Spending PTA loan outside approved allocation wrong, says BoU’s Mutebile

Karuhanga: In April 2016, Parliament passed a loan facility from the PTA Bank and a number of issues have been coming out from all directions; so, as [the] Governor [of Bank of Uganda], we hope we can get a detailed appreciation of all loans, but specifically this PTA loan.
Mutebile: I am sorry I was not prepared for that detail; I thought that my role was simply to explain how we handled this particular loan.
Karuhanga: You can go straight to that; it will give us an idea of how other loans are handled.
Mutebile: Thank you for inviting us to give you a brief about the details of transactions pertaining to a loan from the Eastern and Southern Africa Trade and Development Bank.
On August 22, 2016, BoU received instructions to open a holding account for Trade Finance Facility. This instruction came from Ministry of Finance. The account was opened and the letter confirming the account number 0033003278400013 was sent to the Accountant General on the following day August 23, 2016.
Between October 20, 2016 and May 20, 2017, five payments were made on the account of the trade Facility in BoU by the PTA Bank.
These payments totalled $97.9m and these were total payments into the accounts for 2016/17. On November 11, 2016, $56.5m was transferred from the Trade Facility Account to the Consolidated Fund account 003300138501.
This account was credited with Shs198b. On November 18, 2016, another $15.6m was transferred into the Uganda Consolidated Fund account and that account was credited with Shs55.9b. On May 25, 2017, $25.9m was transferred to the account and Shs92b equivalent was credited to the Consolidated Fund.
So there were five debits of $20 each on the trade facility account for bank charges for the transactions above. Therefore, the trade facility received an amount totalling to $97.9m from the PTA Bank between October 2016 and 23 May 2017 while an amount nearly equivalent to this amount, $97.9m was transferred to the consolidated fund between Nov 18, 2016 and May 26, 2017. The difference of $100 was paid in bank charges to the Bank of Uganda.
Prior to the first payment by the PTA Bank on November 20, 2016, the trade facility had a zero balance and after the last transfer to the consolidated fund of May 25, 2017, the account was left with zero balance.
With the exception of $100 paid in bank charges, all funds received from the PTA Bank on the Trade Facility Account had been transferred to the Consolidated Fund Facility and the use of the Consolidated Fund Facility is subject to control by the Ministry of Finance.
Karuhanga: What happens when this money is put on the Consolidated Fund account?
Mutebile: It is subject for use by the ministry of Finance under the control of the Accountant General of the ministry.
Karuhanga: We got documents about this transaction from ministry of Finance Permanent Secretary/Secretary to Treasury (Keith Muhakanizi). [Included] in his brief were documents which seemed to be from BoU on an electronic transfer of this facility. I would like you to look at them and give us an interpretation of what this would mean in reference to those [who] were supposed to receive this money. You got money from the PTA Bank and this money seems to be tagged to different entities of Government of Uganda.
Karuhanga: (Hands documents to Mutebile). So, does that look a document that ordinarily is from your bank?
Mutebile: (Pushes document to Joyce Okello). Can I direct the Director In-charge of National Payment Systems to verify the document?
Ms Okello: I would like to confirm that this is a SWIFT message that we received from PTA Bank advising us of an amount remitted of $30 million.
Karuhanga: Can you take us through this SWIFT message as a banker so [that] you guide the parliamentarians on what you see.
Ms Okello: The message from PTA Bank was received by City Bank New York, our banker, on November 7, 2016 and it was meant for National Medical Stores worth $30m (about Shs105b). Later City Bank notified BoU of another remittance on November 11, 2016 of $12.8m (Shs44.6b) for National Medical Stores.
[In] another message dated November 15, 2016, BoU received $2.8m (Shs10b) remittance from PTA Nairobi to City Bank New York for Rural Electrification Agency.
Jessica Ababiku: Having listened to the presenter, can I now know why money should be sent to the Consolidated Fund when we had specific objectives and the user ministries were clearly reflected?
John Chemonges (Director Banking): This money was credited on a holding account which is a transit account. So when money is received, we wait for further instructions from the Accountant General. In these particular cases, these accounts are operated by Electronic Fund Transfer (EFT) so we did not wait for physical instruction when the money was credited; we advised the Accountant General who effected the transfer to the Consolidated Fund. He cannot spend out of the holding account because expenditure is via Consolidated Fund after appropriate approvals.
Mathias Mpuuga: Are there circumstances where you directly transfer funds to the recipients as per the field indicated?
Chemonges: No. BoU follows instructions of the person sending the money and in all cases, they must specify the account which must be credited and must always be an account number.
Ibrahim Semujju Nganda: I appreciate the information given to the committee. But are there cases where instructions from ministry of Finance are to the effect that you transfer the money to the user department direct and it doesn’t have to go to the Consolidated Fund?
Chemonges: I think I need to cross-check, but I remember that, yes, depending on the type of the loan. Funds directly to the national Budget must always go through the Consolidated Fund.
Mutebile (winding up): I think the funds should be specified for what they will be used, either for a specific project or budget support.
Mpuuga: Would you then easily conclude that this kind of connotation was misleading to the funder and the recipient because we have the transfers communicating in specific terms?
Mutebile: The money I handled was properly transmitted.
Karuhanga: These end users might have not received money but as Governor and a person who would love to see this country progress, do you think what was done was appropriate?
Mutebile: This is a difficult question for me to say because I have not seen the audited accounts of this money.
Karuhanga: Mr Governor, if you could speak in relation to the money you handled and its transmission.
Mutebile: If they did not issue the funds in accordance with the specifics, then they were not correct.