Kampala –The 2017 Auditor General’s (AG) report is out. And its findings and recommendations for the year ended June 30, 2017 expose weaknesses in many government departments.
Uganda Revenue Authority, the National Agricultural Advisory Services (NAADS), Ministry of Finance, Ministry of Public Service, Ministry of Lands, public universities, the Uganda Electricity Generation Company Ltd (UEGCL), district local governments and more are mentioned.
The weaknesses noted include corruption, poor planning, and poor budget performance, failure to hit targets, unapproved expenditure, and more.
The cases listed have caused problems like low absorption capacity of funds, poor accountability, poor corporate governance, low tax remittances, increasing domestic arrears, offering wrong investment incentives, staff shortage in government and more.
Following the release of the report, the Parliamentary Accounts Committee (PAC) plans to start conducting hearings on the AG report next month.
Coming at a time when the budget making cycle has just turned a mid-cycle corner, there are also questions about whether the AG’s recommendations on the listed weak government departments can be fixed in the 2018/19 budget.
Part of the fear is that similar issues keep recurring annually in the AG reports and are not addressed, leading some expert observers to cast doubt on the government’s commitment to fix them.
Take the case of the upward trend curve for domestic arrears – the money that the government has failed to pay to businesses that supplied it goods and services, civil servants who have retired and are not getting their pensions and those in service but not earning salary, and of complainants against the government who have won court awards.
The AG notes that in just three years, the unpaid arrears have swollen from Shs1.3 trillion in 2014/15 to Shs2.2 trillion in 2015/16 and Shs2.9trillion in 2016/17. The AG says the situation is getting beyond manageable levels.
For example, although the domestic arrears were at Shs2.7trillion at the time the 2017/18 budget was drawn up, the government only allocates Shs300 billion to service the debt. That meant that Shs2.4trillion or 90% of domestic arrears were rolled over to the next year and new debt piled on.
But the AG notes another problem. About Shs1.1 trillion or about 50% of the debts were not got through proper channels. Many were got outside the budget approved by Parliament. Cumulatively, over Shs81 billion was acquired in this way.
In some case, government departments, such as public universities, increase the salaries of their staff without matching resources.
The AG says this happens because of weak and ineffective control systems at the Ministry of Finance, including early closure of the Integrated Finance Management System (IFMS).
However, even after the ministries, departments, and agencies (MDAs) incur the debts, the government sometimes does not make any effort to pay it – leading to unsustainable increase in arrears.
The AG notes that in FY2016/17, there was no budget provision for paying Shs87 billion arrears. The AG warns that failure to budget could lead to diversion of funds from service provision to settling debt.
The AG says failure by the Ministry of Finance Planning and Economic Development (MoFPED) to release money as planned has led to poor service delivery. Up to 38 entities which had a total approved budget of Shs3.9 trillion, only got Shs 3.4 trillion. Generally, out of the planned expenditure of Shs19.5 trillion, only Shs17.6 trillion was released.
The AG notes that the Uganda Revenue Authority (URA) is performing quite well and collecting up to 96% of planned tax revenue and non-tax revenue (NTR) in the period under review.
But the AG says this is possibly because URA has very low targets; especially regarding NTR which more than doubled the set target.
The AG is also concerned about tax exemptions offered to investors. The report notes that there are no clear guidelines on why some investors get exemptions and others are denied, especially within the same investment sector.
The AG also notes that there is no follow-up to assess whether investors create the jobs and economic benefits they claim the tax holiday would enable them to.
Instead, the AG warns, tax exemptions might lead to industrial distortions or even encourage unscrupulous companies to close shop at the expiry of the tax holiday and register new investments for consideration for fresh tax exemption.
The AG says during the financial year, the country lost revenue ranging from US$3.39 million to US$ 16.95 million in royalties from the undeclared gold exports and imports- the second year in a row it happens. Now the AG wants government to expedite recovery of the prescribed royalties.