Barely a week after some District Commissioners and Directors of Finance were transferred in the Ministry of Local Government and Rural Development to curb fraud and theft of tax payers’ money, the latest audit report by the country’s Auditor-General for local councils and central government shows that K10 billion was stolen in financial year 2017/2018.
The report shows that this ‘Christmas’ that civil servants ‘enjoy’ through theft of public money is by fraudulent payments without supporting documents, among other methods.
The K10 billion lost in one financial year was enough money to build three Community Day Secondary Schools (CDSS) with hostels, laboratories, books and staff houses.
The amount was also enough to finance 600 kilometres of rural roads which could have helped farmers easily access various markets.
According to the audit report, signed by Auditor General Thomas Makiwa, K7 billion was not accounted for through payments without supporting documents and documents that were not provided for audit inspection.
Failure to maintain a Fixed Asset register, poor fuel management, poor stores management and failure to record transactions in the cashbook and unauthorised payments are among issues cited in the report.
The report further says there was breach of provisions of the Public Procurement Act and its related regulations, failure to prepare bank reconciliation, non-remittance of Pay-As-You-Earn (PAYE) and other taxes to Malawi Revenue Authority and that construction materials for projects were not delivered.
There were some payments for no work done as well as non-existent Constituency Development Fund (CDF) Projects and failure to produce financial requirement.
For example, an audit of Blantyre City Council for the year ended June 30, 2018 that was completed in October 2018 shows that the council failed to collect city rates amounting to K2, 946,747,797.86.
The audit shows uncompleted Market Fee books not disclosed of revenue of up to K2, 118,000.00.
On the other hand, main findings from the audit for central government have revealed fraudulent payments to personal accounts at the Malawi Mission in Ethiopia.
“Major findings by value at the central government have revealed 73 percent of the irregularities were due to stores not traced to the stores ledger, fraudulent payments to personal accounts, payment vouchers not provided for audit inspection, fuel not recorded in the fuel register, operating account used for unrelated activities, fake remittance advices created leading to abuse of public funds, passport not presented for verification of external travel, payments made before rendering services and misallocation of public funds,” reads part of the report.
The Auditor General has since recommended that local councils be staffed with qualified personnel, who will be able to adequately maintain accounting books.
He said councils should ensure that the Fixed Asset Register is maintained for accountability of non-Current assets.
According to Makiwa, there is need to develop an effective system of accounting and internal control to institute measures ensuring effective operation of the system.
He also cites need for councils to adhere to procurement procedures and systems, stressing that the Office of the Director of Public Procurement should be requested to assist in training of personnel in procurement procedures in the councils.
The report also recommends that management of the Councils should ensure that proper records management is in place to avoid loss of supporting documents and failure to account for fuel and stores.
“The councils should ensure proper coordination with members of Parliament (especially on CDF project management) to ensure that there is adherence to laws and regulations,” the report further reads.
It is also recommended that councils should ensure that the statutory deadline for the production of financial requirement should be adhered to at all times.
“The Ministry of Local Government and Rural Development should ensure that there is no frequent rotation and turnover of accounting staff which has greatly impacted on the performance of councils,” the report concludes.
On the central government audits, the Auditor General has recommend that government should speed up the process of migrating to accrual based Accounting so that the financial reports are comprehensive.
He says there is immediate need to enhance the functioning of Audit Committees in all government ministries, departments and agencies (MDAs) to facilitate speedy responses to audit reports and to ensure implementation of audit recommendations.
“Procurement of goods and services should be executed within set processes and regulations and procedures to ensure that maximum value of money is obtained,” it reads.
The report also pointed out need for officials to comply with Government financial rules and regulations and that bank reconciliations should be timely prepared for all bank accounts maintained by the Reserve Bank of Malawi.
“Strict compliance with financial provisions should be enforced in the MDAs in order to improve public financial management and control;
The use of invalid supporting documents should be stopped forthwith and no payment should be made without adequate and valid supporting documentation,” it further states.
Makiwa has ordered further investigations to be conducted by special teams on the areas raising suspicions that public resources may have been lost or mismanaged.
“The Secretary to the Treasury should review the IFMIS system of recording receipts and payments in the cash book so that proper records are used for reconciliation statements” Makiwa said.
Speaking on the local government report findings, Minister responsible Ben Phiri said although he has not read the report, councils have let down Malawians when it comes to money meant for development.
“I have not read the report but it is true that funds meant for development were stolen in different councils as the councils failed to account for money. This is why since I was appointed as a minister, I want to change things,” he said.
When quizzed if this is why his ministry has made a lot of transfers, Phiri said the transfers are normal but stressed that all he wants is sanity in the ministry.
Ministry of Finance spokesperson Davis Sado said Treasury will continue engaging MDAs on financial prudence matters and as custodian of the Public Finance Management (PFMA).
He further said they will strive to ensure that all resources disbursed to MDAs are well accounted for and that they are used for the intended purpose, for effective and efficient service delivery.
“It is very unfortunate that some Ministries, Departments and Agencies are failing to comply and continue flouting the laid out procedures and processes that guide financial transactions as stipulated by guiding laws, regulations like Public Finance Management Act of 2003, The Public Procurement and Disposal of Public Assets Act, Treasury Instructions Finance and Stores and other various Regulations on public financial management,” Sado added.
The Auditor General’s report shows almost 73% of the irregularities are to do with failing to adhere to control processes and compliance.
Commenting on the issue, Executive Director of Centre for Social Accountability & Transparency (Csat) Willy Kambwandira said his organisation is saddened by these revelations.
“Unfortunately this is coming at a time government cannot manage to effectively deliver most basic social services, and when inequality and poverty levels are reportedly worsening, and government borrowing has reached unprecedented levels… this is a worrisome trend that needs to be checked and discouraged by all means,” he said.
He added that it is no longer a secret that there is total disregard for governance, compliance and control at both central and local government level in the public sector.
He said there is need for proper and improved accountability in councils.
He has since asked Treasury to expedite the amendment of the Public Finance Law 2003 as there are so many loopholes in the law.
According to Kambwandira, the current Public Finance Law does give adequate power and penalties for violations, adding there is laxity by duty bearers to mete out punishment.
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