10 January 2013

Uganda: Sh165 Billion Paid to Ghost Pensioners

Up to sh165b was misappropriated in pension payments by the ministry of public service (MOPS), according to a new forensic report by the Auditor General (AG).

Of the sh165,416,588,331 that was misappropriated sh155.7b was lost in payments to ghost pensioners; sh9.5b in double payments to the nonexistent pensioners and sh173.9m in doubtful payment to foreign pensioners.

According to the report dated December 21, 2012 and addressed to the Speaker of Parliament another sh15, 487,040,200 is feared to have been lost in payments purportedly made in respect of damages to pensioners due to delays in the payment but this was not supported with adequate documentation.

The report titled: Report on special investigations on the allegations of financial impropriety of pension funds in the ministry of public service notes that although the National Social Security Act exempts pensioners from social security contributions, funds amounting to sh88.2b were irregularly budgeted for as social security in the financial years 2010/2011 and 2011/2012.

"A total of sh165,416,588,331 was misappropriated as the expenditure was not supported with the required documentation. In all instances these payments were not backed with personal files to provide employment details of the beneficiaries, the payees were neither on the Pension Management System (PIMs) nor the pension's payroll. Further verification also revealed that the beneficiaries did not exist in their former purported places of work," the report signed by the Auditor General John F.S Mwanga notes.

The report also highlights a pension payment process, riddled with weaknesses, among them lack of involvement of internal auditors to verify payment schedules and incomplete information on pension files and delays in processing pension emoluments.

The audit was commissioned in response to a request by the ministry of finance and the police, particularly after police unearthed the scam in the ministry covering the period October 2009 to September 2012.

According to the terms of reference the audit was to ascertain the procedure for payment of pensions, identify and evaluate the major controls; ascertain that the people on the list from the criminal intelligence and investigations directorate (CIID) received payments through the ministry of public service, establish whether all the procedures relating to the application, verification, assessment and approval were followed and where instances of fraud has been confirmed, ascertain the loss occasioned and where possible those responsible, among others.

The report notes that a total of sh910.7b was released for pensions in three financial years of 2009/2010; 2010/2011 and 2011/2012.

Though the report did not covers the entire releases for the three years under review it focused on payments in respect of gratuity; controls relating to payments of pension benefits and specific payments relating to requests by the CIID.

The report notes that of the sh165b that was misappropriated, sh155b was lost in payments to 2434 pensioners purported to be beneficiaries of the East African Community gratuity payments.

However, a scrutiny of the records and other procedures according to the report, revealed among others that the purported pensioners did not exist on the ministry database and the pensions payroll and that there were no personal files provided for audit to enable verification of the authenticity of the payments.

It also notes that verification of the existence of the beneficiaries with their purported former places of work indicated that there was no record of the individuals as having worked adding that the purported pensioners were originated in the ministry of public service.

"The schedules generated were traced to the computer of the manager IT (Francis Lubega) of MOPS. A review of the file properties of a sample of schedules from that computer revealed that the schedules were authored by the Principal Accountant (Christopher Obey). The schedules supporting the payments were signed by Obey and the Permanent Secretary (Jimmy Lwamafa)."

"Interview with other staff of the ministry who should have been involved in processing the files and those of the internal audit unit in the ministry of finance the, planning and economic development, that should have reviewed these files indicate that they were not aware of the payments and did not process or review them.

On how the fund were processed, the report notes that the schedules contained lists of pensioners that were not verified and or assessed by the relevant sections and did not exist in the ministry database; that the schedules were later submitted to ministry of finance with a covering letter signed by the principal accountant, who would in turn submit soft copies for payment of gratuity to IT section at the ministry to encrypt and forward to the Uganda Computer Services (UCS) department of ministry of finance.

The payment schedule would be processed by treasury and then sent to Bank of Uganda for payment.

The report notes that according to records, the beneficiaries of the funds opened accounts in Cairo International Bank (CIB) with introductory letters by an official of the East African Community Beneficiary Association (EACOBA).

"In some instances, the accounts would be opened even before receipt of the letter of introduction," the report notes.

It highlight control weaknesses in the pension processing system; absence of internal audit verifications, lack of a commissioner for compensations, incomplete information on pension files and lack of adequate mechanism to communicate to pension applicants on the progress of their applications as some of the weaknesses.

This comes as part of wide investigations onto the ministry where sh169b was allegedly paid to over 3000 ghost pensioners.

Several officials from the Ministry Including Jimmy Lwamafa (Permanent Secretary), Steven Kiwanuka Kunsa (the Director Research and Development); Obey Christopher (Principal Accountant), all interdicted; David Oloka (the Assistant senior accountant in charge pensions), Joan Nantwenda (Principal Personnel Officer); Steven Lwanga and Fred Tumusime have been arrested and recorded statement with the police.

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