More rot as K3.2bn vanishes

Best practices in public finance management continue to elude Capital Hill as a 2017/18 Malawi Government Accounts Audit has revealed that ministries, departments and agencies (MDAs) failed to account for a whopping K3.2 billion.

From the audit report, one sees the same old trends of weaknesses in accounting for public funds among MDAs as well as failure by controlling officers to provide supporting documents for their expenditures.

In an Executive Summary of the report for the year ending June 30 2018, acting Auditor General Thomas Makiwa said the general picture shows that MDAs failed to comply with laid out public finance management laws, regulations and procedures.

In the report, the National Audit Office (NAO) observes that 73 percent of the valued irregularities include stocks not traced to the stores ledger, fraudulent payments to personal accounts, supporting documents not provided for audit inspection, payment vouchers not provided for audit inspection, fuel expenditure not recorded in the fuel register and operating account used for unrelated activities.

The audit also establishes creation of fake remittance advices leading to abuse of public funds, passport not presented for verification of external travel claims, payments made before rendering services and misallocations of public funds.

The report categorises the valued irregularities into three: major findings by value at K2. 5 billion, significant irregularities by value at K612 million and other isolated irregularities by value at K136 million.

Further, the audit notes other areas of non-compliance, but did not value the same. These include abandonment of motor vehicles in garages, failure to prepare and maintain fixed asset register, failure to produce planned outputs for audit inspection, manual interface between payroll and related systems and failure to produce monthly returns.

However, on a positive note, the report shows that government budgetary operation registered an expansion in both revenue and expenditure during the year under review.

Reads the audit report in part: “Total revenue collected increased favourably by K57.9 billion from K953.9 billion realised in 2016/17 financial year compared to K1 011.8 billion in financial year 2017/18, which represents an increase of six percent.

“Total expenditure increased by K282 billion from K786.1 billion in 2016/17 financial year to K1 068.1 billion which represents an increase of 35.9 percent.

“Domestic revenue remained relatively buoyant and continue to maintain an upward trend. This was mainly premised on the improved tax collection and administration by the Malawi Revenue Authority. As earlier mentioned, revenue account registered K1 011.8 billion in revenue while the recurrent expenditure was K1 068.1 billion.”

Reacting to the report, Economics Association of Malawi (Ecama) executive director Maleka Thula yesterday described the findings as worrisome, saying cases of misappropriation of public funds remain a big challenge in the country.

He said: “What this means is that the taxpayers’ money is continuously being used by few individuals for personal gains and prosperity at the expense of a majority of the Malawians who continue to wallow in despair.

“This comes at a time when the country cannot manage to effectively deliver the most basic social services in health and education sector, at a time when inequality and poverty levels are reported to be worsening.”

To improve the situation, Thula suggests collective efforts from all stakeholders to curb the malpractice and prevailing organisational culture breeding abuse across all sectors of the economy.

He said: “The culture of quick gains and prosperity needs to be dealt with by imparting discipline in families, schools, churches and above all at workplaces.

“At workplaces, accountability and transparency of how one amasses wealth needs to be emphasised if this unfortunate behaviour is to be addressed.”

The bad public finance management trend, especially relating to payments without supporting vouchers and missing payment vouchers, invoke memories of Cashgate—the plunder of public resources at Capital Hill—exposed in September 2013 through the shooting of then Ministry of Finance budget director Paul Mphwiyo outside the gate of his Area 43 house in Lilongwe on September 13 2013.

Former president Joyce Banda ordered a forensic audit which British firm Baker Tilly undertook over a randomly-selected six-month period between April and September 2013. It established that about K24 billion was siphoned from public coffers through dubious payments, inflated invoices and goods or services never rendered.

In May 2015, a financial analysis report by audit and business advisory firm PricewaterhouseCoopers (PwC) also established that about K577 billion in public funds could not be reconciled between 2009 and December 31 2014. The amount was, however, revised to K236 billion after another forensic audit reconciliated some payments.

The highlighted shortfalls cover the first three years President Peter Mutharika and his Democratic Progressive Party (DPP) administration took charge of Capital Hill following their triumph in the May 20 2014 Tripartite Elections.

Mutharika and his administration pledged to end Cashgate exposed under the watch of his predecessor, Banda, and indicated in March last year that government had completed procurement of the new Integrated Financial Management Information System (Ifmis)—government’s electronic payment system—to enhance security and speed up processing of government financial transactions.

In February last year, in a presentation titled Public Purse: Use, Misuse, Abuse of Government Resources under the auspices of Malawi Law Society (MLS), Professor Dan Kuwali pointed out that Malawi’s public finance management laws have loopholes that are undermining the fight against theft and abuse of the national purse.

In the latest audit report, Makiwa recommends an immediate need to strengthen Audit Committees in all MDAs to facilitate speedy responses to audit reports and ensure implementation of audit recommendations;

He also recommends, among others, that procurement of goods and services be executed within set processes and regulations and procedures to ensure that maximum value of money is obtained.