Auditor General names gov’t money swindlers

Racket involves officials in Bank of Uganda, Ministry of Finance, Accountant General’s Office, Treasury

• AG recommends prosecution, recovery of billions from private companies, Centenary Bank, district officials, army veterans and other individuals
• Probe could lead to wide ranging reforms in how ministries manage public funds
• Government awaits donor response after abuses

On December 1, 2011, Shs 14.8 billion was disguised as a salary payment and illegally transferred by Electronic Funds Transfer (EFT) from the Treasury in the Ministry of Finance Planning and Economic Development to the Central Bank.

The fraudulent action had the risk of being discovered with disastrous consequences for those involved unless there was a well-executed cover up. To that effect, an e-mail was sent from the Ministry of Finance to the Treasury indicating that the Irish Government had given Uganda a grant of the said Shs 14.8 billion as support to the Karamoja region.

The dubious email sent to Bank of Uganda together with a Security Paper were signed off by a commissioner and the Accountant General’s Office.

Under normal procedure, the Central Bank is required to cross-check the document with the Finance ministry.  In this case, however, in blatant abuse of controls, the BoU officer who prepared the security brief in the Treasury also reconciles the transaction as a genuine payment, and files it.

This might read like an extract from the latest Nigerian movie but it’s actually an extract from the Special Report into the probe in the fraud in the Office of the Prime Minister (OPM).

Prepared by the Auditor General, the document remains top secret. However, when it goes to the Parliamentary Accounts Community (PAC) as required by law, sparks are bound to fly.

The damning report, a copy of which The Independent has seen, appears to be a hard slap in the face of those who are calling for more stringent systems and better laws to contain graft in public office.

It shows that the fraud in OPM, where monies far above the Shs 15 billion so far talked about are feared to have been swindled in a racket allegedly centering on the interdicted former Principal Accountant, Godfrey Kazinda, was not because of lack of systems.

Instead, the report shows that the swindlers acted in blatant abuse of the existing systems and controls through a mafia-like ring involving the officials who are supposed to ensure that the checks and controls work properly. The audit report documents incredible collusion between officers who are supposed to safeguard public funds to stuff their own pockets.

The key players identified in the report are Godfrey Kazinda, the former Principal Accountant in the OPM, top officials in the Ministry of Finance and incredibly the otherwise venerable Bank of Uganda.

For example, on January 30, 2012, exactly two months after the Shs 14.8 billion was swindled, the mafia fraudulently transferred another Shs 5.2 billion.

The Auditor General’s report shows that another Shs 5.3 billion deal was attempted but failed.

PRDP money

All the stolen money was from the multi-million dollar Peace, Recovery and Development Programme (PRDP), which aimed at resettling formerly displaced people in Northern Uganda.

To facilitate the swindle, it was fraudulently transferred to the account of Crisis Management in Karamoja, which had been dormant for two financial years. It was then wiped clean using forged signatures of the permanent secretary and without the authorisation of the Accountant General.

The Shs 20 billion cited is a lot of money in any currency. For example, the government recently released just Shs 6.5 billion to the Ministry of Health to kick-start the recruitment of more than 6,000 health workers in health centres III, IV and V countrywide. That means Shs 20 billion could pay the salaries of 2,500 new health workers in northern Uganda for five years.

The fraudsters knew that all money from donors, technically called Budget Support Accounts, can only be transferred by way of signed security papers and not by EFT and requires authorisation by the Accountant General.

In addition, they knew that all transfers from the Budget Support Accounts must go only to the Consolidated Fund. To go around those huge roadblocks and transfer the loot from the safely guarded Budget Support to a dormant account, they knew that they needed teamwork – like hungry wolves – to bring down the huge buffalo.

Consequently, the fraud was originated from Treasury and was sent from a Uganda Computer Services computer whose password is known to two officers only; Wilbert Okello and Tony Yawe.

To complete the transaction, access to the Finance server in BoU was required to send the two EFTs. The password to the computer was traced back to Wilbert Okello.

The next step was covering up their trail. To do this, an email was sent from David Mugisha, an official in the Macro Economics Department in the MoFPED to Bright Atwine of the Treasury Services Department (TSD).

The email “confirmed” that a Shs14.8 billion grant had been sent by the Irish Government for crisis management in Karamoja Project.

Atwine then prepared a Security Paper, which was signed by the Commissioner TSD and the Accountant General, of course with Mugisha’s e-mail acting as the basis for their signatures.

According to the Auditor General’s report, the development partners told the auditors that all their funds released for the PRDP were by budget support and not project support. Ironically, this arrangement was agreed as a measure to reduce corruption, which was rampant under project support.

Sources close to the ongoing-probe have told The Independent that while the Auditor General has seen enough fraud in public expenditure over the years, this particular fraud was so outlandish that it has left the whole Office of the Auditor General reeling in shock because of its enormity and the level of collusion at the highest levels.

BoU collusion

The report notes that there were “internal control weaknesses” on the part of Treasury that could have led to lapses in the processing systems. For example, there is rampant use of ‘generic passwords’ for sensitive roles, which the AG says makes it difficult to assign responsibility for an action. To make matters even worse, there are no cameras in the server room, which would have helped to identify users at a specific time.

Indirectly, this means it might be difficult to pin down one individual as the one responsible for the loss.

Also, there is minimal supervision in regard to bank reconciliation, which leaves the system open to irregularities that take too long to detect.

But most importantly, the AG identified weaknesses at the Central Bank, which made the fraud possible.  For example, the Deputy Director is supposed to confirm all payments in excess of Shs 20 million by calling at least one of the signatories. It was noted, however, that in the period under review, 61 non-cash payments totaling about Shs 11 billion were not confirmed with the signatories.

Even more interesting is the fact that where confirmation was done, most of the confirmations were with the Principal Accountant (Kazinda) yet the Accounting Officer, Permanent Secretary Pius Bigirimana, is the principal signatory.

The audit revealed that 121 payment instruments totaling to more than Shs 13 billion appeared to have forged signatures of the PS and Under Secretary.   However, for all the instruments with suspicious signatures, it was Kazinda who was called by the BoU for confirmation. The instruments were subsequently approved by Milton Opio, the deputy director banking.

“In some instances, the difference in signature was so apparent that the staff of the bank would have had to confirm with the signatory whose signature differed before effecting payment. However, this was not done and confirmations were made with the one whose signature appeared authentic,” the report notes.

“Under the circumstances, it can be concluded that negligence on part of the Bank is apparent and collusion with OPM staff cannot be ruled out. The responsible officers both in BOU and OPM should be held accountable.”

BoU is also faulted for allowing five dormant accounts to exist illegally, two of which had been used for the fraudulent activities.