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Subject: Fw: ugnet_: ISO: Uganda May Have Overpaid Swipco by $20m



  
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Regional - EastAfrican - Nairobi - Kenya 
Monday, February 23, 2004  
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ISO: Uganda May Have Overpaid Swipco by $20m

By WAIRAGALA WAKABI 
THE EASTAFRICAN 

UGANDA'S INTERNAL Security Organisation (ISO) has informed President Yoweri Museveni and Finance Minister Gerald Sendawula that the government could have overpaid Swipco some $20 million (Ush39 billion), The EastAfrican has learnt. 

Swipco, the Swiss Procurement Company, was engaged by the government between September 1996 and September 2003 to provide procurement audit services. 

Attorney General Francis Ayume told The EastAfrican that he had received a copy of the report. "I do not know whether what ISO is saying is correct. It was the Finance Ministry which was paying Swipco so they are the ones who know," he said, adding that his staff would study the case. 

Mr Sendawula said last week that he was not aware whether the firm was overpaid, and declined to comment on the report. "What Swipco valued was at times donor money and if it was dollars the commission differed," he told The EastAfrican. "One has to check on those facts to see whether the report is accurate, whether there was overpayment." 

The report recommends that President Museveni instructs Mr Sendawula to establish a commission of inquiry into the payments. "The government may have lost up to Ush20 billion in dubious overpayments to Swipco. If the government does not do so [form an inquiry commission], subsequent governments will be tempted to investigate Swipco the Kenya Goldenberg way," it said. 

Investigators said that, by 2003, it had become clear that corrupt officials in the Ministry of Finance had ignored prudent advice by the Attorney General, Auditor General, State House and the Inspectorate of Government regarding Swipco's contract and payment terms. 

The report says, for instance, that in February 2003 the Finance Ministry gave Swipco $1,243,540 as a consultancy fee for the Kampala Industrial Park Namanve.  

The investigators queried what work Swipco did, considering that the land on which the park is located belonged to the government, which passed it on to the Uganda investment Authority (UIA). Information from the Finance Ministry indicates that Swipco was engaged by UIA. 

The ISO report has been circulated to several government officials, including Mr Ayume, Inspector General of Government (IGG) Jotham Tumwesigye, Minister of State for Security Betty Akech, and the Auditor General John Muwanga. It recommends that the Finance Ministry halt payment of Ush4 billion ($7.2 million) which Swipco is demanding from the ministry until investigations are completed. 

Mr Ayume said last week, "If there was overpayment, we should find out who paid. It is likely to be the Finance Ministry because Swipco is a procurement agency, which was engaged by the government and was paid by Finance." 

Swipco last year sued the Uganda government over failure to pay an outstanding sum of $7.2 million. The court ruled in favour of Swipco but payment has reportedly not been effected. 

The report says Swipco was paid based on gross calculations rather than on actual work done, and that its contract to offer services to the government was offered irregularly. It adds that Finance officials continued paying the company a 2.1 per cent commission even after the Central Tender Board (CTB) and parliament advised the ministry to reduce the rate. 

It was not possible to speak to Mr Robert Mwesigwa, the managing director of Amproc - the firm that took over Swipco's interests. He was said to be out of the country. 

The report notes that, by the end of 1999, Swipco had claimed $12.7 million for work done between 1996 and 1998. "Quite clearly, the Swipco bill of $12.7 million was based on wrong computation of money government projected to use. In addition, a large part of claims was based on donor funded projects which were outside Swipco's mandate," it says. 

On September 20, 2000, Keith Muhakanizi, the Director for Economic Affairs in the Finance Ministry, wrote to Swipco clarifying that donor-funded projects were not part of the deal. Investigators say much of the $12.7 million was for projects funded by the International Development Association (IDA). 

Former Auditor General James Kahooza wrote to the finance minister on February 4, 1999, saying, "The more I get familiar with the way the contract was handled, the more I get profoundly surprised." 

He added: "A letter from the IGG on the contract not only reveals more irregularities, but points to cases which are shocking to say the least. The state is even required to pay for services that are not and cannot legally be under the ambit of the Swipco contract!" 

Mr Kahooza called for a renegotiation of the contract and to have it ratified by the Central Tender Board. He added that the government should pay for services that Swipco actually rendered, not the projected service cost. Mr Kahooza also wanted all Swipco invoices to be audited by his office; and the procurement of parastatal bodies, donor and borrowed funds not to be part of the contract. 

The contract the government signed with Swipco on September 5, 1996, excluded the CTB and the Justice Ministry, which prompted former Finance Minister Mayanja Nkangi to seek the Attorney General's opinion, in 1998, on what the government's obligations to the firm were. 

A meeting between President Museveni, Attorney General Bert Katureebe and Mr Nkangi on November 8, 1998, agreed with a recommendation of the Auditor General that the CTB ratify the contract, but that the contract be renegotiated. 

Mr Katureebe said Swipco should be paid a percentage of savings the government made as a result of engaging its services, and not on the basis of the grand total of projected or actual expenditure.  

In January 1999, Mr Katureebe opposed a payment of a $7.2 million claim to Swipco, questioning whether the government had made any savings. He said he wanted the contract renegotiated to clear the issue of fees to pay Swipco, and that he was also interested in a review of the issue of the company's fees being exempted from taxation. 

On January 27, 1999, the IGG wrote to the Finance Minister giving five reasons why the government should not pay Swipco a claim of $3.6 million. He said the company's claims included charges for services to parastatals and donor-funded projects that were outside the Swipco mandate. The IGG also pointed out that some of Swipco's bills were not related to procurement. 

The dossier that ISO has sent to the President documents other cases in which government departments wrote to the Finance Ministry opposing the amounts of money which the consultants were claiming. G. Singh, a senior official in the Auditor General's office, wrote on October 16, 2001, referring to a case in which the ministry had paid Swipco Ush152 million as consultation fees for participating in the selection of a pre-shipment inspector (PSI). 

"The figure of $8,438,789, of which Swipco was paid one per cent, is a probable figure and not an established criteria that the fees will be collected," he said, adding that in the opinion of the Auditor General the fee of one per cent of the probable amount was rather high. Mr Singh added that since the inspection fees accrue to the PSI inspector and not the government, then the commission earned by Swipco had to be paid by the PSI firm. 

Another letter from Mr Singh said his office had been unable to obtain information regarding details of savings generated as a result of engagement of Swipco's services to justify a $2.4 million payment made to them in 2000. It added that there was no reduction in the workforce of the CTB despite the engagement of Swipco. 

The ISO report accuses the Finance Ministry of failing to renegotiate Swipco's percentage of payment. It says that, instead, when the agreement was finally renegotiated on May 5, 2000, the company's performance bond was reduced from $800,000 to $390,000. 

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