In the 62nd EXCO meeting held on 21st March 2007, it was recommended that a tender advert be placed in the media with the requirement that bidders respond to the invitation within a week of the publication. The justification for the one week period was the apparent urgency of the project.

According to PPDA Procurement Flow Chart, a procurement requisition should be raised by the user department before a bid notice is placed in the media.

The requisition for the project was raised on 22 August 2007, four months after the bid documents were opened on 11 April 2007. This clearly indicates that the initial urgency to procure the IMIS was unwarranted.

1.1.1 Irregularities in the IMIS procurement The following irregularities were noted:

1.1.1.1 Planning

According to the budget for financial year 2006/2007 a change of the IMIS had not been provided for in the budget, though the bid was made in this financial year.

The bid was being treated as an emergency. This contravened section 58 (a) of the PPDA Act which states "avoid emergency procurement and disposal wherever possible". After the tender was awarded to CIAL, the amounts were then allocated in the financial year 2007/2008 budget.

The ISO contravened section 32 (2) of the PPDA Act which states "the user department shall prepare a work plan for procurement based on the approved budget, which shall be submitted to the procurement and disposal unit for implementation when required."

Josephine had indicated on Form PP243 that there was an allocated budget of Ushs 250 million. We reviewed the budget for 2006/7 and found no evidence of Ushs 250 million allocation for procurement of the IMIS system.

1.1.1.2 First payment made to CiAL

CIAL signed the contract on 29 August 2007 and had earlier sent to NSSF an invoice dated 28 August 2007 , for $3,197,533.50. This invoice was stamped as "received" by Jamwa's office on 27 August 2007 and approved for payment by Jamwa on 28 August 2008.

Therefore, NSSF was invoiced and payments approved before signing a contract with CIAL.

1.1.1.3 Lack of requisition

A requisition for the purchase of an IMIS system was not raised by ISD, which was the user department, before the bid notice was placed in the newspapers. The ISD therefore contravened section 34(1) (a) and 35(a) of the PPDA Act

The requisition was raised on 22 August 2007, after the bid documents had been opened and a supplier selected.

1.1.1.4 Bid notice

The bid notice of 12 working days was less than the recommended 22 working days. This contravened section 64 of the PPDA Act which states the bidding period shall be sufficient to allow bidders prepare and submit their bids and shall not be reduced with the aim of limiting competition and also PPDA Regulation 145 (1) (a) which requires an open domestic bidding of 21 days.

1.1.1.5 Implementation

On 29 October 2007, CIAL wrote to NSSF requesting for variations in scope of work accounting (JDE) and data integrity. This letter was received by the MD on 31 October 2007. The CC met on 30 November 2007 and approved the variation in the scope of work. In this variation the contract price was revised from USD 4,900,000 to USD 5,472,845. This increased the total cost of the contract by USD 672,845; a 12% increment.

1.2 Irregularities in the payment of salary advances, allowances, and loans

NSSF currently has the following loan schemes:

• Staff housing loan scheme;

• Motor vehicle/motor cycle loan scheme;

• Education loan scheme;

• General purpose loan scheme; and

• Staff land acquisition scheme.

The NSSF BOD met on 21 June 2007 and on 4 July 2007 and approved the current loan policy. NSSF Administration of Loan Schemes under Paragraph 1.6 (iii) states that, "the total deductions including loan recovery shall not exceed 55% of the applicant's monthly net salary.

The total deductions shall include all the consolidated deductions on the applicant's gross monthly salary." This implies that any member of staff is expected to receive at least 45% of the net salary. According to explanation provided to us by the payroll accountant net salary is gross salary less statutory deductions (PAYE and NSSF).

Prior to June 2007, Chapter 25 of the staff handbook contained the Loan Policy. Paragraph 25.9 stated that,"the.total deductions includi-ng the Joan recovery should notiexceed40% of the applicant's net salary".

This means that every employee was supposed to receive at least 60% of net salary. Some of the staff members were receiving less than 60% net salary during the application of this loan policy. For4nstance, in June 2005, 57 employees out of 243 were receiving less than 60% of net salary. This included several members of EXCO and other senior management personnel.

1.2.1 The Employment Act

Section 46 (3) of the Employment Act states that, "the attachment of wages by operation of law shall be permitted, but any such attachment shall not be more than two-thirds of all remuneration due in respect of that pay period."

This implies that an employee should not receive less than one-third of the gross salary. Therefore, NSSF violated the Employment Act by paying Jamwa and Kagonyera less than one-third of their gross salary. A comparison of the amounts they were earning and the amount they were paid is presented in 1.3.4 and 1.3.6 below respectively.

1.2.2 Irregularities on salary advances

1.2.2.1 Staff receiving less than 45% of gross salary

We also noted the following:

• NSSF gave loans to staff at an interest rate of 5%. The market rate of interest that NSSF receives from its local investment is an average of 12%. Therefore, NSSF subsidises about 7% interest cost on loans to staff.

• Some members of staff are receiving very low net salaries after taking into account all I deductions. This introduces issues of morale, independence and integrity.

1.3 Advances

1.3.1 Housing advances

The 37th EXCO meeting held on 9 November 2005 increased housing advance for all staff from an equivalent of 12 salary months to 24 months.

1.3.2 Salary advances

Paragraph 25.1 of the Loan Policy states that, "a salary advance will be granted at the discretion of the head of department. A salary advance shall not exceed one month's net salary. The full amount shall be repaid and deducted from the pay in the following month. No more than one salary advance shall be authorised in any year".

1.3.2.1 Jamwa's housing and salary advances

Jamwa commenced his contractual term with NSSF on 2 February 2007 and in a period of 22 months to 4 December 2008, Jamwa received a total of Ushs 407,810,000 in housing and salary advances, as follows:

Jamwa received salary advances on three occasions (2 August 2007, 14 April 2008 and 18 September 2008) which were more than his monthly salary of Ushs 18 million as indicated in the table above. This was a violation of paragraph 25.1 of the Loan Policy quoted above.

1.3.3 Personal life insurance Ushs 28,085,000

On 31 July 2007, Jamwa applied for a salary advance of Ushs 28,085,000 to pay for his personal insurance cover. The amount was subsequently recovered from a gratuity paid in advance to Jamwa on 27 March 2008.

This transaction had the following irregularities:

(i).The salary advance was more than one month's salary, contrary to paragraph 25.1 of the Loan Policy quoted above.

(ii). It was recovered eight months later from a gratuity paid in advance. This money was irregularly recovered because Jamwa did not qualify to receive a gratuity at that time as his term had not ended.

There was no interest charged on the amount and therefore in effect Jamwa received an interest free loan from NSSF.

1.3.4 Irregularities with Jamwa's advances

We noted the following irregularities:

(i) Jamwa was not entitled to receive housing advances because he did not contribute to the pension scheme.

(ii) Jamwa received salary advances on three different occasions which were more than his monthly salary. This was in violation of paragraph 25.1 of the Loan Policy. The three salary advances could not be recovered in the subsequent month as they were more than his monthly basic salary of Shs 18,000,000, thus violating paragraph 25.1 of the Loan Policy.

(iii) Jamwa received four salary advances in 2007 and two salary advances in 2008, thus violating paragraph 25.1 of the Loan Policy which allows only one salary advance per year.

(iv) The salary advance received on 27 September 2007 was approved by Stephen Bandutsya who was not a staff member but a member of the BOD.

(v) Jamwa was getting less than 45% of net salary (after statutory deductions). As illustrated below:

The expected lowest net pay of 45% is not constant due to the allowances earned by Jamwa.

(vi) According to the ledger provided to us by the Deputy Finance Officer, Jamwa owed NSSF Ushs 244,169,835 in advances as at 31 January 2009. To recover these amounts from him during the remaining period of his contract to 31 January 2010, NSSF would have to deduct Ushs 20,347,486 per month beginning February 2009 (Ushs 244,169,835 divided by 12 months). If this is implemented, the following would be the expected monthly salary for Jamwa...

The above indicates that Jamwa will have a negative monthly salary for the remaining period of his contract, in fact, he should be making payments of Ushs 8,524,486 per month to the NSSF for the remaining period of contract.

1.3.5 Kagonyera's advances

Kagonyera commenced his term at NSSF on 2 February 2007, and in a period of 22 months to December 2008, Kagonyera received a total of Ushs 236,200,000 in housing and salary advances.

1.3.6 Irregularities in Kagonyera's advances

We noted the following irregularities:

1.Kagonyera was not entitled to receive housing advance as he didn't contribute to the pension scheme.

2. Kagonyera received three salary advances in 2007 and two salary advances in 2008, thus violating paragraph 25.1 of the Loan Policy which allows only one salary advance per year.

3. Kagonyera was receiving less than 45% of the net salary, as shown in the table below:

Source: monthly payrolls

4 .According to the ledger provided to us by the Deputy Finance Officer, Kagonyera owed Ushs 111,475,773 in advances to NSSF as at 31 January 2009. To recover these amounts from him during the remaining period of his contract to 31 January 2010, NSSF would have to deduct Ushs 9,289,648 per month beginning February 2009 (Ushs 111,475,773 divided by 12 months). If this is implemented, the following would be Kagonyera's expected monthly salary:

The above indicates that Kagonyera will be earning less of the Authorised 45%, of net salary for the remaining period of his contract.

1.4 Gratuities to Jamwa and Kagonyera.

Jamwa and Kagonyera were appointed as the MD and DMD of NSSF respectively by the Minister of Finance through letters dated 31 January 2007.

Note 3 of paragraph 3 of their contracts stated that they were entitled to an "end of contract gratuity at the rate of 20% of your gross salary, payable yearly in respect of each completed year of service".

1.4.1 Gratuities paid in advance

Jamwa and Kagonyera have been receiving gratuities in advance contrary to the above clause in their employment contracts.

These amounts were not due and should have been paid at the end of their contracts in January 201O.

Due to the gratuities received above, Jamwa and Kagonyera owe NSSF the following amounts:

The above amounts are gross before tax.

1.4.2 Weaknesses relating to housing advance

1.4.2.1 Security

Housing advances are secured or covered through an employee's contribution to the Staff Provident Fund. Members of EXCO do not qualify for the housing advance as they do not contribute to the Staff Provident Fund.

1.4.2.2 Gratuity as security

EXCO members, and senior staff, who are not members of the Staff Provident Fund, received housing advances. As at 28 February 2009, the EXCO members who have received housing advances include the following:

1.5 Motor vehicle purchase contract

On 5 June 2007, the NSSF Transport Department raised a purchase requisition for 67 vehicles under an operating lease.

A bid notice titled "Acquisition of a new motor vehicle fleet for NSSF on an operating lease arrangement" was placed in The East African newspaper on 23 July 2007. The closing date for the receipt and opening of the bids was set for 29 August 2007, at 10.00 am.

Although the bid notice indicated that the bid documents were available for collection from 16 July 2007, the bid notice was placed in the newspapers on 23 July 2007. Due to this discrepancy, the bid notice days were 5 days less (28 working days instead of 33 working days).

Kampala Nissan Limited won the bid and was awarded the contract to supply the vehicles. However, on 16 April 2008, NSSF changed the contract from an operating lease to a hire purchase agreement. This agreement included an option of purchasing the vehicles within six months of execution of the agreement.