CHOGM: Who will pay for lost billions?

By Mubatsi Asinja Habati & Matsiko wa Mucoori

Contractors paid before signing agreements

In January 2008, Prime Minister Apolo Nsibambi gave the Auditor General James Muwanga a 30-day deadline to deliver audited accounts of expenditure on the Commonwealth Heads of State and Government Meeting (CHOGM) held in Kampala in November 2007. Two years later, and in spite of two reports by the Auditor General, nothing is clear yet about the cost and benefits from CHOGM. Now, the annual report of the Auditor General for the year ending June 30, 2008, is raising the issue again.

As the Parliamentary Public Accounts Committee (PAC) launches investigation into CHOGM expenses, its total cost is not known although it is generally accepted that CHOGM is the single most expensive event Uganda has hosted.

The initial budgeted cost was Shs 180 billion but this swelled to Shs 278 when supplementary budgets emerged. Now, however some reports put the final cost at between Shs 300 billion and Shs 380 billion.

The Public Finance and Accountability Act, requires the accounting officer for CHOGM (Ministry of Foreign Affairs) and the accounting officers of the CHOGM implementing ministries to account to Parliament for the resources appropriated for CHOGM.

But Cabinet specifically asked the Auditor General to carry out an audit following public outcry over alleged massive thefts of public funds and shoddy work

The AG’s findings, in his 2008 report, reveal huge amounts of money lost in outright fraud, substandard or undone works, and recklessness on the part of the government negotiators during the contract talks.

AG wants government to recover outstanding money, ensure agreed works are completed, and accounting officers to issue reports of closure. Will it happen?

The report notes, for example, that out of 26 physically audited projects, 15 were physically tested and the results showed that eight or 60% were poorly done.

Some road construction materials and items used, such as asphalt, sand, stones, steel gratings and paints were, in some instances, less than the specified quantities and of a poorer quality. Because of this, the AG wants up to Shs 1 billion recovered from the Ministry of Works and Transport alone.

PAC officials should know that the man who should be at the centre of the storm, the PS Ministry of Foreign Affairs says the issue is being politicised.

‘All the accounting officers of the various ministries accounted satisfactorily for what they were given and the evidence is in the complete success of the CHOGM. Some people are trying to bring in politics in these issues which is not a good thing,’ James Mugume said in an interview.

He has been summoned to appear before the Public Accounts Committee and it’s unlikely that his brash claims will satisfy the panel which has a penchant for figures.

Mugume is not alone. PAC has summoned a raft of ministers, permanent secretaries and other accounting officers.

Eight ministry officials, most likely ministers, are to appear before PAC including those from the ministries of Foreign Affairs, Tourism, Finance, President’s Office, Vice President’s Office, Prime Minister’s Office, and Ministry of Information.

Under the Public Finance and Accountability Act, 2003, the Accounting Officer, CHOGM (Ministry of Foreign Affairs) and the Accounting Officers of the CHOGM implementing Ministries are duly accountable to Parliament for the resources appropriated for CHOGM activities.

However, the people who were in charge of the CHOGM expenses should, therefore, provide accountability are the chairpersons/accounting officers of the CHOGM sub-committees. But Mugume, whose Ministry of Foreign Affairs was in charge of the whole CHOGM organisation, only handled the Venues Committee.

Instead, PS/Secretary to the Treasury, Chris Kassami, was in charge of the CHOGM budget committee. This has created a problem because the people who controlled the most CHOGM money are now passing the buck over failure to account for money. The Auditor General notes this in his report.

‘Due to conflicting guidance on the accounting for CHOGM expenditure,’ the report notes, ‘the Ministry of Foreign Affairs did not undertake a proper consolidation of all CHOGM expenditure. The Ministry expensed all transfers of funds to CHOGM implementing ministries.’ This treatment assumes that all funds had been fully spent as at end of year whereas this was not the case as some Ministries had balances at the year end. The report says the Ministry of Foreign Affairs and other ministries that implemented CHOGM claim that consolidation was the responsibility of the other.

‘I was not able to confirm that the amount disclosed as expenditure on CHOGM is properly stated,’ the AG notes.

The AG has been trying but has failed to get the Ministry of Foreign Affairs to coordinate and communicate to the various accounting officers/heads of committees of the decision to ensure that they submit reports.

Only a few, like Charles Muganzi (PS Works and Transport) who was in charge of the Infrastructure Committee were correctly deployed. He was in charge of the main budget for Civil Aviation Authority, Kampala City Council and Entebbe Municipality.

Others were Tecla Kinalwa (Secretary Office of the President), for Security and Accreditation committee; Martin Odwedo, (PS office of the Prime Minister) Media and Publicity; Dr Sam Nahamya (PS Tourism, Trade and Industry) was in charge of accommodation; Mohammed Kezaala (PS Ministry of Health) was for health; Geoffrey Kibbuka (Ag. PS ICT was in charge of communications; Richard Muhinda (State House Comptroller) for Spouses programme; and David Ebong (PS Gender, Labour) in charge of Youth Forum.

Other committees were Arts and Special Exhibition in Museum and Cultural Events and the Commonwealth Business Forum.

The chink in the summons, however, is that some of the ministers and accounting officers did not hold these portfolios at the time CHOGM was held.

Hilda Musubira who headed the CHOGM secretariat for example has since resumed her job as deputy head of public service and is unwilling to talk on CHOGM affairs.

While reports of shoddy work and inflated bills have dominated the media, compiling final CHOGM accounts has been complicated by payment claims that have not been settled two years later.

Just after CHOGM in December 2007, Works minister John Nasasira told parliament that his ministry owed Shs 2.65 billion to the firms that provided transport after the budget shot to Shs 27.31 billion from Shs 24.66 billion. Those unpaid included Katatumba Safaris demanding Shs 542.4 million and CHOGM Tour Agents 2007 Ltd Shs 485.7 million, African Nature Conservation Shs 203.5 million, and drivers.

At least 1,241 vehicles were used instead of the 1,044 and that vehicles purchased to transport sniffer dogs and a refrigerated van were still in the bonded warehouse due to the late release of funds.

A CID investigation into allegations that the vehicles (BMWs), which were used to transport guests, were imported from South Africa instead of Germany has not been made public.

At the time of the latest audit, 34 ministries reported huge outstanding debts arising out of the CHOGM since some major activities and contracts were still ongoing.

It is not clear how the ministries intend to pay these debts. For instance, the Ministry of Works has outstanding CHOGM bills of about Shs 31 billion yet it only has Shs 1.5 billion on its account. How do they intend to clear these bills?

Who will answer for what?

Ministry of Finance

The ministry was responsible for releasing all funds to finance CHOGM preparations. But the report states that a colossal Shs 9.1 billion was diverted from CHOGM funds and used for non-CHOGM activities. The report argues that this could have affected the implementation of planned CHOGM related activities.

Officials from the ministry will also explain why Shs 2.2 billion was invested in J&M Hotel at Bwebajja which did not host any CHOGM guest.

Finance Minister Syda Bbumba was not then in the ministry, which means head of Treasury Kassami will take the bulk of the flak.

Foreign Affairs

The Foreign Affairs Ministry, under whose docket the CHOGM activities were planned and overseen, will perhaps take most of the questions and do a lot of explaining. Shs 255 billion was released from 2005/06 to 2007/08 to cater for the CHOGM meeting, of which Shs 110 billion was released during the year under review. However, all CHOGM expenditures were not properly consolidated by either Ministry of Foreign Affairs or the respective implementing ministries/agencies, nor the Government of Uganda consolidated financial statements.

‘As a result, all the cash balances on the CHOGM bank accounts were not disclosed in the accounts,’ the AG’s report notes. The men to take the flak will be Foreign Affairs Minister Sam Kutesa and PS Mugume.

This ministry was responsible for purchase of what is commonly known as the CHOGM vehicles. The AG’s report notes that there were a number of flaws in the procurement of 174 BMW vehicles. Some vehicles delivered were not of agreed specifications.

‘It is probable that government would have made substantial savings if the procurement had been carried out competitively and transparently,’ reads the report.

The Ministry of Foreign Affairs will also tell why the supplier, Motocare\Intercar, claimed that the cars were from Germany and yet they were imported from Austria and Denmark at a higher price of 47,600 Euros each, contrary to the manufacturer’s export price of 38,057 Euros.

The government leased 144 vehicles at Shs 52 million each for the four days, implying the government spent Shs 7.5 billion on leasing. Government further purchased 30 executive vehicles each at Shs 124 million (Shs 3.7 billion), bringing the total government expenditure on the vehicles to Shs 11.2 billion.

In preparation for CHOGM Government spent Shs 17.2 billion on investments into two private hotels, J&M Hotel on Entebbe Road and the Commonwealth Resort, as a strategy to help them achieve the desired level of preparedness for CHOGM. It is reported that a whopping Shs 29 billion was invested in the Munyonyo Commonwealth Resort, a joint venture between government of Uganda and Meera Investments of Sudhir Ruparelia, but the AG is concerned that the land was never valued, no land title presented, and no audit could be carried out because it involved a private firm. This implies government might have lost the money and there is need to recover it.

At one point, deputy secretary to Treasury, Keith Muhakanizi told Parliament that government was pulling out of the joint-venture with Sudhir Ruparelia in which it had sunk US $7.5 million (Shs 15 billion). It failed.

Government in anticipation of thousands of visitors booked 300 rooms in Imperial Royale Hotel but later declared it not ready for CHOGM as some construction was still ongoing by the time of the meeting. Whose loss was it? By end of August this year, the Foreign Affairs Ministry was demanding $1.6m which the Government advanced to Imperial Royale Hotel for the accommodation of the CHOGM delegates in 2007.

Accordingly, the ministry has asked the Solicitor General to take legal action against the hotel to recover the money. It is said Imperial Royale Hotel, on its part, received $2.6m (about Shs 5.4 billion) from the government to guarantee accommodation. The hotel would recover the amount by charging the guests. Each CHOGM guest would pay $500 per night.  On its part, the hotel says its facilities were ready, but the guests either did not come or sought cheaper accommodation elsewhere. Other private hotels that were paid millions of dollars from government to upgrade their facilities include Speke Resort Munyoyo, Serena, Golf Course and Sheraton, only some of which have paid up.

Trade, Industry and Tourism

Minister of Trade, Industry and Tourism Kahinda Otafiire and Permanent Secretary Sam Nahamya will appear before PAC to answer queries relating to the huge sums of money advanced to hotels in preparation for hosting CHOGM guests.

The ministry received Shs 3.1 billion to ensure CHOGM delegates had safe, secure and comfortable accommodation. The ministry was also in charge of the CHOGM village at the Uganda Museum, where two model huts were built, each at Shs 30 million. Answers will be required on this.

According to the Auditor General, the taxpayer lost huge sums of money in the dubious government deals with hotels. For example, the government paid Shs17.2 billion on investments into two private hotels ‘ Speke Resort Munyonyo and Imperial Royale Hotel ‘ as a strategy to help them achieve the required preparedness for CHOGM. However, despite this huge payment, one of the hotels [Imperial Royale] never achieved the desired standard of preparedness and was therefore never utilised for CHOGM.

‘It was further noted that the land the owners of the second hotel purport to have invested in the joint venture has never been valued and is still in the names of the hotel owners,’ the AG reveals.

His findings also show that an extra Shs 13.9 billion not treated as capitalisation was also invested in the same hotel infrastructure. But by the time of audit, government had no share certificates for the investments it had made into the hotel. Is this money recoverable or lost totally?

The government is bound to lose a whopping Shs 20 billion in suspect hotel deals. It’s intriguing how the excitement of hosting CHOGM blinded government to diligent and cautious expenditures. This blind excitement for CHOGM led the government to spend Shs 6.1 billion on furnishing and Shs 15 billion on construction works of other private hotels that included, among others, Kampala Serena, Golf Course Hotel and Sheraton Kampala Hotel.

In fact in one of the hotels the cabinet directed that the expenditure be turned into capitalisation or shareholding. However, not only has the cabinet directive not been followed, also the terms under which government was made to finance the private venture have not been concluded. There is no mention of how this money will be recovered. This means that the money may never be recovered from the hotels or the hotel owners can now change the terms to their advantage since they got the money before conclusion of the negotiations.

The hotel venture is quite a grey area. The government advanced US$4.5 million (about Shs 8.5 billion) to private hotels for hosting self paying CHOGM delegates. The money was to be recovered from the payments the guests made to the hotels. However the hotels did not receive the expected number of the delegates to match the money advanced to them by the government. Government engaged a private accounting firm to establish the recoverable funds paid to the hotels in regard to self financing delegates/guests. The firm ascertained US$ 2,333,121 (Shs 4.4 billion) as being recoverable from the hotels out of the US$4.5 million (Shs 8.5 billion), leaving US$2,189,699 (about Shs4.1 billion) irrecoverable. The AG recommended that this money be followed up and recovered.

Despite this seemingly unrecoverable amount, the government’s chief auditor discovered that actually the rates charged by the hotels for both the conference facilities and the rooms were hiked and changed significantly among comparable hotels. This shows that the government did not carry out proper negotiations to obtain better prices or the concerned government officials connived with the hotels to inflate the charges and be paid the inflated difference.

Gender, Labour & Social Development

Minister of Gender and Social Development Gabriel Opio and his Permanent Secretary Christine Guwatudde Kintu will have to answer queries relating to the Commonwealth Youth Forum and Peoples Forum. The two forums which preceded CHOGM received various funding from private corporate firms and organisations but there was no accountability given for audit, meaning it cannot be ascertained whether the funds received were properly utilised.

‘I was not able to establish the amounts received and ascertain whether utilisation was in accordance with the guidelines,’ says the Auditor General.

Works and Transport

Perhaps the committee’s most intense spotlight will be put on Works and Transport Minister John Nasasira and his Permanent Secretary Charles Muganzi. The duo will, of course, take solace in the fact that the chief engineer who was in charge of the CHOGM projects, Samson Bagonza, has already paid the price of shoddy work having been interdicted last year over shoddy work on Entebbe-Kampala highway.

Be that as it may, there will still be a lot of explaining to do. Apparently, the Ministry of Transport contracted construction firms for road works worth Shs 21 billion. However some works were still incomplete by time of CHOGM in November 2007 yet the contracting companies had already been paid. This means the government paid for work not yet done which would increase the risk of incurring losses in case the companies failed to finish the work or if they did sub-standard work. Other road works started long after CHOGM yet they were meant for the summit, according to the AG’s report.

But the real headache for the ministry will be the 48 infrastructure works (13 for design and supervision consultancy and 35 for civil works) contracts. According to the AG’s engineering audit of the projects, the following findings were made:

There was no consultant for the driveways and parking lot at Speke Commonwealth Resort Munyonyo and the Ministry of Works and Transport handled the project in-house.

In four cases of emergency repairs on particular city roads, the selection of contractors was based on the ‘pseudo estimates’ method, contrary to the procurement rules.

Thirty three projects had addenda or variations issued, seven of which were signed after implementation. In seven cases, contractors were paid before signing of the contracts. This means the contractors could even run away with the money without doing the work. Or if they did shoddy work, it would be hard for the government to hold them to make good of the defects, having received the whole payment.

In many instances, contractors who were paid did not issue receipts acknowledging the payments received. This means they can demand double payment claiming they have never been paid. In the alternative, it means that the money the ministry officials claim to have paid the contractors could be different from the actual amount received, thus opening the door wide open for fraud.

As a follow up of the earlier engineering audit findings in August 2008, a subsequent audit found out that some civil and road works had not been completed by February 2009.  Projects where major works were still ongoing by audit time are: Lukuli’Buziga’Munyonyo road and Munyonyo Marina.

The AG report shows that corruption in the CHOGM activities was wide. For example, some construction materials used such as asphalt, sand, stones, steel gratings and paints in some cases were less than the specified quantities and of poor quality.

‘The contractors should refund the money or make good of their poor works,’ the report notes, adding; ‘It was observed that the quality of some works was doubtful. Roads which had just been repaired or reconstructed had either developed potholes or ripping.’

Some stretches of roads were contracted to a number of companies which the AG’s report says were poorly done; and did not follow the recommended designs. For example, Cementers Ltd were in charge of Kampala and Mackinon roads where the AG report notes that this road together with Queen’s Way and Jinja Road had incomplete manholes whose work is valued at Shs 235 million.

Dott Services handled various roads that included Yusuf Lule and Wampewo Avenue, driveways and parking lots at Munyonyo, and Munyonyo Marina. All these works, according to the report, had defects. The Yusuf Lule Road had a shortfall in asphalt thickness valued at Shs 608 million while Wampewo Avenue’s asphalt shortfall was valued at Shs 63.2 million and the anomalies in road markings and missing steel gratings were valued at Shs 18 million.

Sterling Civil Engineering Company worked on Kampala, Mugwanya and Circular roads but the AG’s report shows that uncovered drains are worth Shs 109 million.

The AG observes that recovering money may not address the long term, social and economic effects resulting from the deteriorating quality and strength of the roads. The AG also says the contractors should be compelled to rectify the works as per the original agreed specifications and design. If this does not happen, the consultants and the ministry’s supervising engineers should be held liable for failure to ensure quality assurance.

The AG further observes that although the ministry has proposed to recover some moneys from retention, this would undermine the purpose for which retentions are made ‘ to rectify defects. He advised that the permanent secretary recovers the money from the outstanding payments and that retentions should be used to serve their intended purpose.

At the time of conducting the audit some road works that commenced after CHOGM had not been completed and by February this year, the works on these roads were ongoing.

But Susan Kataike, the senior spokesperson for the Works Ministry said ‘all road works are now completed.’

Local Government

Local Government ministers Adolf Mwesige and Hope Mwesigye, and Permanent Secretary John Kashaka Muhanguzi are also expected to take questions on the ambitious decoration project that was meant to turn Kampala and Entebbe from dusty garbage littered towns to clean modern towns with flowers.

The AG notes that to achieve this, in some cases government paid colossal sums of money to decorators to do beautification work on selected strategic places in and around the city but no written contracts were made with them. Without knowing the terms under which they were engaged, the transaction became a fertile area for fraud.

For instance decorators were engaged to do decoration work without any contract or agreement with the Ministry of Local Government. They have since presented bills of Shs 617 million which have been disputed by the ministry. A decorator engaged to carry out beautification work on Clock Tower’Nsambya’Gaba’Munyonyo-Salaama’ Kibuye Corridor has not completed the works months after CHOGM despite an advance payment.

But even then, the whole decoration effort has fallen flat, with garbage returning to the streets and some of the materials having been vandalised.

ICT ministry

The ministry was responsible for telecommunications and live broadcasting of the event. Venues had to be connected to information and communications technological equipment. This required setting up ICT equipment for connectivity, desktop hardware and application services, technical support, the CHOGM Information Portal, Media Centre design, satellite and broadcasting facilities.

Prime Minister’s Office

This, among others, was in charge of media and publicity. Saatchi & Saatchi and TERP Consult got the CHOGM media and publicity contract. The former is owned by Patrick Quarcoo while the latter is owned by the president’s son-in-law Odrek Rwabwogo.

Regarding the media centre and publicity the Auditor General could not ascertain if the procurement of the equipment complied with laws due to ‘absence of supporting documentation’. But the report says the contractor for the publicity and media centre has so far been paid Shs7.8 billion out of a contract sum of US$4.5 million (Approx. Shs 9 billion).

Another company contracted at Shs2.4 billion to provide publicity services had so far been paid Shs1.4 billion without adequate supporting documentation. The same company made collections of Shs360 million which has not yet been properly accounted for.