Councils in audit mess

 The Auditor General’s (AG) report for the financial year-ended June 2021 on the accounts of city, municipal and district councils shows that allocation of public funds continue to be abused.

The report, submitted to Parliament last Monday has shown recurring irregularities on management of public funds in local councils, ranging from expenditure, procurement, to management of projects, receivables, revenue, records and payables.

The report, signed by Acting Auditor General Thomas Makiwa, further spotted irregularities on unjustifiable subsistence allowances, unaccounted for funds, irregular expenditure, misallocation of funds, failure to remit taxes, especially Paye, and failure to administer deceased estates and recover loans and advances.

Due to all these irregularities, the councils failed to collect revenue from debtors amounting to about K15 billion and ended the year owing suppliers K600 million.

Makiwa says in the report: “The glaring financial challenges in councils need urgent attention if the decentralisation process is to continue achieving its intended purpose.”

The audit report on Machinga District Council showed that some financial statements did not contain title deeds for assets. The council does not have title deeds for the various land and buildings valued at K1.19 billion.

“Interviews with management and members of staff disclosed that title deeds had not yet been secured because of lack of adequate funds to make up necessary follow ups and also lack of understanding of the importance of the title deeds by most council staff,” the report reads.

The councils also overspent by about K125 million, and culprits include Dedza District Council where K24.4 million was overspent from other recurrent transactions (ORT) because the council repaid money borrowed by some sectors from the District Development Fund (DDF).

Nsanje District Council also overspent on its budget line by K27 million, while Ntcheu overspent on its Constituency Development Fund (CDF) projects by K36.1 million.

Ntchisi had unsigned contracts for CDF projects amounting to K25.7 million, which the report said was making the transactions illegal and unenforceable in the event of non-compliance from the obligations of either party to the contract.

For M’mbelwa Council the report revealed that the council received a sum of K440 million for the eleven constituencies and the total expenditure was K308 million leaving a balance of K131 million.

“However, the balance was not spent on CDF activities but was used for other unrelated commitments. The council could not produce any authority to use these funds on non-CDF activities,” it reads.

The counci l a l s o had misallocation of expenditure amounting to about K180 million, cash payment to staff instead of using cheques amounted to about K210 million, salaries paid from operations instead of salaries account amounts to about K85 million.

For Mchinji, procurement irregularities include payment made to unregistered suppliers amounting to K15.3 million.

In Karonga, misprocurement amounts to K27.4 million and procurement without approval of the internal procurement committee is at K35 million.

On projects, Chikwawa District Council spent K39 million on markets that are not being used, Blantyre District underestimated budget for projects by K103 million while Mulanje is the biggest culprit, as it failed to open a separate account for CDF money amounting to K352.2 million.

In the report, Makiwa has warned the councils to ensure that they put in place adequate and effective controls to safeguard against loss of revenue, assets and other public funds.

He said: “All revenues not banked should be banked within seven days of receiving this report.

“And all funds which have not been accounted for should be accounted for within a month of receiving this report and the responsible officers dealt with in accordance with the existing regulations. All procurement flaws should be investigated.”

Whi l e Makiwa wa n t s c o u n c i l s t h a t f a i l e d t o process some transactions through Integrated Financial Management Information System (Ifmis) to be probed, the Malawi Local Government Association (Malga) said the new Ifmis is yet to be rolled out in all councils.

Malga chief executive officer Hadrod Mkandawire, while admitting some failures on the part of councils, said they were better off than the central government.

He said: “We have drawn some positives [from the audit report]. There are some gaps that include enhancing capacity on public finance management which we need to seriously pay attention to.

“But let the new Ifmis be fully rolled out. We need to build a customised finance management capacity for controlling officers, and capacitate governance structures like council members and committees for them to be able to provide meaningful oversight throughout the budget cycle.”

During the 2020/21 fiscal year, councils were allocated a revised K46.6 billion, but actual expenditure was K43.7 billion resulting in underexpenditure of K2.9 billion.