More rot in embassies

• K538m abused, mismanaged—NAO Report 
• Bank balances for K778m could not be verified

An Auditor General’s preliminary review of use of funds in Malawi’s missions shows that there is an entrenched culture of flouting public finance management systems which is resulting in mismanagement of funds.

A report by the National Audit Office (NAO) review of six missions shows that K538 million was mismanaged as a result of ignoring rules set out in the Public Finance Management Act (PFMA) 2003 and other regulations.

Says the report signed by Auditor General Stephenson Kamphasa: “We further noted that most payments were borrowings which we have not established if indeed these moneys were refunded. We also noted there were weak controls as regards to the foreign missions’ revenue usage as any officer could sign the instruction letters on behalf of the controlling officer, which we believe at times the controlling officer might not have been aware of.”

The review also failed to verify bank balances totaling K778 million, it says. A review of documentation at the Ministry of Foreign Affairs and International Cooperation and upon conducting interviews with the accounting department revealed that the ministry does not submit monthly revenue returns from foreign missions to the Treasury.

Says the report: “This is a gross violation to the Act. As a result of this weakness, the audit team could not validate revenue figures. There is risk that revenue collected could be understated or spent at source.”

The exercise came hot on the heels of abuse and mismanagement of K293 million at the Malawi Embassy in Ethiopia. Fiscal police in May this year arrested former deputy ambassador in Ethiopia Doreen Kapanga and former secretary for administration and finance Fletcher Chowe for being suspected to have been involved in siphoning the funds out of the public purse depositing them into their personal accounts.

The NAO preliminary review covered Lusaka, Kuwait, London, United Arab Emirates, Washington DC and Brussels.

It also shows the missions used visa fees totaling K175 million for operational expenses despite the Ministry approving a budget to cater for this.

The report signed found that the foreign missions used a total of K538 million from deposit account, revenue/visa account, salaries account and other foreign accounts for paying air tickets, external travel allowances, settling bills and loan payments for diplomats without the authorisation of the Secretary to the Treasury.

This is against Treasury Instruction (2004) number 5.7.3.6 which stipulates that no bank account shall be operated for the deposit or withdrawal of public money without the express authority of the Secretary to the Treasury.

Similarly, Section 34(1) of the PFMA (2003) relating to overseas imprests and other accounts stipulates: that ‘The Secretary to the Treasury may direct that any public money received outside Malawi to be paid into a bank account for the credit of such imprests account or other account as he may determine.”

However, against this regulation, any officer at the Ministry of Foreign Affairs could sign a letter on behalf of the controlling officer, which was a significant control weakness and resulted in a loss of funds through theft, notes the report.

In addition, the review did not find any record for visa stickers’ books that are sent to various foreign missions. Visa stickers are primary source documents for the collection of visa fees. Auditors noted that visa funds are used at the source, contrary to the rules.

It states that Embassies also avoid producing and submitting to the Secretary to the Treasury monthly revenue returns and monthly bank reconciliations. The PFMA requires all ministries, departments and agents (MDAs) to submit monthly expenditure returns, revenue returns, payroll reports, among other reports, to the Treasury so that it can check the prioritisation of funds in line with budgeted activities.

Last year, Pricewaterhouse Coopers (PwC), an audit and financial advisory consultancy firm on Malawi government from January 2009 to December 2014 found that K577 billion could not be reconciled with bank balances. The development prompted the firm to carry out a cashbook reconstruction exercise.

But a forensic audit on the accounts by LLP Risk Assurance Services of the United Kingdom in July this year reduced the unaccounted figure to K236 billion.

Spokesperson for NAO Rabson Kagwamminga said on Thursday his office has now been funded and will commence the full audits of the foreign missions in question.

Although the preliminary review sampled six foreign missions, NAO has targeted to audit 10 missions namely, London, Berlin, Brussels, Tokyo, Abu Dhabi, Beijing, India, Cairo, Johannesburg and Dares-salaam, Kagwamminga told Weekend Nationin an emailed response. Kagwamminga said the choice of the missions to be audited was based on risk assessments as well as when a mission was last audited and level of funding.

Chairperson of the Public Accounts Committee (Pac) of Parliament Alekeni Menyani declined to comment on the report, saying he was yet to see it.

But Malawi Economic Justice Network executive director Dalisto Kubalasa hoped that government will follow up the exercise to the very end by doing everything that needs to be done as a true redress mechanism.

Said Kubalasa: “This will help getting the right message across; and setting the right precedence when everything is said and done.”

“We have been following this issue with keen interest because it is apparent that there is something worrisome going on that needs to be ‘urgently arrested’ forthwith,’” he said.

He said it is clear government is losing huge amounts of resources in most of these missions that could have made a huge difference in peoples’ lives if only it was able to effectively plug off such glaring public finance management systems loopholes that are continuing to drain public revenues.

“As a matter of principle, we look forward to a time this report and all other such crucial reports will be made available and accessible to the public, so that we all keep following up and moving towards getting justice done, in a true spirit of transparency and accountability for our public resources,” he said.

Kubalasa encouraged the Office of the Auditor General to stand firm in doing what the law requires it to do on behalf of all Malawians to ensure the country gets back what belongs to the people of Malawi through the ideals of fiscal prudence alongside the basics of walking the talk and in conformity with the PFMA, Public Audit Act, the Public Procurement Act, among others.