Govt fails to spend Shs4.5t amid service delivery flaws

“Warrants totalling Shs48.854 trillion were issued to different votes and a total of Shs44.435 trillion was spent leading to an underutilisation of Shs4.419 trillion. This was due to insufficient funds, cancelled invoices, unimplemented activities by MDAs and local governments (LGs) as well as late releases among others,” the Auditor General, Mr John Muwanga, explains in his December 2022 report.

Mr Fred Muhumuza, an economist, said: “Warrant doesn’t mean cash, it is authority to spend, but there may not be money.  It is the authority that if money becomes available, you can spend it. Money eventually may not be found to be disbursed. The variation between a warrant and the actual money spent maybe a result in shortfalls in cash.”

“Part of it may have been money, that cash was available but entities were not able to spend it because of other reasons. Others, it is a warrant-permission to spend- but you do not get the money to spend,” he added
A forensic audit of the budget performance found that failure to utilise available funds meant that roads were not constructed, civil servants were denied their hard-earned pay, and the vulnerable were starved of much-needed support. 

This consequently affected the achievement of the National Development Plan (NDP) III and Vision 2040.
“Under absorption of funds limits the implementation of planned activities thus affecting service delivery…the anticipated objective of service delivery to the communities was not achieved. In addition, in order to complete the project, more time will be required to re-tender the works, causing extra delays to deliver services to the community,” the report states. 

MDAs contributed Shs3.8 trillion to the unutilised warrants, even as a number of ministries complained of lack of funds to bankroll key projects. 

Shs3.43 trillion was utilised funds from the warrants of treasury operations, which could mean some government’s commitments were not met. 

LGs absorbed only 88.48 percent of the cash available. 

Entities with unspent funds include the Office of the President (Shs1.3b), the Office of the Prime Minister, the Ministry of Defence and Veteran Affairs (Shs1.2b), and the Ministry of Finance that failed to utilise Shs10.3b meant for treasury operations. The others are the Ministry of Agriculture (Shs4.8b), the Ministry of Local Government (Shs26.1b), and Ministry of Education and Sports (Shs2.7b) 
Uganda National Roads Authority (Shs488.7b), Uganda Development Corporation (Shs210.48b), Parliamentary Commission (Shs3.7b), Kampala Capital City Authority (Shs13.56)

Local governments 
According to the report, local governments failed to utilise Shs703 billioin meant for salaries, pension, and gratuity, construction of roads, Microscale irrigation, livelihood improvement programmes, and agriculture support, among others.

Shs176b wage unspent funds left 8,347 staff and pensioners/beneficiaries in 115 local governments underpaid. Additionally, four LGs did not implement 25 infrastructure projects under Uganda Support to Municipal Infrastructure Development- Additional Funding (USMID-AF), 190 farmers were not supported with irrigation equipment, which exposed a large number of farmers’ plantations to drought.

“I noted that a total of Shs79,214,076,265 revolving funds paid to 8,703 Saccos in 169 LGs remained idle on the Saccos bank accounts. Failure to timely utilise disbursed funds delay the achievement of the PDM objectives of improving community livelihoods and will also compromise recovery of the advanced funds,” the report states. 

Shs40b meant for rehabilitation and construction of infrastructure investments under the USMID-AF in new cities remained untilised

The Office of the Prime Minister failed to spend Shs13b meant for the Livelihoods Programme, Sustainable Environmental Management under Development Response to Displacement Impacts Project DRDIP, PCA, and support to micro-groups.

“As a result, there have been challenges in implementing and monitoring the related service delivery activities due to the poor implementation,’’ the AG advised that the said funds are sent directly to implementing local governments.

Shs15.8m was lost in bank charges and foreign exchange losses on various transactions made to return unspent balances by diplomatic missions and embassies, the AG further reports.

The AG and experts in budget operations cited multiple reasons, some beyond the control of implementing entities, including late release of cash by the Ministry of Finance Planning and Economic Development that leave entities with limited time to implement projects.

On their part, MDAs and LGs are faulted for poor planning, prolonged procurement processes, especially in construction, and plainly put, sleeping on the job. 

Legal issues such as injunctions and investigations may also affect project implementation, and thus absorption of funds. 

“It could also be that there are other complementary activities to be done, for example Unra was supposed to do a road, but the right of way has not yet been granted. Even if you sign a contract, the contractor may not be able to do the road. Or some other legal issue comes up, the process can drag on and before you know it, the financial year has closed and the money sweeps back,” Mr Muhumuza said.

The unutilised cash, is by law, sent back to the Consolidated Fund. 
Section 17(1) of the Public Finance Management Act, 2015, provides that every appropriation by Parliament shall expire and cease to have any effect at the close of the financial year for which it is made. 

Sub-section 2 of the Act states: “A vote that does not expend money that was appropriated to the vote for the financial year shall at the close of the Financial Year, repay the money to the Consolidated Fund.

Mr Henry Musasizi, the State minister in-charge of General Duties, explained that these funds are used to finance other government undertakings. 

The AG, quoting district accounting officers, reported that the unspent balances of salaries, pension and gratuity resulted from failure or delays to carry out planned recruitments, release of funds beyond the requirement, and delayed validation of pensioners. 

“I also observed that whereas the cities had not operationalised the city staff structures, funds for recruitment were released and therefore remained unutilised at the end of the financial year. This limits the availability of funds to cater for priority areas and creates an avenue for misappropriation of funds,” he said.

Minister Musasizi said cash releases are dependent on cash flow. This means when the Uganda Revenue Authority does not realise its target collections, it will affect the quarterly releases by the ministry. 

“In the every quarter, we issue cash limits after analysing our cash flow, how much cash we have and the entities adjust their budgets accordingly,” he said while acknowledging that the last quarter money is warranted late hence failure to absorb the funds.

He further explained: “The money unutilised forms the closing balance and the activities expire. If you want the same activity, the subsequent year, you budget for it afresh.  

“It is supposed to return to the Consolidated Fund, but under the Treasury single account, money does not leave the Consolidated Fund. We only give them authority to plan within a given figure and the money remains with us. When they want to incur an activity, they invoice us. Whatever goes is what is spent,” he said.

Mr Aggrey Kibenge, the Permanent Secretary at the Ministry of Gender, Labour and Social Development, which scored 100 percent absorption fund, explained why entities that have other urgent pressures may return funds untilised. 

“The cash limit is distributed along specific budget line items that cannot be varied. So I cannot pick money from salaries to pay a service provider. This money is ring-fenced for let me say construction and you cannot use it to meet any other pressures you have,’’ he said.

He also explained that some unforeseen circumstances may affect project implementation, and thus unspent funds. 

“You might have an investigation, you have an activity which you planned, and you get a directive from IGG questioning maybe the procurement. You cannot continue until that is completed and so you cannot utilise the money,” he said.  

The AG also faults Parliament for approving budgets without corresponding strategic plans, which undermines implementation.

“Parliament approved budgets for 89 LGs without the corresponding certification of strategic plans by the National Planning Authority (NPA) whose regulations require entities to submit five-year development plans for certification before approval to ensure that strategic plans are well aligned to the National Development Plans.’’

Some MDAs with unutilised funds

Receipts (Shs)    unspent (Shs)   and     Spent(Shs)

Office of the President    555.9b    1.3b
Ministry of Defence and Veteran Affairs (MoDVA)    4.1t    1.2b
Ministry of Finance, Planning and Economic Development (MoFPED)    792.8b    10.34b
Ministry of Local Government    106.7b    26.1b
MAAIF    201.3b    4.8b
Ministry of Foreign Affairs (MOFA).    64.4b    2b
Ministry of ICT and National Guidance (MoICT    74.5b    2.5b
Ministry of Lands, Housing and Urban Development    143.6b    0.94b
Ministry of Education and Sports    415.7b    2.7b
The Ministry of Energy and Mineral Development (MEMD) 2021/2    480.1b    0.86b
Ministry of Water, and Environment (MoWE    456.1b    7.7b
Uganda Wildlife Education Conservation Centre (UWEC).    14.3b    3.4b
Office of The Prime Minister    178.5b    2.2b
Parliamentary Commission.    822.2b    3.7b
Kampala Capital City Authority (KCCA).    313.6b    13.5b
Uganda National Roads Authority (Unra)    3.1t     488.7b
The Independent Electoral Commission    227.5b    66.2b
Uganda Development Corporation (UDC).    243.6b    210.4b
Uganda Railways Corporation    191b    32.3b
Mulago National Referral Hospital.    74.5b    2.3b
Mulago Specialised Women & Neonatal Hospital.    25.3b    0.38b
Entebbe RH    3.3b    32m
National Drug Authority.    104.8b    19.1b
Allied Health Professionals Council (AHPC).    4.4b    289m
Uganda Coffee Development Authority (UCDA).    86.07b    9.2b
Makerere University    347.8b    3.4b
Makerere University Business School (MUBS    92.1b    1.2m
Uganda Management Institute (UMI).    43.5b    12b
Uganda Skills Development Project (USDP) -MOES    149.2b    87.8b
National Curriculum Development Centre 2021/22    40.7b    1.7b
The National Council for Higher Education     12.4b    1.3b
Uganda Business and Technical Examinations Board (UBTEB)    35.2b    2.5b
National Oil Palm Project    26.6b    11.2b
Uganda Multi-Sectoral Food Security and Nutrition Project (UMFSNP)    25.5b    16.6b
The Agriculture Cluster Development Project (ACDP)    145.8b    61.3b
Directorate of Government Analytical Laboratory (DGAL)    25.8b    6.5b
Justice Law and Order Sector 
(JLOS-SWAP).    106.3b    30.3b
Office of the Director of Public Prosecutions (ODPP).    53.6b    0.4b
Uganda Human Rights Commission    20.8b    0.4b
Uganda Law Reform Commission.    11.490b    0.934b
Ministry of Justice and Constitutional Affairs.    164.8b    4.1b
The Directorate of Citizenship and Immigration Control.    101.3b    1.4b
The Court of Judicature (The Judiciary).    378.2b    41.2b
The Uganda Prisons Service    101.3b    1.4b
National Identification and Registration Authority (Nira)    62.6b    5.3b
Uganda Wildlife Authority    124.8b    30.8b
Uganda Investment Authority    28.3b    2.9b
Uganda Communications Commission.    200.5b    53.4b
The Inspectorate of Government (IG)    17.7b    8.6b
Uganda Bureau of Statistics (Ubos).    67.5b    7.4b
Microfinance Support Center (MSC)    146.8b    21.2b
The Treasury Operations    17.3t    3.4t
Public Procurement and Disposal of Public Assets Authority (PPDA)    19.52b    3.7b

Unutilised funds in local governments

Activity    Amount unspent (Shs Billions) 
Salary, pension and gratuity payment    176.3 
USMID AF in refugee 
hosting districts    41.8
Micro scale irrigation    28.3
DRDIP funding subprojects    12.4
USMID construction of roads    31.4
Others    413.3
Total    703.6

Govt budget performance per spending category

Revised budget (UGX Tn)   Total warrants (UGX Tn) C    Actual expenditure (UGX Tn) D    Unwarranted funds (UGX Tn) E=B-C    Unutilized warrants (UGX-Tn) F=C-D
MDAs    46.287    43.759    39.927    2.528    3.832
LGs    5.275    5.095    4.508    0.18    0.587
Total    51.562    48.854    44.435    2.708    4.419
 

*Source: Auditor general