The frequent theft of public funds by corrupt government officials is mainstream in third world countries with Uganda being one of the top countries to suffer from the negative effects of the corrupt practice.
Uganda has lost billions of money to individual looters and embezzlers in the past 35 years, with the most recent fraud case being the Bank of Uganda currency scandal. Other corruption scandals in which the country has lost billions of shillings include;
- The 1997 Junk Chopper scandal – Shs 45.4 billion
- The 2010 Pension scam – UGX 88 billion
- The 2007 CHOGM scandal – UGX 500 billion
- The 2011 OPM scandal – UGX 38.3 billion
- The 2003 Valley Dam scandal – UGX 3.5 billion
- The 2008 NSSF Temangalo land scandal – UGX 11 billion
- The 2010 ID scandal – UGX 19 billion
- The 2011 LC bicycle scandal – UGX 4.7 billion
- The 2011 Microfinance scandal – UGX 60 billion
- The 2012 OPM scandal – UGX 5 billion
- The 2012 Pension scandal – UGX 169 billion
These and many more corruption scandals only show how the government of Uganda has failed to contain the problem of theft of public funds by its own officials. Corruption has gone on to affect the standard of living of the people of Uganda, and our country’s image has been globally tainted. A 2020 survey ranked as one of the most corrupt countries in the world.
For the government to fight the problem of theft of public funds, it is important to first identify and understand different types of fraud risks before structuring solutions to combat them. Some of the fraud risks include;
Contractor Fraud Indicators
Contractor fraud is one of the common ways public funds are stolen and transferred to the organization’s employees, political associates, friends, family members etc Below are some of the indicators that can be used to identify this kind of fraud;
- Contractors that have no actual address but contracts are awarded to them.
- Contractor’s office address is the same as that for an employee of the government parastatal, family member, or close business associate affiliated to the key employees of the parastatal awarding the contract.
- A contractor is paid in a very short interval of time, and he donates almost the same amount to a political ally, event or cause.
- A contractor is paid through wire transfer instead of cheque, because a cheque may require approval by a higher authority.
- Payments are made to the contractor without going through the standard approval process.
- A contractor is paid an advance for a service to be rendered.
- A contractor has very close relationship with employees of the organization or local officials.
Procurement Fraud Indicators
This type of fraud is almost similar to the contractor fraud and it is carried out on an immensely large scale. Different indicators that play out in identifying a looming or already existing procurement fraud include:
- When the won awarded bid is far higher than the budgeted cost.
- When most of the bidding companies have never executed a similar project in the past
- When the bidding process is not advertised as required by the law
- When a contractor is awarded multiple contracts in one bidding process
- When one contractor is winning similar contracts across different parastatals.
- When submitted bids are too small
- When contracts are awarded with bidding process
- When the government parastatal fails to show history of its bids
- When a contract is not awarded to the contractor company with the lowest bid, without a convincing explanation.
Payroll Fraud Indicators
Payroll fraud has been rampant in government institutions since Uganda’s independence , and they take so many forms including nepotism, ghost employees and so much more. Below are some of the indicators of payroll fraud:
- A bigger number of employees are registered but office premises are less populated
- To many former or existing employees are related to current employees
- No physical verification of current or terminated employees
- Various employees sharing same salary account
- Cheques are mailed instead of picking them at the accountant’s office
- Multiple employees sharing same home address which is not an official staff quarter
Financial Fraud Indicators
While similar to payroll fraud indicators, financial fraud indicators are usually more direct and are easy to spot. Some of them include;
- Order issuing departments and accounts department do not arrive at the same figures at the end of the day.
- Expenses recorded in the department don’t match department’s needs
- Financial reports are incomplete or suddenly go missing
- When expenses recorded in a department are unrelated to the department’s needs.
- Organisation’s activities are digitalized but employees prefer doing work manually.
- Too many large transactions are manually recorded
- Transactions in the ledger are back-dated
- Too many bank accounts rather than ledger reports
- Undocumented money transfers from the organisation’s bank account.
- When employees take too long to present documents for audit or verification purposes.
General Fraud Indicators
While payroll, contractor, financial and procurement fraud are the major fraud sources in organisations, there are still other general fraud indicators that shouldn’t be overlooked as they are still loopholes that aid theft of public funds. They include;
- Employees work for extra hours they are not paid for.
- There’s high number of lawsuits against the organisation
- There are little or no safety measures for critical organization assets like cash, supplies etc
- Leadership ignores procedures laid to get things done right
- An organization has been run by one individual for 10years or more
- Leadership prioritizes part time employees over permanent ones
- When there are rumors of corruption in the organization
- When there are no restrictions for transfer of money from the organisation’s bank accounts.
- When employees refuse to take leave off work
- When non-official email addresses are used for official purposes.
From the above listed fraud indicators in government organisations or even in private organisations, creating technology based systems that reduce efficiency is key to fighting theft of public funds. Here are some strong ways the government of Uganda can use technology to fight fraudulent activities in government organisations:
Ways Uganda government can use technology to stop looting of public funds
1). Digitize the entire workflow of every government organization
The government should digitalize the entire workflow by setting up a network based revenue management system where all workflows regarding generating orders, receipts, payments, recording data etc are all linked to one central system. This would ensure that every operation in the organization is centralized and monitored remotely. This way, accounts can be easily reconciled since data is automatically recorded every time an activity is performed.
2). Make use of blockchain technology for 100% transparency
To understand what blockchain means, it is important to first know that blockchain is a public growing list of records called blocks. These blocks are linked using cryptography. By design, data in a blockchain cannot be modified. So, any legitimate or illicit transaction can never be modified or removed.
Once a transaction is recorded in a blockchain, details of the transaction such as price asset and ownership are recorded, verified and settled in just seconds. It is public knowledge that this process is 100% irreversible. Blockchain technology would build extreme transparency as data cannot be altered. Anyone who would try to tamper with the system will be publicly seen and verified.
While blockchain technology was initially created as an accounting method for virtual currencies such as Bitcoin, it is possible to digitalize, program and insert any document or any commercial application into the blockchain.
Many countries around the world including India and Rwanda are using blockchain technology to ensure transparent activities across all government organisations. Blockchain technology is the most secure way to track activities in any government institute.
3). Multiple key unrelated staff members should have to approve cash transactions and amendments
Whether the organisation’s activities are run through an blockchain network or through the ordinary computer network, any change that has to do with reversing or approving a financial transaction must be confirmed by at least two key staff members with different roles in the organization. Every confirmed data must be recorded, irreversible and unmodifiable.
4). Provide an easy and highly efficient way for employees to report theft or fraud by co-workers
There should be an anonymous computerized system that makes reporting of suspicious fraud activities extremely easy. The access to fraud report data should not be kept too private, because when a small clique of people control information, they can easily delete it or modify it. The data on fraud reports should be sent over a blockchain network so that it becomes easy to verify incase of an investigation.
5). Carry out periodic unannounced informal audits
The government must carry out periodic unannounced audits. They should never announce information on when audit activity will be done, and the auditor should be completely an independent firm with zero ties to the government organization in question or its staff members.
6). Build up in-depth information on every employee and office holder
Building up information on every employee or office holder should be gathered at the time of employment and after employment. By doing this, it becomes extremely easy to understand what the employee is best at when given a responsibility and also determine if the employee is prone to corrupt or fraudulent activities.
Some information that should be gathered from employees and stakeholders and take keynote are;
- A sudden devotion to work and working late beyond normal work hours
- Lifestyles that are above their salary level
- Their alcohol and drug usage levels
- Proneness to gambling, borrowing or bad cheque writing
- Personal and official relationship with fellow employees
- Having them declare their asset every after six months.
- A sudden devotion to work and working late even long after people have gone home.
By having in-depth information on the employees and stakeholders of any organisation, it can be easy to determine which employees is mostly likely to involve themselves in legitimate or illicit activities in an organization.
7). Prosecute promptly
There is no better way to inspire fear and discipline than prosecuting guilty offenders. Prosecution should be done as quickly as possible, and those found guilty should be subjected to heavy prison sentences. This would scare away the would be offenders of similar fraud activities.
The theft of public fund is mainstream in Uganda and will continue to create a bigger rot in the Ugandan economy if measures to stop vice are not implemented on an aggressive scale. If the Uganda is to curb fraudulent theft of public funds from its confines, it must implement measures that don’t just target guilty individuals, but measures that frustrate the whole theft process and quickly prosecutes guilty individuals with harsh punishments.
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