Auditor General’s latest report a healthy field of stories

KAMPALA, April 17—The local media have reported some stories from the Auditor General’s annual report for the year ended June 30, 2013, which was presented to the Speaker of Parliament on 31 March. But the biggest stories in there remain untold. And they are very many.

Here are a few examples of key findings that are crying out for intelligent probing and follow-up.

Growing domestic arrears

The AG reports that “despite adopting the commitment control system, the total value of domestic arrears payable have continued to increase over the years”, from Shs473.65 billion in 2010/2011, Shs763.18 billion in 2011/12 to Shs1.12 trillion in 2012/13.

He concludes that this steady increase clearly indicates that “the current approaches to address the problem are not working. The debt figure may become unmanageable as it appears to be spiralling out of control.”

Some questions to consider:

What is at stake here? What could possibly happen if this trend is not arrested? Can it be arrested? How (what can be done)? What is the commitment control system? How was it supposed to work? Hot does it actually work (or not) in reality? Who is responsible for this problem? Who can help solve it?

Arrears for court awards

The AG further reports that arrears for court awards and compensations doubled from Shs82 billion in 2011/12 to Shs164 billion in 2012/13. (Note that this rise is 100%, not 200% as Vol. 1 of the AG’s report says).

It was found that there is very little documentation to support many of these awards.

The story of court awards is of course not new. What’s new is that AG is questioning “the extent to which government is making efforts to minimize court awards and compensations”.

Some questions to consider:

What is going on here? What kinds of awards are we talking about? Can we establish a pattern? Can we list some of the major cases? Do they have anything in common? Who is benefitting from these awards? Who is more likely to win these awards and compensations? How are they arrived at? Who is not doing their work—the “concerned entities” that the accounting officer accused of “laxity” in providing “the necessary information for the cases”? Do other countries in the region have a similar problem? How have they dealt with it?

Basajjabalaba’s Haba Group ‘loan’

Remember this story?

The AG reports that although Bank of Uganda recognised “a receivable from government of UGX.140 billion in respect of letters of comfort that were made to various commercial banks for loans extended to M/S Haba Group of Companies”, the central bank made “a provision for impairment losses for the entire amount of UGX.140 billion, implying that recovery was highly unlikely”. The AG concludes that the “effect of the write off is that the bank’s capital was impaired to the magnitude of the impairment losses.”

Put simply the central bank suggests to one ear that it expects money from the government to clear Basajjabalaba’s ‘loan’ (was this ever a loan?) and then whispers to the other ear that this is a bad debt that won’t be cleared.

Some questions:

What is going on here? What does this mean? Is there any evidence that the central bank has “exhausted all available means to recover the funds”? (The AG says no evidence was presented to him). Is the government pushing for the recovery of the money from Haba Group? How does Basajjabalaba get away with all this? Who is he? Who is behind him?

Advances to individual personal accounts

It appears that accounting offices in various ministries have not learnt from the OPM scandal.

The AG reports they continued to advance to their staff through individual personal accounts large sums of money, totalling to Shs16.28 billion. Although this was noted as an improvement in absolute terms (Shs67.08 billion had been advanced to staff in the previous year), the AG maintains the practice “is contrary to regulations, highly risky and exposes government funds to loss since accounting officers have no control over individual’s bank accounts”.

Some questions to ponder:

Why are accounting officers blatantly defying government regulations and getting away with it? How exactly does this play out? Who benefits from this practice? How can this problem be solved?

Utilization of Oil Money so far received

It turns out that the Bank of Uganda invested part of the Oil Tax Fund in short term money

market deposits. The AG reports that according to the bank, only Us$.171 million was invested during the year which yielded interest of Us$.246,344 equivalent to UGX.640,060,834.

“The note further states that the oil fund is ring fenced for future development expenditure,” he says. “However, I was not provided with the investment instructions by PS/ST authorizing the bank to invest part of the fund and giving directions on utilization of interest earned. Under the circumstances, there is a risk that the bank may undertake unauthorized investments which are not in tandem with the underlying laws applicable to utilization of oil revenues.”

You will recall that our first big earnings from oil taxes went to the purchase of fighter jets after the central bank governor caved in to pressure from the president.

This is a good opportunity to take another look at the regulations that have been proposed in the Oil Revenue Management section of the Public Finance Bill 2013.

Expenditure on motor vehicle repairs

The AG reports that Shs231.42 billion was spent by various government ministries, departments and agencies on repairs and maintenance of motor vehicles “without technical pre and post inspections to determine the extent of the defects on the vehicle and thus the repairs required”. Obviously as the government watchdog notes, “lack of technical pre-repair and post repairs inspections/certificate of completion exposes the entities to risks of loss of funds through over invoicing, payment for no work done and recycling of old parts by the garages”.

Again, concerns over government expenditure on motor vehicle repairs and maintenance are now new.

Some questions:

How can it be after all these years, this is being blamed on “lack of proper guidelines” on how to deal with motor vehicle repairs and maintenance? Who is responsible for developing the regulations? Who is sleeping on the job? Why have we not learnt anything from the reforms in neighbouring Rwanda on this issue of managing government vehicles? What do government vehicles actually do? Who is entitled to one? How are they supposed to be used (assuming we have guidelines on this)?

Can we break down the figure of Shs231.42 billion that was spent? How many vehicles were worked on? How does this compare to the size of the entire government fleet? (By my calculations, assuming a decent new four-wheel drive motor vehicle costs Shs200 million, what was spent on repairs would buy at least 1,157of these)?

Tax incentives and Tax refunds

The AG reports that tax refunds totaling Shs49.05 billion are due on behalf of Ministry of Finance.  “The refunds arise from tax incentives to various entities however,” he says. “However, the ministry lacks documented criteria in selecting and approving the tax incentive beneficiaries.”

In a bid to raise more revenue, the minister of Finance had announced last year that the government was going to do away with most of these tax incentives.

Some questions:

What progress has been made since last June?

What companies are getting these tax incentives?

Agriculture sector taxes for importation of raw materials

The AG reports that the government paid Shs642.9 million for import taxes for two companies that “instead imported semi/finished textiles” including bed sheet materials. He notes that “this is against the purpose” for which the agriculture sector value chain incentive was established.

Some questions:

What are these companies actually doing? Is the country benefitting from this incentive that they are enjoying?

Prison conditions

The AG reports that that “only 28 out of the 230 prisons found countrywide had water borne toilets. The prisoners continue to use the bucket system as a toilet facility”.  He notes, “This system is not only unhygienic but also humanly degrading.”

Quick Tip:

This would make a very good feature story. Visits to some of these prisons are a must.

Here are some other key findings crying out for focused follow-up:

• Failed government projects
• Continued deterioration of government buildings
• Accounting for net domestic funding
• Depletion of the Contingencies Fund (The AG notes that the opening and closing balance had been static at Shs976,950 (yes, less than a million shillings) for the whole financial year.
• Gaming and Betting Companies (Many of them are operating illegally)
• Entebbe Expressway (Some people who were compensated are still holding on to titles.
• Unexecuted road works certified and paid for.
• Kazo-Kamwenge and Fort Portal- Bundibugyo roads were paid for in excess of about 33.2bn. The AG says amounts certified in excess should be paid back by the contractors.

The list is endless.

Here are a few unsolicited tips for journalists on how to make the best use of the latest report from the government watchdog.

• Read the report closely, squirreling away as many story ideas as you can identify.
• Focus on specific cases (findings) and explore the possibility of news features or depth reporting that extent of the problems identified by the AG beyond the numbers.
• Treat the Auditor General’s findings as tips that require follow-up.
• Educate yourself on how government institutions work (or don’t work, as Observer editor Richard Kavuma quipped on Twitter recently).
• Think about human and other sources that can bring the findings to life and more accessible to the ordinary newspaper reader, radio listener or TV viewer.
• Ask the big contextual questions. So what? Why does this matter? What is at stake? What are the implications? Who benefits? Who loses? How did we get here? What next?
• Explore the policy/reform options before Parliament.