Audit reveals abuse at MEC

A preliminary National Audit Office (NAO) report has exposed “flawed and faulty” financial transactions at the Malawi Electoral Commission (MEC) that left an estimated K1 billion (US$2.2 million) unaccounted for between 2008 and 2012.

Some of the anomalies the NAO audit unearthed include questionable refunds to candidates in the 2009 general elections, cheque payments that no payee signed for, payments for items not delivered and fuel expenditures that were based on documents NAO deemed suspicious.

The audit was conducted between November 15 2012 and August 21 2013, according to a management letter dated February 4 2015 from the Auditor General to MEC’s chief elections officer Willie Kalonga that Weekend Nation has seen.

But MEC spokesperson Sangwani Mwafulirwa, while confirming the existence of the preliminary report, has rejected some of the audit findings.

“It is one of the reports not taking into consideration the full responses from the commission on the issues that were raised by the auditors,” he said.

On its part, NAO has indicated that it was still consulting on the issues raised.

The audit covered financial transactions for the period from July 2008 to June 30 2012. It was also partly extended to 2012/2013 financial transactions where it was deemed necessary, according to the management letter.

But, says the management, the audit revealed MEC’s weak operational control structures and accounting system that resulted in several financial improprieties.

The report highlights about 55 eyebrow-raising financial transactions thought to have been the conduits for possible siphoning of money out of the commission.

Most of the transactions have no supporting documents while others flouted laid-down procedures, according to the management letter.

Serious abuses contained in the letter include MEC’s failure to account for nomination fees for the May 19 2009 Presidential and Parliamentary Elections (PPE) candidates amounting to K36.6 million.

The 2009 PPE had 1 171 candidates, out of which eight were presidential candidates.

According to the electoral procedures, parliamentary candidates were to pay K100 000 (US$222) each and presidential candidates, K500 000 (US$1 111) each, totalling K120.3 million (US$267 333).

However, auditors’ examination of general receipts, bank deposit slips and bank statements revealed that only K83.7 million (US$186 000) was deposited into MEC’s account against Treasury instructions which require that public revenue, once received and receipted, must be banked intact.

Reads the letter: “Out of the money that was banked, only an amount of K62.7 million (US$139 333) was supported by general receipts, leaving a balance of K21 million (US$46 667) which was deposited into the account without being receipted. Since the 1 171 candidates represented K120.3 million and only K83. 7 million was deposited into the account, the balance of K36.6 million (US$81 333) could not be accounted for.”

Another flaw highlighted in the audit report is the missing of receipted payment vouchers amounting to about K208.5 million (US$463 333).

It says on a test-check basis, receipted payment vouchers amounting to K70.6 million (US$156 889) were not made available for audit examination.

A further examination of cheque numbers extracted from the cheque register with the available payment vouchers in the same range of the cheque serial numbers revealed that payment vouchers amounting to K137.9 million (US$306 444) were not produced for audit.

There was also cash amounting to K10.7 million (US$23 778) which was not accounted for after cheques amounting to K50.8 million (US$112 889) were drawn between August 19 2008 and November 27 2010 in the names of accounts personnel in form of honoraria and allowances.

However, the audit review noted that only K41 million (US$91 111) was supported by the signature sheets of the recipients, leaving a balance of K10.7 million which was not supported by any documentation. This happened during the financial years 2008/09 (K7.5 million) and 2010/11 (K3.2 million).

Other irregularities

lK68.4 million cheques issued between August 11 2010 and July 1 2011 to various payees were not signed for in the cheque dispatch register by the persons who collected them.

lK54.1 million for stores items procured between July 13 2010 and November 9 2011 were not recorded in the bin cards during the 2010/11 financial year.

lK44.2 million unsupported payments for fuel contrary to government financial regulations which state, among other things, that a voucher must be fully supported by an original invoice.

lK39.4 million unsupported payments made in the names of various persons whose original copy vouchers were not supported by signature sheets, any marks or receipts to acknowledge receipts of the amounts.

lK33.4 million used to purchase fuel basing on one proforma invoice between September 23 and October 27 2008.

lK32.3 million meant for Local Government Elections expected to be held in the 2010/11 financial year, but was used on unrelated activities.

lK21.5 million payments made between January 6 2010 and May 27 2011 for undelivered goods.

lK11 million overcharged on items by suppliers during the 2010/2011 financial year after MEC opted for suppliers who charged higher prices than those who quoted lower.

lK10.3 million not deducted as withholding tax from payments made to suppliers who did not possess Malawi Revenue Authority’s (MRA) Withholding Tax Exemption Certificates in line with Section 102A of the Taxation Act.

lK7.3 million used to purchase 33 different types of cellphones and I-pads in June 2012 allocated to commissioners and other employees, which were not returned after usage period. Article 9 of their conditions of service provides for telephone allowances to the commissioners, not procurement of cellphones.

lK5.7 million payment of fuel in the names of individuals for the purchases of fuel ignoring Accountant General’s advice through a letter reference number 4490 dated August 18 2008 addressed to all controlling officers that government had introduced the use of Malswitch fuel smart cards as one way of managing expenditure on fuel.

Dubious travel allowances

On June 28 2012, MEC is reported to have paid as external travel allowances K738 242.97 to its officer and two commissioners for trips that were never undertaken.

The two commissioners [names withheld] received K254 566.54 each for their purported trips to South Africa, while the officer [name withheld] got K229 109.89 to travel to Kenya.

But, according to the NAO letter, upon examining their passports, there was no evidence that the officials indeed travelled to the said countries as claimed.

Furthermore, some officers and commissioners did not make available their passports to the auditors to confirm if their trips, for which they drew external allowances amounting to K1.9 million on June 28 2012, were undertaken.

The individuals [names withheld] got K254 566.54 each to travel to Kenya, Tanzania and South Africa.

One of the commissioners also received K648 558.99 separately for a trip to the Democratic Republic of Congo (DRC), while two other commissioners got K254 566.54 and K229 109.89 for trips to Kenya and Tanzania respectively.

According to the NAO letter, the auditors discussed the findings with MEC management on May 21 2013.

However, NAO states in the letter, finalisation of the letter delayed because management promised to provide information on nomination fees, which it did not do.

But Mwafulirwa said after the auditors had concluded their work, management carried out a comprehensive review of the audit findings and several meetings were organised with NAO where certain issues were reportedly cleared by the auditors.

“The very last meeting was held on or around 16 September 2013. As we respond to this questionnaire, we are still waiting for the auditors to provide us with the final report of the audit exercise,” he said.

He, however, said some of the issues raised by the auditors had been given proper attention and MEC has since strengthened and tightened its internal financial controls.

Said Mwafulirwa: “We now have a fully-fledged internal audit department and also an Audit Committee of the Commission.”

When contacted for reaction on Mwafulirwa’s claims, NAO spokesperson Lawrence Chinkhunda just said: “Our position is that we cannot comment on the issues until we finalise our consultations.”

The revelations of financial impropriety at MEC come at a time the electoral body is struggling financially to hold by-elections in five wards after exhausting its funding for 2014/15 financial year.

MEC planned to hold the polls on June 23 2015, but postponed the activity because it could not raise K403 million.