Charles Mwanguhya
15 October 2007
Kampala — A BIZARRE racket in which officials with access to huge deposits of public money hold the cash in special accounts and reap from it in interest can now be exposed.
The officials transfer the cash to fixed deposit accounts for at least a month and end up reaping millions off it in interest.
Mr Ssebuliba Mutumba, the Vice Chairman of the Parliamentary watchdog - the Public Accounts Committee - told Daily Monitor yesterday that the scheme is a "big and complex syndicate" involving mainly the Ministry of Finance which originates most of the funds, Ministry of Defence which is one of the biggest spenders, Bank of Uganda, which does the bulk cash releases and other project-heavy ministries like the Ministry of Health.
"Even if the money stays for two or three days (on fixed deposit accounts), because it is a huge amount, it is still able to make for them millions in interest. It is a complicated syndicate, in fact and the Auditor General only captures just a few," said Mr Mutumba, who is also MP Kawempe South. These government workers with access to the large sums of money, especially those managing project funds, are thus able to make the millions by colluding with top banks in town to hold the money as fixed deposits. The interest that accrues is later pocketed.
The discovery could go a long way in explaining the magic that modestly paid government workers use to be able to live splendid lives, send their children to schools where their monthly salary cannot cover a term's school fees and build plush mansions without the risk of facing court bailiffs over loans.
Top commercial banks in the city are key in the scheme. The money, according to documents available to Daily Monitor, is normally held for anything between one month, three to six months;- during which period it accumulates millions in interest. Now, Parliament watchdog committees are gunning for the heads of those behind the scam and are launching a full investigation. The Local Government Accounts Committee, the Public Accounts Committee and the Parliamentary Committee on Statutory Bodies, State Enterprises and Commissions, are teaming up with the Auditor General to demand that the interest is deposited in the government's coffers.
"We are getting very close to them," Mr Mutumba said. "We shall get their (financial) statements, bank reconciliation and we shall track the money." The interest is usually switched to a separate account to make more money or is pocketed, Daily Monitor has learnt. Meanwhile, the principal sum could either be withdrawn-depending on how much pressure a particular government official could be under to pay off the bonafide beneficiaries or in the absence of such pressure, the fixed deposit period may be renewed.
Because the government does not demand accountability on funds beyond what it disbursed, officials can safely make and keep the difference for themselves.
In one case discovered by the Auditor General, a key government body deposited Shs1.446 billion and at the expiry of the fixed deposit, the project manager wrote to the bank; "the above mentioned fixed deposit matures today 28th June 2001.
We have received your offer to renew the same on 30 days term deposit at an interest rate of 4 per cent and decide to instruct you as follows; 1) Convert Uganda Shillings 867, 500, 000 to US$500, 000 at agreed exchange rate of Uganda Shillings 1,735 and credit that amount into our dollar account. Renew the balance of Uganda Shillings 578, 589, 033 on the fixed deposit account for 30 days at an interest rate of four per cent per annum."
According to audit queries by the Auditor General, in many incidents, only part of the project money is credited to official accounts while larger balances are kept on different accounts which are not official, an indication, officials noted, that some government staff are colluding with either banks or staff members to divert project funds.
Although Daily Monitor's investigations concentrated on bigger project monies, the chairman of the Local Government's Accounts Committee, MP Geoffrey Ekanya, said the problem is bigger.
"It has been going on for the last many years. In fact, it used to be worse under the old system because cheques used to be delayed in Kampala (where they were invested on fixed deposit accounts) and when they are released to the districts, the districts also deposit them on a general account where it of course makes interest," he said, adding that "this interest is never declared."
Mr Ekanya said some affected areas included civil servant's salaries and cited the example of teachers who have often faced the brunt of delayed wage payments. "It is criminal because people who are supposed to be paid suffer and it also leads to creation of domestic arrears," he said.
Sharing the bounty
Because the money is big and has to follow a given trail, which requires many along the ladder to know about it, a well worked-out sharing plan is also in place.
In some projects or ministries, the accruing interest may be given to staff through internal salary loan schemes, Mr Mutumba said, adding: "There is a tendency to lend it internally. It is a very a big game. It is a big, big cancer because at the end of day, projects suffer."
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