Introduction:
On the 25th August 2009 the Director of Finance reported to the DG on the issue of budget deficit due to a number of factors. The Director of Finance mentioned among other things is the non availability of budgeted funds to be provided by external donor on one hand and unpaid regulatory fees from public owned utilities on the other hand, namely ELECTOGAZ, ONATRACOM and ORINFOR.
The Director General appointed a team made up of the Director of Finance, the Director of Economic Affairs, the Internal Auditor and the Director of Human Resource and Administration to discuss on the issues and to come up with strategies to get out of the situation and set up strategies to collect contributions.
Deliberations.
The ad hoc committee held three meetings; on the 26th August, 31st August and 9th September 2009 to discuss the issue. After analysis, it was realised that the main problem lies on the following factors:
Public owned institutions are not paying their contributions as per provisions of the law, these include ELECTROGAZ, ORINFOR and ONATACOM.
Other operators are experiencing difficulties to pay their outstanding invoices, especially broad castors.
It has been reported to the committee that Bralirwa has shown some resistance to pay its VISAT fee contesting the way in which the new tariff set up by the Board of RURA has been communicated to it.
In consideration of the above, the ad hoc team decided to revisit the budget by reviewing the real cash flow expectation in comparison with the budgeted expenditures for the remaining months of the year from September to December 2009 as follow:
In line with the mandate set by the Director General agreed to identify the factors underlying that budget deficit through comparison of budgeted amount with the status of revenue collected.
Revenue collection analysis.
Under this chapter, the team considered the status of payments received in comparison with the budgeted revenues as per the following tables 1 and 2.
Income progress report
The situation of payments received as per budgeted is summarized in the hereafter table.
Table 1: Income progress report as at 31st august 2009 as registered in accounting section.
Expected Income
Received
Difference
variation in %
Internally generated revenues
2,897,980,573
2,137,099,408
-760,881,165
73.74%
Operator's contributions (1%)
1,564,864,614
810,293,129
754,571,485
51.78%
MTN Rwandacell
629,546,004
649,546,668
-20,000,664
103.18%
Rwandatél
200,000,000
93,357,868
106,642,132
46.68%
ISPA
1,200,000
0
0
0.00%
STAR MEDIA
781,796
1,437,505
-655,709
183.87%
TELE 10
2,832,704
6,550,821
-3,718,117
231.26%
ALTECH
104,293
104,293
0
100.00%
NEW ARTEL
20,522,639
7,179,990
13,342,649
34.99%
ELECTROGAZ
326,830,639
0
326,830,639
0.00%
ELGZ outstandings
228,904,951
29,930,716
198,974,235
13.08%
ONATRACOM
54,141,588
0
54,141,588
0.00%
Other Transport operators
100,000,000
22,185,268
77,814,732
22.19%
Other regulatory fees
950,000,000
937,220,047
12,779,953
98.65%
Frequencies allocations
750,000,000
612,456,160
137,543,840
81.66%
Numbering fees
150,000,000
110,935,530
39,064,470
73.96%
Transport licences
50,000,000
213,828,357
-163,828,357
427.66%
Other Income
0
6,470,273
-6,470,273
Balance account at 31december,2008
383,115,959
383,115,959
External Funds
1,102,950,000
25,180,320
1,077,769,680
2.28%
eRwanda
456,000,000
0
456,000,000
0.00%
RCIP
456,000,000
0
456,000,000
0.00%
UERP
85,500,000
0
85,500,000
0.00%
ICF
105,450,000
25,180,320
80,269,680
23.88%
TOTAL REVENUE
4,000,930,573
2,162,279,728
1,838,650,845
54.04%
The table above illustrates that:
The table above have tree components
1% contribution of turnover:
Other regulatory fees
Extenal funds
The above table shows 51.78% performance in correction of 1% regulatory fees.
The many factors identified for that low % is due to:
Overestimation of regulatory fees of Rwandatel,
None payment from ELECTROGAZ,
Concerning other regulatory fees the table shows the good performance of 98.65%. Under this item, it was noted that the amount from transport licence was mote that 4 times than expected. This stems from the underestimation of the numbers of transport operators at the beginning of the year. However it was observed that under the some item, there was issues related to the frequency fees due to some disputed invoices and none payment of broad castors
External Funds: The external fund represent 27.5% of the total RURA budget, but the table shows the very low performance of 2.28% as at 31st August. However there is indication that this performance might improve significantly during the remaining period September to December.
From the above different performance rate, it is observed that the average performance rate was fund to be 54.04%.
Considering the above difference between the expected based on formal commitments from the concerned operators and received amount, the team found it necessary to assess the exact amount that RURA can expect to receive and the budgeted expenditures for the remaining period (Sept. to Dec. 2009)
Expected revenues
With respect to expected revenues, the following table 3 was prepared based on estimates provided by the directorate of economic regulation.
Table 2: expected revenues for the period of September - December 2009
Transport
6,746,800
ICT
78,867,619
ELECTROGAZ
265830089 [1]
Sub Total
351444508
External fund
349,364,940 RWF
Total
700,809,448 RWF
Source: Directorate of Economic Regulation and HRA
The above tables show that the projected receivable amount of regulatory fees for the period from September to December 2009 is Rwf. 700,809,448 RWF out of Rwf. 1,838,650,845 or 38 %.
By comparing, The above figures with the budget expenditure, for the remainder year we determine the financing gap on the following section.
Expenditure analysis
Table 3: Situation of expenditures as planned, executed and proposal for the period September to
December 2009.
Items
Budgeted
Executed
Remains
Proposed
Observation
Employees charges
2,649,058,721
1,240,239,096
1,408,819,625
909,732,265
The amount was over estimated,
Fuel
5,000,000
0
5,000,000
0
We propose to remove this item; there is no need of fuel in RURA.
Office stationeries & Consumables
30,000,000
17,961,397
12,038,603
12,038,600
Cleaning, maintenance& repair
20,000,000
14,624,852
5,375,148
12,261,603
We propose to increase the amount as the number of cleaners has also increased
Beverages, tea and coffee
17,500,000
1,946,616
15,553,384
600,000
This was provided to Directors only while it was budgeted for all staff
Proposed amount is enough
ICT consumables
14,327,500
1,921,700
12,405,800
Subscription to news paper
1,000,000
1,009,185
-9,185
10,000
We propose to increase in order to cover amount exceeded.
Maintenance of equipments
7,500,000
1,310,300
6,189,700
6,189,700
Local perdiems & accomodation
58,046,000
7,238,496
50,807,504
8,000,000
This amount was over estimated by some Directors, the entire budgeted could not be used.
Car hire
70,891,400
21,810,444
49,080,956
9,993,468
The amount was also over estimated, the main cause is the review of the rates of accommodation.
International Travelling DG
3,500,000
2,975,980
524,020
2,096,080
We proposed to increase as budgeted amount is almost finished.
International Travelling HRA
15,000,000
13,367,401
1,632,599
1,632,599
Communication costs
35,500,000
17,253,776
18,246,224
4,208,000
This amount should be reduced based on amount executed.
Acquisition of books.
10,000,000
84,932
9,915,068
9,915,068
Water & Electricity consumption
25,000,000
6,428,837
18,571,163
8,000,000
According to monthly consumption, total amount remained will not be consumed.
Security charges
7,500,000
2,580,200
4,919,800
7,000,000
There is tender in process.
Marketing& Publicity
28,000,000
13,938,148
14,061,852
7,000,000
This amount will be enough for remained period based on budget execution data.
Consultancy
89,707,992
15,485,720
74,222,272
74,222,272
Training costs
Training supported by RURA budget
558,266,050
275,039,556
283,226,494
60,000,000
Taking into consideration cash problems, training cost should be slowed down
Training supported by RCIP
185,250,000
185,250,000
allow those pending( in process) only for the rest of the year.
Training supported by ICF
139,869,940
139,869,940
For the case of donors, they accepted to refund only the balance mentioned.
Training supported by UERP
24,245,000
24,245,000
International perdiems HRA
15,000,000
14,189,012
810,988
2,371,320
We propose to decrease the amount for a remained month as budgeted is almost finished.
International perdiems DG
15,000,000
14,586,196
413,804
1,413,805
This item was highly consumed and we would propose to be reduce for the remained months.
Office rent( Kimihurura)
80,720,000
42,441,697
38,278,303
45,000,000
This amount will be enough for remained months.
Other contingencies & emergencies
10,000,000
9,970,970
29,030
29,030
We hope not to have other contingencies and emergences for remained period.
Membership fees to international orgs
31,500,000
8,367,512
23,132,488
9,500,000
This amount was over estimated and should be reduced based on previous execution.
Audit &advisory costs
8,500,000
727,950
7,772,050
3,886,025
Only half of it will be enough based on budget execution.
Sports clothes
15,000,000
This amount is expected to be paid for sports clothes.
Translation cost
7,500,000
3,379,354
4,120,646
4,120,646
Survey
40,000,000
15,925,292
24,074,708
24,074,708
Meeting and hiring conf.room
28,550,000
4,475,292
24,074,708
12,000,000
This amount has been overestimated and only half of it will be enough
Seating allowances
6,500,000
2,171,600
4,328,400
2,080,000
Refreshments DG's office
3,600,000
291,300
3,308,700
3,308,700
Announcements& Emission
40,580,000
10,585,960
29,994,040
8,000,000
This amount was over estimated by Directorates and can be reduced.
Workshops,seminars and conference
75,182,910
66,604,070
8,578,840
8,578,840
Total debt to be paid to UAF
243,417,429
This amount is to be paid by RURA to UAF.
Total
4,008,430,573
1,848,932,841
2,508,862,672
1,865,045,098
Source: DF directorate, budget section.
5. Determination of Financing Gap
The above budgeted expenditures of Rwf. 1,865,045,098 and the expected revenues of RWF 251,557,248 for the remaining months show a deficit of Rwf. 1,613,487,850. If we assume that pledges from donors will be honored, we can reduce the deficit to a total of 1,613,487,850 minus 349,364,940 or RWF 1,264,122,910. This is the financing gap to be bridged by RURA for it to be able to achieve its objectives of the year 2009.
In addition to this, it is reasonable to say that a provision of security margin of three months for the 1st quarter 2010 in which RURA will be waiting for the first operators' disbursement of their regulatory contributions needs to be taken into consideration if we are to avoid any insolvency problem.
conclusion and recommendations.
Based on the above assessment of the RURA financial situation, the team suggested the following measures to be taken in order to secure the budget:
5.1 On short term basis............
5.2. On long term basis…….
Annexes:
Annex 1…
Annex 2…
Team members.
RUTAYISIRE S. Innocent, Director of Finance, Chairman
MVUYIKONGO J. Claude, Director of Economic Regulation, member
Kayira Sadock, Ag Director of HRA, member
Marthe UWAMARIYA, Internal Auditor, member.
