The latest Auditor General’s report for financial year 2022/2023 has revealed a daily loss of sh2.2 billion, paid in form of interest charges on delayed payment to project contractors.
The audit report presented to Parliament this week by Auditor General, John Muwanga, indicates that financial statements of Uganda National Roads Authority (UNRA) and Ministry of Works and Transport have an outstanding payments amounting to 804.26 billion Shillings.
Out of the sh804.26 billion, a total of sh588.77 billion is for UNRA while 215.49 billion is for Ministry of Works and Transport. These figures translate to a daily interest payment of 1.61 billion by UNRA and 590.38 million Shilling by Ministry of Works and Transport as at 30th June 2023.
“Long outstanding payables is an indication of poor budgeting and causes a risk of litigation and payment of penalties (Interest) for delayed payments. For example, UNRA paid out 11.93 billion in-respect of interest charges for the Interim Payment Certificates (IPCs) which were not paid in the agreed timelines. This was attributed to inadequate budget provisions for settlement of domestic arrears,” reads the audit report.
In an earlier explanation to Parliament in November 2022, the Executive Director UNRA, Allen Kagina said that arrears for unpaid contractors had been accumulating over years. She then said that the arrears positions has increased by 145.75 per cent from 215 billion at the end of financial year 2020/2021 to 528 billion at the end of the financial year 2021/2022.
“This is largely attributed to the budget suppression at 77 per cent of the approved Government of Uganda budget that was released,” Kagina then said, adding that for failure to pay the debt, they would incur nugatory expenditure that includes interest expenses, idle equipment, and reduction in the works by the contractors.
Auditor General Muwanga advised the accounting officers to liaise with the Ministry of Finance to avail additional funding for settlement of these domestic arrears.
Meanwhile, the Auditor General also queries commitment charges incurred due to delayed absorption of loans from development partners. “I reviewed the total cumulative disbursements for three donor funded road projects implemented by UNRA which included; North Eastern Road-Corridor Asset Management Project (NERAMP), Kabale-Lake Bunyonyi/ Kisoro-Mgahinga Roads Upgrading Project and Kampala-Jinja Expressway (KJE) Project and noted a total of undisbursed loan funds as at 30th June 2023 of US Dollars 458.759 million. This was majorly caused by delays in procurement processes and instances of lengthy approvals of project activities by the development partners,” reads the audit report.
Muwanga said that as a result of the undisbursed loan funds, government has accumulated commitment fees amounting to US Dollars 10.63 million on undisbursed donor funds since effective dates of the projects.
He advised the Accounting Officer to engage development partners and other stakeholders to come up with measures to reduce delays in procurement process of contractors for civil works as well as the lengthy approvals of project activities.
Also, the audit notes that the Uganda Railways Corporation incurred significant losses for the last two years that increased by 9.2 percent from the previous year’s loss of 32.22 billion despite the increase in revenue by 13.83 percent.
“The Corporation also incurred a loss due to theft of materials or equipment on Rehabilitation of Tororo-Gulu Railway line worth Euros 3.083 million and US Dollars 3.76 billion,” further reads the audit report.
Muwanga says that this is an indication of weaknesses in operating, profitability and the corporation’s ability to sustain provision of service.
He urges the Corporation to devise strategies aimed at improving the revenue generating potential.