Byarugaba to IGG: My decisions were legal

On June 29, 2023, the Inspector General of Government (IGG) issued a directive to Richard Byarugaba, the former managing director of the National Social Security Fund (NSSF), and Stevens Mwanje, the former director of Finance, to repay Shs 5 billion.

This amount was paid to staff who voluntarily retired from the Fund under the early retirement program. According to the report released by the IGG, out of the Shs 5 billion, Shs 687.2 million was paid to Fred Bamwesigye and Julius Bahemuka as compensation for the remuneration they would have earned over a three-year period as members of the board.

These two individuals left the board to make way for the appointment of female members. Additionally, Shs 4.4 billion was paid to 17 out of the 24 staff members who applied for early retirement. These 17 individuals received amounts exceeding their contractual salaries for the remaining period of their contracts.

Furthermore, the inspectorate instructed Byarugaba and other NSSF staff members to reimburse expenses for trips where they spent fewer days than what had been paid for in 2019.

The IGG’s investigations were initiated based on a petition from Betty Amongi, the minister of Gender, Labour and Social Development. Amongi accused Byarugaba of mismanagement, abuse of office, and corruption.

Amongi alleged that Byarugaba had exaggerated the budget of Shs 400 billion for the purchase of land at Nakigalala and falsely claimed that the purchase had been approved by the president, the minister of Finance, Planning and Economic Development, and the NSSF board.

She stated, “Byarugaba accepted a commission in exchange for waiving NSSF contributions for workers of the Uganda Railways Corporation and Uganda Broadcasting Corporation. The MD also unjustly reduced the penalty that Tororo Cement was supposed to pay, in exchange for per- sonal gain.”

According to her claims, Byarugaba and his accomplices, including the head of Investments, exploited the budget to siphon money from the NSSF through extravagant expenditures on foreign trips. Additionally, during the purchase of MTN and Quality Chemicals shares by NSSF, kickbacks were allegedly paid to Byarugaba and the investment team.

Amongi further asserted that CATIC Construction paid a bribe of Shs 3 billion in exchange for the contract to build the Mbuya CITADEL Apartments. The money was allegedly shared between Byarugaba and the head of Procurement, Gerald Mugabi, who reportedly used his portion to construct a hotel in Kagadi called Hotel Seyaife Courts.

IGG’S FINDINGS AND RECOMMENDATIONS

Section 3 subsection (6) (b) of the NSSF Act 2022 empowers the minister to ensure gender balance, consideration of persons with disabilities, as well as skills and experience in the composition of the NSSF board. However, the composition of the board at that time did not align with the amendment, as there were five men and only one woman representing the workers’ and employers’ representatives.

To address the gender imbalance, the minister of Gender directed the reconstitution of the NSSF board. As a result, Fred Bamwesigye (employers’ representative) and Julius Bahemuka (workers’ representative) exited the board in February 2022 to make way for the appointment of female members.

To implement the minister’s directive, the former managing director made irregular payments totaling Shs 687.2 million as compensation for the remuneration that Bamwesigye and Bahemuka would have earned over three years as board members. Out of the total amount, Shs 249.5 million was paid to the Uganda Revenue Authority (URA) as taxes, and Shs 95 million was paid to the members’ NSSF accounts as a 15% contribution.

Bahemuka personally received Shs 222.7 million, with Shs 175 million deposited into his personal bank account and Shs 47.6 million into his NSSF account. Similarly, Bamwesigye directly benefited from Shs 214.9 million, comprising Shs 167.5 million paid to his personal bank account and Shs 47.3 million to his NSSF account.

However, the Act does not provide for any compensation for board members who are removed or resign from office. The inspectorate found that it was irregular to compensate the board members, as they had all declared a conflict of interest during the meeting where the exit package was discussed.

Therefore, Byarugaba and Stevens Mwanje, the chief finance officer, are held responsible for the arbitrary payments to Bamwesigye and Bahemuka.

The IGG stated in the report, “Byarugaba and Mwanje abused their office by making arbitrary payments to Bamwesigye and Bahemuka, which were not supported by any legal framework or NSSF policy. The Inspectorate of Government should recover the total amount of Shs 687.2 million in equal installments to compensate for the loss incurred by the Fund.”

Another issue discovered was irregular payments made to staff members who exited the Fund. After a review of the NSSF staff structure by Deloitte in April 2022, which proposed changes for better performance, it was noted in an executive committee meeting that there might be voluntary early retirement due to the reorganization. Compensation packages were prepared accordingly.

A total of 24 NSSF staff members applied for voluntary early retirement, with contract periods ranging from 10 days to four years and nine months. However, the Fund paid a total of Shs 4.4 billion to 17 of those employees, exceeding the salary they would have earned for the remaining contract period.

The IGG found that it was negligent, irregular, and wasteful to pay exiting employees such excessive amounts that were not rightfully due to them. Byarugaba and Mwanje were held accountable for authorizing these irregular payments, causing a financial loss of Shs 4.4 billion to the Fund.

“It was negligent, irregular, and wasteful to pay exiting employees exorbitant amounts of money that were not due to them. Byarugaba and Mwanje caused the Fund a financial loss of Shs 4.4 billion by authorizing these irregular payments,” IGG found.

The IGG directed Byarugaba and Mwanje to refund the total amount of Shs 4.4 billion in equal installments within six months to compensate for the loss incurred by the Fund as a result of authorizing these irregular payments to staff who exited through the voluntary early retirement program.

Regarding allegations of siphoning money out of NSSF through excessive expenditure on foreign trips, the IGG revealed that there was no evidence supporting such claims. The overall expenditure on trips remained within the budget for all the reviewed financial years.

However, the IGG recommended that Byarugaba and the team responsible for the trips make refunds for the days spent that were fewer than what was paid for in 2019. Byarugaba should refund Shs 8.4 million, Gerald Kasaato Shs 5.9 million, Muhammad Kasumba Shs 7.2 million, Ibrahim Buya Shs 7.2 million, and Keneth Owera Shs 5.4 million.

Additionally, Byarugaba should refund Shs 8 million for spending 17 days out of the 21 days that were paid to him in 2022. Regarding the Nakigalala land acquisition, the IGG found that the estimated cost of the land remained at Shs 250 billion, not Shs 400 billion as alleged. However, the land was subject to ownership disputes, with ongoing civil suits contesting the ownership by the Madhvani Group and the family of the late Prince Yusuf Ssuuna Kiwewa.

The IGG recommended that NSSF halt any further processes for acquiring the land until the ownership disputes are conclusively resolved to avoid potential endless disputes and costly litigation.

TAKING BRIBES FROM URC, UBC AND TORORO CEMENT

In 2008, NSSF filed a lawsuit to recover unremitted contributions, statutory interest, and penalties from Uganda Railways Corporation (URC) for the period between 1995 and 2001. During the legal proceedings, the ministers of Works and Finance intervened, and a partial consent was reached, which was subsequently endorsed by the court on February 7, 2013.

Under the consent agreement, URC acknowledged the under-remittance and committed to pay Shs 4.8 billion, which covered the outstanding contributions, interest, and a discounted penalty. Initially, URC owed NSSF a total penalty of Shs 25.1 billion.

However, the managing director (MD) waived 94 percent of the penalty following an appeal from the minister of Finance, resulting in an outstanding penalty of Shs 1 billion.

In 2016, NSSF conducted a compliance audit on Tororo Cement Ltd, which revealed that the company had contribution arrears amounting to Shs 1.2 billion and a penalty of Shs 3.4 billion. NSSF and Tororo Cement Limited entered into a settlement agreement where the company agreed to pay Shs 1.2 billion in four installments, and the managing director would consider waiving the penalty upon full settlement. The company made the payments as outlined in the agreement.

However, they had not applied for the waiver by the time the IGG conducted her investigations, resulting in the penalty remaining at Shs 3.4 billion. In 2018, NSSF filed a criminal case against Uganda Broadcasting Corporation (UBC) in the Chief Magistrate’s court of Nakawa to recover contribution arrears, interest, and penalties that had accumulated due to noncompliance.

On September 22, 2021, a consent judgment was reached between UBC and NSSF, stipulating that UBC would pay outstanding amounts in installments.

UBC was obligated to pay Shs 4.9 billion, representing unremitted monthly standard contributions from November 2005 to September 2016, and Shs 3.7 billion as the annual statutory interest accrued on the contributions as of July 11, 2019.

Additionally, it was agreed that the Fund would waive the accumulated penalty of Shs 29.1 billion. As of January 2023, UBC still owed NSSF Shs 11.6 billion.

The IGG clarified that Byarugaba waived the penalty for Uganda Railways Corporation by 94 percent following intervention from the minister of Finance. The penalty for Tororo Cement was not waived be- cause they had not applied for the waiver.

NSSF SMART CARDS

It was discovered that the smart card project was initiated in 2014 with the aim of replacing the plastic laminated cards used by NSSF members. These smart cards were intended to provide access to various NSSF products, serve as a payment platform for utilities, airtime, mobile money, transport, and education, and enhance the NSSF brand, among other functions.

On June 23, 2015, Madras Security Printers Private Limited was awarded the contract for the smart card project at a total cost of USD 547,870 (Shs 2 billion).

The contract specified a delivery period of five months, ending on November 23, 2015. However, the cards were not delivered within that time frame due to enhancements made to the smart card specifications, including the inclusion of chip and pin technology for enhanced security features.

In 2017, Madras Security Printers supplied 150,000 smart cards to NSSF. How- ever, these cards were not distributed to the intended cardholders. By the time of the planned rollout, it was determined that the smart card technology was no longer viable, and alternative and more cost-effective technologies such as SMS and email could provide the same services originally intended for the cards.

The Inspectorate of Government (IGG) concluded that the failure of the smart card project was not due to fraudulent intentions but, rather, poor project management, lack of project risk management, and control.

IRREGULAR DONATIONS TO NOTU AND COFTU

It was revealed that NSSF had been making donations to the Central Organization of Free Trade Unions-Uganda (COFTU) and the National Organization of Trade Unions (NOTU) since 2018 as part of their corporate social responsibility (CSR) initiatives.

These donations were aimed at building partnerships, promoting good corporate citizenship, and engaging in philanthropic activities. The donations, made under the approved CSR Policy, were not subject to strict ac- countability measures, as they were considered voluntary contributions.

However, in 2022, after revising the CSR Policy to require accountability from strategic partners, NSSF donated Shs 100,000,000 each to NOTU and COFTU. The IGG found that these donations were not accounted for by the two entities as required by the revised CSR Policy of 2021.

The IGG noted that previous donations lacked a policy framework to ensure ac- countability, leaving them vulnerable to potential misuse or abuse. She emphasized the need for an early provision in the CSR Policy to ensure proper accountability for donated funds.

“The donations were specific since funds were donated for specified activities arising from the requests from COFTU and NOTU. It was, therefore, prudent that a provision should have been provided much earlier in the CSR Policy to provide for accountability of the funds donated,” she said.

BYARUGABA’S RESPONSE TO THE REPORT

Regarding the report, Byarugaba stated that he had only seen a summary of the findings and recommendations and would comment further once he had read and processed the full report. He commended the IGG for her work and acknowledged the report’s alignment with his assertions of innocence and baseless accusations.

Byarugaba emphasized the diligent work carried out at NSSF, highlighting the fund’s growth and positive investment returns. He clarified that the payments made to board members and staff were managerial and administrative decisions made lawfully and in accordance with resolutions by the board and the minister.

He pointed out that there were minutes documenting these decisions. Byarugaba also stated that the staff payments resulted from a restructuring exercise ordered by the board and con- ducted by Deloitte Uganda, a reputable and independent firm, ensuring transparency and fairness. However, he noted that if the IGG deemed these payments irregular or unlawful, she should have recommended refunds from the recipients.

“I would like to applaud the IGG for coming up with the report in such a short time and under clearly difficult circumstances. We welcome the report and thank her and her team for such a good job. The report resonates with what I have always said; that I’m innocent and the accusations leveled against me were baseless,” he said.

“On the recommendation of the IGG on the refund of the money we paid to two board members who resigned and payments to staff who exited under voluntary early retirement, I wish to say that these were managerial and administrative decisions that were made lawfully and legally. These were not personal decisions aimed at enriching myself as an individual,” he said.

“Suffice it to say that my decision-making is the reason I have grown the fund by 922 per cent over the last 12 years and therefore my integrity is unquestionable. The board payments were decisions made by the minister and a resolution of the board. There are minutes to this effect,” he said.