An investigation into how a private South African firm contracted to provide payroll administration solutions to government has been instituted after it emerged that civil servants are losing millions of shillings from their salaries over loans taken from financial institutions.
The Public Procurement and Disposal of Public Assets Authority (PPDA) has launched investigations to find out under what circumstances Payment Solutions Uganda (PSU) violated the conditions and terms of a contract they signed with the Public Service Ministry.
“This lady [Goretti Sendyona, Commissioner] in Public Service and PS should answer all the questions, but on Monday I am sanctioning an investigation why they are deducting people’s money,” PPDA Executive Director Edgar Agaba told Saturday Monitor.
PSU signed a contract with the Public Service ministry to handle the payroll for all government servants to recover loans for free. However, hundreds of civil servants with loans are losing up to 2.5 per cent per month from their income as Payment Solution Uganda started deducting the money apparently without the knowledge of the civil servants.
Reaping as middleman
It is estimated that the middleman’s role being played by PSU could earn the firm around Shs4 billion a year; a fact commercial banks and other lending institutions fear could lead to higher borrowing costs for civil servants like teachers and nurses who earn a monthly pay of less than Shs300,000.
PSU publicist Hannington Musinguzi told Saturday Monitor that whereas it is true they signed a contract with government to provide a free service, the firm also signed another contract with financial institutions involved in lending civil servants loans and PPDA therefore could be ignorant about the contract with the financial institutions.
“It is true PSU offers free services to government and the civil service as far as this contract is concerned. However, our cost is met by the end users and these are financial institutions” Mr Musinguzi said.
Saturday Monitor has learnt that the payroll deduction management system was not one of the issues that were agreed upon in the meeting that took place on July 2, 2009 in the Accountant General’s office on implementation of salary procedures with all financial institutions.
Mr Agaba told Saturday Monitor that although PPDA gave the Ministry of Public Service clearance to use PSU’s services, it was agreed that they would be offered free and that the change of terms and conditions by PSU to levy money on salary was illegal since it was not part of the agreed position.
“We thought PSU wanted to give free services but later on would get a contract with government. We referred them to Solicitor General and Ministry of Finance,” Mr Agaba told this newspaper on Wednesday.
According to documents obtained by this newspaper, the world integrated payroll and payment systems was supposed to compliment Uganda Computer Services but the system, which was expected to be free, now deducts money from people’s monthly salary.
“It should also be noted that the Public Service Payroll was already enforcing a 50 per cent deduction rule under the updated IT system. So there was no need of a third party player to help enforce this rule. Worse still the affordability criteria of 50 gross rule is not accurate in PSU system,” the documents read in part.
On October 19, 2009, Ms Goretti Sendyona wrote to Mr Bosco Rutagarama, the director Payment Solution Uganda Limited asking him to provide copies of Memorandum of Understanding which he signed with financial institutions.
Mr Agaba also said that PSU had never mentioned anything about payroll deduction in their terms of reference.
However, PSU said the 2.5 per cent per annum paid by financial institutions to them annually depends on what they collect.
“Some financial institutions have been charging as far as 72 per cent per annum but when we took over this and normalised the system to 2.5 per cent, they opened a war on us because they have been making a lot of money from people’s money,” Mr Bosco Rutagarama said.
PSU, according to one of Ms Sendyona’s communications, was hired to improve payroll management especially the management of deductions related to loans and hire purchase.
Public Service PS Mr Jimmy R. Lwamafa on April 10, 2010 put the project on hold citing several complaints. “There is continued stakeholders’ interest in the pricing of services offered by Payment Solutions Uganda Limited. This is becoming a political matter and may cause me unnecessary engagement as the accounting officer. I strongly advise that Payment Solutions Uganda Limited revises its pricing from 2.0 per cent to 1 per cent per installment going forward,” he wrote in a letter dated April 17.
Ms Sendyona denied the existence of the above letter. Ms Rose Namirembe, a teacher allegedly affected by the deductions, petitioned Parliament on July 5, 2010. She complained that event banks/lenders had resisted the services of the company because of their uncompetitive rates.
“Both the line minister and Deputy Attorney General denied knowledge of any agreements with this company on behalf of government,” she wrote.
“That alone demonstrates that there is everything to hide about how this company was procured to only extort money from us poor civil servants.”