Audit report exposes holes in how political parties spend public funds 

Several political parties failed to account for Shs 842.1 million advanced to them by the Uganda Electoral Commission, according to the auditor general’s report on the financial statements of the Electoral Commission for the year ended June 2023.

The report indicates that at least six political parties did not maintain adequate financial records, as stipulated by the accountant general’s guidelines. Among the parties mentioned, the ruling National Resistance Movement (NRM) and the Uganda People’s Congress (UPC) failed to remit Pay As You Earn (PAYE) taxes amounting to Shs 2.5 billion to the Uganda Revenue Authority (URA) and Shs 173.4 million to the National Social Security Fund (NSSF).

Under Section 14A of the Political Parties and Organizations Act, 2005, the government is mandated to contribute funds or other public resources towards the activities of political parties represented in parliament to support their day-to-day operations.

The accountant general has provided guidelines stating that public resources allocated to political parties should be released based on an agreed work plan, and all expenditures must be accounted for. Political parties are expected to maintain financial records, including cash books, asset registers, store registers, and procurement records.

They must also prepare periodic financial reports, such as statements of receipts and expenditures, reflecting opening and closing balances, statements comparing budgets with actual expenditures, and statements of any unexpended balances.

During the year under review, a total of Shs 44.9 billion was disbursed to seven political parties in Uganda. The National Resistance Movement (NRM) received the largest share, amounting to Shs 34.1 billion, followed by the National Unity Platform (NUP) with Shs 5.7 billion.

The Forum for Democratic Change (FDC) received Shs 3.1 billion, the Democratic Party (DP) and Uganda People’s Congress (UPC) each received Shs 908 million, Justice Forum (JEEMA) was allocated Shs 100.9 million, and the People’s Progressive Party (PPP) received Shs 100.8 million.

The auditor general’s report reviewed the utilization of these funds and identified significant issues. One key observation was the failure of some political parties to prepare annual work plans. Specifically, Jeema, DP, and FDC did not have annual work plans corresponding to the financial year 2022/2023 against which their funding was allocated.

“I was not able to confirm whether the funds advanced were put to the right use and the activities that were implemented. The accounting officer explained that the work plans were part of the strategic plan submitted to the commission by these parties. I took note of the accounting officer’s response; however, this was funding provided for the financial year 2022/2023, and these parties ought to have prepared a specific annual work plan for this financial year against which funds should have been released,” remarked Auditor General John Muwanga.

Muwanga emphasized the importance of accountability and urged the accounting officer to ensure that all political parties prepare and submit annual work plans for future financial years, serving as a basis for fund allocation. The report further highlighted that six political parties did not maintain adequate financial records as stipulated by the accountant General’s guidelines.

Jeema did not maintain registers for all assets, stores and procurement records as required by the guidelines. Additionally, there was no statement of unexpended balances provided. The reports indicate that the financial statements presented by the People’s Progressive Party (PPP) lacked comparatives between budgeted and actual expenditures, contrary to the established guidelines.

The statement of receipts and expenditure submitted by PPP was incomplete, missing crucial information related to the budget and its performance. Similarly, the Democratic Party (DP) failed to provide a complete statement of receipts and expenditures, omitting the required details of opening and closing balances and a statement of unexpended balances.

While the Forum for Democratic Change (FDC) submitted a statement of receipts and expenditures with opening and closing balances, it did not include the necessary comparatives between budgeted and actual expenditures. The National Unity Platform (NUP) also presented financial statements that were incomplete, lacking a statement of unexpended balances, as required by the guidelines.

The accounting officer at the Electoral Commission acknowledged the difficulties faced by the parties in adhering to the reporting requirements and committed to guiding and educating the parties on the correct format for financial statements. Auditor General John Muwanga emphasized the need for proper guidance and sensitization of party representatives responsible for preparing financial statements, ensuring they adhere to the correct presentation format.

UNACCOUNTED-FOR FUNDS

The report reveals that Shs 842.1 million remains unaccounted for at the time of writing. The Uganda People’s Congress (UPC) did not account for Shs 65.9 million from the previous financial year, while the Democratic Party (DP) failed to account for Shs 79.4 million allocated for party publicity activities.

The Forum for Democratic Change (FDC) could not account for Shs 634 million, which was paid to various creditors, and failed to provide agreements between the party and the lenders. Additionally, FDC did not supply supporting documents for Shs 62.8 million spent on workshops and retreats. The Auditor General stated that he could not confirm the accuracy and authenticity of these payments.

The accounting officer noted that the relevant accountabilities had been submitted by the political parties after the audit exercise.

UNREMITTED PAY AS YOU EARN

According to Section 116 of the Income Tax Act of Uganda 2015, as amended, employers are required to withhold tax on their employees’ income at the prescribed rates, and per Section 123, these taxes must be remitted to the Uganda Revenue Authority (URA) within 15 days of the month in which the payment was made.

However, the report indicates that the political parties did not comply with these regulations. Despite paying out Shs 8.6 billion, they failed to deduct and remit tax amounting to Shs 2.5 billion to the URA.

Specifically, the Uganda People’s Congress (UPC) only paid Shs 324.2 million, leaving Shs 97,262,850 unpaid to the URA. The National Resistance Movement (NRM) paid Shs 8.3 billion but left an outstanding Shs 2.4 billion. Auditor General John Muwanga noted that this non-compliance is irregular and contravenes the Income Tax Act.

The accounting officer acknowledged the issue and stated that parties would be guided to comply with this statutory requirement by deducting and remitting PAYE in the future. Muwanga advised that the accounting officer should follow up with the parties to ensure that the outstanding amounts are remitted.

UNREMITTED NSSF CONTRIBUTIONS

The NSSF Act of 1985, as amended, under Sections 6 and 7, mandates that eligible employees and employers must contribute to the National Social Security Fund (NSSF).

The audit report reveals that, despite not being exempt, some parties have not enrolled their staff with the NSSF nor have they deducted the required 5% of individual salaries and topped up with an additional 10% for remittance.

While Shs 8.6 billion has been remitted to the NSSF, Shs 173.4 billion remains unremitted by the NRM and UPC. The UPC remitted Shs 324.2 million, leaving Shs 48.6 million unpaid, while the NRM remitted Shs 8.3 billion, with Shs 124.7 million outstanding. Muwanga stated that failing to deduct and remit NSSF contributions constitutes non-compliance with statutory requirements and deprives staff of their savings.

The accounting officer assured that parties would be instructed to comply with these obligations. Muwanga recommended that the accounting officer ensure the outstanding NSSF contributions are remitted.

USE OF POLITICAL PARTY FUNDS TO REPAY LOANS

The auditor general highlighted that the Democratic Party (DP) utilized a portion of the funds advanced to them to repay a loan obtained for purchasing land on Plots 173 and 174, Block 10, Mengo Kibuga at Namirembe. The loan was taken from a moneylender, Babirye Mary Kabanda, on September 13, 2022.

The auditor general expressed concern that obtaining loans from moneylenders, rather than financial institutions, exposes the party to higher interest rates, making it more expensive in the long run. The accounting officer explained that the party initially intended to acquire a loan from a commercial bank or a moneylender to purchase the land.

However, all banks, including Centenary bank, declined their request, leading them to secure the loan from Babirye Mary Kabanda. Additionally, the accounting officer stated that the party sought approval from the Finance Committee before borrowing the funds.