Govt loses sh962b to private firms
Apr 14, 2009
THE Government has lost over sh962b in loans to private companies, according to the latest report by the Auditor General.<br>The report states that a total of sh491b worth of loans to state enterprises, agencies and private companies have been in arrears
By Barbara Among
THE Government has lost over sh962b in loans to private companies, according to the latest report by the Auditor General.
The report states that a total of sh491b worth of loans to state enterprises, agencies and private companies have been in arrears for over five years without repayment.
It also revealed that last year, loses relating to cash and stores amounted to sh939m.
However, the report said that sh161m was lost but not reported. The bulk of the loss related to a computer fraud perpetrated in the Ministry of Works.
A total of sh75.4b also remains unaccounted for, according to the 2008 report. It noted that the trend of unaccounted funds was on the increase, from sh8.6m in 2006 to sh10m in 2007.
“In the absence of the requisite accountability, I was not able to confirm that funds were utilised for the intended activities,†said the Auditor General, John Muwanga.
The audit discovered improper utilisation of funds, flouting of procurement laws, poor book keeping and lack of accountability in most ministries, agencies and government institutions.
It was also discovered that ministries and institutions were spending above the approved budget, leading to an increase in domestic arrears.
The Government also incurred excess expenditure amounting to sh55.7b above the approved budget as a result of weakness in controls.
The Police last year spent an extra sh28.4b, Uganda Prisons sh3.2b and State House sh2.121b. The New York Mission spent an extra sh2.997b, Washington sh212m and Canberra sh115m.
By the end of June 2008, domestic arrears for ministries, hospitals, government departments and foreign missions stood at sh378b compared to sh209b accumulated in 2007, an increase of 80%.
In the ministries of works and transport, justice and constitutional affairs, Office of the Prime Minister and the Police, the increment of arrears was more than five times.
The defence ministry accumulated the highest arrears of sh43b, foreign affairs sh24b, water and environment sh11b and the Ugandan embassy in Kenya sh232m.
The Accountant General, Gustave Bwoch, explained that domestic arrears continue to accumulate due to resource constraints.
He, however, said some arrears could not be controlled by the committee control system such as court awards, compensation, utilities and rent.
Contrary to the constant demands by ministries and departments for more funds, the report revealed that sh11b remained as unspent money on their expenditure accounts last year. Nineteen of the entities have over sh100m held on their account while four of them had over sh1b.
“Having such huge balances of unutilised funds without clearing existing stocks show weakness in cash flow planning,†said Muwanga.
Advances
According to the report, laxity in control over advances in various ministries, departments and institutions still persisted.
In 2008 advances totalling sh75.2b were unaccounted for despite requirements for all advances to be accounted for by end of the year. “Such delays may lead to falsification of accountability,†Muwanga said.
The premier’s office scored the highest with sh49.7b in advances not accounted for, followed by Makerere University sh6.6b, the finance ministry 5.8b and Parliament sh3b.
Money from UCB gone
The report points out that sh26b realised from the sale of former Uganda Commercial Bank (UCB) was withdrawn from a Bank of Uganda account and spent without authorisation. “According to available information, this money has since been withdrawn and part of it spent without the benefit of having it appropriated by Parliament and authorised by the Auditor General,†said Muwanga.
Loans to private individuals and companies
The possibility of recovering sh512b as loans the Government had granted to either private individuals or organisations is remote, says the report.
“Sh512b, of overall government receivable is non-performing,†said Muwanga. “Included is sh21b recoverable from a private company, the recoverability of which is to be difficult because of uncertainties on its existing mortgage,†he added.
Muwanga said $18m (sh36b) obtained from Bank of Uganda as loan is undisclosed, though the money had been disbursed to a supplier by the Central Bank on behalf of the Government.
The Government is bound to lose $11.5m (about sh23b) it lent to a private company to pay-off its debt owed to commercial banks; however the company has since failed to pay back the banks and closed shop.
The company also sold off its properties.
“The Government has not been able to recover the funds from the company,†the report said.
A sum of $6m (about sh12b) that was deposited by the Government at dfcu Bank to enable a private company access a credit facility from the bank, at the same time another $3m (about sh6.1b) was lent from the Uganda Development Bank to the company.
“In both instance, the company wholly failed to honour its credit obligation with the bank. Indeed Bank of Uganda has confirmed that this debt is no longer recoverable from the company,†said Auditor General.
Investments in foreign and local companies at threat
The report reveals that the Government could lose shares in several companies it has invested in.
It states that the companies are giving unreliable information to the Government on status of their audited accounts.
In cases where there is increase in value of shares, they are not properly explained and new valuations are not declared.
Muwanga said due to lack of a valuation report of the companies, he had been unable to confirm the Government investments into the companies.
“Confirmation were in certain instances not backed by additional corraborative information such as audited accounts of the respective organisation and therefore could not be wholly relied upon,†said Muwanga.
For example, the Government is yet to obtain share certificates in respect of sh2.2b paid as share contribution in a privately owned hotel.
Also while the confirmation from Islamic Development Bank showed the value of the investment as $2,770, details revealed that the value of this investment for the previous year was $11,464,987.
Another loss would arise from a Memorandum of Understanding with a private foreign company where the Government acquired 35% share in exchange for the responsibility to pay off its creditors.
However, the value of the private company’s assets cannot be ascertained, neither are their audited account books available.
THE Government has lost over sh962b in loans to private companies, according to the latest report by the Auditor General.
The report states that a total of sh491b worth of loans to state enterprises, agencies and private companies have been in arrears for over five years without repayment.
It also revealed that last year, loses relating to cash and stores amounted to sh939m.
However, the report said that sh161m was lost but not reported. The bulk of the loss related to a computer fraud perpetrated in the Ministry of Works.
A total of sh75.4b also remains unaccounted for, according to the 2008 report. It noted that the trend of unaccounted funds was on the increase, from sh8.6m in 2006 to sh10m in 2007.
“In the absence of the requisite accountability, I was not able to confirm that funds were utilised for the intended activities,†said the Auditor General, John Muwanga.
The audit discovered improper utilisation of funds, flouting of procurement laws, poor book keeping and lack of accountability in most ministries, agencies and government institutions.
It was also discovered that ministries and institutions were spending above the approved budget, leading to an increase in domestic arrears.
The Government also incurred excess expenditure amounting to sh55.7b above the approved budget as a result of weakness in controls.
The Police last year spent an extra sh28.4b, Uganda Prisons sh3.2b and State House sh2.121b. The New York Mission spent an extra sh2.997b, Washington sh212m and Canberra sh115m.
By the end of June 2008, domestic arrears for ministries, hospitals, government departments and foreign missions stood at sh378b compared to sh209b accumulated in 2007, an increase of 80%.
In the ministries of works and transport, justice and constitutional affairs, Office of the Prime Minister and the Police, the increment of arrears was more than five times.
The defence ministry accumulated the highest arrears of sh43b, foreign affairs sh24b, water and environment sh11b and the Ugandan embassy in Kenya sh232m.
The Accountant General, Gustave Bwoch, explained that domestic arrears continue to accumulate due to resource constraints.
He, however, said some arrears could not be controlled by the committee control system such as court awards, compensation, utilities and rent.
Contrary to the constant demands by ministries and departments for more funds, the report revealed that sh11b remained as unspent money on their expenditure accounts last year. Nineteen of the entities have over sh100m held on their account while four of them had over sh1b.
“Having such huge balances of unutilised funds without clearing existing stocks show weakness in cash flow planning,†said Muwanga.
Advances
According to the report, laxity in control over advances in various ministries, departments and institutions still persisted.
In 2008 advances totalling sh75.2b were unaccounted for despite requirements for all advances to be accounted for by end of the year. “Such delays may lead to falsification of accountability,†Muwanga said.
The premier’s office scored the highest with sh49.7b in advances not accounted for, followed by Makerere University sh6.6b, the finance ministry 5.8b and Parliament sh3b.
Money from UCB gone
The report points out that sh26b realised from the sale of former Uganda Commercial Bank (UCB) was withdrawn from a Bank of Uganda account and spent without authorisation. “According to available information, this money has since been withdrawn and part of it spent without the benefit of having it appropriated by Parliament and authorised by the Auditor General,†said Muwanga.
Loans to private individuals and companies
The possibility of recovering sh512b as loans the Government had granted to either private individuals or organisations is remote, says the report.
“Sh512b, of overall government receivable is non-performing,†said Muwanga. “Included is sh21b recoverable from a private company, the recoverability of which is to be difficult because of uncertainties on its existing mortgage,†he added.
Muwanga said $18m (sh36b) obtained from Bank of Uganda as loan is undisclosed, though the money had been disbursed to a supplier by the Central Bank on behalf of the Government.
The Government is bound to lose $11.5m (about sh23b) it lent to a private company to pay-off its debt owed to commercial banks; however the company has since failed to pay back the banks and closed shop.
The company also sold off its properties.
“The Government has not been able to recover the funds from the company,†the report said.
A sum of $6m (about sh12b) that was deposited by the Government at dfcu Bank to enable a private company access a credit facility from the bank, at the same time another $3m (about sh6.1b) was lent from the Uganda Development Bank to the company.
“In both instance, the company wholly failed to honour its credit obligation with the bank. Indeed Bank of Uganda has confirmed that this debt is no longer recoverable from the company,†said Auditor General.
Investments in foreign and local companies at threat
The report reveals that the Government could lose shares in several companies it has invested in.
It states that the companies are giving unreliable information to the Government on status of their audited accounts.
In cases where there is increase in value of shares, they are not properly explained and new valuations are not declared.
Muwanga said due to lack of a valuation report of the companies, he had been unable to confirm the Government investments into the companies.
“Confirmation were in certain instances not backed by additional corraborative information such as audited accounts of the respective organisation and therefore could not be wholly relied upon,†said Muwanga.
For example, the Government is yet to obtain share certificates in respect of sh2.2b paid as share contribution in a privately owned hotel.
Also while the confirmation from Islamic Development Bank showed the value of the investment as $2,770, details revealed that the value of this investment for the previous year was $11,464,987.
Another loss would arise from a Memorandum of Understanding with a private foreign company where the Government acquired 35% share in exchange for the responsibility to pay off its creditors.
However, the value of the private company’s assets cannot be ascertained, neither are their audited account books available.