Meeting with National Housing and Construction Company (NHCC) Limited
Discussed in the Committee on Commissions, Statutory Authorities and State Entreprises on November 11th, 2014
The meeting chaired by Hon Ssemujju Nganda met with NHCC to hear the responses to the queries that arose in the Auditor General’s report of 2011. The procession from NHCC was led by the Chief Executive officer Felix Okoboi and with him was the Chief Internal Auditor, Mr. Twinomujuni, Mr.Henry Balwanyi, Ms Betty, Public relations.
NHCC is a parastatal that has been in existence since 1964, 51% shares are owned by the Government of Uganda and 49% to Libyan African Investment Company (LAICO). At the time of the audit the following queries arose in the report;
On the land lease that NHCC has in Namungoona, there are very many squatters occupying the land. These squatters even sued the entity for compensation as legal customary tenants. The true value of this land remains unknown and the auditors could not conclude on the value rights and obligations of this land. It came to the committee’s attention that this land had a history of squatters and this was majorly because the land was inherited with them. It first belonged to the Ministry of Housing, then the Buganda Land Board who then signed over to NHCC. Despite seeking legal redress for the matter, the problems of squatters has been dragged for a long time, a case in point is the 11 files with suits against the squatters that went missing from the magistrates court. However management assured the committee that 3 test suits with the same details as most of the land undergoing litigation were being pursued to solve the squatter problem.
On the land in Mbuya that that is currently occupied by Ministry of Defence; the auditor’s office noted that NHCC didn’t have possession of this land and it wasn’t indicated in its financial records. However the NHCC told the committee they could not put this land in any of their financial records because they didn’t know the actual value of the land. The attempts to value this land have been futile as armed guards deny access to whoever needs to carry out the exercise.
The audit report also noted that NHCC was not enjoying benefits of owning shares in Shelter Afrique, this was because the shares that NHCC bought in Shelter Afrique at $500,000, were still in the names of Government of Uganda. GoU has continued to control and use these shares for the benefit of the entire real estate industry of Uganda.
NHCC also irregularly offset dividends payables against receivables of the amount UGX 2.11 billion; the amount owed by statehouse and Ministry of Defense in rent arrears was offset against the Public Finance and Accountability Act, 2003. The committee heard that Statehouse claimed it did not owe NHCC any money as they had not entered any binding agreement, however management says it owes the UGX 65billion in rent arrears. NHCC also told the committee that negotiations on the same were going on.
The report also made the committee aware that NHCC entered a lease agreement with Kireka Estates limited, however in 2003 the latter sued the former for breach of terms of the lease contract and the court ruled in favor of Kireka Estates. NHCC was required to pay UGX 13 billion in settlement and also for reversionary interest for land in question, which it paid. However the Auditors offices made the COSASE aware that Kireka Estates was entirely owned by foreigners and there was no way they could have owned the said land for more than 49 years according to the land Act. So the Amount paid in reversionary interest was deemed fraudulent and the officers responsible for the transaction are going to face the law. In addition the same land had been earmarked by government for the Kireka Slum upgrading project, therefore the auditor was not sure land estimated to be UGX 16.23 billion was going to be repossessed by NHCC.
In the review of NHCC policies by the auditor’s office it was noted that the company had a 6 month liability period where it paid costs incurred on repairs and maintenance. Therefore the realized costs didn’t match revenues. Management explained that they had recently amended the finance manual and all additional costs were budgeted for in their right expenditures.
There were also unsold units by NHCC after their completion, therefore profits obtained in earlier years are more than those the company was currently receiving. In addition many projects undertaken by the company were not completed within their designated time frame. This led to increased overall costs at the expense of profitability.
The audit report noted that NHCC did not have an updated disaster recovery plan to speed up the process of recovery of lost data and also minimize the loss of data. Management assured that it was in place although at the time of the audit it had not been approved by the board of directors.
The chairman ended the meeting by requesting Management of NHCC to avail all the requested documents to ease the committee’s work on the report.