Fraud and theft have cost the Malawi Government about K13 billion (about $32.5m) in public funds, including K3.7 billion (about $9.2m) siphoned from the Ministry of Tourism, Wildlife and Culture alone between April and September 2013, according to a forensic audit report produced by British forensic auditors.
Findings of the report could dent President Joyce Banda’s chances of assuming office with a majority mandate in the May 20 Tripartite Elections.
So far, about 70 cases are in court following arrests and revelations of the theft which the report has attempted to put in perspective.
The report, prepared by the British forensic audit team of Baker Tilly and handed over to the Ministry of Finance on Friday night, but which The Nation has seen, put the theft into categories of ‘cashgate’ amounting to about K6 billion (about $15m), about K4 billion (about $10m) in payments without supporting documents and inflated procurement prices pegged at K3.6 billion.
Of the K6 billion cash siphoned through ‘cashgate’ means, K3.7 billion was stolen through the Ministry of Tourism, Wildlife and Culture that was linked with the purchase of the disowned ‘cashgate’ buses; K2.1 billion (about $5.2m) from the Office of the President and Cabinet (OPC); K151 million (about $377 500) from the Ministry of Local Government and Rural Development; and K81 million (about $202 500) from a government department that is not known.
An examination of the companies involved found that some were established as early as May 2013, apparently with the sole purpose of siphoning money from government coffers.
However, the report does not contain the names of companies and individuals involved in the theft to avoid prejudicing legal proceedings currently in court. The Anti-Corruption Bureau (ACB), Malawi Police Service (MPS) and the Director of Public Prosecutions (DPP) have, however, been given the full report to compare against ongoing investigations.
Reads the report in part: “Overall, we have noted funding misappropriation and theft of Government of Malawi funds. We have seen funds transferred between unrelated companies, individuals withdrawing funds from unconnected organisations and inflated prices paid to companies with limited or no trading history and very large cash withdrawals.
“We do not believe the receivers of these funds are therefore the ultimate beneficiary in all cases.”
The forensic audit has also found that during the period between April 2012 and September 2013, about K3. 9 billion was paid without supporting documents to two companies established within the same period.
The report categorically states that further investigations are needed, but charges may be levelled against the individuals.
The report has also confirmed suspicions that from the time the theft was discovered in September following the shooting of the then Ministry of Finance budget director Paul Mphwiyo, attempts were made to delete transactions and erase all records of wrongdoing by some individuals in government.
The 598 data lines of deleted transactions identified 133 payment vouchers totalling K5.6 billion and K8.6 billion deleted from four different ministries: Tourism, Wildlife and Culture; Local Government and Rural Development; OPC; Irrigation and Water Development and another one yet to be identified.
The report also identified “high value payments” to two newly formed companies whose contracts resulted in K3.6 billion being misappropriated or stolen.
The K13 billion stolen also includes payments to 16 companies valued at about K6 billion where no evidence was provided to support provision of services or goods to government.
The forensic auditors said these figures were likely to increase upon further investigations.
The report also states that commercial banks in the country were complicit in the theft as they allowed cash withdrawals over the limit in short periods of time.
Reads the report: “The bank statement of one company shows an amount of K516 million was withdrawn in cash or encashed cheques in one day and a further K550 million was withdrawn by similar means by the same company from the same bank two days later.
“This is one example of a number of examples of large-scale cash withdrawals from a commercial bank.”
During the forensic audit, the auditors came across barriers within the private sector through banks which had to be subpoenaed and the Accountant General’s office Information Technology Department which delayed in providing what was termed “read only access” to the Integrated Financial Management Information System (Ifmis), government’s electronic payment platform.
The former Accountant General who was in office for only six months, signed for 32 cheques between June and September 2013 valued at K16 million, including 14 cheques found on deleted transactions valued at K424 million.
“Both the Accountant General and the Assistant Accountant General could be considered to have failed their public duties by not challenging or checking validity of payments they approved,” the report reads.
The report has recommended that more investigations are needed and these should be extended to international bank transfers.
The report has also recommended that the Accountant General should institute an effective filing system and review the current list of 554 bank accounts of government.
—A forensic audit refers to an examination and evaluation of an organisation’s or individual’s financial information for use, mostly as evidence in court. It is an investigation that attempts to get evidence suitable for use in litigation.
—The report shows theft by ‘cashgate’ amounting to about K6 billion, payments with no supporting documents amounting to about K4 billion and inflated procurement prices amounting to K3.6 billion.
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