THE REPUBLIC OF UGANDA - Office of the Auditor … audit report on the capacity building support to...

1VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT TO SACCOs BY THE RURAL FINANCIAL SERVICES PROGRAM

A REPORT BY THE AUDITOR GENERAL

OFFICE OF THE AUDITOR GENERAL

T H E R E P U B L I C O F U G A N D A

M A R C H , 2 0 1 3

VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT

TO SACCOs BY THE RURAL FINANCIALSERVICES PROGRAM


www.oag.go.ug | E-mail: [email protected]


VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT

TO SACCOs BY THE RURAL FINANCIALSERVICES PROGRAM


MARCH, 2013


20th June, 2013

The Rt. Hon. Speaker of ParliamentParliament of UgandaKampala

VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT TO SACCOs BY THE RURAL FINANCIAL SERVICES PROGRAM (RFSP)

In accordance with Article 163 (3) of the Constitution, I have undertaken a VFM audit on The Capacity Building Support to SACCOs by the Rural Financial Services Program and hereby submit this report.

My office intends to carry out a follow – up at an appropriate time regarding actions taken in relation to the recommendations in this report.

I would like to thank my staff: The Director, Mr. Stephen Kateregga and Assistant Director Ms. Liz Nambuya; and team Mr. Bob Monday – Senior Principal Auditor, Mr. Paul Rwabutara - Principal Auditor, Mrs. Suzanne Alum Opio - Senior Auditor, and the two auditors, Mr. Sam Ssemugooma and Ms Sheila Ngira who undertook this audit. I would also like to thank the staff of Ministry of Finance, Planning and Economic Development, and the RFSP implementating agencies for the assistance offered to my staff during the period of the audit.

John F. S. MuwangaAUDITOR GENERAL

AUDITOR GENERALAUDITOR GENERAL’S MESSAGE

TAB

LE O

FCO

NTE

NTS

TAB

LE O

F CO

NTE

NTS

TABLE OF CONTENTS

i

List of Tables ………………............................……….................................…………………………………… iiList of Pictures ……………..................................…………………………………………………….................. iiList of Figures ………………………………..................................……………………………......................... iiAbbreviations …………………………................................................................................................ iiiExecutive Summary ................................................................................................................. iv

CHAPTER 1INTRODUCTIONBACKGROUND .......................................................................................................................... 21.1 Motivation ..................................................................................................................... 21.2 Description of the Audit Area ..................................................................................... 31.2.1 General Description ..................................................................................................... 31.2.2 Legal Framework ......................................................................................................... 31.2.3 RFSP Vision .................................................................................................................. 41.2.4 Objective and Activities ................................................................................................ 41.2.5 The Organization Structure ......................................................................................... 41.2.6 Funding ......................................................................................................................... 41.3 Audit Objectives ............................................................................................................ 51.4 Scope ............................................................................................................................ 5

CHAPTER 2AUDIT METHODOLOGY2.1 Sampling ...................................................................................................................... 72.2 Data Collection ............................................................................................................. 72.2 Data Analysis ............................................................................................................... 7

CHAPTER 3SYSTEM AND PROCESS DESCRIPTION3.1 Roles and Responsibilities of Key Players ................................................................. 93.2 Process Description .................................................................................................... 11

CHAPTER 4FINDINGS, CONCLUSIONS AND RECOMMENDATIONS4.1 Formulation of SACCO Regulation ............................................................................. 164.2 Provision of External Audit Services .......................................................................... 184.3 Establishment of SACCOs .......................................................................................... 194.4 Provision of kits (Basic & Advanced) .......................................................................... 204.5 Provision of Modular Trainings (Basic & Advanced) .................................................. 244.6 Funding ........................................................................................................................ 274.6.1 Utilization of IFAD loan ............................................................................................... 274.6.2 Disbursement of GOU Funds ...................................................................................... 284.7 Mentoring of Saccos ................................................................................................... 304.8 Programme Outreach, Usage and Sustainability ...................................................... 324.9 Performance Monitoring Tool Training by AMFIU ..................................................... 354.10 Computerization of The Cooperative Registry ........................................................... 374.11 Training in Cooperative Principles ............................................................................. 384.12 Support to SACCO Unions .......................................................................................... 39Glossary Of Terms .................................................................................................................. 41AppendicesAppendix i ........................................................................................................................... 42Appendix ii ........................................................................................................................... 43Appendix iii ........................................................................................................................... 45

VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT TO SACCOs BY THE RURAL FINANCIAL SERVICES PROGRAM A REPORT BY THE AUDITOR GENERAL

Table 1: RFSP funding for the period 2008/09-2011/12 ………………………………………............. 5

Table 2: Showing Provision of basic kits to SACCOs……………………………………………............ 21

Table 3: Showing Provision of advanced kits to SACCOs……………………………………............. 22

Table 4: Showing the period taken to deliver kits to SACCOs locations………………........... 22

Table 5: Showing undelivered equipment/kits in the stores……………………………….............. 23

Table 6: Showing Budget and Actual expenditures on basic …………………..…………............. 25

Table 7: Showing Annual budget performance IFAD Loan…………………………………............. 27

Table 8: Showing Delayed release of GOU funds to RFSP………………………………….............. 27

Table 9: Showing Annual Budget performance GOU………………………………………….............. 29

Table 10: Showing Annual Budget & Actual expenditures on Mentoring ………………........... 31

Table 11: Showing Monthly work load per FEW …………………………………………………............... 31

Table 12: Showing trends in Outreach & Usage Indicators………………………………….............. 33

Table 13: Showing trends in Reality check results……………………………………………….............. 34

Table 14: Showing Analysis of the Reality check Results…………………………………….............. 34

Picture 1&2: Showing generators & Motorcycles still in stores ……………………............………….. 23

Figure 1: Showing performance in provision of module training to SACCOs ………….......... 25

Figure 2: Showing disbursement of GOU funds to UCSCU 34 …………………………….............. 28

Figure 3: Showing budget performance of GOU funds ………………………………………............... 29

Figure 4: Showing Graph performance of technical assistance to SACCOs …........…………. 36

Figure 5: Showing Performance of Mentoring tools …………………………………………............... 36

LIST OF TABLES

ii

LIST OF PICTURES

LIST OF FIGURES


ABBREVIATIONS

iii

AAG Assistant Auditor General

AG Auditor General

ADB African Development Bank

BOU Bank of Uganda

AMFIU Association of Microfinance Institutions in Uganda

DMF Department of Microfinance

DCM Department of Cooperatives and Marketing

DCO District Commercial Officers

FEW Financial Extension Workers

GoU Government of Uganda

IFAD International Fund for Agricultural Development

MDI Micro finance Deposit taking Institutions

MFI Micro Finance Institutions

MOFPED Ministry of Finance, Planning and Economic Development

MOU Memorandum of Understanding

MSCL Micro finance Support Centre Limited

MTIC Ministry of Trade, Industry and Cooperatives

OAG Office of the Auditor General

PAU Project Administrative Unit

PDU Procurement and Disposal Unit

PFA Prosperity for All

PMT Performance Monitoring Tool

RFSP Rural Financial Services Programme

RFSS Rural Financial Services Strategy

SACCO Savings and Credit Cooperative Organization

SHS Uganda Shillings

UCA Uganda Cooperative Alliance

UCCK Uganda Cooperative College Kigumba

UCSCU Uganda Cooperative Savings and Credit Union


BACKGROUNDThe Auditor General is required under Article 163 (3) (b) of The Constitution of the Republic of

Uganda to conduct financial and value for money audits in respect of any project involving public

funds. This mandate is amplified by Section 21(1) of the National Audit Act 2008 which requires

the Auditor-General to carry out value for money audits for purposes of establishing economy,

efficiency and effectiveness in the operations of any department or ministry.

The Rural Financial Services Programme (RFSP) supports the Rural Financial services Strategy

(RFSS), which is one of the pillars of the Government vision of: “Prosperity for all”. The programme

is aimed at poverty eradication and ensures that every household in Uganda has a means to earn

a minimum living.

Accordingly, the Rural Financial Services Programme was formulated with an objective of increasing

outreach usage, and sustainability of financial operators (SACCOs) at the grass root level.

The Government of Uganda spent Shs.48.6 billion towards the Rural Financial Services Programme

(RFSP) in a period of four years, between the financial years 2008/09 and 2011/12.1

However, despite the substantial amount invested in the programme, the programme was only

able to achieve a target of 735 SACCOs and to-date, there are still many people in rural areas who

do not have easy access to financial services.

KEY FINDINGSFormulation of SACCO Regulations

One of the objectives of the RFS Programme was to contribute towards the establishment of a

regulatory framework that provides standards and guidelines for microfinance operations as well

as protecting the deposits and savings of members2.

Through document review and interviews with officials at MOFPED and RFSP, it was noted that in

the period FY 2008/09 to 2011/12, a total of shs.564,212,537 was spent by the Programme towards

the formulation of the Regulations, however, at the time of audit (January 2013), the Regulations

were not yet passed, they were still in Cabinet for discussion.

1 Financial Statements for 2008/09-2011/12.

2 RFSP Way forward document 2008-11.

EXECUTIVE SUMMARY

iv


Establishment of SACCOs

According to the RFSP Project Document (Way forward) for the period 2008-2011, the programme

targeted to provide support for the establishment of SACCOs in sub-counties where none existed.

Accordingly, the RFSP Annual work plans for the FYs from 2008/09 to 2009/10 targeted to form 161

SACCOs in various sub counties.

It was revealed that out of the targeted 161 SACCOs, 111 SACCOs were fully established and they

had graduated to the start-up category, while 50 cooperative groups are still in the formation

process and had not taken off as fully registered SACCOs.

Provision of kits (Basic & Advanced)

According to RFSP Project Document (Way forward) for the period 2008-2011 and the annual

Work plans and Budgets , the Rural Financial Services Programme was supposed to procure and

provide the basic kits (safes, bicycles, filing cabinets, operation costs, calculators and stationery) to

selected SACCOs in start-up category and Advanced Kit (Computers, Motorcycles and generators)

to SACCOs in the strengthening category. Accordingly, a Memorandum of Understanding was

signed between RFSP and the Lead Implementing Agency (UCSCU) in which the RFSP was fully

responsible for the implementation of the procurement function under the intervention.

The review of financial records for the FY 2008/09 to 2011/12 indicated that a total of shs.7,142,006,506

(Advanced kits shs.1,506,378,886 and Basic kit shs. 5,635,627,620) was spent on procurement of

kits to be distributed to SACCOs. However, scrutiny of the annual performance reports of the

Programme indicated that there were delays in the provision/delivery of kits to SACCOs. For

instance, in the financial years 2009/10 out of 200 targeted SACCOs 63 (31%) received basic Kits

in the start-up category and out of 284 targeted SACCOs 74 (26%) received advanced kits in the

strengthening category. The kits were delivered past the expected days of delivery.

Provision of Modular Trainings (Basic & Advanced)

According to RFSP Project document (Way forward 2008-2011); The Rural Financial Services

Programme was supposed to provide the basic modular training and advanced modular Trainings

to SACCOs.

Through document review it was noted that from the FYs 2009/10 to 2011/12 a total of shs.1,761,397,947

was spent on providing modular trainings to SACCOs (Basic training shs.466,432,455 and advanced

training shs.1,294,965,492) by UCSCU. It was noted that the trainings were not conducted as

planned.

For instance in the financial years 2010/11 and 2011/12, out of 208, 316 and 322 planned advanced

module trainings to SACCOs, only 139 (44%) and 138 (43 %) were conducted, respectively. While in

the same years, out of 202 and 248 planned basic modular trainings only 51 (25.2%) and 63 (25.4%)

were conducted, respectively.

v


KEY RECOMMENDATIONS

1. The Ministry of Finance Planning and Economic Development (MOFPED) should coordinate the

activities of the various stakeholders, including Ministry of Trade, Industry and Cooperatives

(MTIC) and the Bank of Uganda (B.O.U), critical to the formulation of the regulations and

should expedite this process for effective regulation and supervision of SACCOs.

2. The Project Administration Unit (PAU) should ensure that the Lead Implementing Agency

(UCSCU) conducts adequate follow-up and mentoring visits to SACCOs in accordance to

annual work plans. The PAU should also ensure that UCSCU adheres to steps in SACCO

establishment.

3. Project Administration Unit should build its capacity in the Procurement and disposal Unit

(PDU) to ensure that the procurement of goods and services is carried out according to

properly drawn procurement plans to avoid unnecessary delays in the procurement process.

PAU should also constantly monitor and review the activities of UCSCU, including delivery of

kits to ensure that they are implemented according to work plans.

4. PAU should monitor the training activities of the Implementing Agencies and should ensure

that they have the capacity to effectively implement training activities as planned.

vi



CHA

PTE

R O

NE

CH

AP

TER

ON

E

1

2VFM AUDIT REPORT ON THE CAPACITY BUILDING SUPPORT TO SACCOs BY THE RURAL FINANCIAL SERVICES PROGRAM A REPORT BY THE AUDITOR GENERAL

INTRODUCTION

BACKGROUND

1.1 MotivationThe Rural Financial Services Programme supports the Rural Financial services Strategy (RFSS),

which is one of the pillars of the Government vision of: “Prosperity for all”. The programme is aimed

at poverty eradication and ensures that every household in Uganda has a means to earn a minimum

living.

Accordingly, the Rural Financial Services Programme was formulated with an objective of increasing

usage, outreach and sustainability of financial operators (SACCOs) at the grass root level.

The Government of Uganda spent Shs.48.6 billion towards the Rural Financial Services Programme

(RFSP) over a four year period between the financial years 2008/09 and 2011/12.3

Although the project had achieved some progress, there remains much more to be done because

there are still many people in rural areas who do not have access to financial services.

While financial support is critical for social and economic advancement, overall, access to financial

services in Uganda is still low and mainly concentrated in urban areas compared to rural areas.

According to a national survey carried out in October 2010 on demand, usage and access to financial

services in Uganda, 30% of Ugandans have no access to any form of financial services. 42% have

access to informal financial services, 21 % use banks, while 7% have financial access through other

institutions such as Micro Finance Institutions (MFIs) and SACCOs4.

The study also indicated that usage of banks is higher in the urban areas (38%) than in the rural

areas (15%). Similarly, higher proportions of people in urban (9%) than in the rural areas (7%) use

other formal financial institutions that are not banks. However, the rural population (47%) uses more

informal financial services than those in urban areas (28%)5.

According to the Supervision and Implementation Support Mission/ Aide Memoire (May 2012), the

execution of the annual work plans for the RFSP as at 31st March 2012 was still very low at 37%,

which reflected the low rate of project execution by the implementing agencies, in particular, the

3 Financial Statements-2008/09-2011/12.

4 FinscopeUganda 2009 Report October 2010-by Steadman now synovate (U) Ltd.

5 ‘Finscope Uganda 2009’- Report October 2010.

CHAPTER ONE



of Microfinance in the Ministry of Finance,

Planning and Economic Development (DMF/

MOFPED).

In 2008, the Government signed a loan

agreement with the International Fund for

Agricultural Development (IFAD) to jointly

fund the programme with an objective of

increasing outreach, sustainability and

utilization of SACCO services by households

in rural areas.

The Programme is implemented through

Agencies, namely: Uganda Cooperatives

Savings and Credit Union (UCSCU) being the

lead Implementing Agency, Association of

Microfinance Institutions in Uganda (AMFIU),

Uganda Cooperative College Kigumba

(UCCK), the Department of Cooperatives

Ministry of Trade, Industry and Cooperatives

(MTIC) and the Uganda Cooperative Alliance

(UCA) and targeted 735 SACCOs.

1.2.2 Legal FrameworkThe Rural Financial Services Programame

operates under the Ministry of Finance,

Planning and Economic Development and the

Ministry derives its mandate and functions

from the 1995 Constitution of the Republic

of Uganda and other laws, including: the

Budget Act (2001), the Public Finance and

Accountability Act (2003) and Acts establishing

agencies and auxiliary organizations.

The Ministry of finance has a mandate to

formulate policies that enhance stability

and accelerate economic growth and

Association of Microfinance Association of

Uganda (1%), Uganda College of Commerce

Kigumba (8%), and Ministry of Trade, Industry

and Cooperatives(26%).6

Similarly, according to the Auditor General’s

financial audit report for the FY 2010/11, the

budget performance of RFSP for capacity

building was below 50%, and it was also noted

that 54% of the SACCOS benefitting from the

Rural Financial Services Programme (RFSP)

were not sustainable.

It is against this background that a value for

money audit was undertaken by the Office

of the Auditor General (OAG), on the Rural

Financial Services Programme under the

Ministry of Finance, Planning and Economic

Development: to assess its performance

in providing capacity building support to

SACCOs, identify challenges and recommend

to the management of RFSP the areas for

improvement.

1.2 Description of the Audit Area

1.2.1 General DescriptionThe Rural Financial Services Programme

was designed by the Government of Uganda

to provide capacity building support for

the development of rural financial services

infrastructure through the Savings and Credit

Cooperatives (SACCOs).The Programme is

managed by the Programme Administration

Unit (PAU) established under the Department

6 Aide Memoirs- May 2012


development, plan and design strategies for

rapid economic growth and transformation,

mobilize domestic and external resources,

monitor and account for the utilization of

public resources.

1.2.3 RFSP VisionThe Rural Financial Services Programame

shares the Vision of the Ministry of Finance,

Planning and Economic Development, which

is to be:

“A most effective and efficient Ministry of

Finance, Planning & Economic Development

that is capable of achieving the fastest rate

of economic transformation among the

emerging economies”.

RFSP Mission is:

“To develop a sustainable infrastructure of

Savings and Credit Cooperative Organizations

at every sub county in Uganda”

1.2.4 Objective and ActivitiesObjective

The main objective of RFSP is to increase

access to financial services in rural areas

by enhancing the outreach, sustainability of

SACCOs and Utilization of SACCO services by

poor rural households.

Activities

In order to achieve the above, there are several

activities carried out by RFSP. These include:

· Facilitate the establishment of new SACCOs

in sub counties where none existed.

· Facilitate Strengthening of existing SACCOs

and support them to expand outreach.

· Strengthen Apex Institutions which represent

the interest of SACCOs.

· Institute effective SACCO supervision and

regulation arrangements and contribute to

the establishment of a regulatory framework

to protect deposits and member savings.

· Promote regional SACCO networks and

encourage financial linkages.

1.2.5 The Organization StructureThe Permanent Secretary is the technical

head of the Ministry and is deputised by the

Deputy Secretary to the Treasury. The Under

Secretary is the Accounting Officer of the

Ministry of Finance, Planning and Economic

Development (MOFPED) and reports to the

Permanent Secretary. The Commissioner /

DMF reports to the Director in charge of

Economic affairs; who reports to the Deputy

Secretary to Treasury.

The Commissioner/DMF is deputised by an

Assistant Commissioner. The Programme

Coordinator RFSP reports to the Assistant

Commissioner/DMF.

The Programme Administrative Unit of RFSP

is headed by the Programme Coordinator who

is assisted by the Operations Manager and an

Administration Manager. The Administration

Officer, Financial Controller, Procurement

Officer and the Monitoring and Evaluation

Officer report to the Administration Manager.

While the Programme Support Officer reports

to the Operations Manager. Details of the

organisation structure are shown in Appendix

(i).

1.2.6 FundingThe Rural Financial Services Programme is

funded by the Government of Uganda (GOU)

and the International Fund for Agriculture

Development (IFAD). Over the years FY



2008/09 to FY 2011/12, RFSP received a total of Shs.48.6 billion from GOU and IFAD. Details of

funding by source are as per Table: 1 below:

Table: 1 Showing RFSP funding for the period 2008/09 to 2011/12 in billion shillings

Source/FY

2008/09 2009/10 2010/11 2011/12 TOTAL

GOU 8.64 6.71 4.07 6.27 25.69

Donor/IFAD 3.45 4.58 8.74 6.14 22.91

Total 12.09 11.29 12.81 12.41 48.6

Source: RFSP Financial statements

1.3 AUDIT OBJECTIVESThe major objective of the audit was to review the performance of the project and specifically

establish whether the project met its targets with regard to:

· The establishment of new SACCOs in targeted sub counties where none existed.

· Strengthening of existing SACCOs and supporting them to expand outreach.

· Strengthening of Apex Institutions which represent the interest of SACCOs.

· Instituting an effective SACCO supervision and regulation arrangement and contribution to the

establishment of a regulatory framework to protect deposits and member savings

· Supporting the promotion of regional SACCO networks and encouraging financial linkages

1.4 SCOPEThe audit was undertaken at the Rural Financial Services project at the Ministry of Finance,

Planning and Economic Development and covered a period of four (4) financial years (FY) from

2008/2009 to 2011/2011 with particular focus on the establishment and strengthening of SACCOs

and APEX institutions ,SACCO supervision and regulatory arrangements.


CHA

PTE

R T

WO

CH

AP

TER

TW

O

2



AUDIT METHODOLOGY

The audit was conducted in accordance with the International Organization of Supreme Audit

Institutions (INTOSAI) Auditing Standards and guidelines in the Office of the Auditor General (OAG)

VFM manual. The standards require that the audit is planned in a manner which ensures that an

audit of high quality is carried out in an economic, efficient and effective way and in a timely manner.

2.1 SamplingThe sampling method used was stratified

random sampling. Eight (8) out of eleven (11)

UCSCU Regional areas of operation were

sampled for this study. The regional areas

were selected based on the overall distribution

and performance of SACCOs in the country.

The sampled districts visited were randomly

selected, from the regional areas of operation

and these included: central region (Kampala,

Wakiso, Mukono); Victoria Masaka region (

Masaka, Lyantonde); Ankole region (Mbarara,

Bushenyi Ntungamo);Bunyoro region

(Masindi, Kiryandongo); West Nile region

(Arua, Nebbi); Lango region (Lira, Oyam);

Eastern region (Mbale, Budaka) and Busoga

region (Jinja, Iganga). Similarly, SACCOs were

stratified into category/stage of formation

(Start-up and strengthening category).

The sample of SACCOs visited within the

categories were randomly selected.

2.2 Data CollectionDocument review

The team reviewed documents to obtain

information relating to the operations of the

RFSP and its implementing agencies: the

key processes, roles and responsibilities

of key players, financial performance, and

the general performance of the whole

Programme for the period under review. The

details are shown in Appendix (ii).

Interviews

The team interviewed (126) officers at the

various entities, namely: the Department

of Microfinance – MOFPED, Department of

Cooperatives - MTTI, Rural Financial Services

Programme, and UCSCU Headquarters in

Maganjo. The team also interviewed officers

from SACCOs and the UCSCU regional offices

in Kampala, Iganga, Lira, Masaka, Arua,

Mbale, Mbarara and Masindi with a purpose

of assessing the performance of the entities.

Details of the people interviewed are shown in

Appendix (ii).

Inspection

Field visits were carried out at the UCSCU

Regional offices – Arua, Iganga, Lira, Mbale,

Masaka, Mbarara, Masindi, and Kampala

to ascertain the activities undertaken by

the programme. SACCOs were also visited

in various sub counties to assess their

operational status.

2.3 Data AnalysisAnnual Work plans and progress reports were

analyzed to assess the actual outputs against

planned targets of the programme; budgets

and audited financial statements were

scrutinized to establish whether the budgeted

amounts were availed and adequately utilised.

Records from SACCOs were analyzed in

order to corroborate data obtained from the

Programme headquarters.


CHA

PTE

R T

HR

EEC

HA

PTE

R T

HR

EE

3



SYSTEM AND PROCESS DESCRIPTION

3.1 Roles and responsibilities of Key PlayersPermanent Secretary/ Secretary to

Treasury—MOFPED

The Permanent Secretary of MOFPED who

is also the Secretary to Treasury and is the

technical head of the Ministry is responsible

for policy implementation and overall

supervision of activities in the Ministry.

Undersecretary/Accounting Officer

The Undersecretary is the Accounting Officer

of the Ministry, his/her responsibility is to

facilitate policy formulation, effectively and

efficiently manage the Ministry’s physical,

human and financial resources.

Commissioner, Department of Microfinance-

(DMF/MOFPED)

The Commissioner is responsible for

overseeing policy formulation, developing

an appropriate regulatory framework that

provides standards and guidelines for

microfinance operations. He/she coordinates

and supervises the RFSP, and is charged with

the formulation of regulations for the tier four

financial institutions.

The Commissioner, Department of

Cooperatives and Marketing (DCM/MTTI)

The Commissioner is responsible for

the supervision and monitoring of all

cooperatives to ensure that they operate

within the established cooperative laws and

set objectives for the benefit of members.

In order to strengthen the cooperatives

department to fully execute its mandate, the

Cooperatives Department has an MOU with

the RFSP which stipulates that the RFSP

is responsible for providing funds to the

Department of cooperatives to enable it fully

update and computerize the SACCO Registry

and conduct district SACCO forums with the

assistance of District Cooperative Officers

(DCOs).

The Coordinator Rural Financial Services

Programme

The Coordinator is in charge of the overall

management, supervision and delivery of the

Rural Financial Services Programme.

She/he is charged with the leadership and

supervision role of the different sections

responsible for the implementation of the

RFSP and ensures proper management of

financial, human and technical resources of

the RFSP Programme.

The Coordinator is also responsible for

ensuring periodic reporting and effective

communication on the activities of the RFSP.

She/he is also a member of the planning and

organizing Management Committee.

Operations Manager-RFSP

The operations Manager is responsible for

ensuring that the Programme is effective on

the ground and targeted programme results

are achieved.

She/he coordinates between UCSCU, PAU

core management team and field officers on

all matters relating to the field operations and

relaying actions required of any section of the

RFSP.


Procurement Officer-RFSP

The procurement Officer is responsible for the

effective procurement of goods and services

under the Programme and ensures their safe

delivery.

She/he prepares periodic procurement

plans and institutes measures to expedite

procurement activities for effective

implementation of programme targets

stipulated in Annual Work Plans and Budgets.

The procurement Officer also supervises

the implementation of procurement

activities/contracts for purposes of ensuring

competition, transparency and achievement

of value for money objectives under the

Programme.

Finance Controller –RFSP

The Finance Controller is responsible for

providing financial services for effective

implementation of programme activities and

ensures modalities for accountable use of

Programme resources.

She/he also ensures timely disbursement

and replenishment of funds for effective

and efficient programme implementation

and provides financial services as well as

ensures modalities for the accountable use of

programme resources.

Monitoring and Evaluation Officer-RFSP

The Monitoring and Evaluation officer is in

charge of setting up and operationalizing the

monitoring and evaluation system for the

Programme.

The M & E works with the agencies managing

the components to design the format and

contents of the periodic reports and the

structure of impact and monitoring indicators.

She/he is in charge of gathering data for

performance measurement of programme

components, ensuring that all agencies

managing the components submit their

reports as required and take responsibility for

preparing appropriate sections and annexes

to the semi annual progress reports of the

PAU.

Uganda Cooperative Savings and Credit

Union Limited (UCSCU)

UCSCU is the lead implementing agency

of RFSP; it is a national apex organization

for Savings and Credit Cooperative

Societies (SACCOs) in Uganda. UCSCU is

responsible for SACCO development and

SACCOs represent the larger component

of Rural Financial Services Programme.

This Agency is responsible for mobilizing

communities to form new SACCOs, provide

capacity building to SACCOs and supervise

their performance.

The Association of Microfinance Institutions

of Uganda

The Association of Microfinance Institutions of

Uganda (AMFIU) is an umbrella organisation

of microfinance institutions (MFIs) in Uganda.

AMFIU has signed an MOU with the RFSP

to carry out performance monitoring tool

training, provide technical backstopping and

receives reports generated from SACCOs. In

addition, AMFIU supports the implementation

of Management Information System (MIS) in

selected SACCOs in accordance with agreed

work plans and budgets.

Uganda Cooperative Alliance (UCA)

UCA is an umbrella organization of

cooperatives, registered with the aim of

promoting the economic and social interests

of cooperatives in Uganda.



UCA is supported by RFSP to facilitate

strategic planning and provide periodic

mentoring support to existing SACCO Unions,

facilitate the process of registration for new

Unions that have applied, with priority given to

those that include Programme SACCOs.

Uganda Cooperative College Kigumba

(UCCK),

Uganda Co-operative College is a Tertiary

Education Institution funded by the

Government of Uganda. The college has

entered into an MOU with RFSP to conduct

training needs assessment among a selected

sample of Financial Extension Workers

(FEWs): District Commercial Officers (DCOs)

and Field Officers (FOs); and put together a

training programme to address the needs.

UCCK also provides short training courses

on SACCO principles, governance and

management to FEWs, DCOs and FOs and

part-time certificate and diploma courses to

90 SACCO managers and staff.

3.2 PROCESS DESCRIPTION

Policy and Regulation Formulation

The DMF is supposed to prepare and refine the recommendations and principles for regulation

and supervision of Tier IV Microfinance Institutions.

The department carries out consultations with the different stakeholders in the microfinance sector

and these include: district leaders, parliamentarians and officials in Microfinance Institutions and

Government. It also drafts policy guidelines and submits the drafts to Cabinet for discussion and

approval.

Budgeting and Funding

The Programme prepares annual work plans and budgets and submits them to the Department

of Microfinance for integration into the DMF’s budget. The DMF budget is then consolidated in the

MOFPED budget. RFSP is funded by donor /IFAD and GOU.

The request for GoU funds for the quarter is submitted to MOFPED in the last week of the previous

quarter, and funds are released by the first week of the quarter.

For Donor funds, IFAD channels its funds to RFSP through a Special Account opened with a float

of a minimum of USD One million; this amount is replenished depending on the frequency of

withdrawals and requests made. Withdrawal applications are made against the IFAD approved

budget and submitted through MOFPED to IFAD. Accountabilities of the last disbursement are

submitted with supporting documents by the PAU and approved by Treasury before replenishment

is processed and effected.

Disbursements to the agencies are effected on a quarterly basis based on their annual work plans

and budgets.


Support for SACCO formation

SACCO formation activities are supported by

Rural Financial Services Programme. . The

activity is supposed to begin by identifying

a sub-county where no SACCO exists, after

which community entry activities involving

mobilization, sensitization and training of

rural communities to elect a SACCO interim

committee are carried out by UCSCU- financial

extension workers (FEWs).

The FEWs then liaise with the District

Commercial Officer (DCO) to assist the

interim committee fulfill the requirements

for registration and subsequently register

as Savings and Credit Cooperative Societies

(SACCOs) with the Registrar of Cooperatives.

They also assist the formed SACCOs to: enroll

as UCSCU members in order to access support

from the Programme, and hold their first

Statutory Annual General Meeting.

Once local communities have been sensitized

and have proceeded to form and register their

SACCOs with the Registrar of Cooperatives,

and met the criteria for inclusion support

from RFSP, the programme is supposed to

provide basic training modules and a “Basic

Kit” that includes: a safe, two bicycles, 15

months of operating costs (rent and salaries

for three qualified staff), and refurbishment

and furnishing of premises, if required.

Support for SACCO Strengthening

The RFSP, in collaboration with UCSCU,

identifies SACCOs to be strengthened by

following laid down criteria. A SACCO qualifies

to be strengthened if it has been formed and

remains active through the first year, and

has met the minimum legal requirement for

a cooperative of holding an Annual General

meeting and providing an audited financial

statement to its members.

Additionally, SACCOs that have been duly

selected as the lead SACCOs in their sub-

country and meet the criteria for SACCOs

strengthening are selected by UCSCU staff for

programme support.

Qualifying SACCOs are assessed by the

programme in collaboration with UCSCU to

determine the appropriate combination of

support to be given in terms of equipment and

training.

After the assessment is done, the SACCO is

provided with an advanced kit, which includes:

1 computer, UPS, printer, 1 generator, 1

motorcycle, photocopier, MIS software, external

audit services, module trainings 1,2,3,4 & 5,

and customized trainings.

Strong SACCOs that need to increase outreach

and have credible business plans are also

availed with the advanced Kits, to enable them

reach unserved rural communities.

A flexible kit, which includes a mixture of items

selected from both the basic and advanced

kits, is also given to existing SACCOs, in order

to meet specific needs of the SACCOs.

Mentoring

SACCO mentoring is a routine activity to be

carried out by UCSCU field staff and Financial

Extension Workers (FEWs) on a monthly

basis. Technical assistance is provided to

SACCOs depending on the needs identified

and includes provision of skills in bookkeeping,

savings, member mobilization and training of

the SACCOs supervisory committees. Other

customized trainings tailored to the identified

needs are also conducted.



Strengthening of Apex Institutions

The Rural Financial Services Programme

identifies implementing agencies to support it

carry out its mandate under the RFSS. RFSP

then signs memoranda of understanding

with them. These implementing agencies

include: UCSCU, AMFIU, UCCK and UCA.

Guided by Annual Work plans and budgets,

RFSP then supports the agencies by providing

technical support and assistance in relation to

procurement of goods and services to enable

achievement of programme objectives.

Cooperative Training

The Uganda Co-operative College Kigumba

(UCCK) in collaboration with UCSCU is

supposed to select a targeted number of

UCSCU field Officers (FOs), Financial Extension

Workers (FEWs) and District Commercial

Officers (DCOs) and carry out a training needs

assessment of the officers and thereafter put

together a training programme to address

the identified needs. The trainings are to be

conducted on quarterly basis. Additionally,

UCCK is supposed to offer training in certificate

and diploma courses to SACCO managers and

staff.

Performance Monitoring Tool Training

The Association of Microfinance Institutions of

Uganda (AMFIU) is supposed to conduct training

of SACCOs in the use of the Performance

Monitoring Tool (PMT). Identification of the

target number of SACCOs is done followed

by a needs assessment in terms of computer

literacy of SACCO staff, availability of

computers/equipment and availability of power

supply at the SACCO.

After the training needs assessment,

computers and appropriate software are to

be provided by RFSP. The PMT data provides a

benchmark to assess the overall performance

of the SACCOs.

In addition, AMFIU is supposed to provide

technical back stopping/ monitoring of SACCOs

on a quarterly basis by offering technical

assistance to SACCOs where challenges are

met in the use of PMT. Furthermore, AMFIU

is supposed to implement the Management

Information System (MIS) software that would

enhance the use of PMT as well as financial

related information used by SACCOs.

SACCOs are supposed to generate reports

through the PMT and submit them to AMFIU

on a quarterly basis. The data is processed

at AMFIU and information is shared among

stakeholders.

Computerization of the Cooperative Registry

In order to strengthen the cooperatives

department to fully execute its mandate, the

RFSP has an MOU with the Cooperatives

Department to provide the required funding

to facilitate updating and computerizing the

SACCO registry.

The Department of cooperatives is supposed

to conduct a data collection exercise in

order to obtain up to date data on the status

of cooperative organizations in the country

including SACCOs.

RFSP is supposed to assist the cooperative

department to recruit a consultant to design a

data base so that all data collected is entered

into the computerized cooperative data base.

The data base is supposed to have information

that is up to date and easily accessible to

enhance monitoring & supervision.


Support to SACCO Unions

UCA is supposed to conduct mobilization and

sensitization of SACCOs to encourage them to

join SACCO Unions. In addition, a situational

analysis is done on the existing SACCO

Unions with a view of providing technical

support and periodic mentoring. After the

situational assessment, UCA is supposed to

select SACCO networks and assist them to

register with the Department of Cooperatives

to become Unions.



CHA

PTE

R F

OUR

CH

AP

TER

FO

UR

4


FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

4.1 Formulation of SACCO Regulation

One of the objectives of the RFS Programme was to facilitate the process of establishment of

a regulatory framework that provides standards and guidelines for microfinance operations as

well as protecting the deposits and savings of members7. Accordingly, the Ministry of Finance,

Planning and Economic Development planned to formulate the Regulation for the Tier 4 financial

Institutions, including SACCOs, by the end of the FY 2010/118.

Through document review and interviews with officials at MOFPED and RFSP, it was noted that in

the period of four years from FY 2008/09 to 2011/12, a total of shs. 564,212,537 was spent by the

Programme towards the formulation of the Regulations, however, at the time of audit (January

2013), the Regulations had not been put in place.

The Principles for the regulation of Microfinance Institutions was presented to Cabinet in 2011 and

a response received from the Cabinet Secretariat in July 2011. The DMF revised the proposals and

submitted it to the senior management of MOFPED in February 2012. Currently, the proposals are

before cabinet for consideration. It is unlikely that the programme will achieve this objective, given

that it is closing in June 2013.

Through interviews with officials at MOFPED and MTIC, it was noted that the delay was due to lack

of coordination between the key stakeholders in the microfinance sub sector, especially between

the Ministry of Finance, Planning and Economic Development and the Ministry of Trade, Industry

and Cooperatives, where SACCOs are currently regulated under the Cooperative Act.

Whereas the Ministry of Finance, Planning and Economic Development is in the process of

formulating the Regulation on the Tier 4 financial institutions, including SACCOs, the Ministry of

Trade, Industry and Cooperatives is in the process of consulting stakeholders and reviewing the

Cooperative Act and subsidiary laws on cooperative regulation. Similarly, the Bank of Uganda is in

7 RFSP Way forward document 2008-11.

8 MOFPED Ministerial Policy Statement, FY 2010/11

CHAPTER FOUR



the process of preparing amendments to the

MDI Act to cover the largest SACCOs.9

The absence of the Regulation for Tier

4 financial Institutions and SACCOs has

hindered effective regulation and supervision

of SACCOs. Currently, SACCOs face

challenges in recovering funds that have been

mismanaged or loaned to members.

Non-adherence to financial and governance

principles by SACCO management and staff

has also been attributed to the absence of a

regulation.

Interviews conducted with staff of 68

programme SACCOs sampled indicated

that 50 (74%) of the SACCOs were facing

challenges due to mismanagement of funds,

non-compliance with the legal requirements

of having an annual audit and Annual General

Meeting (AGM), non recovery of loans given out

to members; while 18 (26%) were operating

fairly.

Conclusion

The Regulation for Tier 4 financial

institutions, including SACCOs, is not yet

formulated, leading to ineffective regulation

and supervision of SACCOs, which in turn has

occasioned the challenges facing the SACCOs.

The delays in passing the tier four Regulations

present challenges for the attainment of value

for money on the Shs.564,212,537 so far spent

on the programme activity.

Management Response:

It is true that the law regulating Microfinance

institutions is not yet in place. However, the

9 Supervision and Implementation Support

Mission May 2012- Aide Memoire.

draft Principles and ensuing Regulations for

Tier 4 institutions have been prepared and

submitted to Cabinet.

The project funds meant for this activity

was invested in extensive consultations

with the various stakeholders, including;:

industry practitioners (SACCOs, Academia,

Researchers, Government agencies,

Local Governments, Non-Government

Organisations, etc), study visits,

consultancy support and consultations with

Parliamentarians.

While this process has taken time, it was inevitable to carry out wider consultations for purposes of gaining consensus and ownership of all the stakeholders.Currently, the Principles are before Cabinet for discussion. This will form the basis for drafting the necessary laws.

Auditor’s Comment:

Management’s efforts are acknowledged, but

the regulation is yet to be formulated.

Recommendation

The Ministry of Finance, Planning and

Economic Development should coordinate

the activities of the various stakeholders,

including Ministry of Trade, Industry and

Cooperatives and the Bank of Uganda, an

intervention that is critical to the formulation

of the Regulation, a process that should be

expedited for effective regulation, supervision

of SACCOs.


4.2 PROVISION OF EXTERNAL AUDIT SERVICES

According to the Memorandum of

Understanding between the Government

of Uganda and UCSCU, the RFSP was

supposed to provide support to SACCOs in

terms of providing funds for external audit

fees, which was included in the packages for

both the basic and advanced kits. The fees

were supposed to be paid to Certified Public

Accountants’ firms. Accordingly, the annual

work plans for FYs 2009/10 and 2010/11

identified 263 and 233 SACCOs in the start-up

category, respectively which were supposed

to receive this support. For the FY 2009/10,

50 SACCOs were identified for support in the

strengthening category.

A review of the annual reports for the FYs

2009/10 and 2010/11 prepared by RFSP

revealed that out of the 263 and 233

SACCOs(start-up category ) identified for the

support , only 91 (34.6%) and 18 (7.7%) SACCOs

received support respectively. While in the

FY 2009/10, only 20(40%) of the 50 SACCOs

identified for support in the strengthening

category, received the support.

It was further noted during field visits to a

sample of 68 SACCOs that only 23 SACCOs

(34%) benefited from the support and only

16(23%) were being audited by the DCO

instead of Certified Public Accountants’

firms. 29(43%) SACCOs had no audited final

accounts.

The low number of SACCOs receiving the

support was attributed to the fact that the

external audit facility was demand driven,

and therefore fewer SACCOs were requesting

for the support from UCSCU due to the

conflicting guidelines that currently require

financial statements of SACCOs to be audited

by a District Commercial Officer (DCO) as

required by the Cooperatives Act and not by

a Certified Public Accountant as envisaged

by the Programme. Audit also noted that

SACCOs did not have adequate capacity to

prepare financial statements in line with the

generally accepted accounting standards.

Many of the SACCOs did not comply with the

legal requirement of having audited financial

statements, which is one of the requirements

to holding the Annual General Meetings and,

as a result, the affairs of the SACCOs have not

been managed in a transparent manner.

Conclusion:

Fewer SACCOs are accessing support in

terms of external audit fees paid to UCSCU in

regard to the auditing of financial statements.

This has, in turn, hampered the good

management practices exercised by SACCOs,

hence exacerbating the numerous challenges

faced by them, such as: mismanagement of

funds and the high levels of non-performing

loans.


RFSP provides support for external audit

through Certified Public Accountants,

however, many SACCOs have not taken

advantage of the services. The responsibility

of appointing an external auditor for the

SACCO lies with the SACCO AGM.

The Project has drawn the matter to the

attention of the Registrar of Cooperatives and

will continue to avail a list of non-compliant

SACCOs. This is to help the SACCOs appreciate



the need for certified external auditors.

Compliance has increased from 74% in

2010/11 to 89% in 2011/2012 of the supported

SACCOs.

The Project will continue to ensure that the

trainings by UCSCU in the relevant modules

will address and strengthen the financial

reporting function in SACCOs.


All SACCOs under the programme should be

supported and their books of account audited.

Recommendations:

• The Ministry of Finance should harmonize

the work of the key stakeholders in the

Microfinance sub sector in order to streamline

the provision of external audit services

rendered to SACCOs.

• The Coordinator of RFSP should ensure

that UCSCU is empowering SACCOs to

enable them to prepare financial statements

for auditing; and that the funds disbursed for

auditing SACCOs are properly utilized as per

annual work plans and budget.

4.3 Establishment of SACCOs

According to the RFSP strategic plan (Way

forward) for the period 2008-2011, the

programme was supposed to provide support

for the establishment of SACCOs in sub-

counties where none existed.

Establishment of SACCOs involves: holding

a consultative meeting, where people clearly

identify their common needs and desires to be

addressed; conducting feasibility and viability

studies to establish what would be required

to cover the operation costs of the SACCO

before it starts earning its own income; and

propagating and selling of the SACCO ideas

to other members of the community for

recruitment. Accordingly, the RFSP annual

work plans for the FYs from 2008/09 to 2009/10

targeted to form 161 SACCOs in various sub

counties.

Through the review of the financial

statements for the FY 2009/10, it was noted

that shs 142,835,400 was spent towards

SACCO formation activities by UCSCU. It was

revealed that out of the targeted 161 SACCOs,

111 SACCOs10 that were fully established had

graduated to the start-up category, while 50

SACCOs were still in the formation process.

Analysis of RFSP records further indicated

that out of the 50 cooperative groups still in

the formation process, 21 (42)% had not yet

taken off .

Field visits to 8 sampled SACCOs in the

formation process further confirmed that

7 (87%) had not taken off yet and of the 27

SACCOs which had graduated to the start-up

category, 19 (70%) were experiencing severe

operational challenges. (See list of SACCOs

that are non operational or closed Appendix

(iii). The failure of some SACCOs to take

off was attributed to non-adherence to the

SACCO establishment guidelines stated in

the RFSP Project Document Way Forward

2008-11.

Similarly, there was inadequate follow-up

and mentoring of SACCOs by the Uganda

Cooperative Savings and Credit Union

(UCSCU). Review of RFSP and UCSCU

annual work plans and progress reports for

the FY 2009/10, indicated that out of the 263

mentoring visits planned by UCSCU, only

41(15%) were made.

10 RFSP Annual Report 2011-12


Consequently, the SACCOs formed in various

sub-counties did not take off as planned, are

non-operational or have closed; hence, the

people in the targeted sub-counties did not

access the envisaged financial services.

Conclusion

Although, the Rural Financial Services

Programme facilitated SACCO formation,

not all the SACCOs took off, hence limiting

access to financial services in the targeted

rural areas.


Although activities were planned for in FY

2008/09, the activity was carried out in the FY

2009/2010. Shs.142,835,400 was spent and

accounted for in the FY 2009/2010.

It is true that 161 sub-counties were targeted

for SACCO formation, at the time of audit 111

had fully registered as SACCOs, to-date the

number has increased to 148 SACCOs.

The 50 cooperative groups referred to, were

not yet registered as SACCOs, currently, 37

have since registered as SACCOs and 13 have

never taken off.

The Project will continue to facilitate UCSCU

to enhance mentoring of SACCOs.


SACCOs were not established as per work

plans.

Recommendation

• The PAU should ensure that UCSCU

adheres to laid down guidelines/steps in

SACCO establishment such that Cooperative

groups and newly formed SACCOs are fully

established and operational.

• The Project Administration Unit (PAU) should

ensure that the Lead Implementing Agency

(UCSCU) conducts adequate mentoring visits

to SACCOs in accordance with its annual work

plans.

4.4 Provision of kits (Basic & Advanced)

According to RFSP strategic plan (Way

forward) for the period 2008-2011 and

the annual work plans and budgets , the

Rural Financial Services Programme

was supposed to procure and provide the

basic kits (safes, bicycles, filing cabinets,

operation costs, calculators and stationery)

to selected SACCOs in start-up category and

advanced kit (computers, motorcycles and

generators) to SACCOs in the strengthening

category. Accordingly, a Memorandum of

Understanding was signed between RFSP

and the Lead Implementing Agency (UCSCU)

in which the RFSP was fully responsible for

the implementation of the procurement

function under the intervention.

Review of financial records for the FYs 2008/09

to 2011/12 indicated that a total of shs.

7,142,006,506 (advanced kits shs.1,506,378,886

and basic kit shs.5,635,627,620) was spent on

provision of kits to SACCOs.

However, scrutiny of the annual performance

reports of the Programme indicated that kits

were not delivered to beneficiaries in time

as per set targets in the annual work plans/

budgets.

For instance, what was planned in the FY

2009/10, that is, advanced kits (computers,

motorcycles and generators) was provided for

in the FY 2010/11. In the FY 2010/11 and FY



2011/12, out of 200 SACCOs only 63 (31%) received basic kits and out of 284 SACCOs only 74 (26%)

received advanced kits in the strengthening category.

In the FY 2009/10, on average, 90% of the planned basic kits were provided to SACCOs. All the

equipment and stationery were provided except for external audit support, where only 91 SACCOs

out of 263 received this support. In addition, during the FY 2010/11, only 4% of the planned basic

kits were provided to SACCOs. No equipment and stationery was provided to SACCOs apart from

some support for operational costs (22%) and external audit services (8%). The details of the

provision of basic kits are provided in Table 2:

Table 2: Showing Provision of Basic Kits to SACCOs

BASIC KIT 2008/09 2009/10 2010/11 2011/12

Plan Actual % Plan Actual % Plan Actual % Plan Actual %

Safe 263 263 100 38 38 100 149 0 0 150 0 0

Filing Cabinet

263 263 100 92 38 100 156 0 0 156 129 32

Calculators 263 174 66 526 526 100 248 0 0 248 248 100

Bicycles 263 126 48 196 196 100 312 0 0 248 248 100

Operation cost

263 263 100 263 263 100 572 128 22 572 275 48

External Audit services

263 0 0 263 91 34 233 18 8 138 0 0

Stationery 263 207 79 263 263 100 45 0 0 124 0 0

Average % 70 90 4 40

Source: OAG Analysis of RFSP- Annual work plans & Progress Reports

In 2011/12, on average, 42% of the planned advanced kits were provided to SACCOs. No generators

and support for external audit services was provided as planned. In the FY 2008/09 and 2010/11 no

advanced kit was provided to SACCOs. In the FY 2009/10, only generators and support for external

audit services were provided to some SACCOs. The details of the provision of advanced kits are

provided in Table 3 below:


Table 3: Showing Provision of Advanced kits to SACCOs

ADVANCED KIT

2008/09 2009/10 2010/11 2011/12

Plan Actual % Plan Actual % Plan Actual % Plan Actual %

Computers 100 0 0 50 0 0 60 0 0 60 50 83

UPS - - - 50 0 0 67 0 0 67 50 74

Printers 75 0 0 50 0 0 75 0 0 75 50 67

Generators 75 0 0 50 43 86 136 0 0 136 0 0

Motorcycles 122 0 0 50 0 0 88 0 0 88 24 27

External Audit

50 0 0 50 20 40 95 0 0 95 0 0

Average % 0 21 0 42

Source: OAG Analysis of RFSP Annual Reports.

The procurement of computers and motorcycles delayed for three (3) years while that of generators

took one (1) year.

Through interviews with officials at the PAU, it was noted that the Procurement and Disposal

Unit lacked capacity to manage the large volumes of procurement activities on time, for example,

at that time; the unit had only one officer. A review of the progress reports also indicated that

the delay in the procurement process was attributed to the irregular meeting of the contracts

committee and the delays in evaluation of bids.11

Similarly, the review of the delivery notes and dispatch notes of a sample of equipment revealed

that it took an average of 5 months for the equipment to arrive at SACCO locations. (See details in

Table 4).

Table 4: Showing the period taken to deliver Kits to SACCO locations

Equipment/Kits QuantityPeriod Received

Period dispatched

Time (months)

Motorcycles 88 April 2012 August 2012 5 months

Computers and accessories

60 October 2011 February 2012 5 months

Generators 136 January 2012 Not dispatched -

Filing cabinet 156 August 2011 October 2011 3 months

Bicycles 312 March 2011 October 2011 8 months

Average 5 months

Source: Analysis of delivery and dispatch documents

11 Annual work plan/progress 2011/12



The delay in delivery of equipment to SACCO premises was caused by the untimely procurement of

services for transporting equipment to the various SACCO locations. For example, some generators,

bicycles, computers, printers, filing cabinets and motorcycles valued at Shs.768,664,826 (Table 5)

were found at UCSCU’s premises not yet delivered to SACCOs (Picture 1 and 2).

Table 5: Showing undelivered equipment/kits in the stores

Equipment Quantity Unit cost Total cost

Motorcycles 33 5,559,251 183,455,283

Computers 3 2,550,000 7,650,000

Printers 3 1,300,000 3,900,000

Coin counting machine

14 2,000,000 28,000,000

Generators 136 3,903,155 530,829,603

Filing cabinet 23 325,680 7,490,640

Bicycles 46 159,550 7,339,300

Total 768,664,826

Source: Analysis of store records at UCSCU

Picture 1 and 2 Showing Generators and Motorcycles still in stores:

Source: OAG photo taken on 15/01/2013 at 12.45pm

As a result, SACCOs in the start-up category that did not receive the basic kits in time (safes,

filing cabinets, bicycles, operation costs, external audit fees and stationery) had to incur additional

expenses on their own amidst low savings/income. The SACCOs in the strengthening category

which did not receive the equipment in time, such as: computers and generators were found using

manual records and were unable to use the Performance Monitoring Tool for effective monitoring


and evaluation of their overall performance.

SACCOs that did not receive motorcycles

in time could not effectively monitor their

members in order to recover the loans

disbursed to them.

It was also noted that delayed delivery of

the procured kits also exposed UCSCU to

additional storage costs and security risks.

Conclusion:

SACCOs were not provided with the necessary

basic and advanced kits in time to support

their growth and sustainability initiatives and

this impacted on their operations.


There were delays in the delivery of kits, which

was attributed to the re-assessing exercise

that was on-going at the time for some of the

beneficiary SACCOs. The project is committed

to delivering the kits after the assessment

envisaged to end by June, 2013.

The PDU has been strengthened with

technical staff and all procurements have

since been completed.

In addition, the necessary training for the

contracts committees, evaluation committees

and partner agencies has been carried out.

All procurements for kits to SACCOs have

been completed according to PPDA guidelines

and procedures.

PAU will step up monitoring the delivery of kits

and is closely working with UCSCU to ensure

the process is completed by June 2013.


UCSCU has not delivered all the procured kits

to SACCOs and this undermines the purpose

as to why they were (kits) procured.

Recommendations:

• The Ministry of Finance, Planning and

Economic Development should ensure that

programme funds are released on time.

• Project Administration Unit should build

its capacity in the PDU to ensure that the

procurement of goods and services is carried

out according to properly drawn procurement

plans to avoid unnecessary delays in the

procurement process.

• PAU should ensure that the Contracts

Committee meets regularly to dispose of, on

a timely manner, any procurement business

at hand.

• PAU should constantly monitor and review

the activities of UCSCU, including the delivery

of kits to ensure that they are implemented

according to work plans.

4.5 PROVISION OF MODULAR TRAININGS (BASIC & ADVANCED)

According to RFSP Way forward document

2008-2011; the Rural Financial Services

Programme was supposed to provide the

basic modular training and advanced modular

trainings to SACCOs.

Through document review, it was noted that

from the FYs 2009/10 to 2011/12 a total of

Shs.1,761,095,947 was spent on providing

modular trainings to SACCOs (basic training

Shs.466,132,455 and advanced training

shs.1,294,963,492) by UCSCU.



Table 6: Showing Budget and Actual expenditures on Basic and Advanced Training Activities

(Shs.‘000)

FINANCIAL YEAR

PLANNED ACTUAL VARIANCEBudget Performance %ge

Basic Training

Advanced Training

Basic Training

Advanced Training

Basic Training

Advanced Training

Basic Training

Advanced Training

2008/09 ** ** ** ** ** ** ** **

2009/10 341,642 498,000 287,599 482,907 54,042 15,092 84.0% 97.0%

2010/11 634,000 1,550,000 150,367 445,704 483,632 1,104,295 24.0% 29.0%

2011/12 0 593,508 28,165 366,352 (28,165) 227,155 NA 62.0%

TOTAL/ AVG 975,642 2,641,508 466,131 1,294,963 509,509 1,346,542 54.0% 63.0%

** Financial Statements not provided

Source: UCSCU Financial Statements

Through the review of RFSP annual report for the FY 2010/11, it was noted that training in basic

and advanced modules did not meet the set targets in the annual work plans. In the financial years

2010/11 and 2011/12, out of 316 and 322 planned advanced module trainings to SACCOs, only

139 (44%) and 138 (43 %) were conducted, respectively. While in the same years, out of 202 and

248 planned basic modules trainings only 51 (25.2%) and 63 (25.4%) were conducted, respectively.

See Figure 1.

Figure 1: Showing Performance in Provision of Module trainings to SACCOs.

Plan Actual Plan Actual Plan Actual Plan Actual

2008/09 2009/10 2010/11 2011/12

208

84

250

189

316

139

322

138

526

298

133 133

202

51

248

63

Provision of Advanced and Basic Training to SACCOs

Advanced Trainings

Basic Trainings


The delays in the provision of module

trainings to SACCOs were attributed to the

low rate of disbursement of donor funds

due to the delays in assessment of training

needs by the SACCOs.12 The Management of

UCSCU also attributed inadequate training to

limited funds caused by the delayed release

of G.O.U counter-part funding. An analysis

of the budget performance also confirmed

that there were challenges of absorption

of funds as indicated by low rate of budget

performance. For example, in the FY 2010/11

the budget under the basic and advanced

training modules showed a low performance

level of only 24% and 29 %, respectively.

This compared very lowly in the FY2009/10

where the budget under the same modules

reflected a good performance of 84% and 97%

respectively. However, it should also be noted

that although the budget performed well in

that FY, actual trainings in both modules were

less than 50% of the planned.

SACCOs that were not trained did not acquire

the requisite skills and knowledge in the

governance and micro finance practices;

savings mobilization; financial management

and loan appraisal, among others. Non-

adherence to governance and financial

standards by SACCOs is also attributed to

inadequate trainings.

Conclusion

SACCO management and board members did

not acquire the relevant skills and knowledge

to effectively operate SACCOs.


The incomplete Modular trainings that had

12 Aide-Memoire- MAY 2012, and RFPS Annual Aide-Memoire- MAY 2012, and RFPS Annual

report FY 2010/11

been planned for 2010/11 were eventually

adjusted to customized trainings after a

needs assessment, which ascertained the

actual requirements of the SACCOs. These

were subsequently rolled into the AWP&B for

the FY 2011/12.

The project is still faced with the challenge of

high staff turnover in SACCOs and term limits

of the board as provided for by the SACCO by-

laws.

The project has in place a monitoring and

evaluation system to track performance

and absorption of funds to implementing

agencies.

PAU has been monitoring training activities by

the implementing agencies like UCSCU and

verifying from the beneficiary SACCO.


The trainings, whether customized or not,

should be extended to SACCOs.

Recommendation

• PAU should monitor the training activities

of the implementing agencies and should

ensure that they have the capacity to effectively

implement training activities.

• The Ministry should ensure timely

disbursement of Government counter-part

funds.

• Implementing agencies should improve

on their funds absorption and accountability

capability to allow them requisition for more

funds to enable them access funds for timely

implementation of activities.

• PAU should ensure timely submission of

accountabilities for funds released to the

implementing agencies.



4.6 Funding

4.6.1 Utilization of IFAD loan

According to the Programme Loan agreement, (October, 2003) between the International Fund for

Agriculture Development (IFAD) and the Government of Uganda/MOFPED), the total investment in

the RFSP Programme was SDR 14,729,562 (IFAD-SDR13,900,000 and G.O.U-SDR 829,562), which

was estimated at Shs.44 billion of which IFAD contributed 90% while the Government of Uganda

(G.O.U) Counter-part funding accounted for 10%.

A review of the audited financial statements of RFSP indicated that the absorption rate of the IFAD

loan was recorded at 57% over the FYs 2008/09 to 2011/12. Low absorption of funds (36%) was

registered in the FY 2008/09 as compared to the FY 2010/11 where a high absorption rate of 84%

was registered, as detailed in Table 7 below:

Table 7: Annual Budget Performance - IFAD Loan (FYs 2008/09 – 2011/12)

F/year Planned Actual Variance %Utilization

2008/09 9,700,428,000 3,459,426,588 6,241,001,412 36

2009/10 10,072,739,000 4,583,936,851 5,488,802,149 45

2010/11 10,339,412,988 8,743,514,864 1,595,898,124 84

2011/12 10,324,319,460 6,148,560,433 4,175,759,027 60

Total 40,436,899,448 22,935,438,736 17,501,460,712 57

Source: RFSP Audited Financial Statement

A review of the annual report for the FY 2011/12, dated 28th September, 2012 revealed that the

low absorption of the IFAD loan was attributed to: delays in the procurement process, delayed

submission of accountabilities by implementing agencies and delays in the release of funds by

Government for its funded component. For example, it took an average of 2.5 months for funds to

be released to the RFSP in the period under review (FY2008/09 to 2011/12) as indicated in Table 8

below:

Table 8: Showing delayed release of G.O.U funds to RFSP

FINANCIAL YEAR AVERAGE DELAY(DAYS)

2008/09 69

2009/10 47

2010/11 85

2011/12 79

Average 70


A review of the programme performance reported in the AWPB13 for the FY 2012/13 attributed low

absorption to: delayed procurement, delayed signing of M.O.Us with implementing agencies and

delays in accountability for funds14.

Consequently, programme activities were not carried out by implementing agencies as planned. It

was also observed that delayed release of funds by MOFPED to RSFSP subsequently affected the

budget performance of the implementing agencies since the programme did not have enough funds

to disburse to them. For example, UCSCU, the major implementing agency, on average, received

only 60% of its budgeted amount. Figure 2 below details UCSCU budget performance over the years

under review.

Figure 2: Showing Disbursement of GoU funds to UCSCU.

Source: UCSCU financial statements FYs 2008/09 to 2011/12

4.6.2 Disbursement of GOU Funds

Government of Uganda was required, according to the Programme Loan agreement, (October, 2003),

to provide counterpart funding to cover taxes, rent for PAU offices and salaries for some PAU staff.

In addition, G.O.U was to provide funds to RFSP for SACCO development totaling to an equivalent of

USD 9.3 million.

A review of the Aide Memoir of 7-18th May, 2012 indicated that as at 31st March 2012, G.O.U had paid

USD 5.7 million leaving a balance of USD 3.6 million15.

13 Annual report FY2011/12, page 33.

14 RFSP AWPB FY 2012/13, page 33

15 Aide Memoir 7-18th May, 2012, page 14.



An analysis of the RFSP audited financial statements in the period under review also indicated that

GoU funds towards the Programme were not released according to approved annual work plans

and budgets. During the period under review (FY 2008/09 to 2011/12), only 75% of the budgeted

funds had been released as detailed in Table 9 and figure 3 below.

Table 9: Annual Budget Performance – G.O.U (FYs 2008/09 – 2011/12) 0

F/year Planned Actual Variance % Disbursement

2008/09 8,652,658,861 8,647,435,290 5,223,571 99.9

2009/10 9,959,620,000 6,719,393,243 3,240,226,757 67

2010/11 8,222068,000 4,071,657,795 4,150,401,205 50

2011/12 7,222,289,828 6,274,067,043 948,222,785 87

Total 34,056,636,689 25,712,553,371 8,344,074,318 75

Source: RFSP Audited Financial Statement

Figure 3: Showing Budget Performance of GoU funds

Source: RFSP Financial Statements


Conclusion:

Programme operations were not funded

as per MoUs, annual work plans and

budgets, hence, hindering the attainment of

programme objectives.


There was generally low budget absorption

of funds under the IFAD Loan over the years.

The major cause of the low absorption of

the IFAD Loan was attributed to delays in

procurements. However, all procurements

related to equipment for SACCOs have been

completed. Currently, the cumulative loan

absorption is over 90%.

Other reasons for the low absorption include

the time spent on preparatory activities for

instance, signing of MOUs with additional

Implementing Agencies, clearance by the

Solicitor General and amendment of the loan

agreement in the subsequent years.

In order to increase funds absorption, the

project is currently providing back stopping

to its implementing agencies to improve

funds absorption and timely submission of

accountabilities.

Un-timely disbursement of funds has been

attributed to the limited resources envelope.

PAU has carried out training to implementing

agencies in the financial management of

public funds. After training, PAU is currently

providing back stopping to its implementing

agencies to improve funds absorption rates

and timely submission of accountabilities.


The absorption rate of funds has just

improved as the project is nearing to the end.

However the problem affected earlier stages

of programme implementation.

Recommendation:

• The PAU should ensure absorption of loan

funds as per Approved Budgets and loan

agreements.

• The Project Administration Unit should

ensure timely procurement of goods and

services for use by the beneficiaries/SACCOs.

• The Project Administration Unit should

ensure that the various Implementing

Agencies make timely submission of

expenditure justifications and accountabilities

in order to access programme funds.

• The Ministry of Finance, Planning and

Economic Development should ensure timely

release of GoU counter-part funds.

4.7 MENTORING OF SACCOs

The Memorandum of Understanding

between Government of Uganda and Uganda

Cooperative Savings and Credit Union

(UCSCU), states that UCSCU shall provide

assistance to SACCOs in terms of mentoring,

this includes training SACCO members, board

and staff in owning, using and controlling

SACCOs in a beneficial way. Mentoring

was supposed to be conducted by Financial

Extension Workers on a monthly basis.

The review of UCSCU financial statements

for the FYs 2009/10 to 2011/12 indicated

that a total of shs.694,733,610 was spent on

mentoring of SACCOs, as shown in Table 10

below:



Table 10: Showing Budget and Actual expenditures on Mentoring Activities

FINANCIAL YEARSACTIVITY

2009/10 2010/11 2011/12 Total

SACCO Mentoring

Budget 180,000,000 698,500,000 314,500,000 1,193,000,000

Actual 136,250,980 230,344,250 328,138,380 694,733,610

variance 43,749,020 468,155,750 (13,638,380) 498,266,390

Budget Performance (%) 76 33 104 58

Source: UCSCU Financial Statements.

The review of the RFSP Annual report for the FY 2009/10 indicated that out of 263 SACCOs planned

for mentoring, only 41 SACCOs were mentored, PAU management explained that, in addition,

during the FY 2009/10 routine mentoring activities were conducted to programme SACCOs in the

country due to a change in the mentoring approach16.

The review of a RFSP quarterly report on the assessment of the effectiveness of field teams (FEWs

and FOs) in mentoring SACCOs, indicated that the mentoring function performed by the entire 15

Regional field teams was unsatisfactory17

Further analysis of monthly mentoring reports by UCSCU regional offices also indicated that there

was inadequate mentoring of SACCOs due to the limited number of FEWs in the regions, which

increased their (FEWs) monthly workload. This challenge was exacerbated by the high number

of SACCOs, which also included non-programme SACCOs. For example, a Financial Extension

worker is required to visit, on average, 43 SACCOs in a month. Considering that there are only 22

working days in a month, the FEW would be required to visit 2 SACCOs a day. Detailed analysis of

FEWs workload in the regions is indicated in Table 11 below:

Table 11: Showing Monthly Work load per FEW

Regional Office

FEWsProgrammeSACCOs

Non-ProgrammeSACCOs

TotalSACCOs

WorkloadPer FEW

Arua 5 59 44 103 21Masaka 5 57 97 154 30Mbarara 5 79 145 224 44Gulu 3 41 80 121 40Soroti 5 43 95 138 27Iganga 4 46 225 271 67Luwero 2 42 24 66 33Lira 3 56 36 92 30Kampala 4 63 226 289 72Mbale 6 62 171 233 38Karamoja 1 37 12 49 49Tororo 2 24 27 51 25

Masindi 1 38 35 73 73

Kabarole 3 56 84 140 46

Kabale 2 46 76 122 61

Total 51. 735 1,377 2,112 656

Average 3 49 91 140 43

Source: UCSCU Annual progress report 2011

16 Aide-memoire September, 2009.

17 RFSP/UCSCU Joint quarterly report on assessment of mentoring SACCOs-March 2012


The inadequate mentoring of SACCOs was

attributed to the limited capacity of UCSCU in

terms of number of the Financial Extension

Workers (FEWs). A FEW is in charge of

an average of 43 SACCOs against the best

practice of 20 SACCOs, according to UCSCU

management.

As a result, SACCO mentoring was not

effectively conducted, given the scope of the

work at hand on a monthly basis as required,

thus SACCO needs and challenges were not

fully addressed in time. For example, during

field visits, 29(43%) of the 68 SACCOs visited

were not adhering to governance and financial

standards. Similarly, 21(31%) were facing

challenges in the management of funds.

Conclusion:

Whereas SACCOs were of the opinion that

receiving capacity enhancement inputs

through coaching and mentoring was making

a bigger contribution to their development18,

there was inadequate mentoring.


It is true that 263 SACCOs were planned

for mentoring in the FY 2009/10 but only 41

were mentored. However, the mentoring

methodology was reviewed in 2011 and

mentoring was defined as a routine provision

of on-site technical support to all SACCOs

depending on their specific needs or

challenges.

Under the new mentoring methodology, funds

disbursed are used to facilitate FEWs (SACCOs

mentors) in terms of fuel and motorcycle

repairs in the course of their work.

18 Supervision and Implementation Support Mission Supervision and Implementation Support Mission

,May 2012- Aide-Memoire

Mentoring is done by a team of field officers

comprising FEWs, FOs, and DCOs, whose

capacities to mentor SACCOs have been

enhanced through tailored trainings provided

by UCCK.


The Implementing Agency did not carry

out effective mentoring of SACCOs and

the effectiveness of the new mentoring

methodology can only be assessed in future.

Recommendations:

PAU should ensure that the Implementing

Agency (UCSCU) builds adequate capacity to

carry out effective mentoring of SACCOs.

PAU should ensure that the Implementing

Agency (UCSCU) properly accounts for the

funds released for the mentoring of SACCOs.

4.8 PROGRAMME OUTREACH, USAGE AND SUSTAINABILITY

4.8.1 Outreach and Usage

Outreach is measured by the number of people

reached and served; while usage is measured

by the number of people utilizing the SACCO

services for their improved welfare.

It was noted that the programme performed

well in its outreach and usage initiatives as

indicated by the annual trend figures. The

number of supported SACCOs grew from 317

at inception of the project in the FY 2007/08

to 735 in the FY 2011/12. This resulted into

increased number of fully paid-up members

from 249,365 to 547,439 in the same period.

The annual total share capital holding also

grew from 2.4 to 30.2 billion shillings with



a total growth in savings from 11.0 to 52.4 billion shillings, also in the same period. The Loan

portfolio in this category of SACCOs has also grown from 17.4 to 88.1 billion shillings.

The details of annual performance in this regard are shown in the figures of outreach and usage

presented in Table 12.

Table: 12 showing Trends in Outreach and Usage Indicators

Indicator June 2008 June 2009 June 2010 June 2011 June 2012

No. of Supported SACCOs 317 400 735 735 735

Number of fully paid-up Members in supported SACCOs

249,365 338,631 362,050 448,307 547,439

Total Share Capital in supported SACCOs(UG Shs million)

2,367 9,593 16,310 25,023 30,158

Total Savings in supported SACCOs(UG Shs million)

11,172 21,126 27,986 44,709 52,422

Total Loan Portfolio in supported SACCOs(UG Shs million)

17,385 32,388 44,352 78,456 88,131

Source: RFSP Results Framework

4.7.2 Sustainability

Sustainability refers to the ability of SACCOs to be able to generate sufficient income to cover their

expenditures and thus continue providing services to members beyond the project life. In measuring

the financial sustainability of SACCOs, four indicators are used, which include: Operational self-

sufficiency (OSS), Financial self-sufficiency (FSS), Return on Assets (ROA) and Portfolio at Risk

(PAR).

According to the score based – criteria (zander 2010) used in the RFSP reality check tool, a

sustainable SACCO should have an OSS>125 %, FSS>100%, ROA>5% and PAR<20%.

A review of the RFSP reality check results for –December 2011 indicated that out of the 735

programme SACCOs only 176(24%) were categorized as non-reporting or closed. Field visits to

a sample of 117 SACCOs also revealed that 49(41%) of the SACCOs were closed/non-operational

(Appendix iii).

Further analysis of the results on the operating/reporting 559 SACCOs indicated that 253 (45.3%)

were financially sustainable, 184 (32.9%) were potentially sustainable while 122 (21%) had

challenges of financial sustainability and were at risk19. On average, only 47% of SACCOs were

financially sustainable.

Summary of the reality check results are indicated in Table 13 and 14 below:

19 RFSP Reality check data- December 2011


Table 13: Showing trends in Reality Check results

Indicator 2009 2010 2011

No % No % No %

Category 1 68 12.0% 96 16.6% 253 45.3%

Category 2 176 30.9% 174 30.1% 184 32.9%

Category 3(a) 95 16.7% 101 17.4% 41 7.3%

Category 3(b) 230 40.4% 208 35.9% 81 14.5%

Total Reporting SACCOs

569

(77%)100%

579

(77%)100% 559 (76%) 100%

Not Reporting 166 156

119

Closed 57

Sub-Total Non-Reporting/Closed 166 (22.6%) 156

(21.2%) 176 (24%)

Total No of SACCOs 735 735 735

Source: RFSP Reality Check data December 2011

Table 14: Showing Analysis of the Reality Check Results

Financial Sustainability indicators

No. of Sampled SACCOs

SACCOs that do not meet criteria

Percentage

OSS<125% 559 255 45

FSS<100% 559 273 49

PAR>10% 559 403 72

ROA<5% 559 265 47

Average 53.2

Source: RFSP reality check data –December 2011

The programme has registered an increase in the number of sustainable SACCOs across the

years 2009, 2010 and 2011. However, as at 2011 more than 50% of the supported SACCOs were

still financially unsustainable; and 176 were either dormant (119) or closed (57). SACCO closures

and or lack of sustainability was attributed to mismanagement of funds/fraud, non-adherence to

governance and financial standards, inability to recover loaned funds and inadequate mentoring

and training.

Conclusion:

The Rural financial Services Programme was able to achieve the objectives of outreach and usage

as planned, but had not yet fully achieved the objective of sustainability. 53% of the programme

SACCOs still required more support to attain full-scale financial self sustainability.




The project fully achieved the objectives of outreach and usage which can be verified through the

RFSP results framework agreed upon by the donor and Government.

There is an increasing positive trend (i.e. Years 2009-2011) in attaining financial sustainability by

SACCOs as indicated in the reality check results.

Auditor’s Comment

There have been positive trends towards the achievement of increased outreach and usage of

SACCOs, however, more effort is still required in the area of SACCO sustainability.

Recommendation:

The Ministry of Finance, Planning and Economic Development and the PAU should ensure that

a legal framework for regulating SACCOs is in place, and should provide adequate technical and

supervision support to SACCOs.

4.9 Performance Monitoring Tool Training by AMFIU

The Memorandum of Understanding signed between the RFSP and the Association of Microfinance

Institutions of Uganda (AMFIU) requires AMFIU to provide training in the Performance Monitoring

Tool (PMT) to programme SACCOs. AMFIU was also required to provide technical backstopping/

assistance to the trained SACCO staff to enable them prepare and use PMT reports on a quarterly

basis.

According to the RFSP annual work plans for the FYs 2009/10 and 2010/11, 65 and 51 SACCOs were

supposed to be trained in the PMT, respectively.

A review of the financial statements for the period from FY 2008/09 to 2011/12 revealed that a total

of shs.454,252,562 was disbursed to AMFIU in respect of the training and provision of technical

assistance to SACCOs.

It was noted that for the FY 2009/10 training was carried out in all of the 65 SACCOs as planned,

however, in the FY 2010/11 no PMT training was conducted. In the FY 2011/12, out of 65 SACCOs,

only 38 SACCOs received training.

Further analysis of the Quarterly technical assistance reports revealed that not all the SACCOS

that received training were technically assisted in the preparation of PMT reports.

In the FY 2010/11 for the first and second quarters, out of 65 SACCOs 36(55%) and 32(49%) received

technical assistance, respectively. Details of quarterly technical assistance to SACCOs are given

in Figure 4.


Figure 4: Graph showing performance of technical assistance to SACCOs.

Source: OAG Analysis of AMFIU technical assistance reports

The inadequate PMT training was attributed to delays in submission of expenditure justifications

/ accountability by the implementing agency, for example, Shs.88.3 million advanced to AMFIU in

September 2011 had not been accounted for.20 It was noted that AMFUI did not have capacity, in

terms of numbers of staff, to provide the technical assistance. They were largely depending on

contract staff to carry out technical assistance.

The analysis of PMT data provided by AMFIU indicated that although SACCOs were trained in the use

of PMT to prepare quarterly reports, not all trained SACCOs were submitting. In the FY 20101/11,

out of the 65 trained SACCOs, only 37(56%) and 31(47%) SACCOs submitted PMT reports in the

first and second quarters, respectively. Similarly, in the FY 2011/12, out of 104 trained SACCOs, only

54(51%) and 18(17%) submitted PMT reports in the third and fourth quarters, respectively. Details

of quarterly submission of reports are indicated in Figure 5 below:

Figure 5: Performance Monitoring Tool –Reporting by SACCOs.

Source : OAG Analysis of AMFIU PMT data

20 Supervision and Implementation Support Mission, May 2012 –Aide-Memoire.



Field visits to a sample of 29 SACCOs trained

in PMT, revealed that the Performance

Monitoring Tool was being utilized by 12 (41%)

of the SACCOs.

Inadequate training and technical assistance

provided to SACCOs resulted into the inability

of SACCOs to use the performance monitoring

tool, which would have assisted them in timely

reporting and monitoring performance.

Conclusion:

Not all SACCOs trained in PMT are reporting

using the Performance Monitoring Tool,

a shortcoming that is hindering effective

monitoring and supervision of the overall

SACCO performance.


AMFIU targeted to train 116 SACCOs, and all

of them received training in the use of PMT

(65 SACCOs in the FY 2009/10, 38 SACCOs

in 2011/12, and 13 SACCOs in 2012/13). The

training that did not take place in the FY 2010/11

was due to inadequate preparedness on the

part of the SACCOs to receive the training,

that is, they lacked computers, a power source

and competent staff to undergo the training.

However, the training was planned for and

carried out in the subsequent years.

The project will continue working with AMFIU

to ensure that all trained SACCOs receive

technical backstopping, produce and utilize

PMT reports on a quarterly basis.

Auditor’s Comment

The training delayed and management’s

commitment to work with AMFIU can be

assessed in the future.

Recommendations:

The Project Administration Unit should

ensure that AMFIU builds capacity in order to

provide quarterly technical backstopping to

SACCOs that have been trained in the use of

PMT.

The Project Administration Unit and AMFIU

should ensure that SACCOs report using the

Performance Monitoring Tool on a quarterly

basis for effective monitoring of SACCO

performance.

PAU should ensure that AMFIU conducts

training and technical assistance according

to the approved work plan and submits

accountabilities on time to enable it access

further funding.

4.10 Computerization of the cooperative registry

The Memorandum of Understanding signed

between the Government of Uganda/

MOFPED and the Department of Cooperative

Development /MTIC stated that the Rural

Financial Services Programme shall provide

funds to set up a fully computerized and

updated registry of SACCOs. The MOFPED was

also supposed to facilitate the department to

conduct regional and district SACCO forums.

According to the RFSP annual work plans

for the FY 2011/12, the Department of

Cooperative Development/MTIC was

supposed to collect data for updating the

SACCO registry, computerize the SACCO

database and conduct district SACCO forums.

A review of financial statements indicated

that a total of shs. 338,108,000 was released


to MTIC in the period under review to carry

out those activities.

It was noted that by June 2012, the process

of updating the SACCO registry was still on

going, data collection and entry was not yet

complete. It was also noted that the SACCO

registry was not yet fully computerized.

The Department was provided with 2 desk

top computers, 3 laptops, a digital scanner,

printer and photocopier. The consultant

who is supposed to develop and upgrade the

existing cooperative database had not yet

been recruited by the PAU.

This delay in computerization of the registry

has been attributed to the delay in the

procurement of the services of a consultant

to re-design the SACCO database.

The absence of a computerized SACCO registry

hinders effective supervision, monitoring and

regulation of Cooperatives/SACCOs.

Conclusion:

The Cooperative/ SACCO registry is not

computerized, a problem that is hindering

effective supervision, monitoring and

regulation of SACCOs.


The computerization process of the SACCO

Registry is already ongoing. The project

procured all the required equipment and

delivered it to the Department of Cooperatives.

It also facilitated the department to collect

data from all SACCOs in the country for

updating the SACCO registry. The project

has also recruited a consultant to redesign

the SACCO database, and is expected to

commence on 1st April, 2013.

Auditor’s Comment

The computerization of the project has

delayed hence affecting the attainment of its

intended purpose.

Recommendation

The Ministry and the RFSP should expedite

the process of recruiting a consultant to

re-design the SACCO database to ensure

computerization of the Registry.

4.11 Training in Cooperative Principles

The Rural Financial Services programme

signed a Memorandum of Understanding

with the Uganda College of Commerce,

Kigumba (UCCK) for 2 years from the FY

2011/12 to 2012/13 to conduct a training

needs assessment; provide short training

courses on SACCO principles, governance and

management to FEWs, DCOs and FOs; and

to provide part-time certificate and diploma

courses to SACCO managers and staff.

Through review of financial statements, it

was noted that Shs.466,194,010 was released

to UCCK in the FYs 2011/12 to conduct those

services in accordance with the annual work

plan.

According to the RFSP Annual work plan for

the FY 2011/12, the UCCK was to provide short

training courses to FEWs, DCOs and FOs in

Training of Trainers (TOT), refresher and audit

training and mentoring teams. The college

was also to provide part-time cooperative

management certificate and diploma courses

to SACCO managers and staff to be completed

in June 2013.



A review of the progress reports indicated

that short term training courses on SACCO

principles, governance and management

were conducted to 174 FEWs, DCOs and FOs.

Training in part-time diploma and certificate

course in cooperative management for

90 SACCO managers and staff had also

commenced and the course is scheduled to

end in June 2013. However, the short training

courses of FEWs, DCOs and FOs in ToT

refresher and audit training and mentoring

teams was rolled over to the FY 2012/13.

The delay in conducting the short training

courses was attributed to the delay in

developing their course units and the slow

selection process of participants which was

being done in collaboration with UCSCU field

staff and trainers. This will delay the training

of beneficiaries in short courses.

Conclusion

The training in Cooperative Principle was not

conducted in time as per the approved work

plans.


At the time of this audit, the refresher TOT

and audit training for FEWs, DCOs and FOs

had been rolled over to the FY 2012/13. The

Training has since been completed.

PAU and UCSCU are currently updating the

list of trained FEWs, DCOs and FOs.

UCCK developed all the relevant course units

for certificate and diploma courses and these

are running.

Auditor’s Comment

No documentary evidence was provided to

justify management’s response.

Recommendation

The PAU and UCSCU should have a database

on the various FEWs and FOs being trained.

The PAU should ensure that the UCCK

expedites the process of developing course

Units.

4.12 Support to SACCO Unions

According to the memorandum of

understanding between the Government of

Uganda and the Uganda Cooperative Alliance

(UCA), UCA was supposed to conduct a

situational analysis on the existing SACCO

Unions with a view of providing technical

support and periodic mentoring of 4 SACCO

Unions. UCA was also supposed to mobilize

and sensitize SACCOs so as to encourage

them to join unions and select 2 SACCO

networks for assistance in registration with

the Department of Cooperatives. Additionally,

UCA was supposed to document lessons

learnt from support to Regional SACCO

unions to form a basis for future interventions

in the sector.

Through document review it was noted that

a total of shs.132,565,000 was released to

UCA to carry out those activities in the period

under review.

A review of progress reports revealed that

UCA conducted a situation analysis of the

SACCO unions and presented a report to the

PAU. As a result of the report, it was agreed

that UCA, instead, provides mentoring and

technical support to 2 existing SACCO Unions

that were currently registered and work with

4 other SACCO networks and assist them to

register as Unions.


At the time of audit (December 2012), UCA

had not commenced activities of periodic

mentoring and trainings of SACCO Unions.

The assistance of the selected SACCO

networks to register with the Department of

Cooperatives was deferred to the FY 2012/13.

The delay to conduct periodic mentoring and

trainings of SACCO Unions, mobilization and

sensitization of SACCOs and registration of

SACCO networks was attributed to the delayed

process of signing M.O.U, which affected the

timely release of funds and implementation

of agreed activities.

Delayed registration of SACCO networks;

delayed mobilization and sensitization of

SACCOs; and delayed training and mentoring

of SACCO Unions denied SACCOs of the

benefits and opportunities accruing from

forming SACCO networks and Unions.

Conclusion:

The sensitization of SACCOs and technical

assistance provided to SACCO unions by the

Uganda Cooperative Alliance delayed and

was not conducted as per agreed work plans,

thus delayed the attainment of the objective of

preparing SACCOs for sustainable existence.


PAU has been monitoring the activities of UCA

and reports indicate that the activities have

been undertaken.

In addition, RFSP, through routine monitoring

is currently verifying these activities.

Auditor’s Comment

No documentary evidence was provided to

justify management’s response.

Recommendation

The PAU should monitor and supervise the

implementation of the activities of UCA as

agreed in the M.O.U.

John F. S. MuwangaAUDITOR GENERAL



GLOSSARY OF TERMS

Advanced kits:

A collection of specified user equipment which are given to

SACCOs in the strengthening category to enable it improve operations.

Basic kits:

A collection of specified user equipment which are given to

SACCOs in the start-up category to enable it improve operations.

Financial Extension Worker

Are individuals who work closely with the rural communities within all the Sub-Counties in their

respective districts of operation as a focal point for gathering information from the community/

members of savings and credit societies.

Microfinance deposit institutions:

Are microfinance Institutions which receive members Deposits in addition to the core function.

Programme SACCOs:

Are SACCOs supported by Government of Uganda through the Rural Financial Services

Programme

Start-up category:

A lower category of SACCO classification; duly selected as a lead SACCO for the sub county,

with a membership of at least 250 paid up members, registered with the department of

cooperatives.

Strengthening category:

A higher level of SACCO status; with a savings portfolio of at least 6 million, portfolio at risk

lower than 10%,operating in a free-of charge premises, a minimum of 300 members.

Tier 4 financial Institutions:

These are financial institutions that are Savings and Credit Cooperatives, Non-governmental

organizations and companies engaged in microfinance, often associated with donor-supported

programs.


APPENDICES

Appendix(i)Organization Structure

MINISTER OF FINANCE PLANNING AND ECONOMIC DEVELOPMENT

PERMANENT SECRETARY/ SECRETARY TO THE TREASURY

DIRECTOR ECONOMIC AFFAIRS

COMMISSIONER DEPARTMENT OF MICROFINANCE

COORDINATOR- RURAL FINANCIAL SERVICES PROGRAMME (RFSP)

UNDER SECRETARYDEPUTY SECRETARY TO THE TREASURY



APPENDIX (ii) Methodology

Documents Reviewed

Document Purpose

Ministerial Policy Statements-2008/08-2011/12

Obtain mandate, functions of the Ministry of Finance. Mission, Vision, and strategic objectives.

RFSP -Annual Work plans and Budgetsf/year 2008/09 t0 2011/12

To assess and establish the Activities planned, funds disbursed and utilized by the Programme.

RFSP- Annual/Quarterly Progress Reports -2008/09-2011/12

To assess and verify whether activities were conducted as per MoUs and Work plans/ Budgets and if Objectives were achieved, challenges faced and recommendations.

Work plans and Progress Reports of Implementing Agencies(AMFIU, UCA, UCCK)

To Verify whether Activities as per MoUs and Workplans/ Budgets were conducted, challenges faced and recommendations.

Memorandum of Understanding between RFSP and the Implementing Agencies(AMFIU,UCA, UCCK)

To verify and understand the roles of each Agency in regard to the implementation of Programme activities.

Annual Work plans and Progress Reports UCSCU

To assess and verify whether activities were conducted as per MoUs and Work plans/ Budgets and if Objectives were achieved, challenges faced and recommendations.

SACCO Monthly ReportsTo verify the Portfolio at Risk, Operational and Financial self Sustainability of SACCOs.

Way Forward Document 2008-2011 To obtain information on operations of key-players in the sector over the period.

Aide Memoirs -2010-2012 To obtain Information on performance of the RFSP its achievements and challenges.

RFSP Mid Term Report -2010 To obtain Information on performance of the RFSP its achievements and challenges.

Finscope Uganda 2009 ReportTo obtain information on Demand and Access to Financial Services in Uganda

Programme Implementation Manual-RFSP RFSP ,Way forward 2008-2011, between GoU And IFAD

To verify Regulations and procedures followed by the programme

Cabinet Memorandum-Principles for Comprehensive Regulation of MicrofinanceInstitutions in Uganda(2011)

To understand regulations followed by various players in the Microfinance Sector.

Savings and Credit Cooperatives Bye- lawsCooperative Societies Statue 1991 To establish Regulations that govern Cooperatives.


Officers Interviewed

LOCATION OFFICER REASON

The Department of Microfinance-MOFPED

Commissioner –DMF.

To assess the performance of the department in their role towards formulating the regulation for Tier 4 financial Institutions, activities conducted and challenges faced by the department in fulfilling their role.

Department of Cooperatives-MTTI

Commissioner/Registrar-MTTI.

To verify the activities conducted by the department in regard the MoU signed with RFSP, achievements made and challenges faced by the departments in fulfilling their role.

Rural Financial Services Programme-Kampala

Coordinator-RFSP

To assess the performance of the Programme verify activities carried out whether set objectives were achieve and Challenges faced by the programme and recommendations of mitigating the challenges.

Operations manager -RFSP

To assess the performance of the Programme verify whether set objectives were achieved, and Challenges by the programme and recommendations

Procurement Officer-RFSP

To assess the performance of the Programme verify Procurement plans against Targets to ascertain whether targets were achieved and Challenges faced by the Procurement Unit.

Uganda Credit and Savings Cooperatives Union Headquarters-Maganjo

Chief Executive Officer-UCUSCU.

To ascertain the guidelines, activities of the Union , key processes and Procedures, Achievements and Challenges faced in conducting their work

Operations Manager -UCSCU

To assess whether UCSCU was able to carry out activities as per Annual Work plans /Budgets and if set objectives were achieved. Challenges faced in implementing programme activities and recommendation.

UCSCU Regional Offices.

Branch Heads of UCUSCU To asses and verify activities conducted by the Branches , Achievements and Challenges faced in conducting their work.

IMPLEMENTING AGENCIES AMFIU, UCA, UCCK

To verify whether the Implementing agencies conducted activities as per MoU with RFSP and Annual Workplans /Budgets.

SACCOs Upcountry SACCO managersTo asses and verify the operations, Procedures in management of SACCOs, Achievements and Challenges faced by SACCOs



APPENDIX (iii) Non-operational and closed SACCOs

S/N DISTRICT SACCO NAME CATEGORY STATUS

1. Kampala Kasanga Nezikokolima Start-up 08 Closed

2. Kampala Linear Start-up 08 Closed

3. Kampala Parkyard Flexible kit 2011 Closed

4. Kampala Nakawa market Vendors Flexible kit 2010 Closed

5. Kampala Banamutungo Start-up 09 Closed

6. Kampala Gweyalabyeko Flexible 2010 Closed

7. Wakiso Busiro East Start-up- 11/12 Closed

8. Wakiso Ssisa multipurpose Start-up 08 Closed

9. Wakiso Entebbe Atanaziraba Start-up 07 Closed

10. Wakiso Kitezi Start-up 08(Upgraded) Closed

11. Mukono Banagoma Start-up 08 Closed

12. Mukono KasawoNamuganga Advanced 2007-08 Closed

13. Mukono Nakifuma Start-up 11/12 Closed

14. Mukono Wakisi Elders Start-up 11/12 Closed

15. Mukono KibingeMisanvu Start-up 11/12 Closed

16. Rakai Bwebunakya small business Start-up 11/12 Closed

17. Lyantonde Kinuka Start-up 11/12 Closed

18. Jinja Asonkera Flexible Kit 2010 Dormant

19. Iganga Sendechibula Start-up 11/12 Closed

20. Mbale Industrial division formation Closed

21. Mbale Bugulya farmers formation Closed

22. Mbale Bukalisha Start-up 09 Closed

23. Mbale Bunghoko Mutoto Start-up 09 Closed

24. Mbale Busoba Start-up Dormant

25. Bukwo Bukwo TC Start-up 11/12 Closed

26 Bukwo Chesower Start-up 11/12 Closed

27 Sironko Bumasifwa formation Closed

28. Sironko Buyobo formation Closed

29. Sironko Lusha formation Closed

30. Mbale Bukonde Start-up 08 Dormant

31. Masindi Bunjenje Start-up 08 Closed

32. Masindi Nganghya Start-up 11/12 Closed

33. Masindi BweyaleSolidare Flexible 2010 Closed

34. Lira Amugu subcounty Formation Closed

35. Lira Railway Division Formation Closed

36. Oyam Ayoyerac Start-up 08 Closed

37. Lira Aromo Cooperatives Start-up 08 Closed

38. Lira Oribcing Advanced 2007-08 Closed

39. Lira Acaba Start-up 11/12 Closed

40. Lira Omoro Start-up 11/12 Closed

41. Lira Kangayi Start-up 11/12 Closed

42. Arua Pawor village Start-up 11/12 Closed

43. Yumbe Kei subcounty Start-up 11/12 Closed

44 Arua Adumi Start-up 11/12 Closed

45. Nebbi Akela Start-up 08 Closed

46. Nebbi Jang okoro Start-up 11/12 Closed

47. Nebbi Nebbi subcounty Start-up 11/12 Closed

48. Nebbi Parombo subcounty Start-up 08 Dormant.

49 Jinja Tweyambe Buyengo Start-up 11/12 Dormant

P.O. Box 7083, Kampala. Tel. +256 414 344 340 Fax. +256 414 345 674

E-mail: [email protected]


THE REPUBLIC OF UGANDA - Office of the Auditor … audit report on the capacity building support to...

Documents

Transcript of THE REPUBLIC OF UGANDA - Office of the Auditor … audit report on the capacity building support to...