24 June 2012

Uganda: Sh13 Billion Lost to Fraud At CAA

Investigations into the Civil Aviation Authority (CAA) operations have unearthed numerous scams, where management is accused of engaging in fraudulent dealings, leading to a loss of over sh13b.

Investigators discovered fraudulent transactions in debt recovery, motor vehicle maintenance and repairs, as well as in the collection of rental income and revenue from concessions.

They also discovered unauthorised transactions, unaccounted for staff advances, doubtful debts and irregularities in collection of road toll and parking fees.

These dubious dealings are cited in the 2010/11 Auditor General's report that was released early this year.

When contacted early this week, Ignie Igundura, the CAA public affairs manager, said he had seen the report, but declined to comment.

He said he had sent the report to the authority's finance director for interpretation. We tried to contact him a few days later, but he did not pick his cell phone.

Debt collection

The audit revealed that CAA spent sh4.4b as debt collection fees in the year that ended June 30, 2011. But earlier in 2009/10, a verification exercise established that the debt owed by the Government to CAA, as of 2006, was sh54b, which the treasury committed itself to paying.

However, CAA went ahead and hired Kampala Associated Advocates (KAA) as debt collectors and the firm was paid sh5.4b (10% of the total sum) as debt collection fees.

According to the Auditor General, this expenditure resulted into an unnecessary loss to CAA, which could have been avoided. "Ideally, once the Government commits itself to pay a government agency whose line minister is a member of cabinet, there should be no need to appoint a debt collector," the Auditor General, John Muwanga, stated in the report.

The Government paid sh54b; sh10b in the financial year 2009/10 and the balance of sh44b during the year ending June 30, 2011.

Investigations further noted that a review of KAA's success rate in collecting other debts that had been passed over to the same firm showed a modest collection, indicating that collecting from Government was very easy and could have been ably handled by CAA management.

KAA has 22 registered lawyers who include, Elly Karuhanga, Peter Kabatsi, Oscar Kambona and David Mpanga.

Vehicle maintenance

Auditors revealed that maintenance costs in four different months reviewed in the year 2010/11 were excessive and uneconomical. A total of sh67.6m was spent on repairing seven vehicles.

When it came to fuel, it was established that there were cases where fuel was allocated to individuals for private activities such as weddings and introduction ceremonies and that several vehicles that do not belong to CAA would be filled with as much as 140 litres a day.

Rental income

Although CAA reported sh5.99b in the 2010/11 financial year from the 1,800 square meters that it rents out to 14 firms, almost all the tenancy agreements expired on June 30, 2011, some as far back as June 2009.

By October 2011, there was no evidence that the process to renew these tenancy agreements was in place, the Auditor General noted.

He also pointed out that some tenants were invoiced less than what was agreed on in the tenancy agreement, adding; "Our conservative estimate is that rental revenue of at least $400,000 (sh996m) is exposed to the risk of fraud."

Also, investigations uncovered that CAA spent sh98.8m in a period of six months without adequate supporting documents. These were the months of August, September, October and November 2010, as well as February and April 2011.

Lack of supporting documents, according to the report, exposes CAA resources to a high risk of not being used for the intended purpose.

Road toll and parking fees

The Auditor General also queried the sh1.7b CAA reportedly collected from car parks during the financial year 2010/11.

He said the daily sales printouts from the cash collection machines were not available to enable them to verify the accuracy of income generated from there.

Muwanga foresaw a risk of loss of cash, thereby recommending that management ensures that the daily sales printouts from the machine are produced and all cash collected at the cash collection points be agreed to the totals of the machine printouts.

Money lost in receipt fraud

A total of $4,610.48 (sh11.4m) was used for unauthorised transactions, while several receipts that were not shown as cancelled were also not recorded in the books of accounts.

For unknown reasons, receipts worth $61,697.50 (sh154m) were incorrectly recorded as sh61,697.50.

Additionally, receipts and invoices worth $1,074,074 (sh2.68b) were recorded in the books of accounts as only $21,561.60 (sh53.9m) resulting into an under declaration of income by $1,052,513 (sh2.63b).

"This implies that management is not effectively enforcing the control systems put in place to safeguard CAA assets. There isn't any effective check for authorisations, completeness and correctness of invoices, receipts and payment vouchers before being recorded in the books of accounts. This exposes CAA to a very high risk of fraud," the report outlines.

Staff debtors

As of June 30, 2011, the total staff debt stood at sh1.17b, an increase of 25% from sh934m on the same date in 2010.

A total of 195 staff had outstanding unaccounted for advances amounting to sh554.2m, of which sh421.2m was due from only 20 employees, representing 76% of the total unaccounted for advance balance.

It was also established that additional advances were given to staff who had not yet accounted for their previous advances, which according to the Auditor General, was a risky action.

In the 2009/10 financial year, advances to staff members totalled sh18m and the Auditor General proposed that money be recovered by the company debt collectors (KAA).

However, CAA management said the money was extended to former board members to facilitate their participation in CAA related activities.

As a result, CAA management, in the 2010/11 financial year, requested the board and it approved to write off the debt "without any deliberate act on the part of management to try and recover these monies from the former board members."

This means a sh18m loss to CAA. Besides, there was a risk that debtors were misstated in the financial statements of 2010/11.


An audit to conduct the physical verification of CAA fixed assets in Arua, Gulu, Soroti and Kidepo found out that several assets included in the register do not physically exist. A number of them that exist were not included in the register, while several of them were not engraved.

The auditors also noted a number of safety issues like lack of lighting conductors at buildings and control tower, non-functional electric fence and absence of fire lines around the perimeter fence. These safety loopholes pose high risks to the operations of the aerodromes as stray animals and unauthorised people can easily access the airfields, posing a risk to airplanes during landing and take-off.


Whilst a reduction of the net book value of fixed assets by sh12b, depreciation had increased by sh2b, which according to the investigators, suggested an anomaly in depreciation computation.

Basing on further investigations, it was established that there was a systems malfunction that had not been reported, prompting the auditors to conclude; "there is a risk that (the) depreciation expense is misstated in the financial statements by approximately sh2b."

CAA also included the sh3.2b prepayments to companies for work they are yet to do. Some of the money was paid as far back as November 2008.

On the sh71b loan that CAA secured, it was reported that sh58b had been paid to the bank during the year 2010/11 as the remaining balance plus an interest of sh2.9b, thereby clearing the loan.

However, there was no confirmation from the bank to that effect. Besides, the interest of sh2.9b was based on figures advised by the bank. Despite the Auditor General's recommendation to CAA to make its own computation to verify the interest figure, there was no evidence that it was done. In all the above transactions, Muwanga recommended further investigations and action be taken against those found culpable.

In April 2010, the CAA managing director Rama Makuza, together with six senior managers, were arrested at Parliament and handed over to the Police for further investigations over how they spent billions of taxpayers' money to prepare Entebbe Airport for CHOGM in 2007.

The other officials were former MD Ambrose Akandonda, acting finance director Dan Sevume, procurement manager Godfrey Matovu, Engineer Dan Kasule and chief engineer Herbert Ngobi. This also followed the Auditor General's report of 2008/09.

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