Commentary

Financial reforms will curb theft of public funds

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By Rose Namayanja

Posted  Tuesday, March 11  2014 at  02:00

In Summary

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Corruption has been one of Uganda’s development challenges for a while. The recent scams at the Office of the Prime Minister (OPM) and the Ministry of Public Service (MoPS) are two stand-out cases that left the country reeling from billions of shillings lost. Separately, these scandals presented ‘classic’ illustrations of how insidious acts of graft were slowly gnawing away at the very core of Uganda’s financial sector.

The scams, as it emerged, were orchestrated mainly through manipulation of automated government financial systems by a syndicate of crafty individuals. That the ‘bad apples’ included individuals managing financial systems at OPM, MoPS, the Treasury and Bank of Uganda (BoU) was disturbing indeed. As a country, our anti-graft efforts came under closer scrutiny.

However, to borrow from an old adage, ‘every dark cloud has a silver-lining’. The OPM and MoPS corruption scandals presented stark insights into inherent loop-holes in the government’s software-based financial management systems at that time. Indeed, some observers opined that the defects in the government’s financial management systems at that time were akin to a ‘sceptic wound’ curable only through corrosive disinfection and administration of painful drugs.

In the aftermath of the said graft scandals, the Auditor General (AG) undertook investigations into OPM, MoPS and other government Institutions and made recommendations, calling for reforms in Uganda’s financial systems. Between 2012 and 2014, the Ministry of Finance Planning and Economic Development (MFPED) initiated comprehensive reforms with tighter financial systems and robust control mechanisms. The wide-ranging interventions here-below have indeed plugged the main entry points for crafty officials who were siphoning public funds.

• Measures have been put in place to control donor disbursements within Bank of Uganda and the Treasury. All such in-flows are now first remitted to the Consolidated Fund Appropriation Account before the funds are transmitted to beneficiary accounts, instead of suspense accounts. This seals the entry-points that some elements were exploiting to divert public funds.

• All dormant project accounts in BoU have been closed basing on the Memorandum of Understanding between BoU and MFPED. Dormant accounts are the ones previously used for transactions of projects whose time-span has elapsed. In the case of OPM, in-coming PRDP donor funds were diverted to such dormant accounts by crafty officials before they were reflected on the government’s financial system.

This is how such officials accessed the said funds, undetected for a while, a situation that cannot re-occur with all such accounts now closed.

• The MFPED has installed hi-tech hardware and software to strictly control the use of generic passwords particularly for sensitive roles relating to the operation of the Integrated Financial Management System (IFMS). Again, in the cases of MoPS and OPM it was through abuse of generated pass-words availed to accountants by their cohorts in the Treasury Department that government lost huge sums of money.

With such generic passwords, the said accountants were able to authorise and effect payments at the same time. This, in a way enabled the accountants to usurp the role of accounting officers, to effect payments, again undetected for a while. Internal audit mechanisms of the new system now enable close tracking and usage of all passwords to nip in the bud, any attempts at abuse by crafty elements.

• The process of bank reconciliations between Accountant General’s office and BoU has been improved. Statements from Bank of Uganda are now submitted directly to the Accountant General who is to be responsible for their reconciliation on a monthly basis. All accounting officers are required to make reconciliations and submit reports on a monthly basis. This ensures that all financial transactions are closely monitored and any payments which accounting officers have not authorised are detected in time. This measure reinforces the one against the access to and abuse of generic pass-words.

• At MoPS, government directed the reconciliation and clean-up of the salary and pension payrolls to mop-up all ghost payees. The out-put here has been sealing the loopholes through which thieving officials siphoned billions before they were caught. The cleaned payrolls at MoPS are now reviewed regularly to root out any attempts at introducing phantom employees and pension claimants. Further, government moved to shift the pension and salary payrolls to the IPPS by December 2012, to eliminate diversion of funds from the intended beneficiaries.

• The government is strictly enforcing the policy of rotation of staff regularly particularly those involved in the direct management of government resources such as accountants, procurement officers and internal auditors. It is now mandatory that these categories of officers are moved after a period not exceeding three years. This is because from the OPM and MoPS graft scandals, it emerged that a lot of collusion involves such officers, who tend to build, conceal and entrench networks which they use to steal public funds.

Government realises that implementing these noble reforms is a case of change management which can encounter challenges. Thus, Cabinet resolved to fully supporting the MFPED to ensure that these reforms are implemented to the letter. Deviant public officials in ministries, Departments, agencies and local governments risk severe sanctions. Ultimately, corruption scams like the recent ones at OPM and MoPS must be condemned to history.

The NRM government is steadfast in halting wanton haemorrhage of public resources to consolidate implementation of its numerous transformational programmes. We have another reason to look into the future with optimism.

Ms Namayanja is the minister of Information and National Guidance.