RESPONSE TO ALLEGATIONS IN THE NEW VISION THAT UNRA LOST ‘ANOTHER 36 BILLIONS’ In the last two weeks we have been facing a serialisation of allegations of impropriety in sections of the media that Uganda National Roads Authority (UNRA) has lost hundreds of billions of roads money. These allegations are being repeated on some FM radios and in editorials in a bid to sensationalise the difficult situation we are in as an organisation and also cause alarm to our Development Partners, the Ugandan taxpayer and the general public whom we have served so diligently over the past 6 years. These screaming headlines have very far reaching consequences, the costs of which are far in excess of any potential losses or abuses the editors of these stories are trying to show. The gloomy picture of ineptitude and incompetence that these sections of the media are trying to portray affect the reputation and standing of UNRA as an organisation which is the primary implementer of major development partner programmes. As an organisation, we believe in our credibility and stand for good governance and there is plenty of evidence to show our intentions against vices of corruption and abuse of office. These wild allegations of impropriety are clearly aimed at derailing us from implementing the largest road development programme in the country under which we have tarmacked roads in all parts of the country and much more is underway. The latest attempt to allege that UNRA lost another UGX 36 billion goes to show lack of knowledge of our business which involves forex transactions by virtue of the fact that (i) most of our projects are implemented by international contractors; and (ii) most of the critical inputs to roads of plant, spares and bitumen are imported. UNRA does not manage foreign currency markets to the extent that it would be able to control how major international currencies appreciate or depreciate against the Uganda Shilling. With most of our major development projects paid in part or whole in international currencies, the constant fluctuation of the Uganda Shilling against other major currencies predisposes us to foreign exchange losses much like any other business or organisation or person that pays service providers in international currencies. While part of this information was contained in the Auditor General’s Report for FY 2012/13, UNRA responded to these allegations in the Public Accounts Committee of Parliament and the Hon Members of Parliament appreciated this gross misrepresentation of facts. UNRA would like to once again take this opportunity to assure our Development Partners, the general public and tax payers whose resources are being used for our road development programme that no money has been lost on our projects. The correct facts regarding this latest allegation that UNRA lost UGX 36 billion are the following: - 1. Works Contracts are governed by FIDIC Conditions where Uganda is a member. Under the FIDIC conditions of contract for construction, a contractor can request for a portion of payment of work certified to be paid in a foreign currency. Uganda National Roads Authority (UNRA) contracts are designated in both Uganda Shillings and Foreign Currencies. Under all contracts the rate of the UGX/US$ or UGX/international currency rate is fixed at 28 days prior to the date of submission of bids. 2. Pertaining to the above, when an Interim Payment Certificate or Invoice in foreign currencies is presented to UNRA, foreign currency is purchased from Bank of Uganda based on the prevailing market rates on the date of the transaction. The Bank of Uganda Rates fluctuate on a daily basis leading to foreign currency gains or losses. Payment of interim Certificates is based on the prevailing US$ or international currency trading rate at the time of payment. 3. The UNRA Financial Management Manual provides guidance that foreign exchange losses and gains are treated in the Financial Statements as follows; - Since the reporting currency in Uganda is Uganda Shillings [UGX], assets, liabilities and bank account balances denominated in foreign currency will be converted to Uganda shillings at the rates of exchange ruling at the balance sheet date for statutory accounting purpose in line with International Accounting Standards; - However, actual funds will still be kept in the foreign currency; - Individual transactions denominated in foreign currencies will be converted into Uganda shillings at the exchange rates ruling on the dates payment takes place unless related or matching forward foreign exchange contracts have been entered into when the rates specified in the relevant contracts are used; - Exchange gains and losses on the conversion of foreign currency balances are recognised in the income and expenditure account in the period in which they arise. 4. The alleged loss of UGX 36 billion mentioned is a result of the monthly foreign currency translations that UNRA did for purposes of Financial Reporting. The Foreign Exchange Rate used for this computation is the prevailing rate at the end of the Reporting Period. This is not a cash outflow but rather book entries of accumulated translation gains and losses, revaluations of the assets and liabilities held in foreign currencies at the end of the Financial Reporting period. 5. From the foregoing, it is evident that that there are three (3) forex rates at play in each contract and depending on appreciation or depreciation of the Uganda Shilling against the paying currency at each of the three (3) critical points, there is potential for gains or losses as shown in the diagram below: - 6. It is important to note that it is not only losses that can be realised as a result of revaluation, it can turn out to be a gain or a loss depending on the movement in foreign currency exchange rates against the Uganda Shilling. For example, arising out this treatment, in the FY 2011/12 UNRA realised a foreign exchange gain of UGX 10 Bn which was obviously not reported because that was not sensational news. 7. While UNRA would have wished to mitigate these forex fluctuations through hedging, given that we are financed directly from the Consolidated Fund, we have no access to cash in advance as it is managed directly by Bank of Uganda (BoU). In any case, even if BoU were to do the hedging, this would cost money as the currency fluctuation risk would have been passed on to a third party. We want to assure the general public that UNRA has in place robust public financial management procedures that guard or minimise any potential loss of public funds. What is portrayed in sections of the media is intended to divert us from the deliberate and focussed efforts we have put into building and maintaining national roads all over the country which is a testament to our commitment to this public service. Despite the obvious distractions caused by these distortions of our performance and conduct, we are committed to improving our performance and building even more and better roads. For God and My Country Dan Kitakule Alinange Head, Corporate Communications UNRA UNRA CUSTOMER CARE CENTRE In our effort to help serve our customers better and obtain feedback from all our stakeholders, we have installed a Customer care hotline and email to be able to listen to you better. Talk to us! 031-2233111/113 or 041-4318111/113
Posted on: Fri, 15 Aug 2014 15:20:24 +0000
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