Parliament’s Public Accounts Committee (PAC) has described the 2012/13 fiscal year as marred by laxity and lawlessness in the management of public finances.
In an interview after completing reviewing the National Audit Office (NAO) audit queries for the said financial year with various government ministries, departments and agencies (MDAs), the committee’s chairperson Alekeni Menyani noted that “massive fraud and misallocation of funds” were reported in the year under review as evidenced by confessions from controlling officers of MDAs queried.
The 2012/13 financial was the climax of the massive plunder of public resources dubbed Cashgate.
Within six months from April to September 2013, a cabal of government and private sector players allegedly siphoned at least K24 billion from the State Treasury, according to a government commissioned forensic audit.
A broader forensic audit that looked at the five years up to December 2014 suspected a much bigger problem—that at least K577 billion may have been stolen. That figure was revised downwards to K236 billion after some reconciliations.
The major cause of such losses, according to PAC’s Menyani, was the breakdown of internal systems across the government.
He said: “The internal audit system has collapsed in the country and it is the weakest link that has seen these institutions bleeding.”
Menyani said it was time the country started reviewing or implementing laws governing implementation of internal audit functions to address the weaknesses.
He said: “It looks like the [fiscal] year ended June 2013 was disastrous in the history of the country. It is also the year that marked the genesis of Cashgate [the plunder of public resources at Capital Hill exposed in September 2013].
“There is misallocation of funds and unnecessary spending in each and every place where office bearers do things on their own and there is laxity that needs to be addressed.”
“For the past three weeks PAC has been meeting MDAs, a common problem of misallocation and poor filing system emerged, which raised questions regarding what the internal auditors in various departments really do if external auditors were able to trace even simple issues that could have been addressed before the external auditors come.”
A Treasury Public Finance and Economic Management (PFEM) situation analysis report identifies a weak Central Internal Audit—which falls under the Ministry of Finance, Economic Planning and Development—as one of the major reasons for the pilferage in government because it fails to provide effective financial assurance.
PAC has since given NAO and the Ministry of Finance budget director a 21-day ultimatum to come up with plausible recommendations to check against the malpractice and bring sanity to public finance and resources management.
Currently, the country uses the Public Finance Management Act of 2003 and the Public Audit Act.
Ministry of Finance, Economic Planning and Development spokesperson Davis Saddo said in an interview that most of the audit queries raised during the review resulted from failure to properly record and file transactions due to lack of training by the officers carrying out the duties.
He said to avoid similar issues in future; an internal audit law was being developed.
Said Saddo: “We are in a process of formulating the Internal Audit Act, which is at an advanced stage and we are optimistic that it will be finalised as soon as possible to avoid shortfalls highlighted in the report.”
Besides, he said the Ministry of Finance has also set finance compliance units within MDAs to scrutinise documentation and ensure that funds are paid in line with the required regulations.
On the ultimatum, Saddo said Treasury will manage to furnish the committee with possible solutions, some of which are already being developed.
He said they are now reintroducing staff induction services at the Staff Development Institute at Mpemba in Blantyre to equip newly recruited staff on government systems.