Auditors seek to hook ‘Big fish’

Baker Tilly, the British firm that carried out a forensic audit that established theft of K13 billion (US$31 941 031.9) of public funds in six months, says it has discovered that the culprits named in their “under-wraps” Cashgate audit report were just conduits.

In written correspondence seen by The Nation, the forensic auditors say they have all pointers that there exists somewhere a final beneficiary who must be sought after before the names of the ‘conduits’ are made public as naming ‘small fish’ now would jeopardise catching the ‘big fish.’

Baker Tilly said it arrived at this conclusion after noting that funds were being transferred between unrelated companies, individuals were withdrawing funds from unconnected organisations and inflated prices paid to companies with limited or no trading history and very large cash withdrawals.

“In most cases, it was apparent that the Cashgate cases utilised relatively simple methods of extraction. We did find, however, that the initial recipient of the funds was not, in all cases, the final beneficiary.

“Identifying the final beneficiary is the ultimate aim in order to bring the latter to account,” Baker Tilly partner, Richard Smith, says in a letter to the Auditor General Stephenson Kamphasa dated March 13 2014 and referenced MS/MS/7790297/014.

But civil society organisations (CSOs) who, through the Grand Coalition, have been calling for transparency in the conduct of the audit firm and demanded the release of names of perpetrators, yesterday said Baker Tilly’s information was coming too late.

However, the forensic auditors have complained that they have not received maximum cooperation from the country’s commercial banks, a development that has prevented them from completing some of the case files.

The report, which is now with Parliament, but does not contain full details of perpetrators, put the theft into categories of ‘Cashgate’ amounting to about K6 billion, payments with no supporting documents amounting to about K4 billion and inflated procurement prices amounting to K3.6 billion.

Baker Tilly said they were in the process of ‘peeling back the layers’ to identify the final beneficiary of ‘Cashgate’ and non-Cashgate transactions which was time-consuming.

Reads the correspondence from Baker Tilly: “In relation to non-Cashgate transactions, we generally encountered more elaborate methods of potential fraud with funds passing through a variety of companies and monies being extracted by a variety of different means.

“As part of this, we have found examples of ‘layering of payments’: This is where payments are made through various accounts to either extract the funding at different stages to make the transaction look like genuine business trade or mask the final recipient. We are now peeling back the layers to identify the final beneficiary.”

The letter to the Auditor General has also shed light on the terms of reference of the forensic audit as it states that releasing a report to the public was not part of the agreement, but it was done following pressure from the Malawi public.

“There has been some speculation that two reports were produced. On this, I can categorically confirm that the only report drafted by Baker Tilly is the one titled ‘Fraud and Mismanagement of Malawi Government Funds’. No other report has been drafted or issued,” the letter reads.

CSO Grand Coalition chairperson Voice Mhone said all misunderstanding and expectations from the forensic audit have arisen as a result of secrecy surrounding the terms of reference for the foreign auditors and lack of transparency on the part of government.

The British government engaged Baker Tilly to conduct a forensic audit on behalf of the Malawi Government to trace the source of the plunder of public funds popularly known as Cashgate after revelations of free-for-all looting of funds by some civil servants exposed late last year.