Business

Parliament: Auditor General Didn’t Audit UTL Until It’s on Its Knees

UTL has since been taken over by government

A Parliamentary inquiry has partly blamed the Auditor General for absconding from his duty, page leading to Uganda Telecom’s (UTL) financial meltdown that could see billions of of taxpayers’ money lost in the investment.

According to Article 163 of the Constitution and Section 18 of the National Audit Act 2008, UTL as a company in which the Government of Uganda owns 31 percent shares is subject to audit by the Auditor General.

However, the Select Committee investigating the management and performance of UTL found that the Auditor General had not conducted regular audits of UTL as required by the law.

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“The only time the Auditor General intervened in the financial matters of UTL was when he was asked by the Minister of Finance to conduct business viability appraisal and valuation of UTL in December 2011,” reads the MPs’ report dated May 17.

When the Committee asked the Auditor General why he had reneged on his duty with respect to auditing UTL, he pleaded that there were “practical challenges” in operationalising the provisions of Section 18 of the National Audit Act, 2008.

The Auditor General indicated that “in companies where government funding is amalgamated with private funds, he finds himself constrained due to lack of mandate over private funds.”

He suggested that follow up of government funds could be possible if there was a clear separation.

However, he hastened to say that the “office had not looked at the matter of auditing public companies from the bigger picture of the Constitution.”

The Committee observed that whereas there may be many laws pertaining to UTL, the Constitution is “supreme and any law inconsistent with the Constitution is null and void to the existence of its inconsistency.”

The Constitution gives the Auditor General the mandate to audit all public funds in any company or project as provided by Article 163 (3) of the Constitution.

Further, the National Audit Act, No 7 of 2008 was enacted to among others, provide for the auditing of the accounts of central government, local government councils, administrative units, public organisations, private organisations and bodies.

UTL falls under this Act.

According to Section 2 of the Act, “Public Organisations” mean anybody corporate, whether established under the Companies Act or under any other enactment, in which the State owns the whole of part of the proprietary interest or which is otherwise controlled directly or indirectly by the state.”

The Committee noted that UTL falls within the definition of a public organisation under the National Audit Act.

Section 8 of the Act provides that the Auditor General may inquire into, examine, investigate and report, as he or she considers necessary, on the expenditure of public monies disbursed, advanced or guaranteed to a private organisation or body in which the government has no controlling interest.

Figures

According to the MPs’ report exclusively obtained by ChimpReports, from 2009 to 2014, the company’s revenues declined from Shs 193bn to Shs 118bn.

Further, UTL’s total assets have been in a downward trend from the year 2009 (Shs309.28bn) to 2014 (Shs 204bn), a decline of Shs 104bn in a span of 6 years.

In the year 2011, UTL total liabilities exceeded total assets by Shs 58bn which meant that at that point, the company was incapacitated to clear its obligations.

The condition worsened in 2014 when liabilities exceeded assets by Shs 344bn. This means that since 2011, UTL has been insolvent.

As of December 2016, UTL’s liabilities stood at Shs 689bn for cumulative majority purported shareholder loans, taxes and UCC fees, technical investment costs, interconnection fees among others.

As if this was not scary enough, UTL currently has an outstanding tax payment of Shs 89bn.

The Committee found that it is undisputed that the government of Uganda has interest in UTL.

As per the legal regime, any existing entity that the government has an interest on ought to be audited by the AG.

The AG then prepares a report on the examination and audit of all the accounts and submits the report to Parliament.

The Committee observed that “if the Auditor General had done his constitutional and statutory duty of conducting annual audits of UTL, the poor financial and governance of UTL would have been detected early enough.”

Government recently took over UTL after major share holders Ucom Ltd decided at to stop funding it.

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