Uganda Intergovernmental Fiscal Transfers Program: What the Auditor General Found and What Organisations Can Learn

Uganda's Intergovernmental Fiscal Transfers Program, commonly known as UgIFT, offers a useful case study in a recurring governance problem: an organisation can mobilise funding, build assets, implement systems and report high levels of expenditure — yet still struggle to convert those inputs into the intended service outcomes.

UgIFT was established as a Government of Uganda programme, supported by World Bank financing, to strengthen the adequacy, equity and effectiveness of financing for local government services. Over time, its scope covered education, health, water and environment, micro-scale irrigation, and services in refugee-hosting communities.

The programme also produced measurable gains. The Auditor General's 2024 evaluation of the education component found that fiscal transfers to local governments had become more adequate and more equitably distributed, while the establishment of seed secondary schools expanded access to education. Enrolment in the new seed schools increased substantially between 2022 and 2024, including increased participation by girls.

But the audits also reveal something important for finance, audit and governance professionals.

Funding an intervention is not the same as making it work.

Across construction, staffing, procurement, information systems, performance measurement and local-government oversight, the Auditor General identified gaps between resources provided, activities completed and sustainable service-delivery outcomes.

That distinction is the central governance lesson from UgIFT.

Understanding the audit evidence

There are two particularly relevant Auditor General reports.

The first is the December 2024 Value for Money Audit on the Seed School Programme under UgIFT in the Education Sector. It examined implementation from the programme's inception through FY2023/24, including seed secondary schools and transitioned refugee-serving primary schools.

The second is the Auditor General's report on UgIFT for the financial year ended 30 June 2025, dated 17 December 2025. It included the financial-statement audit, a procurement compliance review and a broader performance evaluation.

This distinction matters.

The 2025 report did not conclude that UgIFT's financial statements were materially misstated. The Auditor General expressed an opinion that the financial statements were prepared, in all material respects, in accordance with the applicable public-finance requirements, the UgIFT Operations Manual and the financing agreement. The Auditor General also reported no key audit matters in the financial-statement audit.

The issues discussed below therefore should not be interpreted as evidence that the programme's financial statements as a whole were unreliable.

They concern something different: whether resources, controls, implementation arrangements and performance systems were functioning strongly enough to translate expenditure into intended results.

What the Auditor General found

1. Infrastructure was being created faster than some institutions could fully operationalise it

The 2024 education audit assessed 259 planned seed secondary schools.

As at October 2024, the Auditor General reported that:

• 104 schools, or 40.2%, had been completed;
• 116, or 44.8%, remained under construction;
• 12, or 4.6%, were stalled; and
• 27, or 10.4%, had not started construction.

Construction, however, was only one part of the service-delivery chain.

Among operational schools, staffing remained a significant constraint. According to the audit, only 10.3% of schools were fully staffed to the applicable Ministry of Education and Sports standards, with particular shortages in subjects including sciences and mathematics.

Physical inspection also identified gaps in the availability or functionality of classrooms, laboratories, libraries, teacher accommodation and other facilities. Utilities created a further constraint: some inspected schools lacked reliable electricity, water or internet connectivity.

This creates a control problem that organisations frequently underestimate.

A project can be physically complete without being operationally complete.

A completed building without sufficient staff, equipment, utilities, operating budgets or functioning management systems may satisfy one project milestone while failing to deliver the intended organisational outcome.

2. Capital investment and recurrent capacity were not always moving together

The staffing issue extended beyond seed schools.

UgIFT was also intended to support the transition of refugee-serving primary schools into government management. The 2024 audit reported that 1,969 teachers were targeted for recruitment across 51 such schools, but only 627 — approximately 31.8% — had been recruited by November 2024. Some schools consequently experienced extremely high pupil-to-teacher ratios.

The FY2024/25 audit identified related human-resource weaknesses more broadly.

In the assessment of infrastructure management across local governments, the Auditor General reported particularly weak results in human-resource management and planning. Only 20.9% of certain expected positions assessed had been filled against substantially higher targets, while technical appraisal within infrastructure planning and budgeting scored 35.2%.

The audit also reported human-resource-management weaknesses in health services, including recruitment gaps for critical health workers and weaknesses in continuous professional development.

The FGL lesson is straightforward:

Capital expenditure creates assets. Recurrent expenditure and organisational capacity make those assets useful.

Investment appraisal should therefore extend beyond the cost of acquiring or constructing an asset.

Management should ask whether the organisation can afford to staff, power, maintain, operate, monitor and replace it throughout its useful life.

3. High budget execution did not automatically mean all programme outcomes had been achieved

For FY2024/25, the Auditor General reported that the UgIFT Reform Coordination Unit had an approved Government of Uganda budget of UGX81.58 billion and that the full amount was warranted. The report recorded UGX80.22 billion as having been utilised by year-end.

Those figures indicate very high expenditure against available funding.

But elsewhere in the same performance evaluation, significant activities and targets remained incomplete.

This illustrates one of the most important distinctions in performance management:

Absorption is not impact.

Budget absorption answers:

Did we spend the money made available to us?

Performance management must go further:

Did that expenditure produce the intended output?

And ultimately:

Did the output improve the outcome the programme was created to address?

These are different questions.

An organisation that monitors expenditure without monitoring outputs and outcomes can appear financially efficient while operational weaknesses remain unresolved.

4. Results-based financing creates its own control requirements

UgIFT used a Program-for-Results structure in which some World Bank disbursements were linked to the achievement and verification of agreed results.

This creates an important governance feature: performance information can become financially consequential.

In the FY2024/25 audit, the Auditor General reviewed implementation of actions associated with Disbursement Linked Indicators.

For one group of actions under DLI 3, the audit identified 13 planned actions that had not been achieved at the point assessed, including elements relating to oversight, coordination and digitalisation. Management explained that implementation had continued and that the programme had nevertheless achieved the required minimum of 50 out of 73 actions, including all compulsory actions, allowing the relevant World Bank disbursement to be triggered.

Both facts are important.

The funding condition was achieved.

At the same time, some underlying reform actions remained unfinished.

This demonstrates why boards and management teams should not treat achievement of a financing milestone as evidence that every operational weakness associated with the programme has been resolved.

A performance threshold may establish eligibility for funding.

It does not necessarily establish completion of the entire control environment.

5. The quality of performance data became a governance issue

Perhaps one of the most important findings for auditors and finance professionals concerned the credibility of local-government performance assessments.

The UgIFT framework used assessments to evaluate local-government management and service delivery. An Independent Verification Agent reviewed aspects of those assessments.

For the 2024 assessment, the Auditor General reported that only 97 of 176 local governments — 55% — were rated credible by the independent verification process, while 79, or 45%, were rated not credible because of inconsistencies, data inaccuracies or irregularities in assessment findings.

The audit associated the weaknesses with factors including delayed assessments, inadequate supporting evidence, weak documentation, insufficient quality assurance and capacity gaps among some assessors and local-government staff.

There was, however, evidence of improvement.

Management reported that the number of local governments registering credible results had increased from 54, or 31%, in the 2023 assessment to 97, or 55%, in 2024, following support and capacity-building efforts by the Office of the Prime Minister and Ministry of Local Government.

That improvement is important context.

But so is the control principle.

When funding allocations, management interventions or performance incentives depend on data, the reliability of that data becomes part of the financial-control environment.

Organisations increasingly make decisions through dashboards, KPIs, ERP reports, automated scorecards and performance systems. A beautifully designed dashboard provides little assurance if the underlying data is incomplete, inconsistent or poorly controlled.

Internal audit should therefore be prepared to audit not merely the decision made from a KPI, but the data lineage producing the KPI itself.

6. Digital transformation requires ownership controls, not just implementation

The FY2024/25 audit also considered systems acquired under UgIFT.

These included information systems supporting education, water and environment and other service-delivery functions.

The Auditor General noted that although contractual arrangements provided for tools, source code, data and information products to belong to the relevant ministries or implementing agencies after acceptance and contract closure, several software programs had not had their copyright registered with the Uganda Registration Services Bureau.

The issue provides a broader technology-governance lesson.

When an organisation procures software, management should not stop at asking:

Does the system work?

It should also establish:

• Who owns the source code?
• Who owns the data?
• Are intellectual-property rights contractually clear?
• Has ownership been formally documented or registered where appropriate?
• Can the organisation maintain the system if the original vendor exits?
• Are administrator credentials and technical documentation under organisational control?
• Is there an escrow, handover or continuity arrangement?
• What licences restrict modification or redistribution?

A digital asset can be technically operational while remaining strategically dependent on a supplier.

That is a governance risk.

7. Procurement controls must begin before a contract is signed

The Auditor General's FY2024/25 compliance audit reviewed a sample of procurements worth UGX31 billion.

One procurement concerned the supply and delivery of a Global Navigation Satellite System at a contract value of approximately UGX2.288 billion.

The Auditor General found that the procurement proceeded without confirmation that adequate funding was available, contrary to the applicable commitment-control requirements. Management explained that UGX0.96 billion had initially been available and that the best evaluated proposal subsequently amounted to UGX2.288 billion. The Auditor General's audit comment stated that the supplier was contracted even though sufficient funds were not available.

The Auditor General recommended ensuring that funding is confirmed in accordance with procurement regulations and guidelines before proceeding.

Importantly, the compliance conclusion was not that the entire procurement system was non-compliant. Subject to the reported finding, the Auditor General concluded that nothing had come to his attention to indicate that procurement, disposal and contract management was not, in all material respects, compliant with the relevant criteria.

For organisations, the control principle is nevertheless significant.

A purchase order or contract is not simply a procurement event.

It is a financial commitment.

Finance therefore needs visibility before an organisation enters obligations, not merely when an invoice eventually reaches accounts payable.

Strong commitment control connects:

budget → procurement request → approved funding → contract → purchase order → receipt → invoice → payment.

Where procurement and finance operate as disconnected processes, organisations can create liabilities before the financial consequences are fully recognised.

8. A programme can improve overall while significant weaknesses remain

The UgIFT audit evidence should not be read solely through its exceptions.

The Auditor General reported that the average local-government performance assessment across six service-delivery areas reached 60.15% in 2024. Management noted that this represented improvement from 57% in 2023, 51% in 2022, 44% in 2021 and 36% in 2020.

The 2024 education audit similarly found substantial growth in enrolment at seed secondary schools. Total enrolment across the new schools increased by 74.7% between 2022 and 2024, while the proportion of girls enrolled increased over the period.

The audits therefore present a more useful governance picture than a simple success-or-failure narrative.

A programme may deliver genuine improvements while still containing material implementation weaknesses requiring management attention.

This is precisely why independent audit matters.

Audit does not have to prove that an entire programme has failed.

Its value often lies in identifying where an otherwise functioning system can fail to convert resources into sustainable results.

FGL analysis: controlling the conversion of money into value

The strongest governance lesson from the UgIFT evidence is not simply that expenditure and outcomes are different. It is that every major investment passes through a chain of conversions, and each conversion creates a separate control risk.

Money is converted into a procurement decision. A procurement decision is converted into an asset, service or activity. That asset must then be converted into operational capability. Operational capability must be used to produce an output. The output must contribute to an intended outcome. Finally, management must have reliable evidence that the outcome occurred.

A useful FGL control model is:

Funding → Commitment → Procurement → Asset/Activity → Operational Readiness → Utilisation → Output → Outcome → Evidence → Corrective Action

The important point is that success at one stage does not provide assurance over the next.

1. Expenditure control is only the first layer

Traditional finance controls are strongest at the front of the chain: budget approval, commitment control, procurement, payment and accounting. Those controls remain essential, but they answer only whether resources were authorised and spent appropriately.

They do not by themselves establish that the organisation obtained the capability for which the money was approved.

This is why high budget execution can coexist with incomplete reforms, partially operational facilities or weaknesses in service delivery. The control objective must therefore extend from “Was the money spent correctly?” to “Did the expenditure create a usable and sustainable capability?”

2. Operational readiness should be treated as a control state

The seed-school evidence shows why physical completion and operational completion should not be treated as the same milestone.

A building can be complete while staffing, utilities, equipment, connectivity, maintenance arrangements or recurrent funding remain inadequate. In control terms, the asset exists, but the organisation has not yet completed the conversion from capital asset to service-delivery capability.

FGL therefore treats operational readiness as an explicit governance checkpoint rather than an informal expectation after project closure.

3. Capital decisions create future operating obligations

Every capital investment creates a second decision that is often less visible: whether the organisation can support the asset throughout its useful life.

The relevant cost is therefore not only construction or acquisition. It also includes staffing, utilities, licences, maintenance, consumables, technical support, replacement expenditure and management capacity.

This means capital budgeting and recurrent budgeting should not be governed as separate conversations. A board can approve an affordable asset that later becomes an unaffordable operation.

4. Performance data is part of the control environment

Where funding, incentives, management intervention or programme continuation depends on performance indicators, the data supporting those indicators becomes financially consequential.

The UgIFT assessment findings illustrate why management cannot rely solely on the final score displayed on a dashboard. Assurance must extend backwards into the evidence, source data, assessment methodology, review process and system interfaces that produced the reported result.

For internal audit, this shifts the question from “Was the KPI achieved?” to “Can the organisation demonstrate that the KPI is complete, accurate and independently supportable?”

5. Threshold-based funding can create a governance blind spot

Results-based financing is valuable because it links resources to performance, but it can also encourage management attention to concentrate on the minimum threshold required to unlock funding.

A threshold can confirm that a financing condition has been satisfied without proving that every related reform, control weakness or implementation dependency has been completed.

Boards should therefore distinguish between meeting a funding condition and completing the underlying control architecture.

6. The final control is corrective action

Independent audit adds value when its findings alter future decisions.

The most mature governance response is therefore not simply to record an exception, assign an action owner and close the audit point. It is to ask whether the weakness reveals something about programme design, incentives, sequencing, capacity or information quality that should change the next investment cycle.

That is the missing middle between money and outcomes: the system of controls that converts authorised expenditure into sustainable organisational value.

What finance, audit and governance teams should do

1. Expand project closure criteria

Do not define project completion solely through physical delivery.

Closure criteria should consider, where relevant:

• construction or acquisition;
• staffing;
• equipment;
• utilities;
• licences;
• operating procedures;
• training;
• data migration;
• maintenance arrangements;
• recurrent funding;
• user adoption; and
• measurable operational readiness.

2. Separate expenditure KPIs from outcome KPIs

Management dashboards should distinguish between:

Inputs: money, staff and other resources.

Outputs: schools built, systems deployed, facilities upgraded or equipment installed.

Outcomes: actual improvements in service access, processing time, productivity, learning, health, control effectiveness or another intended result.

A 100% budget-utilisation rate should never automatically be interpreted as 100% programme performance.

3. Build commitment control into procurement

Before approving a contract, organisations should have evidence that:

• the procurement is budgeted;
• sufficient funding remains available;
• future-period commitments are visible;
• appropriate authority exists; and
• finance has recognised the commitment.

ERP workflows can make this preventive rather than detective.

4. Audit performance data

Where management remuneration, funding, project continuation or resource allocation depends on KPIs, internal audit should periodically test:

• source data;
• completeness;
• accuracy;
• calculation methodology;
• evidence supporting scores;
• manual overrides;
• system interfaces; and
• independent review.

5. Treat systems as organisational assets

Technology procurement should include controls over intellectual property, documentation, source code where appropriate, data ownership, administrator access, vendor dependence, cybersecurity, maintenance and business continuity.

6. Link capital budgeting to lifecycle costing

Investment papers should disclose not only acquisition cost but expected:

• payroll;
• maintenance;
• utilities;
• licences;
• consumables;
• replacement expenditure; and
• other recurrent costs.

Otherwise, organisations risk approving assets that they cannot operate effectively.

Questions management and those charged with governance should ask

1. Which projects are reported as complete but are not yet fully operational?
2. Do our project dashboards distinguish expenditure, outputs and outcomes?
3. Can management identify the recurrent cost created by every major capital investment?
4. Can procurement commit the organisation to expenditure before finance confirms funding?
5. Which decisions depend materially on performance data, and when was that data last independently validated?
6. For every major software system, who owns the source code, data, licences and technical documentation?
7. Are incentive or funding thresholds encouraging teams to concentrate on passing a target rather than completing the underlying reform?
8. When an asset is handed over, who becomes accountable for its utilisation and maintenance?
9. Do internal audit plans examine operational readiness after major investments, or only procurement and expenditure compliance?
10. What evidence tells the board that money spent has actually produced the outcome originally approved?

Subsequent status

The findings discussed in this article largely relate to implementation of the first UgIFT programme and should not automatically be treated as describing the programme's present position.

Official Government information indicates that the first UgIFT phase was scheduled to close in December 2025. The current UgIFT website distinguishes legacy and closure information relating to UgIFT I from the development of a successor programme.

In April 2026, the Ministry of Finance, Planning and Economic Development reported that Government institutions and the World Bank were working on the design of UgIFT 2.0. The Ministry expressly referred to lessons from the first phase, including the need to consider implementation experience and the design of Disbursement Linked Indicators. At that stage, the stated World Bank target was to have the successor programme considered for approval by December 2026.

This is an important part of the case.

The appropriate response to implementation weaknesses is not necessarily abandonment of a programme. It may be to use audit evidence to redesign incentives, simplify controls, strengthen implementation capability and improve accountability in the next phase.

FGL practical lesson

The UgIFT audits point to a broader principle for finance, audit and governance teams: control should follow the full value chain from authorised expenditure to verified outcome.

• Control the conversion chain, not only the spend. Budget approval and payment controls are necessary, but they should be followed by assurance over readiness, utilisation and outcomes.
• Define operational readiness before project closure. An asset should not be treated as fully complete until the people, systems, utilities, equipment and recurrent resources needed to use it are in place.
• Link capital approval to lifecycle capacity. Investment decisions should show how the organisation will staff, operate, maintain and eventually replace the asset.
• Treat performance data as a controlled asset. Where decisions or funding depend on KPIs, management should be able to demonstrate the reliability of the underlying data and evidence.
• Keep finance visible before commitments are created. Procurement should not be able to create obligations without confirmed funding and clear recognition of the financial commitment.
• Do not confuse a passed threshold with a completed reform. Funding conditions and performance milestones should be monitored alongside unfinished actions and residual risks.

For finance professionals, this means moving beyond expenditure control into value-chain control. For internal auditors, it means testing what happens after procurement and project closure. For boards and audit committees, it means demanding evidence that approved resources created the capability and results for which they were intended.

Primary Sources

• Office of the Auditor General, Uganda — Value for Money Audit on the Evaluation of the Seed School Programme under the Uganda Intergovernmental Fiscal Transfer (UgIFT) Program in the Education Sector, December 2024.
• Office of the Auditor General, Uganda — Report of the Auditor General on Uganda Intergovernmental Fiscal Transfer Program (UgIFT) for the Financial Year Ended 30 June 2025, December 2025.
• Ministry of Finance, Planning and Economic Development — Uganda Intergovernmental Fiscal Transfers Programme official programme information and transition material.
• Ministry of Finance, Planning and Economic Development — Second UgIFT 2.0 Program Design Consultative Mission Outcome, 24 April 2026.
• World Bank — Uganda Intergovernmental Fiscal Transfers Program, Additional Financing programme documentation.

Professional use Note

This article is an FGL educational analysis of publicly available audit and programme documents. References to weaknesses, performance gaps or management responses reflect the periods and evidence examined in the cited reports and should not be interpreted as allegations of misconduct or as statements about the current performance of any individual, institution or programme unless expressly supported by current evidence.