A discovery of a bank account that appears to be a conduit for Malawi Government’s stolen funds has sent a shock wave to the country’s public finance management system.
Both the Ministry of Finance and the Department of Human Resources Management said on Wednesday this week that Capital Hill suspects the existence of a syndicate in government that may be defrauding more public funds through similar circumstances.
Our investigations also show that the government accounting package, Integrated Financial Management Information System (IFMIS)—which is supposed to stave off embezzlers—is so compromised that a manual system looks safer, three senior principal secretaries have confided. The system’s weaknesses also make it easy for such syndicates to thrive.
Ministry of Finance spokesperson Nations Msowoya confirmed that more than K11 million (about $30 555) processed as pensions and gratuity were deposited into the said bank account at FMB in Lilongwe for the benefit of a person who does not appear anywhere in the government system.
The Office of the President and Cabinet (OPC) has since frozen the account pending investigations, Secretary for Human Resources Management and Development Sam Madula confirmed this week.
A highly placed source in OPC said last week the syndicate involves officers from several government ministries and departments where one’s file originates on retirement, to the Department of Human Resource Management and Development where civil service payroll and data is controlled, to the National Audit Office where payments are verified and Accountant General’s office where payments are made.
Our investigations traced one cheque paid to a supposed former Malawi Defence Force (MDF) officer—one Julius Kadantele—who got K11 722 611.57 as pension arrears after re-computation of his gratuity and pension.
Government cheque number 347534, a copy of which we have seen, was duly signed by two authorised signatories at the Accountant General’s office after three other officers prepared, authorised and approved a payment voucher number 030PV0033838.
A trace through the civil service data found no record of Kadantele who operates bank account number 5590260444 at FMB Area 2 Branch in Lilongwe.
The payment voucher we have seen shows that Kadantele was “defence personnel” and the voucher shows his service number as VN054226, but MDF has no data on him.
In a brief e-mail interview, Captain Frank Kayanula-Banda of the MDF Public Information Office, wrote on Monday: “I write to inform you that after checking our data base, the name Julius Kadantele does not exist.”
Documents we have seen claim that Kadantele is from Chigoneka Village, P.O Box 186, Lilongwe.
But according to Lilongwe district commissioner Paul Kalirombe, “that village no longer exists because the location where it used to be is where we now have Area 47, Sector 2.”
Records at Lilongwe Post Office show that Box 186 belongs to Lilongwe Girls Secondary School.
“Yes, it belongs to Lilongwe Girls,” confirmed Ireen Ngozo, the school’s deputy head teacher.
Asked if there is a teacher in the name of Julius Kadantele at her institution, Ngozo said, “We don’t have that name here.”
When he collected the cheque, Kadantele signed the payment voucher and indicated his cellphone number as 0888451823.
We tried to call this number, but it could not be reached anymore. Records at TNM indicate that it was last used on January 20 2013 from 11:58 for less than a minute.
Called for comment, Accountant General Dorothy Banda—whose three officers (names withheld) prepared, authorised and approved the payment—refused to speak on the matter.
She advised us to talk to Treasury publicist Msowoya.
Madula, whose Department of Human Resource Management and Development is the custodian of government payroll and have data on all civil servants, confirmed that Kadantele’s name does not exist in their system.
“I have been made aware of the existence of that cheque at FMB. And my investigations have revealed that that person has never worked in the civil service. Other than that, the originating office is in a better position to explain,” said Madula.
But he added: “If the whole process was done from start to finish, it is an indication of a syndicate in the public service because it means the relevant departments which are supposed to cross-check did not do their job,” he said.
Even Treasury suspects a syndicate, involving ministries and departments, that facilitates such transactions undetected.
“What we think is that there is an element of collusion among various players right away from source to the point of payment,” said Msowoya.
“Indeed, the system of processing pensions and gratuity goes through a lot of checks and balances [human resources units in Ministries/Departments, human resources headquarters at Capital Hill, National Audit Office and Accountant General for payment]. This particular case went through all these processes,” he said.
He described the issue of Kadantele as criminal according to the Public Finance Management Act.
The bank snag
When Kadantele deposited the cheque at FMB, the bank called one of the signatories on the cheque at Accountant General’s office.
Three sources identified one of the signatories (name withheld) on the controversial cheque as someone from the Accountant General’s office.
According to sources, when the bank wondered how a public servant could receive over K11 million as gratuity for one-year arrears of between 2011 and 2012, the officer at Accountant General’s office claimed that “the man was senior working as controller of human resource at OPC”. Yet, the payment voucher identified him as a defence officer.
Suspicious, the bank verified the matter with OPC, which swiftly ordered the bank to freeze the account until further notice.
Our investigations at FMB show that Kadantele opened what they call a ‘Fast Account” with the bank on October 29 2012 with an initial deposit of K5 000.
Fast Account is meant for low income earners, according to FMB marketing leaflets. The bank, therefore, expects only small deposits in such accounts and larger deposits automatically attract questions.
Since the account opened in October, Kadantele has made 11 deposits in this particular account. Nine of these were within the Fast Account ranges of K5 000 to K30 000.
According to our investigations, there have been two large deposits into this account; one worth K1 387 224.07 through cheque number 346554 deposited on December 13 2012. This cheque was promptly processed through special clearance within a day.
The second large deposit is the controversial government cheque which was deposited on January 21 2013.
Treasury has since applauded FMB for a job well done on the matter so far.
“We would like to applaud FMB in this particular case for their vigilance in checking any suspicious transactions involving government cheques,” said Nsowoya.
IFMIS a big letdown
Weekend Nation has also established that the government’s computerised accounting system, IFMIS—through which government payments such as pensions and funds transfers to departments and agencies are made—is a porous border through which some civil servants are stealing public funds.
Government abolished the manual system of authorising payments, including funding to ministries, loans, gratuities and pensions in favour of the electronic IFMIS platform.
The system, adopted from Tanzania where it is now reportedly defunct, was intended to close loopholes that led to government losing billions of kwacha to fraudsters.
But in separate interviews over the past weeks, three principal secretaries who spoke on condition of anonymity suggested that IFMIS is even worse.
It aids a few people with passwords to enter the system and defraud government and has rendered the role of controlling officers irrelevant, according to one PS.
The PS said during the former manual system, controlling officers were in physical control, checking every such payment and requisitions.
“But now, a PS will be as shocked as everyone else seeing how some of these payments are made because we are no longer in real control,” he said.
Another PS added: “There are cases of public servants who get a loan today, a few days later that loan is deleted from the system, meaning he or she can no longer pay. A lot of government finances have gone down the drain through this.”
The third PS had this to say: “Largely, it [IFMIS] only helped reduce my workload [not] cutting on fraud.”
Frazer Nihorya, who was Deputy Minister during the second term of president Bingu wa Mutharika, said in an interview on Tuesday this week that while IFMIS provides a reliable audit trail, the system’s major weakness in its current state is its partial implementation and erratic real-time network.
“These hiccups have allowed transactions to be run both manually and in computerised form. The fact that it is not fully functional gives room for other transactions to bypass it, thereby creating a haven for illicit transactions. Money is siphoned through these loopholes,” said Nihorya.
As deputy Finance Minister, Nihorya was given the responsibility of looking after IFMIS and the government’s Internal Audit Unit.
“Another challenge is failure [by senior] officials to adapt to change. Old-timers are not ready to learn new tricks for fear of being overtaken by events or ending up making an error that will cost them their job and their pension.
“These laggards end up delegating their operating rights of the system to young talented juniors who end up abusing the system; hence, the pilferage and waste,” he said.
Nihorya, however, said if IFMIS can be managed well, it is capable of preventing fraud and abuse.”