How did shs 5bn disappear from Bank of Uganda

By Dicta Assimwe

Imagine leaving money on your account and later find that its not only missing but you are also asked to pay charges for overdrawing your account. Your bank doesnt even inform you of the transaction on your account. You only find out during the audit process.

This is what happened to the Ministry of Health after officials from the Ministry of Finance ordered transfer of Shs5.2 billion from the health account at Bank of Uganda to the Ministry of Agriculture account.

The Ministry of Health officials told the Parliaments Public Accounts Committee (PAC) on September 1, that they discovered the money was missing from the ministrys account during the auditing of the ministrys expenditures for 2009/2010.

The accounting officer, Samuel Kyambadde, said officials from the Ministry of Finance had ordered the transfer of Shs5.2b without his knowledge.

He told PAC that he learnt of the missing money when auditors from the Auditor Generals office asked him about it. Kyambadde said his ministry wrote to Bank of Uganda which replied that the money had been transferred on the request of the Treasury in the Ministry of Finance.

In a letter dated May 12, 2010, Ponziano Nyeko, the assistant commissioner financial management in Ministry of Finance, first instructed the central bank to withdraw Shs2.2 billion from the Ministry of Health account by cheque. This was followed by another letter co-signed by Commissioner for Financial Management Services Lawrence. Semakula and Commissioner for Treasury Services at Ministry of Finance Isaac Mpoza on June 1. The letter was instructing the Director of Banking at Bank of Uganda to transfer an additional Shs2.9 billion from the Ministry of Health account to the Ministry of agriculture. The amount totaled to Shs5,194,407,358. The money was withdrawn from the Ministry of Healths recurrent and development budgets.

Instructing Bank of Uganda to transfer the money from the Health account without the knowledge of Kyambadde was a violation of the Public Finance and Accountability Act. The Act allows the Ministry of Finance to withdraw money from a ministrys account only at the end of a financial year if that ministry failed to spend the money allocated to it under the budget by June 30.

Section 8 (2) of the Act states that the accounting officer controls and is personally liable for the regularity and propriety of expenditure of money given to his ministry, department or agency.

In the case of the Ministry of Health money, Finance arrogated itself powers of the accounting officer and decided where to spend it.

Nyeko argued that under section 12 of the Act, the Ministry of Finance has powers withdraw such money from any ministrys account without consulting the accounting officer.

The Ministry of Finance officials had quoted sections 12, 14 and 16 as legal basis for ordering the withdrawal.

However, the PAC legal advisor and Ntenjeru North MP Tom Kazibwe accused Nyeko of intentionally misquoting the Public Finance and Accountability Act so that he could illegally get money from Bank of Uganda. He said none of the quoted sections allows Ministry of Finance to withdraw money from the Ministry of Health account without the accounting officers knowledge.

Mpoza and Semakula told PAC that they directed the withdrawal of that amount from the Ministry of Health because they were correcting an error. They said government had made a mistake during the transfer of the budget money and given Health an extra Shs5.2 billion which belonged to the Ministry of Agriculture. However, they couldnt explain why they moved the money without consulting the Ministry of Health.

Oduman Okello, Shadow Minister for Finance and PAC member, said if the money was meant for agriculture but was sent to health in error, the Accountant Generals office which has an internal auditor in every ministry, would have investigated what the Health ministry  had spent the extra money on.

He said PAC would follow up the case and find out details of the transaction. He said they suspect Finance has been illegally transferring money from ministries accounts to wherever it wanted.

It also emerged during the PAC meeting that by the time the final instructions to move the money were sent to Bank of Uganda, the Ministry of Health account was only holding half of the Shs5.2 billion.  This led the central bank to overdraw the Ministry of Healths account causing a further increase in the debt government owes the central bank. By end of 2008/2009 financial year the Auditor Generals report showed that the governments Consolidated Fund account was in negative of 3.8 trillion shillings.

The Shs5.2 billion was transferred to Agriculture only 20 days to the end of the financial year making it hard for the ministry of agriculture to spend the money before close of the financial year.

PAC also found out that Bank of Uganda had generated EFTs (electronic financial transfers) of Shs600m which was also withdrawn from the Health ministrys account under dubious circumstances.

Kyambadde said the law requires the ministry to generate the EFTs before any transfers of money can be made. He observed that the ministry always generates and keeps a record of EFTs, but that the ministry had never generated EFTs for Shs600 million withdrawn from their account.

The PAC chairman Nandala Mafabi said the only money Bank of Uganda can take out of the account without informing the account owner is the bank charges and that it was not possible the Ministry of Health had accumulated bank charges totaling Shs600m in one year.

Some time back Shs159m meant for Mulago Hospital renovation during CHOGM also went missing from the bank under unclear circumstances.