The hunter has become the hunted.
External auditors have unearthed financial irregularities at the National Audit Office (NAO)—the country’s supposed pinnacle of public finance management assurance.
The irregularities—ranging from questionable allowances to payments without supporting documents—are feared to have cost the taxpayer an estimated K200 million between 2011 and 2013, according to The Nation’s compilations based on three KPMG audit reports on the agency.
The audit of NAO—concluded and presented in 2015, and which looked at the supreme auditing institution’s performance from 2011 to 2013—found several irregularities in the way it was spending public funds.
KPMG found that millions of kwacha may have been mismanaged through unauthenticated payment vouchers which should ideally be stamped ‘paid’, but were not in this case; inconsistent allowances; misallocation of transactions; unsupported payments and in some cases moving funds without payment vouchers.
It also discovered that officers signed allowances for each other; travel requisition forms were accepted without officers indicating reason for leaving duty office; there were duplication of expenditure and virement of funds—an administrative transfer of money from one part of the budget to another.
In the 2010/11 financial year, NAO is feared to have squandered K36 million; K61 million in 2011/12 and K91 million in 2012/13 through various irregularities.
For example, between 2011 and 2013, NAO transacted on unsupported quotations of up to K18.4 million and made unsupported payments of up to K11.3 million.
The auditors also found that NAO could not provide payment vouchers to the tune of K16.4 million.
KPMG also noted that payment vouchers of up to K26.3 million were not stamped ‘paid’ while K1.6 million constituted inconsistencies in allowances paid.
It also said misclassification of transactions was at K3.5 million and transactions not adequately supported was at K2 million while payment vouchers of up to K1.5 million were not provided.
On expenses outside the expenditure lines, the auditors found, for example, that purchase of stationery could be posted to motor vehicle running expenses while maintenance of motor vehicles could be posted on training.
The auditors also observed that there was incomplete fixed assets register and non- existence of an internal procurement committee (IPC) during the time.
In 2012, the auditors found that NAO could not account for K61 million of which K13. 9 million was for misallocation expenditure for foreign travel, K13.9 million for misallocation expenditure for training, K6.1 million in payment not adequately supported, K15.9 million in payment vouchers not provided, K839 287 payment lacking supporting documents, K1.4 million in payments whose documents were not provided, K700 000 in misallocation costs and K29.7 million whose payment vouchers were not stamped ‘paid’ .
And in 2011, the auditors found that NAO could not account for K23.5 million, K3.6 million in payment not adequately supported, K3.2 million in allowances not signed for and K3.6 million in misclassification of payments on foreign travel.
In the audit report on several occasions, NAO management agreed with the findings of the auditors.
The Audit Office explained that in some instances there was lack of supervision in the accounts section, delivery notes were not being issued in purchases from chain stores and that lack of adequate office space led to misplacement of vouchers.
On officers not signing for allowances, NAO told the auditors: “Efforts will be made to trace the concerned officers and have the allowances received signed for.”
On payments that were not stamped ‘paid’ NAO admitted: “This is an anomaly which is regrettable. With the central payment system all the payment vouchers are stamped ‘paid’ at Accountant General’s Department.”
The audited period for the NAO accounts covers part of the five year duration to end December 2014 during which K236 billion (revised from K577 billion) is suspected to have been abused through dubious payments dubbed Cashgate.
In a written response on Wednesday, NAO spokesperson Rabson Kagwamminga said the report was referred to Parliament through Public Accounts Committee (PAC) and that the issues raised were thoroughly discussed at that level.
However, he said, like any other public institution, NAO was subject to audit and that PAC, in liaison with the current Auditor General, sanctioned the audit in question.
“You may wish to note that the audit by KPMG relates to a period between July 2011 and June 2013 and this is way before the current Auditor General joined the institution. It is the period when many government institutions relaxed in terms of financial discipline in the management of public funds and NAO was not spared since it draws its accounts, administration and [human resource] staff from the common service.
“The office has greatly improved not only in its audit operations, but also in the management of its financial resources,” he said.
Kagwamminga explained that the lapses in controls highlighted by the auditors could be attributed to inadequate supervision over the accounts department and laxity on the part of accounts personnel since the office was not being audited before.
“This has not been the case since the coming in of the current Auditor General,” he said.
Kagwamminga said over the past three to four years, NAO has gone through many positive changes, one of which is the adherence to the International Standard of Supreme Audit Institution number 20 (ISSAI 20) apart from the provisions of the Public Finance Management Act 2003.
This is not the first time NAO has failed to live by example.
In 2013, taxpayers refunded Norway and the United Kingdom about K120 million, which NAO had misused in 2011.
The K72 524 047 that was refunded to the UK government came from the Department for International Department (DfID) for NAO’s capacity building project.
But governance expert Anthony Mukumbwa said it is a basic good corporate governance requirement for an institution that undertakes external audits of government and government related entities to have in place internal control and financial management systems that they expect the entities they audit to have.
“Most companies in Malawi and world over are negligent of basic corporate governance principles, especially with regard to risk management and yet lack of risk management practices can be life-threatening to the very existence of the institution. I can challenge you that three quarters of organisations in Malawi do not have the very basic risk management systems. Lack of deterrence and failure to detect many cases of Cashgates being recorded is simply lack of risk management systems,” he said. n