- Says no adherence despite commitments
Despite proclamations by President Peter Mutharika and his administration that strides have been made in strengthening public finance management, the United Nations (UN) has joined other development partners in casting doubt on progress.
In its Harmonised Approach to Cash Transfer Macro Assessment on Public Finance Management System in Malawi report The Nation has seen, the UN observed that government is not adhering to internal controls of financial management despite its commitments.
Treasury spokesperson Nations Msowoya yesterday said government is aware that more still needs to be done and measures have been put in place to address some of the concerns.
He said: “With regard to internal controls, government has for the first time in history appointed 20 controlling officers as required by the Public Finance Management [PFM] Act of 2003.
“Through their appointment letters, it will be easy to impose sanctions and penalties on all offenders who violate the PFM Act.”
Further, Msowoya said as government awaits installation of the new Integrated Finance Management Information System (Ifmis), the centralised electronic payment system; it has in the meantime upgraded the current Ifmis to facilitate faster processing of transactions.
In the UN report released on November 25 2015, it was noted that no disciplinary action on violation of policies and procedures in public finance management has been undertaken. The report also notes lack of proper generation of reports and monitoring of the same.
Reads the report in part: “After the Cashgate [plunder of public resources at Capital Hill exposed in 2013], improvements on financial management are not visible or [are] happening at a very slow rate. Follow up action of internal audit reports is another area of concern.”
The report says government has failed to identify the issue of non-reconciliations in auditors’ reports by the Auditor General’s Office.
Further, the report says even after Cashgate surfaced, government is not able to clear the backlog of audits from 2009 to 2013 which is still not clear with unreconciled items from February 2014 to September 2014 surfacing as well.
Reads the report: “There have been delays in transfer of funds from Ministry of Finance to most MDAs [Ministries, Departments and Agencies] and district councils. Electronic transfer to district councils has started which may reduce the delays to a certain level provided payments are being processed in timely manner at MDAs level.
“Development partners are using the direct payment modality because of delays and loss of trust in national payment system.”
The UN recommends development of key performance areas through audit work plans, monitoring those plans, have an effective functionality of the oversight through independent audit committees.
Apart from the UN, donors in the roads sub-sector—led by the European Union—and the International Monetary Fund (IMF) have recently expressed concern with continued laxity in public finance management.
During the training of government senior officers recently, Minister of Finance, Economic Planning and Development Goodall Gondwe said government has already started reconciling bank reports with the Reserve Bank of Malawi as per donors’ recommendations.
And during a meeting with British parliamentary committees in London earlier this month, the President lobbied the members of Parliament (MPs) to push the British Government to resume direct budget support to Malawi.
The President said his administration is implementing several reforms to regain lost confidence from development partners who withdrew their 40 percent contribution to Malawi’s national budget in October 2013 amid concerns of Cashgate.
In April this year, the President outlined Public Finance Management Reforms which, among others, included reformation and revival of Central Internal Audit Services as a compliance tool.
The shooting of former Ministry of Finance budget director Paul Mphwiyo on September 13 2013 outside the gate of his Area 43 residence in Lilongwe led to revelations of the plunder of public resources at Capital Hill later called Cashgate.
Former president Joyce Banda ordered an audit covering April to September 2013 which British forensic auditor, Baker Tilly, undertook and established that about K24 billion was siphoned from public coffers through dubious payments, inflated invoices and goods or services never rendered.
In May this year, a financial analysis report by audit and business advisory firm PricewaterhouseCoopers (PwC) also established that about K577 billion in public funds could not be reconciliated between 2009 and December 31 2014. n