It is not clear why Government bank accounts in Bank of Uganda have continued to be overdrawn 9as per this report) despite the instruction by Treasury to the Central Bank not to have overdrawn accounts. Is it possible that this is done as a response to instructions from above?
It is difficult to belief that the Accountant General on being asked about 11 non-performing loans worth shs 35,193,062,617 that were found without any supporting documentation (e.g. loan agreements), he explained that the loan agreements were lost when a Consultancy contracted to validate the debts in 1991/92 failed to hand back the loan agreements and that efforts to trace the firm and loan agreements proved futile!
It disturbs to learn that The Accountant General has time and time again reported mis-postings; errors on bank statements, delays to respond to queries and certificate of bank balances being wrongly advised to accounting officers who do not own such accounts. Government accounts in the Central Bank are occasionally overdrawn due to errors, duplicated payments despite Treasury explicit instructions not to allow overdrawn accounts. How on earth can any one accept such lame excuses? For those in the know, Bank of Uganda does not employ lousy staff; many employees are 1st Class degree holders, how on earth can a wrong statement be sent out? Are there no people who check these transactions? How is balancing possible? It is most likely that these errors are committed when those involved do them with a hidden agenda.
It is sad to learn of ‘games being played’ in form of many unexplained transactions referred to as “revalues” and “reversals” are reflected on the Bank Statements and in most cases wiping away the would be – credit balances on these accounts!
It is sad to read of reports like, “Details on Bank Account No. 208209038.1 show that shs 15,199,144,438 was received by the Bank and credited on this account on 6th June 2007. This amount was wiped away by various unexplained transactions and by 30th June 2007, the account showed a debt balance of shs 4,446,462,344. The account was subsequently reconstructed following communication and meetings between the European Commission, Bank of Uganda and the Accountant General which resolved that all transactions wrongly made on the account be reversed resulting into a new credit balance of shs 8,173,566,995. However, the final position of this account was not accordingly adjusted in the accounts.”
THE DETAILED REPORT OF THE AUDITOR GENERAL
CASH AND CASH EQUIVALENTS
Cash Balances
For the period ended 30.06.07, Government reported a consolidated cash and bank balance of shs 2,411,748,703,028 and bank overdrafts shs 1,234,571,805,723 on all bank accounts operated by the Treasury and Central Government ministries. It includes balances with the Bank of Uganda for both the Consolidated Fund and for various votes and for all project Accounts. There is no comprehensive information on the overall stock of Government bank accounts held both in Bank of Uganda and commercial banks to enable the Auditor General undertake audit procedures to confirm the completeness and accuracy of the balances and accuracy of the balances reported.
Besides cash balances on donor funded project bank accounts particularly those still in commercial banks are not captured in accordance with the accounting policy followed on consolidation of Project expenditure.
The absence of a comprehensive data on bank accounts further makes it difficult to periodically circularize and reconcile Government bank accounts and balances for authenticity, purpose, obsolescence/redundancy and excessive liquidity, and illegal overdraws.
Redundant and Overdrawn Accounts
Bank records indicate that 153 bank accounts did not record any transactions for the whole financial year under review. One hundred and thirty three (133) of the accounts had redundant credit balances worth shs 32,199,268,269 while twenty (20) were overdrawn to the tune of shs 11,160,722,951. Government bank accounts in Bank of Uganda have continued to be overdrawn despite the instruction by Treasury to the Central Bank not to have overdrawn accounts.
Foreign Debt
A review of the Foreign Debt portfolio showed that Government was in arrears on twenty one (21) loans that had been due for repayment. According to the DMFAS data base, total principal in respect of the 21 loans as at 30 June 2007 was shs 202,300,014,509. For over 10 years, there had not been any movements in the principal values either in terms of repayments, rescheduling or otherwise. It was explained that the decision not to pay the loans was based on the Paris Club agreement that required all creditors to deliver HIPC initiative debt relief to countries under HIPC 1 and 2.
Included in the 21 non-performing loans were 11 loans worth shs 35,193,062,617 without any supporting documentation (e.g. loan agreements). The Accountant General explained that the loan agreements were lost when a Consultancy contracted to validate the debts in 1991/92 failed to hand back the loan agreements and that efforts to trace the firm and loan agreements proved futile.
Receivable (Outstanding Government Loans)
In the Auditor General’s report to Parliament on Public Accounts of the Republic of Uganda for the year ended 30th June 2006, he said that Government loans totaling shs 1,242,928,209,265 to state and private enterprises were still outstanding. As at 30th June 2007, shs 1,205,608,734,946 was outstanding as a number of enterprises had partially paid up while some debts were wholly or partially cancelled. It was noted that Loans worth shs 620,884,726,162 had not been performing for a very long time. Their recovery is highly doubtful.
Finance Costs
Finance costs in respect of interest on Treasury Repo stocks/transactions amounting to shs 15,774,825,032 accumulated over the years; including shs 5,703,149,467 for the period under review were never recognized or expensed in the accounts, accordingly overstating Government equity. The Accountant General explained that he was hesitant to recognize the expenditure because he could not measure it reliably since no database or records were maintained at the Treasury. He added that the liability was picked from the statement of Government position from Bank of Uganda and that consultations between his office and Bank of Uganda were still going on to explore the possibility of having monthly returns upon which reconciliations were to be carried out.
Treasury Bonds
During the period under review, Treasury Bonds worth shs 184,370,732,115 matured and were accordingly redeemed. However, the debits on the Treasury Bond Investment Account in respect of these redemptions amounted to shs 157,083,500,000 only. The variance of shs 27,287,232,115 was not satisfactorily explained.
The Accountant General explained that the bonds figure presented in the accounts (shs 184,370,732,115) fully reconciled with bank of Uganda Central Depository Treasury Bond redemption profile for the period under review.
Government Non-Resource Taxes (NRT)
During the period under review, Parliament appropriated shs 181,959,964,445 for various Votes to afford import taxes (Non-Resource Taxes) on machinery, furniture and motor vehicles. In accordance with tax reforms introduced during the period, a total of shs 180,990,628,113 in respect of these taxes was released to various Votes with instructions to “Issue block cheques (i.e., for the entire tax release)” to the Treasury. This money was deposited on two Bank of Uganda accounts; TREASURY OFFICE ACCOUNTS GROSS RECEIPTS ACCOUNT and TREASURY OFFICE ACCOUNTS GROSS PAYMENT ACCOUNT. As at 30th June 2007 shs 137,600,572,275 was lying idle on the Gross receipts account. In many instances it was noted that Votes were appropriated tax funds far in excess of requirements, consequently eroding away funds available for allocation to other priorities within the Vote’s MTEF provisions. It was also noted that in a number of cases, tax obligations were paid for in excess of the individual tax appropriations for the Vote. For example, Ministry of Education had its tax obligations for the Vote settled on its behalf by Treasury yet it did not have an appropriation for it. The Accountant General explained that this was the first year of operating the Gross Tax System and certain modalities may have not been finalized. He indicated that once reconciliations with URA are finalized, the amounts standing on the account will be transferred to the UCF.
Treasury Transactions with the Central Bank
1. Transaction Delays, Errors and Mis-postings
The transfer of all Government bank accounts from commercial banks to the Central Bank created increased volume of Government transactions with the Central Bank. The Accountant General has time and time again reported mis-postings; errors on bank statements, delays to respond to queries and certificate of bank balances being wrongly advised to accounting officers who do not own such accounts. Government accounts in the Central Bank are occasionally overdrawn due to errors, duplicated payments despite Treasury explicit instructions not to allow overdrawn accounts. There are also some times delays in creating Treasury Bank accounts. For instance a total of Euros 3,599,000 (Equivalent to shs 8,193,624,393) was released to Bank of Uganda Account 208209070.1 for Poverty Action Fund on 27th June 2007 by KfW in support of the Poverty reduction Support Credit V-VI. The Central Bank communicated to the Accountant General on 10th July 2007 having received the funds. However, the Bank Statement indicates that the grant equivalent of shs 8,193,624,393 was credited to the Account on 31st August 2007, more than two months after receipt of the money.
In another instance, shs 37,296,972,081 transferred from the Customs & Excise A/C on 24th November 2006, 50 days later although the transfers should be done twice a week.
2. Commission Charges
For all transactions denominated in foreign currency, the Central bank charges Government a commission at the rate of 1% on the gross amount. Only the net amounts are posted to the respective bank accounts and the commission charged is posted to a special account meant for Project Bank charges. During the year, total bank charges under Treasury amounted to shs 9,238,011,970 of which shs 8,096,403,082 was posted to this account in respect of commission and charges arising from foreign currency related transactions. The rate and amounts charged appear to be on the high side.
3. Unexplained Transactions on holding Accounts
Budget Support Grants from the donors are kept on holding accounts in the Central Bank before their transfer to the Consolidated Fund. When the grants are received, the Foreign Currency is translated to local currency using the rate at the time (day) and the proceeds credited to the holding account in local currency after the Bank has charged a commission of 1% of the gross amount.
However, many unexplained transactions referred to as “revalues” and “reversals” are reflected on the Bank Statements and in most cases wiping away the would be – credit balances on these accounts.
Details on Bank Account No. 208209038.1 show that shs 15,199,144,438 was received by the Bank and credited on this account on 6th June 2007. This amount was wiped away by various unexplained transactions and by 30th June 2007, the account showed a debt balance of shs 4,446,462,344. The account was subsequently reconstructed following communication and meetings between the European Commission, Bank of Uganda and the Accountant General which resolved that all transactions wrongly made on the account be reversed resulting into a new credit balance of shs 8,173,566,995. However, the final position of this account was not accordingly adjusted in the accounts.
Debt Swap
Over the years, Government has been involved in a series of debt-swaps involving mainly state enterprises listed for divestiture. Although the funds involved are quite colossal, in many instances the debt swaps are never reported in Government’s financial statements and thus are not subject to routine financial audits by the Auditor General.
The Accountant General explained that the initiation of the debt-swap process is done by the affected state enterprise through the Ministry of Finance which then starts the process of debt-swap by constituting a Debt Settlement Committee whose role is to verify the extent of Government’s indebtedness with the assistance of the internal audit department. The committee then makes recommendations based on the findings. On the basis of the recommendations, the Ministry approves and implements the debt-swap by preparing the necessary agreements in consultation with the Solicitor General and presents it to cabinet and subsequently to Parliament for approval. It is after approval by Parliament that the indebtedness of the enterprise is reduced in Government of Uganda records.
Domestic Arrears
Existing procedures require that the arrears are verified by Treasury Service Department in conjunction with the internal audit and inspectorate and registered in an IT based domestic arrears database maintained at the Treasury.
However, a reconciliation of verified domestic arrears database maintained at the Treasury and the actual arrears reported in the financial statements of various Ministries, Agencies, Departments, Universities and Missions revealed variances. In some instances the arrears reported in the financial statements were more or less than those captured in the Treasury database.
