Note: This is our record of what transpired in the meeting. Not verbatim.

Committee meeting with BOU over Auditor General’s Report FY 2013/14 & 2015/16

Discussed in the Committee on Commissions, Statutory Authorities and State Entreprises on August 2nd, 2017

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The Committee meeting was chaired by Hon. Abdu Katuntu and the vice chairperson was Hon. Anita Among. The committee invited Bank of Uganda which was represented by Governor Mutebile Emmanuel, the bank lawyer and other officers in charge.

The meeting was aimed at examining the Auditor General’s reports from the financial year 2013/14 to 2015/16 to review the reports and also explain the causes to the rise of the queries by the Auditor General, whether these queries were answered and also elaborate on the procedures through which the queries will be handled.

In the meeting, only the report of 2013/14 was handled but wasn’t completely wrapped up due to time shortage. The following queries were handled:

Exceptions were noted in the recording of the Treasury Bills/Treasury Bond auctions and redemptions.

A new system Central Securities Depository (CSD) was commissioned to replace the old system Central Depository System (CDS).

All government securities issued are recorded in the CSD system and corresponding amounts recorded in the Bank of Uganda Banking System (BBS) and the two systems are expected to have the same totals. However there was a difference in the in totals an indicated a possibility omissions or duplications of the system.

A solution was provided by the system vendor and testing was expected to be completed by 19 September 2014 and deployed by 30 September 2014 to correct the issues. Bank of Uganda had no evidence to confirm that the challenge was addressed and also observed that there was no observation of specifics to the vendor.

The committee gave the bank two weeks to collect all the evidence and present it to the committee.

Payments from government accounts with insufficient funds

A deficit of Ugx 1,711,351,844 was noted on 30th June 2014 because some of the MoFPED accounts held by Bank of Uganda that were debited for these payments had no funds. This could only be undertaken because the MoFPED payment files were uploaded manually into ECFMS hence BBS was by passed. A refund for this amount was finally made on 14th August 2014. 

Observation; Bank of Uganda broke its own rules and regulations by failing to collect interest on the refund which was made in August 2014 and bypassing its own system.

Recommendations; Bank of Uganda should be hard on the government to pay the interest on the refund and evidence of the payment should be produced something that Governor Mutebile Emmanuel accepted and confirmed to work upon.

Dormant Government of Uganda accounts opened in the name of BOU

It was noted an amount of Euro 3,354,980.64 confirmed by Deutsche Bank Frankfurt in the names of BOU was not recorded on the BOU general ledger. According to management, this account held the proceeds from the sale of Deutsche EntwicklungsGesellschft (DEG), a Germany Investment Company shares in DFCU bank. Management explained that the above account was opened in 2003, but Deutsche Bank first confirmed the balances to Bank of Uganda in 2013, ten years after it was opened.

The Accountant General was contacted in 2013 regarding the status of this account but also had no details of it. According to the OAG, There are three more other accounts in Germany and these accounts were useless, one of the accounts had money which was not accounted for  in 10 years. It was also observed that these accounts were mismanaged. MPs tasked Bank of Uganda to produce evidence of the reasons and procedures of opening these accounts. It was also recommended that Bank of Uganda should provide all the bank statements of the three accounts.

Insufficient re-imbursements for the debt paid on behalf of the Government of Uganda

Section 33 (2) of the Bank of Uganda Act requires that at the beginning of each financial year, the Treasury identifies and submits to the Central bank all its requirements for temporary advances for that year. Whereas re-imbursements were made by the Ministry of Finance, they were not sufficient to cover the amount paid by Bank of Uganda on behalf of government and Ugx 4,733,160,339 was outstanding at the end of the financial year which was fully paid on 29th July 2014.

Given that these were interest free, Bank of Uganda lost out on the opportunity costs of funds in terms of interest foregone. Bank of Uganda was negotiating a memorandum of understanding with the Ministry of Finance which memorandum wasn’t in line with the constitution. It was also observed that the Ministry of Finance does not pay interest to the bank for the overdrafts.

 Recommendations:

The bank should report all the money advanced in the last 3-4 years and no interest was paid on it and also introduce a system that automatically calculates interest in case of an overdraw.

The bank should produce evidence of reminders to the government about the shortages of funds on the government accounts.

Insufficient administrator activities monitoring on the critical applications

IFS, BBS and CSD have administrator level user accounts both at the application and database level. The following were noted:
• For these applications, administrator activities on the respective underlying databases are not reviewed by management to ensure that there are no unauthorized back-end transactions or operations completed by administrators.
• Procedures to review all users‟ activities including administrators have been implemented at application level for IFS, BBS and CSD.
• BBS and IFS application level reviews were limited to login and logout activity and the application process code accessed which is not sufficient. Business owners were not involved in the review of IFS.

A review of the daily logs used by the Security Administrator to monitor System Administrator activities revealed;

Reports for BBS administrator monitoring for 10 of the selected 25 days were not obtained.

• CSD administrator monitoring for nine (9) of the selected 25 days were not obtained.

Observations; The responses given to the Auditor General are dissatisfying than those which were presented in the meeting. It was also observed that the system used by Bank of Uganda doesn’t recognise decimal points. The issue was resolved by the password management tool.

Recommendations; Bank of Uganda should endeavour to produce sufficient responses to the Auditor General on the queries raised. The bank should also provide evidence in two weeks’ time for the resolution of the issue by the password management tool.

Conclusion
The committee observed that Bank of Uganda had not prepared for the meeting and hence had no evidence to present the committee on their explanations to the responses on the queries. The committee offered the bank two weeks to prepare all the evidence required.

The chair of the meeting Hon. Abdu Katuntu adjourned the committee meeting with Bank of Uganda till Tuesday 15th August 2017.

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