14 February 2019

Uganda: SHS 125 Billion Withdrawn From the Petroleum Fund Irregularly - Auditor General

Auditor General notes the money was withdrawn from the petroleum fund without following procedures laid down in the Public Finance Management Act, 2015.

In his latest report to Parliament, John Muwanga, Auditor General has faulted the Ministry of Finance, Planning and Economic Development (MoFPED) of irregular withdrawal of Shs 125 billion from the Petroleum Fund.

In the report to Parliament for the Financial year ended 30th, June 2018, the Auditor General notes that money was withdrawn from the Petroleum Fund and transferred to the consolidated fund in total disregard of the Public Finance Management Act, 2015. The 450-page report containing the disturbing news was released in December, 2018.

Section 58 of the Public Finance Management Act, 2015, requires that withdrawals from the Uganda Petroleum Fund to the Uganda Consolidated Fund to be made under authority granted by an Appropriation Act. Section 59(3) of the Public Finance Management Act, ring fences petroleum revenues to financing infrastructure and development projects only. However, from the report, it is not clear what kind of expenditures the money was used for.

"I noted that management transferred Uganda Shillings125 billion on 2nd, November 2017, from the Uganda Petroleum Fund to the Consolidated Fund, without explicit mention of the Uganda Petroleum Fund in the Appropriation Act, as a source of funding," the report reads in part. Instead, the withdrawal was premised on the medium term expenditure framework for the financial years, 2015/16-2021/22 submitted to parliament which includes the different

sources of revenues financing the budget.

"In the absence of guidance from the Appropriation Act, which would indicate the activities for which the funds have been budgeted, there is no assurance as to whether the funds were used to finance infrastructure and development projects of Government, as provided for under Public Finance Management Act, 2015," the report reads in part.

According to the report, in response, the Ministry of Finance explained in the management letter that the Appropriation Act, provides for only expenditures but does not reflect the various sources of funding for the budget, and that discussions are ongoing to review the presentation of the Appropriation Act to incorporate funding sources.

In the report, the Auditor General advised the responsible Ministries to align the legal framework to sufficiently provide for a format of the Appropriation Act which shows the purpose, activities and amounts of the Petroleum Funds to be appropriated under the Consolidated Fund, or to be transferred to the investment reserve account.

The Auditor General revelations continue to cast doubt on government's willingness to transparently manage oil revenues. For instance, in 2017, a report of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) revealed that $633.7 million dollars (approximately Shs 2.2 trillion) oil revenues had been spent under unclear circumstances.

The COSASE report didn't give details how and where the money had been spent, but the Secretary to the Treasury in a letter, stated it was spent on the construction of Karuma hydro power plant. However, the Cabinet of Uganda approved the country's ascent to the membership of the Extractive Industries Transparency Initiative (EITI) thereby providing hopes for more transparency and accountability in the extractive sector, only if the initiative shall be properly applied to its true purpose.

By Edward Ssekika

Edited by Flavia Nalubega

Uganda

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