As Malawi Government grapples with filling holes that Cashgate punched into the public finance management system to siphon billions, Weekend Nation can reveal that a similar situation has hit the Ministry of Agriculture where unscrupulous staff have in two years drained millions by breaching the human resource management information system.
The fraud, involving salaries for 2012 to 2014, cost the taxpayer an estimated K166 million (US$368 889), according to an investigative audit report by the Central Internal Audit (CIA).
CIA—the government’s internal auditors under the Ministry of Finance—says in the report that the money was lost through six suspected tricks.
The ministry lost the bulk of the money (K131.2 million) to accounts personnel inflating individual salaries.
The report says the ministry lost at least K25 million (US$55 556) to paying arrears no one claimed, around K6.5 million disappeared through same arrears paid several times (recurring), K1.75 million (US$3 889) was in excess of “rightful amounts claimed”, at least K1 million went to suspected ghost workers and K285 000 (US$633) were excess leave grants.
The suspected fraud happened at the ministry’s headquarters in Lilongwe, some research stations and agriculture development divisions (ADDs).
The auditors suspect collusion among staff in human resources, PPPI [Payroll Pensions Processing Information Systems] and salaries sections to pull off the heists.
The ministry’s Principal Secretary Erica Maganga—who instituted the investigation following revelations of fraud by an accounts staff in the ministry’s salaries section—confirmed the report’s existence in an interview this week.
But Maganga refused to comment on the audit findings and remained mum on how she—as controlling officer—allowed the fraud to happen on her watch and what she is doing about it.
“Unfortunately, the audit has not been finalised yet. I shall revert back to you once the entire audit is completed,” she said.
But Weekend Nation has it on good authority that the CIA completed the audit on salaries and submitted the report to Maganga on April 24 2015 for “her information and action.”
The report and its accompanying memo were copied to the Secretary to the Treasury, the Accountant General, the Chief Secretary and the Auditor General.
How alleged fraud was done
By manipulating data in government’s system to system network, the suspected fraudsters were able to make changes to the payroll—an exercise limited to the Human Resources Management Systems—and bloated salaries.
“A review of 600 salary transactions for 16 cost centres for the same period showed that 38 employees were receiving high net salary at the bank in contrast to net salary indicated on their pay slips,” observes the audit report, which is dated April 8 this year.
The problem of ghost workers—said to cost government over K2 billion (US$4 million) annually, according to a 2011 government assessment—also reared its ugly head during the audit exercise.
Auditors questioned the existence of 13 employees who could not be verified despite their names appearing on the ministry’s payroll and receiving more than K1 million during the review period.
Notes the report: “Three employees for Machinga ADD shared the same employment number. Employees appearing in some cost centres could not be verified for existence.”
Six of the 13 suspected ghost workers were detected in Machinga, whereas five were from Salima ADD and two from the ministry’s headquarters.
The alleged fraudsters also beat the system’s salary claim procedure to swindle government of K25 million through payments of salary arrears that were not claimed.
For instance, the auditors discovered that out of the 160 pay slips which indicated payment of arrears, 70 employees received purported arrears they did not claim.
“Others stated that they just noted a higher than anticipated net salary and later withdrew the money…it is apparent there was collusion among staff; HR [human resources], PPPI and salaries sections,” highlights the report.
It also notes that some perpetrators who had rights to the system were able to inflate their net amounts by as much as 500 percent or more.
“A review of the salary processing and payments has identified significant internal control weaknesses with the system…the auditors suspect that a number of perpetrators have exploited these weaknesses through collusion.
“The observations are conspicuous red flags for the absence of governance and operational controls. The control weaknesses have also made [the ministry] a fertile ground for fraud and theft of all kinds,” warns the report.
Other observations that came to the auditors’ attention included payment of K6 481 210 in arrears that kept on recurring and payment of K284 500 in excess leave grants.
“Those who duly got arrears had arrear recurrence of more than two times. When asked, those affected stated they were aware of the money and had since used the money,” reads the report.
What must be done?
In a separate interview, Ministry of Finance spokesperson Nations Msowoya said the audit exercise was commissioned because it is government’s responsibility to check on flaws in expenditure of its ministries and departments.
“The Central Internal Audit [which carried out the exercise] is part of Treasury, a mechanism that checks on the management of government resources,” he said.
He did not indicate what measures Treasury would take to address the situation.
But the audit team has since recommended the following:
• That further investigations be conducted to establish the facts behind insertions on the payroll of arrears that were not claimed to avoid recurrence.
• That staff in the PPPI, HR and salaries section directly involved in preparation and processing of salaries should be investigated.
• That appropriate disciplinary action against perpetrators should be taken.
• That law enforcement agencies investigate collusion among staff involved in order to draw conclusion on corruption.
• That the Director of Human Resource establish the identity, if possible, the whereabouts of the employees suspected to be ghosts since their respective account numbers have been provided.
Responding to a Weekend Nation questionnaire in the week, Department of Human Resources and Manpower Development (DHRMD) spokesperson Rudo Kayira said the department is aware of the existence of ghost workers in the civil service.
“There are certain situations and malpractices that can lead to the existence of ghost workers on their payroll that is why government has put in place measures to prevent such,” she said.
Kayira, who said she was yet to see the audit report, explained that whenever the department or any other ministry suspects the existence of ghost workers, necessary investigations are conducted and those responsible are dealt with accordingly.
But she added: “Let me also clarify that technically, ghost workers can also come into existence due to technical problems that may occur in operating procedures. For instance, if a person dies this month, and the process of deleting him [or her] from the payroll does not go through all the proper channels in time, the person may end up being paid a salary the following [month].”
This is not the first time fraudulent transactions have affected the Ministry of Agriculture where in 2008, another audit report exposed how some officers in the ministry drew allowances for more than 1 000 days per year or 40 days a month. The revelations forced government to restrict out-of-duty station allowances to five per month.
The revelations were later followed by Cashgate, which saw K24 billion looted from public coffers through a porous Integrated Financial Management Information System (Ifmis) payment platform in six months from April to September 2013 when former president Joyce Banda was in power.
A National Audit Office (NAO) interim investi-gative audit carried out between November 2011 and the first half of 2012 also revealed that a separate K92 billion also vanished under the watch of former president the late Bingu wa Mutharika between 2009 and 2012.
