Govt risks another Cashgate

Despite recommendations from the International Monetary Fund (IMF) for the DPP-led administration to restore financial control and accountability in the aftermath of Cashgate, government is failing to conduct regular reconciliation of its bank accounts, an IMF report has indicated.

According to a report from the Bretton Woods institution that recently declared Malawi economic programme offtrack, the continued lack of bank reconciliations is a “matter of serious concern as they are a detective control measure to identify potential misappropriation or loss of public money.”

But Minister of Finance, Economic Planning and Development Goodall Gondwe fell short of explaining why reconciliations were not being done, saying government is working on ensuring financial prudence, including ensuring that reconciliations are done.

The report, however, says “not once” has government completed reconciliation of its financial books since Cashgate erupted.

“Although six months have elapsed since the CIAU (Central Internal Audit Unit) report (of February 2015], necessary investigation into the validity of its findings and recommendations has not yet been completed nor management responses and decisions documented. It is also unfortunate that bank reconciliations have not been successfully completed even once.

“The current process to make decisions on issues affecting bank reconciliations appears to be ineffective. The lack of accuracy of RBM’s own records and reports is also a matter of concern and is a contributory factor to the problems related to bank reconciliation.”

But Gondwe, in an interview this week, insisted that government is working on bank reconciliations.

“Yes, this is a bad situation they have noted and it is related to Cashgate. For a long time, the reconciliation between the Accountant General and the Reserve Bank has been lacking. When we came into government, they asked us to do something about it; we have done something about it, but they also want us to go backwards for a number of years; the past 10 years.

“The reconciliations are now taking place. It was not possible at some point to reconcile the figures in the Account Number One and the figures at the Reserve Bank,” said Gondwe.

But according to the report, following Cashgate and subsequent investigations, the December 2014 IMF Fiscal Affairs Department report recommended measures to restore financial control and accountability, among them, maintaining full accounting records of all government bank accounts; reconciling accounts with bank statements; producing summary reports for bank accounts and government has failed to heed the calls.

The report also raises concerns on strengthening financial reporting and Integrated Financial Management Information System (Ifmis), noting that although several initiatives aimed at increasing the usefulness of Ifmis reports have been taken, weaknesses in financial reporting persist.

Gondwe, however, said there is progress in restoring confidence in Ifmis and revealed that government was close to replacing the system with a new software.

Reserve Bank of Malawi spokesperson Mbane Ngwira said the concerns raised in the report were not the reason the ECF programme has been declared offtrack.

“The issues of reconciliations might be important, but they are not related to the conditions of the Extended Credit Facility,” said Ngwira.

Economics Association of Malawi (Ecama) president Henry Kachaje in an interview on Friday expressed worry that government continued to dilly-dally on crucial reforms as requested by donors and international financial institutions despite the pressing need for donor support.

He said government needs to bring private sector thinking into the administration of the public finance management system.

“These are issues which must be addressed in the on-going public reforms. Quite key are issues of integrity of the financial system. Every bilateral and multilateral donor is telling us that they can’t put money into our system because they don’t trust our system,” said Kachaje.

The economic slippages that led to the derailment of Malawi ECF programme include overspending on the wage bill and over- borrowing.