Treasury and the Malawi Police Service continue to differ over a K500 million interest claim as payment for goods supplied with the police putting its foot down that the interest was not part of its contract while Treasury insists it has to honour it.
The differences came to the fore again yesterday in Lilongwe when the Inspector General of Police (IG), Secretary to Treasury (ST) and the Auditor General appeared before the Public Accounts Committee (PAC) of Parliament to explain their side of the story on the contentious interest claim by Pioneer Investment which supplied food rations to the Malawi Police Service (MPS).
The parliamentary inquiry also follows revelations by our sister newspaper Weekend Nation that Pioneer Investment was claiming an interest of K560 million for delayed payment in a K2.3 billion contract.
In his submission at the PAC hearing, IG Lexten Kachama insisted that his office does not see any merit in paying the demanded interest, arguing it was not part of the contract.
Kachama referred to a letter he wrote Pioneer Investment.
“We have gone through the calculations and verified them to be correct based on bank interest rate calculated on reducing balance taking into consideration the date of delivery of goods and date of payment. However, take note that the issue of interest is not addressed in the contract,” reads the letter which became the defence of the police as a disclaimer that they never authorised payment.
The police chief also told the committee that the fact that the letter addressed to Pioneer was copied to the Attorney General, Auditor General and Secretary to Treasury was evidence enough that Area 30 did not agree with the demand for interest.
But while Karonga Central MP Frank Mwenifumbo immediately heaped praise on the IG for his position against the payment, saying ‘he had served Malawians’ interest, other members raised questions on the police-Pioneer Investment contract, asking who drafted the contract and whether the issue of interest was included.
But Kachama and team indicated that the contract was a template provided by the Office of the Directorate of Public Procument (ODPP) and that they usually benefit from the legal opinion of the Attorney General, whose advice was that the claim by Pioneer be honoured contrary to the expectation of Area 30.
Though police seemed to have put up a strong case, a few moments later there were serious questions after both Secretary to Treasury Ben Botolo and Auditor General Stephenson Kamphasa, appearing to the committee at different times, took turns to blame the police for the status quo.
Botolo said the arrears came about as a result of the police who had accepted invoices from Pioneer Investment which had a clear clause that demanded interest in case payment was delayed beyond a prescribed number of days.
Botolo said the police could have raised an alarm immediately and their failure to do so amount to acceptance of conditions attached.
The ST said it was due to his intervention that payment of arrears has not taken place up to date. Botolo said all payment for arrears are done after verification by the Auditor General and the Attorney General, in case of court determinations. He, however, indicated that he had initially received instruction from the Auditor General to pay, only to put it on a second thought.
Botolo argued that it was also a considered view of the Attorney General that government was obliged to pay the interest because the police owned the invoices which bore such stipulation. He indicated that he will not make payment until further advice from either the Auditor General or the Attorney General.
“I know Pioneer is hating me…I have stood my ground not to make this payment until we verify issues raised. I am also surprised why the police has continued to deal with Pioneer which has always given them tough time,” he explained.
Botolo also argued against the police on the explanation that payment to the supplier delayed because Treasury delayed to disburse funds, claiming security agencies such as MDF, Immigration, Prison and Police are sufficiently funded and on time.
But Kamphasa, however, conceded that funding is sometimes delayed to ministries, departments and agencies; hence accruing arrears on some payment. However, Kamphasa also pushed the blame to police for accepting the invoices which demanded interest and later turn around, refusing to pay the same.
When members demanded to know which was binding or superior between a contract—which was silent on interests and an invoice which demanded for the same—both Botolo and Kamphasa failed to satisfy the committee.
Kamphasa confused members even more when he said what the police possessed was more of an order than a contract, but Botolo contended that the invoice is as important as a contract and best for the police was to raise questions on the invoice than owning them.
The inquiry is expected to conclude on Wednesday as PAC is scheduled to meet Pioneer Investment and the Attorney General Charles Mhango, who had not appeared before the committee, according to PAC chairperson Alekeni Menyani.
“We also summoned the Attorney General today, but he has not shown up. We will check with secretariat if there is a valid reason for that. Otherwise, under the law, abscondment amounts to contempt,” said Menyani who suggested that from the day’s deliberation, there seem to be collusion and a possible syndicate to siphon public funds.