Treasury, the institution entrusted to keep the government purse and set fiscal standards, has found itself defending its moral authority after the World Bank has demanded a K400 million ($549 451) refund from it in misprocurement.
The Nation has established that barely a month after the latest government forensic audit showed that fraudulent procurement was Cashgate’s major cause; the World Bank is on Treasury’s throat for questionable procurement in a project that seeks to avoid a Cashgate repeat.
Both World Bank country manager Laura Kullenberg and Ministry of Finance, Economic Planning and Development spokesperson Nations Msowoya have confirmed the development.
The funds are under the World Bank-funded Financial Reporting and Oversight Improvement Project managed by Treasury.
The project sought to boost the internal controls, accounting, reporting and oversight of government finances at the central and decentralised levels in the country’s Ministries, Departments and Agencies (MDAs).
In an interview last week, Kullenberg said the World Bank has requested for a refund from the Malawi Government because procurement issues are critical in her institution.
In a written response to a questionnaire on Saturday, Kullenberg said: “The request for a refund for computers and a printer that we submitted to government under the Financial Reporting and Oversight Improvement Project totalled $519 142.32 [about K400 million].
“As part of our fiduciary responsibilities and oversight for World Bank Group [WBG] funded projects, we take procurement issues seriously in order to ensure client countries receive value for money from these projects.
“When our due diligence establishes a project expense as ineligible, we normally request a refund from government for those expenses. For example, when goods or services procured do not meet the specifications indicated in bidding documents, when required documentation is missing or when the procurement method used is at variance with what was originally cleared by the bank under its procurement policy.”
Msowoya also confirmed the request for a refund and said government was exploring the option of sanctioning the suppliers to make good of their deliveries.
“We might also include the option of cashing their performance bond. Treasury has to look for money to pay back, which is unfortunate. Obviously, the money has to come from the Ministry of Finance budget,” he said.
Under the Treasury-managed project, a printer and computers were bought to improve accountability, oversight and reporting of government finances.
The $19 million (roughly K13 billion) project started in March 2013 and was expected to end in June 2016, but was expected to be extended.
It has been supporting internal audit and national audit functions through capacity-building initiatives as well as automation of outcomes of their internal processes, including supporting procurement of the Integrated Financial Management and Information System (Ifmis), government’s central payment system.
The project’s implementation status and results report released in April 2016 notes—in the context of the project’s relevance to Malawi—that the recent Cashgate highlighted the immediate need to address the long-lasting public financial management problems, such as delays or the inability of the government to do the following:
(i) Prepare bank reconciliation statements
(ii) Prepare and publish in-year financial statements -quarterly according to Public Finance Management (PFM) Act;
(iii) Prepare and publish audited annual financial statements in accordance with the PFM Act;
(iv) Communicate budget ceilings to MDAs and enforce commitments control;
(v) Prevent misapplication of funds due to non- adherence with rules regarding budget virements;
(vi) Ensure adequate segregation of duties between end users and system administrators of the Integrated Financial Management Information System; and
(vii) Enforce managerial accountability to ensure compliance with rules and regulations.
This is not the first project the World Bank has asked the Malawi Government to refund money over either failure to comply with procurement procedures or lack of accountability.
Early last year, the World Bank also asked the Ministry of Agriculture, Irrigation and Water Development to refund about K2.1 billion in outstanding advances for the Agriculture Development Programme Support Project (ADP-SP).
In January 2015, the World Bank withheld disbursement of any project funds until Dowa District Council reimbursed K32.9 million meant for Local Development Fund (LDF)-supported Public Works Programme (PWP).
Procurement problems are increasingly becoming a major issue in the Public Finance and Economic Management (PFEM) chain.
The recent forensic audit by British firm RSM Risk Assurance Services LLP revealed that President Peter Mutharika’s administration—despite all the right noises about PFEM reforms—could be paying a blind eye to unabated looting of public funds through fraudulent procurement processes.
The auditors said they were disappointed that government did not curb the grand fraud 11 years after it was noted in 2005 under the watch of former president the late Bingu wa Mutharika.
The RSM audit established that public funds not accounted for between 2009 and December 31 2014 stand at K236 billion and not K577 billion as earlier estimated by PricewaterhouseCoopers (PwC) data analysis report in May 2015.