.
The Government was made to pay 25% of the materials and works, or sh15b of the total amount of sh60b.
According to the agreement, Meera was supposed to provide the land as its contribution to the venture.
The Auditor General in his April 2008 report stated that the land was never valued.
He also stated that no land titles and share certificates were presented to the auditors.
However, James Mugume, the permanent secretary of the foreign affairs ministry, yesterday presented to The New Vision the share certificates, issued on October 31, 2008, more than two years after the joint venture agreement was signed.
He also showed the land title and valuation report putting the value of the land at sh2.4b by the chief Government valuer, Bwiragura, after it was reviewed from sh1.8b following a dispute.
The land valuation, too, was done long after the agreement had been signed.
“By the time of inspection, construction had started,†said the report of the Government valuer of March 2007, one year after signing of the agreement.
Meera’s contribution
The Auditor General at that time was not able to carry out an audit of the books since he had no mandate to probe the accounts of a private company.
As a result, he was not able to establish the amount Meera Investments contributed and the actual cost of the project.
URA instituted an investigation in February 2008 to ascertain whether the construction items, imported tax free, were not misused.
The URA investigators valued three items of the Commonwealth Resort considered among the most expensive – the tiles, electrical works and curtains.
In the report, the value of the three items was put at sh3.8b.
The URA investigators indicated in their report that no detailed drawings for the resort were availed.
They also stated that no bills of quantities were provided to them “the reason given was many alterations and that the as-built bill was being prepared.â€
Additional works
The Government signed separate agreements for the construction of a parking, pathways and new entrance at the one hand, and a marina at the other hand.
However, both projects were executed on land owned by Meera Investments, not by the joint venture.
The Government risks losing this money since it was not made part of the joint venture, says the Auditor General.
“There appears to be no basis of guidance on how the Government tends to recover the sh13.9b spent on private property. Such expenditure risks being nugatory (wasteful),†the report said.
The Cabinet directed foreign affairs to enter into negotiations with Sudhir to have this money capitalised into shares.
But Mugume said the money for the marina was never supposed to be recovered.
“The marina was part of the security measures. There was need for an evacuation route through the lake. We are attracting a lot more conferences because heads of state feel safe there.â€
He compared the marina to the construction of the Kigo pier and Entebbe access pier. However, both piers were constructed on Government land.
Asked if Sudhir should not be paying rent or compensation since he is benefiting from the security arrangement, Mugume said it was not provided for in the agreement.
Sole bidding
Auditors of the private consultancy firm COWI also raised concerns about the way the sh9b contract for the parking was awarded.
There was no independent consultant. The works ministry’s own staff, headed by the acting commissioner for engineering, handled the consultancy services.
There was also no competitive bidding. Only one company, Dott Services, was allowed to send in a quotation.
This, the August 2008 COWI report noted, was contrary to procurement regulations.
Sole bidding is allowed when only one company can do the job or when there is an emergency as a result of unforeseen circumstances.
“In this case, there were many contractors that were qualified for the works in question,†said the COWI report.
It also noted that the works ministry knew two years in advance that CHOGM was coming. “There were no reasons not to plan and implement CHOGM projects in time to avoid last minute emergencies and the need for direct procurement.â€
Marina
The auditors in their report raised concerns about the “excessive†cost of both projects.
For the sh5b marina, constructed by Spencon Services, they found that the rates applied for most items were high at the time but “given the nature of the works and urgency, the Government had no choiceâ€.
They also noted that sh1b was granted for preliminaries whereas the engineer’s estimate was sh54m.
In addition, their probe found that there was 88 cubic metres of concrete less than claimed, amounting to sh44m, and that there were 506 metres of guard rails less than claimed, amounting to another sh56m. Moreover, the marina was not completed by the time of CHOGM, defeating its very purpose of providing security for the heads of state.
By the time the auditors visited the place on April 25, 2008, work was still ongoing.
“The Munyonyo marina pier did not achieve its immediate intended purpose because it was not complete by the time of CHOGM and its construction was ongoing by the time this audit was completed,†the report said.
It further noted that about 98% of the contract amount was approved for payment “yet a substantial portion of works are still pending completion.â€
Parking
The cost for the parking, too, was considered excessive by the auditors. The final contract sum came to sh8.8b, which was sh2.2b more than the engineer’s estimate.
When doing physical measurements, the COWI auditors found several items in lesser quantities than claimed, amounting to overpayment of sh573m.
They also raised concerns about the high bill for the entrance gatehouse – sh739m for the two structures and over sh1b when including other security features.
The two structures were far above the engineer’s estimate of sh485m and the auditors’ estimate of sh250m.
Court case
The works ministry asked Dott Services to refund the money overpaid for the entrance gatehouse. In response, the company sued the works ministry, the Auditor General and the Attorney General.
“Dott Services wanted to squash the entire audit report,†said a source in the Auditor General’s office.
However, the High Court judge on Friday ruled that according to the National Audit Act, the Auditor General only makes recommendations to Parliament and his reports enjoy parliamentary immunity.
He also pointed out that since the contract sum and the payment certificates were approved by the works ministry, the permanent secretary had to take responsibility and find a way of refunding the money.
Dividends
Having contributed 25% to the Commonwealth Resort, the Government should at the end of every financial year receive a quarter of the profits.
However, despite CHOGM and numerous other conferences which have taken place since, no dividends have been paid out to the Government as of now.
“The auditors for the resort, Deloitte and Touch, have given their first report. The Munyonyo Commonwealth Resort has broken even. Share of dividends is expected next year,†said Mugume.
According to the Deloitte and Touch report, the resort made a net profit of sh260m in its first year of operations, ending December 2008.
“The board recommended that the profit be re-invested into the resort,†he added.
In tomorrow’s paper: Other CHOGM hotels.