Former Secretary to Treasury Radson Mwadiwa and Reserve Bank Governor Charles Chuka have attributed cash-gate to failure by controlling officers in government to conduct monthly reconciliations on their accounts.
Appearing before the Public Accounts Committee (PAC) of Parliament yesterday, Mwadiwa said Treasury discovered the looting of public funds around September 20 2013 when it was doing the quarterly overall reconciliation of government revenues and expenditure ahead of the World Bank and International Monetary Fund (IMF) joint annual meeting in Washington last month.
He said the reconciliation was done to monitor adherence to the zero net domestic borrowing as one of the tenets of the Extended Credit Facility (ECF) government is implementing with IMF.
“To monitor that target, reconciliations are supposed to be done at various levels including ministry level, Accountant General and macro-level. On monthly basis, every ministry is supposed to reconcile or check what they have spent versus the monies that have come out of the Reserve Bank of Malawi.
“The Auditor General has complained on numerous occasions that reconciliations at the Accountant General and ministries have not been done as desirable,” said Mwadiwa.
He said the Finance Ministry learnt about the looting of public funds when he insisted on probing of revelations of over-borrowing by the government from RBM against the zero borrowing target on the IMF programme.
“When I was on holiday in September, I got information that we seemed to have missed the target. I didn’t know that in some targets we had spent more. We should not have over-borrowed as it was reported to me,” said Mwadiwa.
He said, at first, Treasury thought the over-borrowing was resulting from interests charged on its credit with RBM which resulted from the effects of the massive 49 percent devaluation that cost the central bank about K28 billion (US$70 million) in losses.
“The law requires that RBM should not make any losses at any given time. We didn’t have the K28 billion to give to RBM at that time, so we gave a promissory note which attracts interests.
“After a further look at the figures, we discovered that part of the borrowing was on account of a promissory note which had been overlooked. Then I asked my colleagues to take off the interest rates from the over-borrowed amount but it appeared that we still over-borrowed by about K10 billion. We did further reconciliation to go into the specifics and that’s when we stumbled on this issue,” said Mwadiwa.
He said when the over-borrowing was discovered while he was on holiday, he instructed his staff to report the same to former minister of Finance Dr. Ken Lipenga who asked his deputy to lead a team to do further reconciliation of the figures.
“One of the things that needed to be done was reconciliation at the Accountant General. RBM provided the bank statements and all the information to the Accountant General to do the reconciliation but that reconciliation had not been done.
“I insisted that the reconciliation should be done otherwise we would not have discovered these illegal transactions,” said Mwadiwa.
He said his persistence to reconcile revenue and expenditure figures at the Accountant General’s office revealed that for two months there were no records of expenditure in the Integrated Financial Management System (Ifmis) on the Ministry of Tourism account while the RBM statements were indicating that the ministry had spent K5.5 billion (US$13 750 000) in the same period despite its budget for the months being about K300 million (US$750 000).
“When experts went into the system, they discovered that almost all the transactions in the Ministry of Tourism had been deleted. We retrieved the information and discovered all these payments to contractors, then I sought approvals to close Ifmis and the system was closed,” said Mwadiwa.
Chuka and his team, on the other hand, denied knowledge of any cheque amounting to about K1.2 billion (US$3 million) allegedly cashed at RBM offices by Osward Lutepo’s International Procurement System (IPS), saying all government cheques are cashed at commercial banks.
“The bank simply clears cheques for government. The banks were mandated to always honour those cheques as per the agreement between Treasury, RBM and Accountant General. At RBM, we are concerned with the overall borrowing by government as it affects the country’s monetary situation,” said Chuka.
