K92bn forensic report out, to be presented to Finance Minister next week

The National Audit Office (NAO) is next week set to release the forensic audit report on the K92 billion (US$206.7 million) Cashgate that took place under the late Bingu wa Mutharika’s watch.

In separate interviews this week, officials from the Ministry of Finance, Economic Planning and Development as well as the National Audit Office (NAO) confirmed that the Germany-funded financial investigation—conducted by PricewaterhouseCoopers (PwC)—is ready for release.

Just like the Baker Tilly K24 billion (US$54 million) Cashgate investigative audit of the Treasury looting under the Joyce Banda administration in 2013, the latest forensic inquiry report will expose ministries and departments behind the K92 billion heist between 2009 and 2012 as well as broader public finance malfeasance as it also covers the years up to 2014, sources close to the audit exercise have said.

The new report could thus spark calls for a wave of fresh arrests of those behind the plunder that has largely contributed to Malawi’s current fiscal crisis.

The financial stress is not just as a result of huge amounts of money disappearing into personal pockets under the first Democratic Progressive Party (DPP) administration at the expense of millions—more than half of whom live below the $1 (K450) poverty line.

It is also because the thefts pushed donors to suspend   direct aid to government, which traditionally accounts for 40 percent of Capital Hill’s annual expenditure.

Confirming the completion of the audit in an interview this week, Minister of Finance, Economic Planning and Development Goodall Gondwe said the report—which he said is preliminary—is still with the Auditor General.

“I am yet to see the preliminary report, which is in the hands of the Auditor General. He has asked for 10 more months for the comprehensive report to be released,” said Gondwe.

NAO spokesperson Lawrence Chinkhunda said the report is expected to be formally submitted to the Minister of Finance next week in accordance with the Public Audit Act, for onward tabling in Parliament.

“We value our stakeholders and we are accountable to the public at large and this is why the report will be tabled in Parliament through the Minister of Finance according to the law for public consumption,” Chinkhunda explained.

He, however, declined to shed light on its findings since such information can only be given by the client—Treasury.

Said Chinkhunda: “The forensic audit report, which was produced by PricewaterhouseCoopers as contracted by the Auditor General covers a period of five years, which includes the period when the K92 billion issues occurred.

“As such, it takes a broader perspective, covers many more issues and is not restricted to the K92 billion.”

A source close to the investigation said the report exposes fraud that took place in government between 2009 and 2013.

“The report is pointing out government departments and ministries that misappropriated taxpayers’ funds.

“This is just a preliminary report and it will be shared with the Minister of Finance and concerned donors before it goes to the public,” the source said.

The audit exercise, which the Germany government funded to the tune of K9.76 billion, was prompted by a 2011 interim investigative audit report of government’s payment system—the Integrated Financial Management and Information System (Ifmis)—which revealed that ministries and departments lost about K92 billion through abuse and irregularities  between 2009 and 2012.

The K92 billion interim report—first exposed by our sister paper The Nation in October 2013—also details how the money was allegedly lost or mismanaged through seven irregularities involving specific financial transactions as follows:-

payments that NAO suspects were done “deliberately”—not for emergency reasons or technical faults as some officers claimed—outside Ifmis;

payments without vouchers

payments not supported with liquidation documents

payments made to banks without details of beneficiaries

payments for purchases without Internal Procurement Committee (IPC) authority

payments to suppliers for goods without evidence of delivery

payments for fuel without evidence of delivery.

The Ministry of Finance—through former budget director Dr Dalitso Kabambe—commissioned the audit after suspecting fraud in Ifmis, according to the background note in the report.

The probe coincided with the discovery in late 2011 of K400 million (US$8 889) in a bank account belonging to a civil servant working for the Accountant General’s Department (AGD).

However, the DPP administration systematically discontinued the exercise before 14 more government departments and ministries were probed, suggesting that the K92 billion could be small change compared to what may be the loss if the agencies that escaped the probe were factored in.

The 14 departments and ministries were the Office of the President and Cabinet (OPC); Ministry of Finance (Treasury and Accountant General)—both of which had the highest number of the April-September 2013 Cashgate villains— Office of the Vice-President and Ministry of Information.

Ministry of Defence, Malawi Defence Force, Ministry of Home Affairs, Ministry of Transport and Public Works, Ministry of Energy and Natural Resources, Ministry of Justice,  National Assembly, Department of Human Resource Management and Development, Ministry of Foreign Affairs, and the National Local Government Finance Committee (NLGFC), according to the report.

At OPC, the audit team failed to carry out the audit because they were “turned back” whereas at the Ministry of Finance (Treasury and Accountant General), the investigation was not done because it was “planned to be the last to be audited,” according to the report dated October 12, 2012.

The remaining 12 ministries/departments were not audited due to “logistical problems”.

The calls for a comprehensive probe into the K92 billion issues followed   on the heels of the Baker Tilly audit exercise that exposed how about K24 billion was wantonly stolen from Capital Hill between April and September 2013, under the People’s Party administration.

Revelations of the K24 billion thefts shook the country’s donor confidence, leading to an immediate freeze of budgetary aid, a situation that has forced government to adopt expenditure control measures that have affected public service delivery.

Government is currently prosecuting over 60 cases in the K24 billion Cashgate although most of them have stalled due to, among other factors, failure of witnesses to appear before courts.

So far, six people, including former principal secretary of Tourism, Tressa Senzani, have been convicted of various Cashgate charges.

However, from the six cases where government has managed to secure convictions, only K220 million of the stolen billions has been recovered. 

Fast facts

• Germany funded forensic audit to the tune of K9.76 billion
• Report to be tabled in Parliament through Minister of Finance
•  Auditor General asks for 10 months to produce comprehensive report