Uganda has introduced a new public financial management system as part of efforts to seal gaps that led to the siphoning off of billions of shillings by corrupt officers. The new system is also intended to allay donors’ fears.

Under the new financial management rules released by Treasury last week, government ministries and departments will now be served by a single Treasury account and disbursements done on a quarterly basis instead of monthly transfers.

This has seen the elimination of government accounts held in commercial banks — a soft target for fraudulent transactions — and the closure of dormant accounts discovered at the Bank of Uganda (BoU) by investigators.

European donors suspended $260 million in bilateral aid to Uganda in September 2012 over the loss of $8.6 million in the Prime Minister’s Office. The money was part of funds intended to help the recovery of northern Uganda after two decades of insurgency.

Finance ministry officials said stronger security features have been added to the Integrated Financial Management System (IFMS) to remove delegation of transaction powers by accounting officers, create limits on daily cash withdrawals and introduce monitoring alerts for suspicious entries.

READ: Uganda in reforms to restore donor confidence

While these measures have apparently appeased donors eager to minimise loopholes blamed for the loss of public funds, government releases for the second quarter of 2013/14 should help gauge the efficacy of the new measures.

A total of Ush2.5 trillion ($998.9 million) has been released for the period October-December for both wage and non-wage expenditures, according to data obtained from the Ministry of Finance, Planning and Economic Development. 

“The enhanced IFMS bears camera and voice recording features for monitoring accounting officers while executing transactions on the system. A cash limit of Ush50 million ($19,778) has also been instituted for daily cash withdrawals,” said Kenneth Mugambe, the budget director at the Finance Ministry.

Lack of a ceiling on daily cash transactions led to huge losses of money in the past, with some accounting officers withdrawing as much as Ush800 million ($316,456) per day without queries being generated in the system.

“The recovery of stolen monies remains an uphill task and whatever little is realised is worth the effort under current circumstances,” said Julius Mukunda, a civil society activist.

The new measures took effect almost three weeks ago, following a decision by the donor community to resume budget support, which had been suspended during the 2012/13 financial year.

So far, an estimated Ush126 billion ($48.4 million) that had been withheld over massive losses of funds in the Office of the Prime Minister and Public Service Ministry has been lined up for disbursement this financial year.

Though the share of budget support dropped from 25 per cent in 2012/13 to roughly 19 per cent in 2013/14, resumption of budget support offers much needed relief to various departments that have suffered spending cuts due to the absence of donor funding and weak tax revenues.