State House, others overspend by K23bn
State Residences and the Office of the President and Cabinet (OPC) have emerged among seven ministries, departments and agencies (MDAs) that collectively overspent their allocations by K23.1 billion in the 2016/17 financial year.
An Audit Report on Malawi Government Accounts for the fiscal year 2016/17 which The Nation has seen, prepared by the former Auditor General Stevenson Kamphasa, shows that all the seven votes in question are under central government.
Reads the report in part: “Seven votes on central government recorded an over expenditure of K23.1 billion. The votes are 50,90, 271, 273,274, 510 and 560, thus State Residences, OPC, Accountant General, Malawi Revenue Authority, Roads Fund Administration [RFA], Anti- Corruption Bureau [ACB] and the Law Commission.”
RFA tops the list with an overexpenditure of K19.2 billion, followed by the State Residences at K2.2 billion while the ACB is the least after blowing its allocation by K9.7 million.
The report has also revealed that about 45 votes under spent at K48.9 billion where vote 310, Ministry of Health, underspent by K13.7billion.
Kamphasa explained that the under expenditure, in most cases, was a result of decreased activities or low funding.
According to the report, overall the state of affairs of the Recurrent Budget as at June 30 2017 was a net saving of K7.8 billion, registering an increase of K95.7 billion from a deficit of K103.5 billion recorded at the end of the 2015/16 financial year, which indicates that there was an improvement in terms of budget performance.
In his recommendations to MDAs, Kamphasa said there is immediate need to strengthen audit committees in all MDAs to facilitate speedy responses to audit reports and queries.
Economist Dalitso Kubalasa said the National Audit Office (NAO) report acknowledges improvements from the previous years, but there are significant areas demanding urgent attention.
He said: “The budget may either be very far off the mark from reality or it is simply disregarded by senior government officials. In the year ending 30th June 2016, about K428 million was spent ‘on the wrong things’ without approval. This was reportedly so for 10 out of the 25 audited MDA entities.
“However, it seems that when it comes to spending, the government entities largely continue to make payments on what they wish to spend on regardless of the approved budget.”
Kubalasa said that in some cases, funds budgeted for some development projects (Development Budget) were used for the day-to-day operating expenses (Other Recurrent Transactions, ORT), thereby affecting implementation of the earmarked projects.
The audit also exposes continued rot and weaknesses in the system with K5.3 billion not accounted for in MDAs during the review period. The audit noted a growing tendency among controlling officers of not providing supporting expenditure evidence.
In an Executive Summary, the Auditor General reported that payments without supporting vouchers increased from K517.1 million in June 2016 to K5.3 billion.
The audit report also shows a 1 185 percent increase in missing payment vouchers and other important documents.
Reads the report: “Missing payment vouchers and other important documents increased to K2 033 810 685.59 compared to K158 273 251.61 for the financial year ended 30 June 2016.”
The shortcomings, 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 house.
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.
The highlighted shortfalls cover the period three years after 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 this 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 this year, in a presentation titled Public Purse: Use, Misuse, Abuse of Government Resources under the auspices of the 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.
Kuwali, a Brigadier General in the Malawi Defence Force (MDF), said the public finance management system is also haunted by lack of guidelines for revenue collection and expenditure, absence of reports on previous expenditure by MDAs when seeking fresh funding and lack of accountability on unforeseen expenditures approved by Cabinet and not Parliament.
Moving forward on the highlighted shortfalls, the Auditor General recommended a need to strengthen Audit Committees in all MDAs to facilitate speedy responses to audit reports and ensure implementation of audit recommendations.
