Value for Money Volum 5 – End of Year 2015: On rising debt, rice development, mineral industry development and other economical issues
I have now written down quotes from the 11th Value for Money reports from the Auditor General in Uganda of 2015, and we are in campaign season, so let’s see what the government can say about their own accountability and such. Beginning with this:
“Annual Report of the Auditor General to Parliament prepared under the Directorate of Value for Money and Specialized Audits. This Volume contains summary reports of the 11 Value for Money (VFM) audits undertaken during the Audit Year ending 31st December 2015”.
Let me begin with the MoWE:
“Water sources constructed were generally functional except for instances in Mbale, Rakai and the non-functional tap heads in Bundibugyo” (P: 23). Quick comment: So the ones they we’re building we’re from the get-go not functioning; what the need to use money to taps is and pipes that don’t work. Good work from the Government of Uganda.
Procurement in Ministry of Water and Environment (MoWE):
“Some districts i.e. Bundibugyo and Kamwenge executed works using “Force account” method of procurement without first obtaining a waiver from PPDA contrary to the procurement rules and regulations. While using this method of procurement the districts also irregularly deposited public resources on personal accounts of district employees without any justification which exposes grant funds to misuse” (P: 23). Comment: So the ones buying can by without showing the need or getting rights to use government funds to use them, so he can buy toothpaste for his kids without showing any report of where the money went? Good to know.
Last quote from MoWE:
“Delays in the payment for goods and services to Suppliers / Consultants / Contractors were observed. In some cases such delays exceeded 100 days with some noted for exceeding 180 days” (P: 25). Comment: There is 360 days in a year, 180 is half, 100 days is over three months; That is the shortest for waiting to be paid for delivered service to the ministry; If your unlucky than it can be up to 6 months. Half a year! Can’t you just tell directly that you weren’t sure you had the money to pay for the service in the first place? Since you expect that certain business who you work with has to wait that long for payment!
Utilization of the District Water and Sanitation Conditional Grant (DWSCG):
“A total of UGX 161 Billion was released by MoFPED to the 111 districts as the grant funds over the 3 years period under review. Out of this, UGX 30.8 Billion was received by the 20 districts that comprised the sample of this study” (P: 60). Here is one of the tests that the OAG did and found: “Audit established that Bundibugyo and Kamwenge executed procurements and works amounting to UGX 192,761,460 and UGX 64,571,498 respectively using force account method of procurement without seeking approval from PPDA as required. Force account is a method where the Procuring and Disposing Entity (PDE) procures materials and undertakes the works with the supervision of a technically qualified staff – in this case, the District Engineer and the District Water Officer” (P: 64). Comment: Here it’s more buying of the DWSCG or a department locally without checking procedure, just buying blindly what they need, though doing it and without supervision so the quality control for much of the bought equipment is done unsupervised.
Ministry of Finance, Planning and Economic Development (MoFPED) on Gender and Quality:
“47 government officers from the selected sectors were sponsored for a two-week training in gender and equity budgeting. However the training was mostly funded by donors, which was not sustainable” (P: 31-32). Comment: So the government can’t allocate money for training of their own and has to get the cash to educate their own staff from abroad, sounds not like development or steady progress, but a misuse of money, since you can’t cough up money to educate your own bureaucrats.
On Rice Development:
“The Promotion of Rice Development (PRiDe) project is a successor to three projects by the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) projects: Agriculture Improved Rice and NERICA dissemination and Sustainable irrigated rice project (SIAD)” (P: 39). Quotes on the PRiDe: “PRiDe project has not established a system for collection, recording analysis and reporting of rice data and hence it was difficult to establish with certainty the progress the project was making towards the achievement of the set production targets” (…)”MAAIF should work out modalities that enable rice millers to access funding to acquire the required equipment like the mills, destoners and graders that will be used in improving the quality of rice produced” (P: 39-40). Comment: There isn’t any way to monitor the project or the progress, so they can build a stairway to heaven with the cash for what we know and not initially do any research on how to make rice better or yield better in Uganda.
More on the Rice Project:
“noted that although UGX 2,500,000 was paid to the database developer as part payment of the contract amount of UGX 5,000,000, the database was not yet in operation by the time of the Audit (January 2015) and the rice web page had not been developed.. Furthermore, Audit notes that UGX 21,232,912 was paid out to various staff to collect data from farmers and millers to update the non-operational database. Failure by MAAIF to operationalize a rice website and database denies the rice stakeholders access to vital rice information” (P: 217). Comment: There been paid out money to collect data, but not organize it, so it is lost at some office of the Ministry. Instead of being able for people looking at the experience of yielding rice or making rice better.
Performance of Ministry of Agriculture, Animal Industry and Fisheries (MAAIF):
“According to the project proposal document, GoU was expected to contribute about UGX Four (4) Billion for the five years (FY 2012/13 to FY 2016/17) as counterpart funding. However, the review of MAAIF PRiDe project expenditure documents indicates that only UGX 1,482,409,718 has been released to the project. The released funds represent only 37% of the amount anticipated for three financial years (2012/2013, 2013/2014, 2014/2015) and yet the project has less than two years to close. The failure of government to honour its obligation of providing the budgeted counterpart funding may affect the MAAIFs ability to sustain rice activities beyond the PRiDe project” (P: 223). Comment: Here it has been just dropped 37% of the funds in three financial years, while having two years left. That means that 31,5% of the funds have to be released in each year that are left; so the accounted money will go to the rice activities. Instead they have in three years used 37% of the total, and have to use close to the same each year. That doesn’t seem to happen unless they are starting to waste without waiver and procurement as the MoWE in Bundibugyo?
On External Debt:
Utilization of the Public Debt from the MoFPED (Ministry of Finance, Planning and Economic Development):
“In Uganda, public debt is managed by the Ministry of Finance, Planning and Economic Development (MoFPED) in liaison with Bank of Uganda (BoU). Government of Uganda (GoU) external borrowing has risen over the years from (United States Dollars) USD 3.71 billion in Financial Year (FY) 2012/13 to USD 9 billion FY 2014/15” (P: 40). Comment: In two years going up USD 4 Billion from 2012/13 to 2014/15. That should be worrying for the economy getting this bigger debt burdens that gives the economy more interests rates to pay back to donors and banks who lent them, instead of development.
External debt overview:
“The Auditor General in his annual report further noted that commitment fees paid during the year 2012/2013 had increased by 40% from UGX9.023 billion in 2011/2012 to UGX12.7billion in 2012/2013” (P: 226). Comment: Following up the first comment on the debt, as the more loans you have, them more interest rates you pay to the lenders and banks. This here is expected things. Though this leave less money to be allocated to what the government needs and let more percentage of the budget go back to paying on debt, instead of investing or allocating to something sustainable, but then you need donors to training your own bureaucrats.
Paying back the debt on time:
“Failure to absorb borrowed funds within the specified timeframe of the projects has led to an increase in the cost of debt to Government in form of commitment fees and fines. This is because creditors, such as African Development Bank, Exim Bank of China, and African Development Fund, among others, charge a fixed rateon the loan amount that is yet to be disbursed. Government paid a sum of USD 26.8m in form of commitment charges between FY 2007/8 and 2014/15. The commitment fees paid peaked in FY 2013/14 amounting to USD 5.1m” (…)”the contractors for Tororo-Lira power line and Mbarara – Nkenda charged Government fees for implementation delays to the tune of UGX 23,353,168,480 and UGX 18,221,868,081182, respectively, which further increased the cost of the projects to Government” (P: 232-233). Comments: While the worry has been for more and more stacked up loans. Then the more increase fees paid for the loans that the Government of Uganda has gotten over time. With this knowledge the government and ministry who control the use of money should be sure of paying back the lenders and banks that facilitated the loans. This lead to more debt and fines to the government because they are not doing the job or delivering as promised back to the banks.
“Although funds release performance improved from 22.2% as reported in the 2010 audit report to 71%, MoFPED was still unable to ensure a 100% release performance as promised” (P: 41). Comment: That the ministry can’t ensure that the payments are being served and secured after they had no issues getting the loans for the projects and other development programs, then they should ensure and make funds ready to pay back the fees, interest rates and fines for not releasing over the debt.
Construction of Jinja Market under MATIP:
“Originally the preliminary designs for the market considered four floors at an estimated cost of USD 13.3 Million; however the cost estimate was found to be higher than the project ceiling of USD 10 million” (…)”The original contract sum for construction of the Jinja central market was UGX.28,679,485,336; this was revised to UGX.32,335,198,075 vide addendum no.1 of UGX.3,655,828,962 (VAT inclusive) of 11th September 2014 incorporating additional works related to preliminaries, demolitions, lower ground floor extension from grid 10-12, storm water drainage, stall improvement works, slabs over entry voids, roof improvements and additional security requirements” (P: 43). Comment: Here is just a one project that has gone over the estimated limited and set up of a modern market in Jinja, the Local Government didn’t check the quality of the works and also didn’t do enough monitoring of the project as well. So the basic construction and planning of it haven’t been done that well, when you look at the level of extra expenditure.
Regulation of Construction from by the Ministry of Works and Transport (MoWT):
“The enactment of the UCICO Bill had been planned to be effected by 30th June 2012 but to date (5 years down the road) not much progress has been achieved. The major objectives of the bill were to establish the Uganda Construction Industry Commission to regulate and coordinate the construction industry, register contractors, consultants and other service providers engaged in the national construction industry” (P: 49). And this: “Out of the budgeted amount of UGX 1.4bn, the Ministry received a sum of UGX 1.02bn to cater for the development of the legislation under the programme for public structures as detailed” (P: 51). Comment: That the monitoring unit doesn’t exist while more and more roads cost then estimated, also with little progress of securing the funds used through the UNRA, there should be questioned why the government doesn’t want this transparency unit under the ministry and also checking the builder who seeks private contractors through UNRA.
Regulation of the Ministry and Energy and Mining:
“In efforts to revitalize the mining sector in Uganda, the licensees in the mining business have not been able to get support from banks here in Uganda because the mining industry has just begun to pick up after acquisition of new geological data. This gap of lack of financial support has a negative implication on the licensing process and mining operations, inhibiting the mining sector from developing as any other sector in the country. However, the Ministry will improve by sensitizing the banks on mining business to enable licensees get access to financing of their mining investment projects. In addition, the ministry will take extra care in screening mining applications and plans” (P: 104). Comment: That the banks don’t help the bank-industry. The laws is not yet set in fruition so that the companies in the mining business have proper banking operation, that means the mining industry seems as wild-west if the banks can’t monitor it properly?
Picture of Companies without returns!
“The DGSM takes note of this observation. The MEMD has continued to lobby the Ministry of Finance, Planning and Economic Development and the Parliament of Uganda to make available adequate budget allocations for monitoring and inspections of mining and exploration operations to effectively manage enforcement of working obligations by licensees” (P: 107). Comment: Well, if you see how the banks are not build for the mining industry. This here is a follow-up and this is the second level of monitoring the mining industry and its exploration operations. Initially they have to wait for licensees and pay for them through the banks, to get sufficient structure through the banks to the ministry.
Affected persons of the late payment or compensations for work:
“This was the case with the Tororo-Lira power line project where 137 project affected persons since 2012 to date, claim UGX 3,084,420,624 in way leaves compensations and as a result 156 towers that had been established are not strung to date. Along the Mbarara- Nkenda power line since 2010, 60 project affected persons had unresolved way leaves compensation disputes to the tune of UGX 7,042,469,385 by the time of audit. Additionally, along the Mbarara- Mirama section of the NELSAP power line, 5 project affected persons claim UGX 1,143,401,900 in way leave compensations since 2013. This delayed the stringing phase of the projects because relay towers had not been erected in these areas of disputes” (P: 241). Comment: This is the same as the late payments earlier where business had to wait until 180 days. This here is another ministry, but the same kind of business structures and projects get disputes that leaves the levels of compensations to higher levels. That is shown the doubling of values in the audit as shown by the OAG this time. From UGX 3 Billion to UGX 7 Billion; that is a massive growth and added expenses on the set projects that the General Auditor has shown in the report.
I think the comments on each quotes is enough. Because they speak enough for themselves and the questions on how they used the governmental monies proves the validity on the matter and mismatches on the procurements. The scariest situation is with the rising debt and how the Ministry is dealing with the matter. Peace.