Unpaid court awards and compensations owed by the government have risen to Shs 676.8 billion in the last financial year, according to the latest Auditor General’s report.
The auditor general, Mr John Muwanga, notes that delays by the government to pay claimants have resulted in interest amounting to Shs 168bn being charged on the national purse as penalty fees.
“The outstanding amount in court awards and compensations had been accumulating over the last five financial years from Shs 54.0bn in 2011/2012 to Shs 676.8bn in 2016/17,” the audit found.
“In certain cases, the interest had more than doubled the principal amounts.”
Government has in recent times paid Shs 2.7bn for delayed settlements of obligations arising from contracts for construction services and court awards, the audit also reports. This expenditure, the auditor general said, is considered wasteful as it could have been avoided had these been settled in time.
“I noted that the payments are to continue in the near future as a number of obligations have not been fully settled and there are no concrete plans to clear these obligations,” the auditor general reported.
“There is need for government to have a central database where accounting officers will be submitting the status of these obligations so that government can plan better in terms of prioritising for settlement and also monitoring the causes of these avoidable expenditures.”
The audit recommended that accounting officers liaise with relevant authorities for improved funding with a view of minimising penalties and related charges. Meanwhile, the audit found that several government entities failed to meet their tax obligations.
The Income Tax Act 1997 (as amended) sections 119 and 116 require public departments to deduct withholding tax and pay as you earn (PAYE) for onward submission to Uganda Revenue Authority. A number of them, however, never did so.
Government entities also did not pay VAT worth Shs 37.6bn collected from non-registered service providers.
At least Shs 261m of withholding tax was never remitted to the tax body, while Shs 1.1bn in PAYE from their employees was never deducted. They also failed to deduct Shs 87m in withholding tax on suppliers.
“The practice not only denies the government revenue for funding the national budget but also attracts penalties and fines which further constrain the cash flows of the affected entities. Failure to settle the taxes may also adversely affect future project financing in the case of donor funded projects,” the audit said.