Forensic audit: Much ado about nothing?

Much has been said and written about the forensic audit report into the plunder of public resources at Capital Hill produced by British firm Baker Tilly.

Suddenly, as it is usually the case in Malawi, everyone, including those with little or no numeracy skills, is now a financial analyst, either tearing into the audit report or, typical of “Monday coaches” or “morning editors”, suggesting how best the auditors could have done their job.

From the look of things, it would appear many of us had our own “terms of reference” for the auditors other than those actually assigned to them hence our “disappointment” with the outcome. Worth appreciating at the onset is that an audit is different from a commission of inquiry.

Before proceeding further, perhaps it would be in order to define what a forensic audit is all about and how it differs from ordinary audits. Technically, forensic audit is an examination and evaluation of an organisation’s or individual’s financial information for use, mostly as evidence in court.

Normal audits usually involve internal and external auditors. Internal auditors or auditing devises controls in organisations and ensure that systems are working. External auditors or auditing, on the other hand, tests the systems set by internal auditors. It physically checks receipts, invoices, petty cash, payments and compliance with international financial reporting standards.

Baker Tilly’s forensic audit report found that about K13.7 billion was either stolen or abused under the ‘Capital Hill cashgate’, the free-for-all plunder of taxpayers’ money. The auditors have categorised the theft or plunder into three, with ‘cashgate’ accounting for K6.1 billion, payments without supporting documents at about K4 billion and K3.6 billion for inflated procurement prices.

Perhaps what has irked many, including the many ‘financial analysts’ providing commentaries and ‘analysis’, is the lack of names of companies or individuals involved in the plunder. Many believe names should have been provided instead of simply saying “company A” claimed so much from “party X” without providing the services.

I share this view. Names of the concerned individuals or companies involved in the dubious transactions should have been published for all to know who such heartless individuals are who allegedly pocketed money for themselves at the expense of delivery of public services such as health, modern roads, construction of schools and the like.

In their report, Baker Tilly indicated that their report is solely for reporting on internal controls relating to the scope of the review in accordance with their terms of engagement.

Typical of audits, the forensic audit report has identified various weaknesses in the Malawi Government’s Public Finance Management (PFM) system, including fields of accounting, audit and procurement.

It is an embarrassing report which has exposed loopholes in our PFM system, gross negligence and incompetence of civil servants and public officers. It puts into question the effectiveness of the so many PFM laws we have, including the Public Finance Management Act, the Public Audit Act and the Public Procurement Act that have evidently been reduced to toothless bulldogs as public servants and politicians abuse funds at will, knowing no action will be taken against them. What else can be the conclusion if people, including those in high offices who are supposed to be the custodians of such legislation, freely disregard such laws.

When all is said and done, personally, I find most of the recommendations to be basic. For example, at 50 years of independence, did we need a British firm to come and tell us to strengthen controls in the Accountant General’s Department, including making basic bank reconciliations? Do we really have to be told that payment for goods or services can only be made after verifying delivery of the same? If not, then why were well-qualified public servants processing payments in billions of kwacha for goods and services not rendered?

For all its perceived “deficiencies”, I feel we can draw several lessons from the report, including the fact that our public service or civil service is infested with corruption; the Reserve Bank of Malawi (RBM) acted casually in the handling of critical transactions; Parliament, which is supposed to provide checks and balances, appears to have no clue of its role.