Public finance management at Capital Hill remains a fantasy with the 2018/19 Malawi Government accounts audit exposing continued rot and weaknesses in financial controls and accounting for taxpayers’ money.
The revelations, contained in a Report of the Auditor General on the accounts of the Government of the Republic of Malawi for the Year Ended 30th June 2019 submitted to the Office of the Speaker with a covering letter from Acting Auditor General Thomas Makiwa dated January 21 2020, show that K35 billion has not been accounted for and was probably stolen in ministries, departments and agencies (MDAs) in the 2018/19 fiscal year alone.
The major findings by value of mismanaged funds in the 2018/19 financial year represent a 1 166 percent rise from the K3 billion not accounted for in the 2018/19 financial year.
In an executive summary of the report, Makiwa observes that MDAs have failed to comply with various financial laws, regulations and procedures.
He said the main findings from the audit, which account for 98 percent of the irregularities by value, include non-maintenance of non-current assets register, misallocations of public funds, fuel not recorded/not signed for in register/logbook, revenue spent at source, payment vouchers not provided for audit inspection, revenue not acknowledged by receipts and stores items paid for but not delivered.
Makiwa also reports suspicious long-outstanding pensioners, failure to maintain proper revenue accounting records, funds transfer for referral medical cases abroad not liquidated, stores items not traced to the ledger, under collection of revenue, unfinished construction works, lack of sustainable special budget for PhD scholarships, interbank transfers without supporting documentation, unsettled claims, payments made without adequate supporting documents, and delay in paying contractors.
The report has categorised the valued irregularities into three, notably major findings by value at K35 148 879 433.80, other significant irregularities by value at K652 649 865.85 and other isolated irregularities by value K148 347 622.47.
The document also notes that there are other areas of non-compliance, but not valued. These include works not done according to contract specifications, non-preparation of bank reconciliation statements, failure to implement construction projects, failure to prepare and maintain fixed asset register, failure to insure assets, failure to produce integrated financial management information system (Ifmis) cashbook and other reports as well as failure to prepare procurement plan.
In terms of value, the K35 billion is enough to fund the forthcoming fresh presidential election the High Court of Malawi sitting as the Constitutional Court ordered within 150 days from February 3. In the Mid-Year Budget Review, Parliament approved a K29 billion funding for the fresh poll.
The missing funds are also enough to fund the entire Ministry of Gender, Children, Disability and Social Welfare (Vote 320) whose revised budget is pegged at K34.7 billion in the 2019/20 National Budget.
On the other hand, the audit report shows that government budgetary operation registered an expansion in both revenue and expenditure during the year under review.
Reads the report in part: “Total revenue collected increased favourably by K131.8 billion from K1 011.8 billion realised in 2017/18 and K1 143.6 billion in 2018/19 financial years, respectively, representing an increase of 13.3 percent.”
The report also shows that total expenditure increased by K38.2 billion from K1 068.1 billion in 2017/18 financial year to K1 06.3 billion in the financial year ended 2018/19, representing 3.6 percent increase.
The shortcomings, especially as they relate 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 Area 43 residence in Lilongwe.
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 downwards to K236 billion after another forensic audit.
Meanwhile, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha, who formally presented the report in Parliament on February 19 2020, referred it to the Public Accounts Committee (PAC) of Parliament for further scrutiny.
The committee’s chairperson Ken Kandodo said he would give a response after going through the report with his team.
He said: “We will be meeting two weeks from now to discuss this and other Auditor General’s reports which the Minister of Finance referred to my committee.”
To improve public finance management, Makiwa, in the report, has recommended that salary reconciliation by the Accountant General should be up to date and that the issues of referencing and coding should be sorted out once and for all.
“Government through the Department of E-Government should embark on a massive project to ensure that most of the systems such as fuel, stores and fleet management are electronic,” he said.
Makiwa also recommends that the Secretary to the Treasury should review the Ifmis—government’s electronic payment platform—system of recording receipts and payments in the cashbook to ensure proper records for reconciliation statement, among others.