- Unsupported payments rise to K5 billion
- Missing payment vouchers and other important documents rose to K2 billion in 2017 from K158 million in 2016.
- Recommends recruitment of qualified accounting personnel.
- Auditor General recommends suspension of proforma invoices.
The more things change, the more they remain the same. Prudent public finance management remains a pipedream as a 2017 Malawi Government accounts audit exposes continued rot and weaknesses in the system.
The audit report has revealed that K5.3 billion has not been accounted for –and was probably stolen– in ministries, departments and agencies (MDAs) in the 2016/17 fiscal year alone through a growing habit whereby controlling officers were not providing supporting expenditure evidence.
In an Executive Summary of the Malawi Government accounts for the year ending June 30 2017, former Auditor General Stephenson Kamphasa, who has since retired after his contract was not renewed, reported that payments without supporting vouchers increased from K517.1 million in June 2016 to K5.3 billion.
The audit report, which The Nation has seen, 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.”
Further, the report observes that MDAs continue to overlook observance of established procurement systems and procedures, resulting in accumulation of arrears.
“In total, the arrears that were submitted for verification for the year ended 30 June 2017 amounted to K23 342 322 940.36, increasing from last year by 126 percent [2015/16 was K10 300 137 321.62].
“A total amount of K18 937 483 920.38 was verified and recommended for payment, representing 81 percent of accumulated arrears in the year which is lower by 19.9 percent as compared to last year’s amount of K10 299 565 705.52,” says the report.
On a positive note, the report notes “significant improvements in the financial reporting for the current period” compared to the financial year ended June 30 2016, misallocations improving by reducing to K136178 292 from K427 974 099 for the financial year ended June 30 2016. This improvement represented 68 percent.
So far, MDAs are preparing their financial statements using cash basis International Public Sector Accounting Standards (IPSAS).
Economist Henry Kachaje has called for the need for Treasury to ensure continued effort to restore the integrity of financial management systems as Cashgate is far from over.
He said the critical issue is adherence to the guidelines in the Public Finance Management Act where responsible officers need to be held accountable for procurement systems and procedures.
“Unless we have stiff consequences, adherence will remain a challenge, the increase in cases of unsupported payment vouchers, and missing payment vouchers might be a sign of continued or attempts to perpetuate cash gate style of misappropriation of government funds. This is a worrisome trend that needs to be checked and discouraged by all means,” said Kachaje.
Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa said the country stands to lose out more if government will not improve procurement systems as they are resulting in delayed donor aid.
He said: “This ineffectiveness and whatever challenges attributable and resultant delays in aid in-flows is detrimental to Malawi’s progressive and inclusive development. It is leaving projects without achieving desired results.”
Kubalasa also said improved accountability will require not only stronger State and non-State oversight institutions, but also systems that promote better linkages among these institutions. Such engagement is, particularly relevant in light of theshrinking democratic spaces around the world and the need for continued and reinvigorated checks against government excesses.
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 three years President Peter Mutharika took charge of Capital Hill following his 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.
He observed that where the law is adequate and carries penalties for violating it, there has been laxity by duty-bearers, including the Secretary to the Treasury and Auditor General, to mete out punishments and penalties.
Kuwali, a Brigadier General in the Malawi Defence Force (MDF), a senior partner in a legal firm and author, 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 an immediate need to strengthen audit committees in all MDAs to facilitate speedy responses to audit reports and ensure implementation of audit recommendations;
The report also recommends that procurement of goods and services be executed within set processes and regulations and procedures to ensure that maximum value of money is obtained.
Further, recommends the report: “Knowledge and skills of accounting personnel should be regularly enhanced through continuing professional development for the qualified accounts and the rest through generic training, including refresher courses and workshops;
“[e] In compliance with government financial rules and regulations, bank reconciliations should regularly be prepared for all bank accounts maintained by the Reserve Bank of Malawi;
“[f] Strict compliance with financial provisions should be enforced in the MDAs in order to improve public financial management and control.”
The Auditor General has also recommended an immediate stop to the use of proforma invoices to support and that no payment should be made without adequate and valid supporting documentation.