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Ghosts terrorise Capital Hill coffers

As Malawians count the cost of Cashgate—the organised looting of Treasury through the manipulation of government’s accounting system—more billions were simultaneously disappearing in similar fashion via dubious wages and salaries.

Weekend Nation can reveal that in just 14 months—between January 2014 and February 2015—the National Audit Office (NAO) suspects that government lost at least K7 billion in only 10 ministries, departments and agencies (MDAs) through the manipulation of the Human Resource Management Information System (HRMIS).

The latest audit reveals serious abuses of payroll system and affects many civil servants
The latest audit reveals serious abuses of payroll system and affects many civil servants

Much of the loss, according to an NAO preliminary report on HRMIS and payroll audit, was through manual manipulation of GP5A forms (which provide payroll details for all civil servants), ghost workers, introduction of unauthorised codes in the HRMIS, payment of irregular basic pay, leave grants and double salaries (one civil servant would have two salaries from different votes).

From the analysis, warns NAO, there are strong indications that “more damage” was done prior to 2014 given that over 80 percent of the 10 MDAs reviewed recorded irregularities, meaning the problem could have been public sector-wide.

Thus, the K7 billion ($15.6 million) pilferages could just be a tip of the iceberg for a country still digesting the shocking news of the K577 billion ($1.3 billion) Cashgate—money that the PricewaterhouseCoopers’ analysis report on the reconstruction of government’s cashbook says may have been stolen through dubious payments for “supplies” to government in the five years up to December 2014.

It is suspected that some private sector players and some civil servants connived to pull off the K577 billion heist by manipulating government systems, including the Integrated Financial Management System (Ifmis).

The HRMIS and payroll audit, led by a consultant the Auditor General hired to assess the personal emoluments processes, started on February 16 2015 and ended on April 2.

It was aimed at providing assurances on the design and operating effectiveness of controls within HRMIS and payroll operating environment as well as validate payroll as well as personnel data integrity.

In the preliminary report, the review revealed that of about 10 modules in HRMIS, only three—payroll, establishment and employee data—were operational during the reporting period.

 

The main culprits

The audit covered the Malawi Police Service (MPS), the Accountant General, the Judiciary, the Department of Human Resource Management and Development (DHRMD) as well as ministries of Local Government and Rural Development, Agriculture, Tourism, Health, Finance and Education.

According to the report, ministries and departments would request for more money than provided for in the automated payroll system.

The biggest culprits in this type of abuse are the ministries of Agriculture, Health, Education and Local Government and the purse manager itself, the Accountant General.

During the period under review, Education’s total payroll according to the system generated GP5A forms amounted to K76.9 billion ($170.9), but the forms were manually manipulated and the ministry submitted to the Treasury a request for K81.5 billion ($181.1 million), leading to a cumulative difference of K4.6 billion ($10.2 million).

The Ministry of Agriculture made a request of K9.1 billion ($20.2 million) against a payroll of K8.9 billion; Health had an unexplained amount of K88 million ($195 556) after they received about K32.8 billion ($72.9 million) when their payroll is around K32.7 billion ($72.7 million). The Judiciary had the least difference after they posted a cumulative difference of just K141 447 ($314).

According to the report, the figures were suspected to have been overstated on purpose to provide for fraudulent data manipulation.

It further says the payrolls in some ministries were compromised by the system as they were huge with bulky change requests.

Reads the report: “The payrolls for some ministries are very huge with bulky change requests. Validating such requests is a tedious task, which requires dedicated and motivated personnel to perform the task.”

Such responsibilities are usually left to junior staff [who] usually take advantage of the processing complexities to include unauthorised and fraudulent changes. With manual validation process, it is almost impossible to detect unauthorised changes introduced.”

 

Other revelations

The data analysis report also reveals that:

lAlmost K1.7 billion ($3.8 million) was paid to employees who were not on payroll, with the Ministry of Education accounting for K1.4 billion ($3.1 million). When Education’s GP5A losses are added to this, the abuse accumulates to K6 billion.

lUnspecified millions were paid after staff manually introduced unauthorised pay item codes in the system.

lOver K133 million was paid out across all the MDAs where staff, who have been identified by name, were paid double salaries.

lAbout K31 million ($68 889) was claimed as irregular leave grants for aggregate amounts exceeding K150 000 ($333).

lAbout K97 million ($215 556) was irregularly paid out to staff basic pay following manual manipulation of the system

The report faults administrative malpractices such as inadequate checking mechanisms for invalid human resource events being posted to DHRMD; capturing into the HRMIS of invalid payroll events; and lack of accountability mechanisms for management of changes of HR events, including deletion of staffing.

The report also reveals that fraudulent or invalid payroll events were introduced in such areas as advances, leave grants and allowances.

Employees’ salaries had differences in the net amount on the payslip compared to banked amounts and, according to the report, some staff admitted to manipulating their net salaries, citing financial problems they had been experiencing.

In one case at MPS, for instance, an officer whose salary was K158 530.30 ($352) was paid K357 729.60 ($795), accruing a difference of K199 199.30 ($443) and the money was banked in the employee’s account; at Local Government, there was systematic, if not basic, manipulation of figures where some employees whose net monthly salaries was K39 858.05 ($89) were paid K239 858.05 ($533) instead; K43 828.91 ($97) got K243 828.91($542).

According to the report, the staff involved in the abuse at Local Government “admitted to manipulating their net salaries [due to] financial problems”.

Prevalent in the Ministry of Health was the abuse of payment of ‘Top-Up’ allowances for health professionals where several irregular allowances were paid.

 

It’s chaos out there

The report further reveals that while it is only DHRMD that has mandate to process HR events, some of them originate from various cost centres within the public service without effective mechanisms for validating authenticity.

“As a result, invalid events, such as ghost workers or incorrect salary scales were created while other critical events such as deaths of employees and staffing volumes were not reported. In view of this development, Government would incur more personnel costs than what was necessary,” reads the report.

The report notes that “there were no established responsibilities and accountabilities for the breakdown of the system of internal controls”.

Similarly, payroll had more trouble unlike the human resource events, according to the report, because they are not centrally managed—they are delegated to MDAs and cover administration of advances, allowances, arrears, leave grants and salary deduction.

The report also reveals situations such as salary payments at the Reserve Bank of Malawi (RBM) that were not properly accounted for.

However, the report does not explain why these situations obtained during the reporting period.

 

Whither reforms?

The revelations come against the background that government is pursuing public sector reforms, which started in 2008, including public finance management (PFM) reforms to avoid a Cashgate repeat.

Former president Joyce Banda’s administration also instituted donor-assisted PFM reforms soon after Cashgate unravelled in 2013 while President Peter Mutharika’s government late last year established the Public Service Reform Commission with a mandate to implement wide-sweeping reforms in the public service sector.

But the pilferages were going on as if there were no such reform processes in place or under implementation.

While the Chief Secretary George Mkondiwa said in an interview last week Friday that they were still working on the report, Lawrence Chinkhunda, NAO spokesperson, declined to comment on a set of questions we had sent to the auditing authority.

Meanwhile, in a press release published in The Sunday Times, the Ministry of Finance, Economic Planning and Development announced that it has introduced fiscal measures aimed at stemming the systemic abuse of the government payroll system.

Among other measures, GP5A forms will be system-generated and signed by controlling officers.

“The processing of salaries based on manually generated GP5A forms and/or those that are submitted without the signature of the controlling officer has been discontinued,” reads the statement signed by Secretary to the Treasury, Ronald Mangani. The statement did not provide the context for its publication.

Mangani further advises that “changes affecting the payroll (due to death, recruitment or promotion) are approved by the cost centre head”.

 

Weak system linkages

One of the major causes of abuses along the Public Finance and Economic Management System (PFEM) is that various systems do not read each other because they are not linked, such as HRMIS and Ifmis.

To deal with such problems, government in 2013 established the PFEM Unit   to integrate government systems, including HRMIS and   Ifmis “to coordinate and facilitate implementation of PFEM reforms”.

In an interview with Weekend Nation, Treasury spokesperson Nations Msowoya confirmed that the integration of government systems is one of the issues that were identified as critical for the enhancement of controls in the management of government payroll and public finances.

But with such pilferage in the systems, the effectiveness of the efforts is now questionable, putting Msowoya on the defensive.

“The PFEM Unit was established in 2013. While it is too early to judge its effectiveness, there are a lot of positive things that it has achieved to date. Through the Financial Reporting and Oversight Improvement Project funded by the World Bank and African Development Bank, government has procured new servers for the current Ifmis,” Msowoya said.

Social commentators have said the report has raised serious abuse of State resources requiring further serious following up by accountability institutions, if the public sector reform agenda is to be meaningful and not mere rhetoric.

Human rights defender Billy Mayaya said there is need for serious business processes re-engineering in the management of the HRMIS.

“There is also need to ensure that all the HRMIS modules are functional. Further, there is need to make specific follow-up on each of the MDAs as this is a serious matter,” he said.

The HRMIS, which was supplied by Global Computers Limited, is being managed by DHRMD. It comprises various modules, including establishment, employee data, payroll, loans manager, training, leave manager, recruitment, performance management and terminal benefits.

The system was adopted to improve management of workforce in the public service.

Today’s expansive expose is Weekend Nation’s broader effort at laying bare the abuses of the payroll budget in the civil service.

We first reported in May this year that a suspected salary fraud hit the Ministry of Agriculture, Irrigation and Water Development—costing the taxpayer an estimated K166 million within three years from January 2012 to December 2014.

Following the story, President Peter Mutharika ordered a government-wide investigation into the human resource management and pay system.

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