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Pac seeks Parliament approval for Escom, Macra forensic audit

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In exercise of its oversight mandate on financial matters, the Public Accounts Committee (Pac) of Parliament has said that it will, for the first time, be seeking Parliament’s approval for a forensic audit to be undertaken at the Electricity Supply Corporation of Malawi (Escom) and the Malawi Communications Regulatory Authority (Macra), among other public institutions.

This follows revelations in the Auditor General’s 2015/16 report, which has exposed the plunder of taxpayers’ money in government ministries, departments and agencies.

Pac Deputy Chairperson, Kamlepo Kalua, said, following revelations of the audit report, his committee believed that public scrutiny is essential to the services of public entities such as Escom and Macra.

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Kalua said institutions such as Escom and Macra seem to be immune to accountability, a development which has created a favourable environment for the plunder of public resources.

“The Minister of Finance must implement reforms. Government institutions should all migrate to a new platform of the Integrated Financial Management Systems (IFMIS). This will guarantee safety of public resources,” Kalua said.

On the issue of Pac’s call for a forensic audit, Kalua said there was a need to enlist foreign institutions to undertake the exercise, arguing that this would limit the potential of any influence on the findings by those mentioned in the audit.

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Asked whether Parliament had the power to call for such an audit, Kalua said: “We have the mandate to call for a forensic audit in these organisations, whether they like it or not”.

Kalua said Pac would be taking this course of action for the first time in Malawi’s democratic dispensation.

Meanwhile, Malawi Economic Justice Network (Mejn) Executive Director, Dalitso Kubalasa, has concurred with Pac on the need to promote accountability in public institutions.

“These two cash cows [Escom and Macra] of the government could be the best starting point,” Kubalasa said.

He, however, called for the extensive use of forensic audits, saying financial accountability weaknesses are common.

But, while welcoming the development, United Kingdom-based Malawian law expert, Sunduwayo Madise, has said the issue of effective parliamentary oversight over state institutions is long-overdue.

He added that Parliament should go beyond dressing down controlling officers by making sure that it has power to compel compliance.

Madise said Parliament has legal oversight over Macra and other statutory organisations because Macra is a statutory corporation as, in loose terms, organisations qualify to be called statutory bodies if established under statute (under law).

But Madise observed that Escom is a private company.

Madise said despite Escom being recognised as a state company, it is does not fit the general definition of a statutory body under the general definition.

He said Escom was turned into a limited liability company in 1998 and yet, almost 20 years later, it is still treated as a statutory body.

Madise said, under the Public Finance Management Act (2003) and Public Audit Act (2003), Escom would qualify to be defined as a statutory body, but only for purposes of these Acts because the government controls the composition of the board, has more than 50 percent of voting power.

“In fact, I would say it has 100 percent and holds more than 50 percent of the issued capital (last time I checked, it had 98 percent equity and the other 2 percent was held by [defunct] Malawi Development Corporation as a proxy of government. Therefore, while Escom, as a private company, would not be obliged to respond to summons by Pac, as a State company, it will have to do so, as long as the issues relate to issues covered under the above mentioned Acts,” Madise said.

The Public Finance Management Act requires that all statutory bodies provide financial reports to the Minister (of Finance) and Auditor General.

However, the Act empowers the Secretary to the Treasury to undertake any investigations should he not be satisfied with financial reports, or should he have reasonable belief that proper public financial management procedures have not been adhered to.

He said misuse of resources in statutory bodies can be laid squarely on the feet of the Board of Directors of these institutions, who are not living up to their corporate responsibilities. Boards are supposed to provide oversight and have committees to prevent abuse of resources.

“The sad thing is that most of the boards are full of political appointees; and few of the appointees are so appointed because of competences and skills that they bring to the board. Although the law does give the boards power, most of them have no real power at all,” Madise said.

However, National Audit Office spokesperson, Rabson Kagwamminga, said his office is mandated by Section 184 of the Constitution of the Republic of Malawi and the Public Audit Act (2003) to conduct audits in all government/ public institutions including parastatals such as Macra, Escom and the Malawi Revenue Authority.

Kagwamminga said, while it is worth noting that the Public Audit Act permits the Auditor General to contract out some audits to private firms where necessary, Section 6(2) of the Act requires the Auditor General to undertake an audit programme to review and approve the audited accounts of statutory bodies and conduct audits of any statutory body that has not had its financial statements audited by a firm of public auditors.

He added that the Auditor General may also carry out investigative audits in such organisations when he finds it appropriate.

“You may wish to note that the Auditor General has already acted on some of the institutions in question. At the moment, we are looking for the best way forward in terms of how we can progress from this point. Depending on our final assessment of the situation, some of the matters already under probe will require further investigations while others will just need follow ups,” Kagwamminga said.

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