Useless audits

By Agather Atuhaire

Cases show how Auditor General’s reports are treated no better than garbage

The Office of the Auditor General (AG) needs to be mandated to issue reports that are conclusive on their own and compelling enough for the police and the Director of Public Prosecution (DPP) to act on without them going through Parliament first. If that does not happen, since it now approves appointed accounting officers, parliament’s vetting committee should start rejecting nominated accounting officers who are responsible for the abuses noted by the AG.

These are some of the major views to emerge out of a series of interviews done by The Independent the January following the release of the latest Auditor General’s report for 2015 with reports of gross malpractices that the government has not acted on in the past.

The Auditor General John Muwanga on Jan. 6 presented his 2015 report to the Speaker of Parliament Rebecca Kadaga.

The reports which are annual have become a mere ritual as they raise the same issues year in year out that government never pays attention to.

As a result, Fred Muhumuza, who is an expert on monitoring public accounting processes, says the government is destroying the role of the Auditor General by the way it treats its reports. He was commenting on the government’s failure to settle awards for compensation resulting from court cases the government loses in court, the endless cases of huge sums of money lost in public procurement, and the unending pension sector scandals.

The Auditor General has raised these issues year-in year-out but, according to some observers, it seems government does not treat the Auditor General’s reports with the urgency they deserve.

“The corruption and the arrogance of the executive that has killed other institutions, has not spared the Office of the Auditor General,” Muhumuza told The Independent in an interview.

For instance on the issue of Court awards, Muhumuza who used to be a financial advisor to the government says, the government does not treat them as an obligation. This he says is mainly because government knows no one will penalise it for not meeting these obligations.

A member of the Public Accounts Committee of parliament, Rubanda East MP Henry Musasizi, agrees with Muhumuza. He says government has refused to prioritise action on the AG’s reports.

But the Permanent Secretary/Secretary to the Treasury Keith Muhakanizi says it is not an issue of prioritisation but an issue of availability of funds.

When interviewed by The Independent, he said: “What can I do about the issue of court awards? Court awards money that I don’t have so there is nothing I can do.”

The Auditor General says the awards have now accumulated to a figure that the government cannot afford and warns that they will keep accumulating because of the high interest rates and the pending cases against government “which the Ministry of Justice has no competence or willingness to win”.

Muhumuza attributes the accumulation of the awards to corruption in the judiciary and other government agencies saying that the judiciary in some cases awards outrageous amounts because they expect to benefit from it.

In 2012, former Prime Minister Amama Mbabazi’s lawyer Severino Twinobusingye was awarded Shs13 billion shillings in a manner that was seen by some observers to have been iirregular.

But Muhumuza says there is also a problem about the structure of government and the limited mandate of the auditor General.

“The Auditor General’s reports are for Parliament,” he said, “It is Parliament which scrutinises the reports and makes recommendations to the executive.”

This he says exposes the reports to corruption and influence peddling. He says there have been reports that Members of Parliament have been compromised on most of the reports to exonerate the would-be culprits.

The situation is made worse because even if Parliament passes strong recommendations against the parties implicated, the executive can still ignore them.

The committee charged with the task of scrutinising these reports- the Public Accounts committee has recommended that some people implicated in these reports be investigated by Police and prosecuted but this rarely happens.

In 2011, PAC recommended that former Attorney General Khiddu Makubuya and former Finance Minister Syda Bumba be prosecuted and tasked to refund the money that was lost in the dubious compensation of Haba Group of Companies owned by businessman Hassan Bassajabalaba but this never happened.

Also, the executive is required to present treasury memoranda to Parliament every year reporting the steps it has taken to address the issues raised in the Auditor General’s reports but this is not done.

For instance, the Ministry of Finance has presented treasury memoranda once ever since the ninth parliament commenced in 2011.  Musasizi says there is a problem with the response of both Parliament and the executive on these reports.

First of all, he says, PAC is overwhelmed and does not have the time to scrutinise all the audits in time, which creates a huge gap.

Regarding even the audits they have reviewed, Musasizi says, the executive has not implemented the committee’s recommendations.

“Government ignores these issues,” he says, “Because while it is supposed to come to us with responses to these issues in form of the treasury memoranda, these don’t come regularly.” Muhumuza thinks these reports would perhaps be more effective if they were conclusive on their own and compelling for the police and the DPP to act on them without them going through Parliament first.

Musasizi is certain the situation will improve. He says that since Parliament now approves appointed accounting officers, it will reject nominated accounting officers who are responsible for these recurring audit issues.

“For Instance the issue of an accounted for funds is due to unserious accounting officers,” he says, not just that, the Accounting officers are also responsible for the mischarges because of their laxity and abuse of their mandate. The good news is that the Public Finance Management Act gives Parliament mandate to approve them and what we shall do in the next Parliament is to be strict and reject those causing loss of funds.”

Musasizi says, however, that despite the issues that keep appearing, there has been a significant improvement in public financial management. Muhakanizi agrees. He says the Auditor General’s report is good and shows that the government’s financial discipline has improved.

The Auditor General in his introduction also recognises the government’s efforts and the improvement in Public Financial Management but calls government to pay attention to the challenges that are still beleaguering the system.

Recurring cases

The Auditor General’s office is established under Article 163 of the constitution and has the mandate of auditing and reporting on the public accounts of Uganda.

But the government which has the task of taking action on the issues that the Auditor General raises has more or less rendered his office useless.

In the latest report, the Auditor General raises the issue of pension funds which has featured in almost all his yearly reports.

The 2015 report notes that the pension liability is accumulating and has become unsustainable. According to the report, the pension and gratuity liability was at 199.2 billion as at June 30 2015, from 108.6 billion in June 2014. Although the accounting officer attributed the problem to inadequate budgetary provisions, the Auditor General observes that the problem is due to lack of a comprehensive stock of past employees or a forecast of how the current government employees will retire and therefore plan for their terminal benefits accordingly.

“The Ministry of Public Service only relies on claims submitted by the retired staff or by their benefactors in case of death of the retired employees.”  The report also notes there are irregular payments to pensioners where Shs11 billion was found to have been paid to pensioners who had exceeded their pensionable period of 15 years without proof of their continued existence. The report says that the absence of proof of continued existence of pensioners in form of life certificates to support pension payments could result into payments to nonexistent pensioners.

In his past reports, the Auditor General has raised other issues in the pension sector, including issues of phantom or `ghost’ pensioners and misallocation of pension funds.

The other issue that has become recurrent in the Auditor General’s reports is the issue of court awards. The current report notes that the outstanding compensations bill has accumulated to Shs479.3 billion. The report says the figure has been accumulating over the last four financial years because the delayed payments led to accumulating interest and other related charges compounding the problem.

What is worse, the report says the contingent liabilities for court awards and compensations in respect of the cases still before court are now a staggering 4.3 trillion up from 4.2 trillion in 2014.

Annually, the court awards and compensations have continued to accumulate over the years, rising from Shs82 billion in 2012 to Shs164 billion in 2013 and Shs 442billion in June 2014 and now 479 billion as the Auditor General has been reporting.

The same goes for the contingent liabilities which rose from Shs2.2 trillion in 2013, to Shs4.2 trillion in 2014 and 4.3 trillion in 2015.

Procurement losses

The Auditor General also yet again points out problems in public procurement and the problems that this can and has already created for the government.

In the latest report he talks about the procurement for the hydropower dams of Karuma and Isimba and the Kampala Entebbe expressway.

The auditor general is concerned that the Engineering Procurement and Construction (EPC) contracts for these huge projects were directly procured contrary to provisions of the PPDA Act which requires international bidding for such contracts. “In circumstances where procurement rules are not followed, the fairness of the cost and quality of the works may not be guaranteed,” warns the report.

The report says comparison of the costs of the Kampala-Expressway with similar projects undertaken by the contractor and similar projects in the region, shows that the cost of the Kampala-Entebbe expressway is unfair.

While the unit cost of the Kampala-Entebbe Expressway is $2.315 million per lane kilometer, a similar expressway is $ 1.204 million per lane km.

In the East African region, the Auditor General discovered that constructing a 2-lane highway with similar pavement structure ranges between $ 800,000 and $900,000 per km.  The report adjusts the cost to take into account the four lanes and other infrastructure and reaches a figure of $ 4.14 million per km, which is still less than half the cost of the Kampala-Entebbe expressway which is $9.26 million per lane km.

“The project costs could have been much lower if UNRA had procured the contractor through competitive bidding,” says the report.  The Auditor General again advises government to ensure transparent procurement processes are followed in order to avoid possible costly and substandard projects.

The Auditor General also notes the continued irregular compensation of Project Affected Persons (PAPs) where he notes inconsistencies in the names of the PAPs appearing in the Chief Government Valuer’s report and those compensated.

He says compensation, for example of the people affected by the Mukono-Kyetume-Katosi road, was made to unknown title holders and payments were made to individuals other than those whose land had been valued, and payments were made without land titles and sale agreements.

“A sum of 1.3 billion paid without resolving the inconsistencies was questionable,” the report says. On the same issue, the report says government should avoid release of inadequate funds and delays on compensation which lead to price hikes due to speculation, diversion of compensation funds and rejection of valued rates by the claimants.

“As a result, colossal amounts are still outstanding. For example Shs13.54 billion by Rural Electrification agency, Shs1.85 billion for Mbarara-Nkenda transmission line, and Shs1.34 billion for Karuma and Isimba projects,” the report says. The report also talks about the same recurring issues of Local government like unaccounted for funds, under collection of revenue, procurement anomalies and under staffing.

On the issue of unaccounted for funds, the latest report has a figure of missing Shs5.5 billion. Last year, the figure was reported to be Shs9 billion.