A few months ago, Secretary to the Treasury (ST) Dr. Ronald Mangani released a statement on enforcement of financial reporting requirements of the Public Finance Management Act (PFMA).
In the statement, Mangani said in line with Section 84 (3) of the PFMA of 2003, funding to ministries, departments and agencies (MDAs) would, effective January 2016, only be made upon the Ministry of Finance, Economic Planning and Development receiving the following reports:
- Monthly expenditure returns;
- Monthly revenue returns;
- Monthly commitment returns;
- Monthly bank reconciliation reports; and
- Monthly payroll reports.
MDAs, as the PFMA stipulates, are expected to submit these reports to the Treasury within 14 days from the end of the month to which they relate.
The first month was terrible.
Stuck in the old ways of “ili ndi boma izi sizingatheke”, a precious few MDAs complied with the Treasury instruction in January, the first month of implementing the instruction.
Then Mangani was strong enough to crack the whip—he withheld funding to 25 MDAs that did not submit January 2016 returns.
At the time, Treasury spokesperson Nations Msowoya said out of 46 MDAs, only 21 submitted their expenditure reports by the February 14 2016 deadline as required, which represented a compliance rate of 45.7 percent.
Most MDAs cried wolf, but the ST stood his ground. He knew what he was doing. Nothing jolts MDAs more than the absence of other recurrent transactions (ORT) funding because it means no allowances for field trips—real or imagined—no fuel and those expenditures that keep recurring as well as keeping an office going.
The number of compliant MDAs jumped in February after Mangani stuck to his guns and, in March, as we learnt this week, the compliance rate stood at an average of 86 percent.
With strong leadership, a clear-eyed understanding of his legal mandate and how to apply it, Mangani is pulling off something that has eluded his predecessors since the PFMA was enacted in 2003.
Clearly, Mangani understands the criticality of financial accountability of public expenditures and how the lack thereof bred what has come to be known as Cashgate in which at least K577 billion cannot be accounted for between 2009 and 2014, representing roughly a third of total expenditure over the period.
And if we are to avoid a repeat of the blatant heist that is Cashgate, Malawi has to reach full integration of cash and debt management.
To achieve that, Capital Hill must attain near real time status of its Treasury managed bank account reporting and reconciliation.
It is some of these commitment control systems that will help the country to improve its PFM, win back the confidence of taxpayers and that of donors who no longer want government to directly control budgetary support because of the ease with which people can abuse systems to siphon money without being detected for months, sometimes, years and, in worst cases—and there are many—without being caught and held accountable.
Such a system will also help to sharply cut payment arrears, which are end-year pending bills that are usually pushed to future budgets, thereby affecting service delivery as these have to be paid from budgets that could be spent on more services. So, yes, the accounting discipline of ensuring that bank reconciliations are up to date; recording and reporting of financial transactions are timely and accurate, among other things, is what the country needs to preserve the little it has, wean itself of donor dependence and improve the wellbeing of its people through effective public sector investments that support private sector development and build social capital.
What is important now is for the key political leaders, especially President Peter Mutharika, Finance, Economic Planning and Development Minister Goodall Gondwe and the whole Cabinet to have Mangani’s back.
Often, well-meaning technocrats get thrown under the bus when the political heat is up simply because such officials have chosen to do the right thing—making needed changes for the greater good, but which anger those benefitting from the status quo and who might just be powerful enough to influence the otherwise determined official’s downfall.
And Mangani is simply following the law, which means Parliament—especially its committees on Public Accounts, Budget and Finance as well as Legal Affairs—should be interested in what the ST wants to achieve and support him fully.
So, Dr. Mangani, this one is for you. It is your moment.