Public funds are under threat in some district councils due to poor or lack of audits attributed to inadequate staff and lack of coordination between audit and finance departments, an examination by Public Accounts Committee (PAC) of Parliament has established.
PAC, which has examined 10 district councils, suspects that fraud of district council finances is a result of shortage of internal auditors, a situation that caused rampant abuse of resources in the councils.
Working under Section 19 (f) of the Public Audit Act which empowers the committee to “pursue any concerns that the committee believes are justifiable”, PAC deployed two teams to investigate reports of mismanagement of funds in a selected number of district councils.
The committee has since visited Kasungu, Mchinji, Balaka, Chikwawa, M’mbelwa, Phalombe and Salima district councils where they found grave shortage of staff, especially finance and auditing.
The committee suspects low staff levels in crucial departments and failure by the councils to discipline errant finance officers because they are not employed by the councils is resulting in poor implementation of public finance management systems.
Speaking in an interview after visiting the 10th district, Salima, PAC chairperson Alekeni Menyani said preliminary findings of the committee have found that most councils are short of 60 percent of staff.
He said the committee observed that fear of the unknown and personality clashes in some councils meant that auditing does not take place prudently even when there is adequate personnel.
Said Menyani: “From the examination of the systems, we note that the [National] Local Government Finance Committee [NLGFC] is ineffective in reorganising the councils. The nation is bleeding financially through corruption and the lack of capacity in the councils.”
In Salima, the committee observed that sectors had devolved financially from central government, but this did not extend to assets management in health, education and agriculture as well as personnel management because the district commissioner (DC) could not discipline errant sector heads such as the district agricultural development officer or even a director of finance.
Said Menyani: “The DCs are having problems to control expenditure in the devolved sectors and it would seem that no one is policing the councils.”
NLGFC executive secretary Stanley Tchuthi confirmed the committee’s observation of inadequate staff in local councils, especially in accounts departments.
But he said since the return of councillors in 2014 after a nine-year absence, NLGFC has started orienting councillors on interpretation of financial reports provided by council secretariats.
Said Tchuthi: “In most cases, the councillors through the Finance and Adminstration committees are able to detect fraud and demand action because the oversight function at council level now rests with them.”
To improve staffing levels at councils, the Department of Human Resource Management and Development has approved establishment warrant for the Ministry of Local Government with actual placement of staff expected to be done in six pilot councils.
On his part, vice-chairperson of the committee, Kamlepo Kalua, who led a team that visited Chikwawa, Chiradzulu, Balaka and Phalombe, said the absence of full teams of internal auditors was noted in all the councils.
He said the committee would take up the matter with the National Audit Office (NAO) and Ministry of Local Government and Rural Development.
Kalua also noted a poor relationship between the councils and NLGFC which is responsible for ensuring financial management and compliance.
The backlog of council audits has also exposed revelations of ‘mini Cashgates’, especially those involving funds from the Local Development Fund (LDF) and Malawi Social Action Fund (Masaf) III and IV.
In Chikwawa, the committee investigated reports that K70 million generated through revenue collection was missing and that K130 Million meant for the implementation of different projects has been allegedly embezzled.
In Karonga, the Ministry of Local Government has suspended the director of public works and district lands officer over allegations of fraudulent abuse of Masaf IV funds.
So far, the Auditor General has submitted reports for the financial year 2010/11 whose scrutiny indicated that council officials misappropriated revenue and took advantage of laxity in financial management systems to produce payment vouchers without supporting documents and not remitting tax to Malawi Revenue Authority (MRA).
NAO indicates that the report on the 2012/13 financial year is ready for submission to Parliament and funding has been secured to embark on 2014/15 auditing of councils.
District councils are audited once in every two years which the committee has said is not regular enough to ensure accountability and reduce incidents of fraud and corruption.
The committee was tasked with examining internal controls, checking staffing levels and number of projects being implemented at the councils, preparation of financial statements, management of fuel and stores as well as effectiveness of internal and external audits.
A report on the committee findings is expected to be presented to plenary when Parliament meets this coming month with recommendations going to the Ministry of Finance, Ministry of Local Government, NLGFC and National Audit Office.
In April this year, a 2015 Tilitonse Fund Report said fraud and accountability queries emerged against local councils which failed to produce comprehensive expenditure reports following increased funding from K3 billion in 2005/06 financial year to K34.2 billion in 2015/16 financial year courtesy of decentralisation. n