Icam acts on K1.2bn MSB rot
Institute of Chartered Accountants in Malawi (Icam) has acted on a case of about K1.2 billion ‘fictitious assets’ at the then wholly State-owned Malawi Savings Bank (MSB) and fined the bank’s former head of finance K800 000 for alleged negligence.
In a statement exclusively issued to Icam members, the accountants body cleared rebranded audit and business advisory firm KPMG Malawi and its engagement partner of a charge that they failed to recognise the existence of impaired assets in the Statement of Financial Position of MSB of the sum of K1 249 448 981.03 during the audit of the financial institution for the years 2011, 2012 and 2013.
But the statement, signed by Icam president Henry Chowawa, said then MSB head of finance James Salaka was “found guilty of negligence by recognising fictitious assets in the Statement of Financial Position of Malawi Savings Bank [‘MSB] of the sum of K1 249 448 981.03” and should pay the K800 000 fine by December6 2018.
Reads the statement: “Mr Salaka was found to have wilfully or negligently omitted to write off or provide for the sum of K1 249 448 981.03 in the financial statements of MSB for the years 2011, 2012 and 2013.”
But when contacted last evening, Salaka declined to comment on the matter.
In November 2016, The Nation reported that Salaka and some of his fellow managers at MSB concealed the K1.2 billion loss and further understated Mulli Brothers Limited (MBL) Holdings Group loan balance by at least K3.5 billion.
The alleged double misinformation on the bank’s financial position is believed to have propped-up MSB’s balance sheet and profitability levels and left its eventual buyer, FDH Financial Holdings Limited, feeling short-changed.
According to a forensic audit report by FDH Internal Audit Department dated October 2015, the K1.2 billion loss was only written off in MSB’s financial statements for the year ended December 31 2014 despite dating back to 2012.
The non-provision for the loss, according to the report, was first reported by MSB’s Internal Audit Department in an October 2013 report to its management but action was only taken around April 2015 when the bank’s board was made aware during its extra-ordinary meeting after external auditors, KPMG, insisted they would not sign the financial statement for the year ended December 31 2014 if the K1.2 billion was not written off.
When FDH forensic auditors contacted the then MSB chief executive officer Ian Bonongwe, Salaka and finance manager Million Hera, they all confirmed that the loss was not written off or provided for. This forced MSB to terminate their contracts for their alleged roles on the issue.
Later, FDH reported KPMG to Icam for “failing to recognise fictitious assets” in the former State-owned bank’s Treasury, having certified the accounts that listed the K1.2 billion loss as “other assets” instead of recognising it as loss.
But after its investigations, Icam has cleared KPMG of any wrongdoing.
In a related development, Icam has expelled its member Ufulu Nalivata after finding him guilty of fraud by obtaining payment in his favour using recycled supporting documents.
The Icam statement said Nalivata committed the crime while working with the National Council for Higher Education (Nche).
“His conduct was found to be in contrary to Section 2.3 of Icam disciplinary guidelines and Section 110 of Ifac code of ethics,” reads the statement.
Last evening, Nalivata also declined to comment on the matter, saying he was yet to see the communication on the body’s decision to expel him with effect from August 17 2018.
But an Icam source confided last evening that Nalivata has indicated that he will appeal the decision of the Icam Ethics and Investigations Committee to the Malawi Accountants Board (MAB).
Icam has also asked Nalivata to surrender to the institution’s secretariat the membership certificate by September 18 2018.
Meanwhile, Icam has also cleared Joseph Kampondeni of gross negligence where he was accused of misconduct as head of funding and finance at Technical, Entrepreneurial and Vocational Education and Training Authority (Teveta) for allowing and processing disbursement of funds amounting to K18 million to a Lilongwe-based non-government organisation, Ndi Tsogolo Lathu, without any written agreement or memorandum of understating.
Icam council said it noted that Kampondeni facilitated payment for the money relying on approved signatures of the then Teveta executive director Ndione Chauluka.
Besides discharging him with a letter of reprimand, the council also cautioned him that as a professional accountant, he was expected to act more carefully and with more due professional care in the disbursement of the funds.
The body has since advised the aggrieved members not satisfied with the outcome of their cases to appeal to MAB.
