Skirting around issues in fraud fight
What’s in a forensic audit? This is the question I raised in a repeat publication of an article first published on October 24 2013. Basically, the article explored the definition of forensic audit and how it differs from ordinary or normal audits.
There have been forensic audits before in Malawi, but the 2013 one by British forensic audit firm, Baker Tilly, attracted the most attention, perhaps because of the growing public interest in Cashgate—the plunder of public resources at Capital Hill through inflated invoices and payment for goods and services not delivered—generated.
Besides defining forensic audit as an examination and evaluation of an organisation’s or individual’s financial information for use, mostly as evidence in court, I bemoaned that, sadly, in Malawi, local forensic auditors or fraud examiners are rarely used.
Reacting to my article, one highly esteemed son of Malawi said it is an “understatement’ to suggest that local forensic auditors are not used as, in fact, government does not seem to know how to use them.
Today, I thought of sharing some insights in the feedback I got as follows:
“Dear Aubrey, There is infinite depth to this question [What’s in a forensic audit?]. The fact that there has been no dialogue on this, the fact that government is completely oblivious to it talks volumes about our understanding of financial governance and the nature of ‘organised crime’, ‘fraud’ and ‘corruption’ despite having laws on the books that were clearly designed to fight these evils—the Corrupt Practices Act, the Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act and recently the Financial Services Act 2010.
“In 2008, the World Bank and the East and Southern Africa Anti-Money Laundering Group [ESAAMLG] under the auspices of the Financial Action Task Force [FATF] undertook a review of the Anti-Money Laundering and Combating Financing of Terrorism [AML/CFT] regime in Malawi and concluded that the framework met international standards, but that government need to have a strategy for implementing the regime and made several proposals. Nothing was done apart from passing of the Financial Services Act 2010 by default.
“Then, came Cashgate. Three audits, and one forensic audit down the line [Baker Tilly and Pricewater-houseCoopers] and all the government can promise the IMF [International Monetary Fund] in its Letter of Intent of March 15 2015 is: (1) There will be amendments to the Penal Code, Money Laundering Act and the Corrupt Practices Act; and, (2) The Reserve Bank will re-evaluate its capacity to enforce compliance with the AML regime.”
Further, the reader observed that the Financial Services Act actually provides for internal auditors, external auditors and examiners.
Said the reader: “So, when you write in your last paragraph ‘I understand we have some Malawians qualified in forensic auditing but are rarely used by the State’ it is an understatement. Not that they are rarely used, they are not used because the State does not know how or what to use them for!!
“Malawi not only has forensic auditors, but some of them are also ‘Certified Fraud Examiners’. There are over 15 certified fraud examiners in Malawi nearly all of whom are either qualified auditors or accountants. There is also one or two from the legal background.”
Essentially, the rich feedback from this reader strengthens the case and argument that what Malawi needs are not new laws, but political will and commitment to implement what is contained in the laws.
It is time authorities abstained from fighting fraud and corruption through podium rhetoric and switched to ensuring that laws are put to use. For example, the Public Finance Management Act provides that controlling officers under whose watch public funds are mismanaged should be disciplined.
But, since the law was enacted, year-in and year-out, we read reports about over-expenditure or abuse of office, but none about controlling officers being disciplined.
