By Mary Karugaba and Nelson Mandela Muhoozi
Parliament’s agriculture committee has recommended that the Auditor General (AG) conducts a forensic audit of the Cotton Development Organisation’s (CDO) revolving fund after officials failed to account for sh6.4b.
Presenting the sector budget to the budget committee, which is scrutinising the supplementary budget, the deputy agriculture committee chairperson, Agnes Atim, said CDO needs to fully account for the sh6.4b given to it.
To boost value-addition, Government put in place a Revolving Lint Buffer Stock Fund as an investment incentive for textile manufacturers, to benefit only Fine Spinners (U) Ltd and Southern Range Nyanza (NYTIL). Through it, the spinners procure lint without tying up their working capital. They pay for what they consume into the Fund and the money is rolled over to the following season to repeat the process without interest payments.
In a report to the committee, CDO reported that from 2015 to November last year, it procured a total of 43,126 bales of lint for Fine Spinners and Southern Range Nyanza.
“During the committee scrutiny of the budget, we were informed that this money cannot be traced on CDO’s bank statements. This is why we requested that a forensic audit be undertaken with a view to establish the value and operation of the Fund,” Atim said.
However, CDO managing director Jolly Sabune dismissed reports of missing funds, saying all the money that was given to CDO is in the stock.
“The spinners and the ginners know where this money is,” she said.
Atim also told the committee, chaired by Patrick Isiagi, that despite the allocations, in June 2022, Fine Spinners wrote to the Government requesting for an enhancement of their allocation from sh13.55b to sh25b.
Additionally, CDO, after carrying out a needs assessment, noted that both companies had expanded their operations, wrote to the finance ministry advising that Fine Spinners be given an additional sh15b and Southern Range Nyanza sh5b.
The finance ministry, in January 2023, released a supplementary expenditure of sh7.5b for Spinners only.
Atim said Fine Spinners later requested for a sh2b transport refund, saying due to the effects of COVID-19, the prices of cotton had gone up, and that they had procured locally produced cotton from ginners, who quoted prices in reference to the international markets, which became a cost at the final destination.
However, the committee deems the expenditure foreseeable since CDO knows the cotton seasons and, therefore, those costs should have been planned for during budgeting.
The committee recommended that the sh7.5b released to CDO be returned, arguing that from data provided by CDO, the average consumption of Fine Spinners over the past eight years is 4,297 cotton bales, which translates to about sh6b annually against the base fund of sh13.55b. Similarly, Southern Range Nyanza has an average capacity of 1,691 bales at approximately sh3b, against a base fund of sh7b.
“Therefore, the committee notes that there is no need for a supplementary budget for the two spinners as they have averagely been operating below half capacity,” Atim said.