An audit report by the Central Internal Audit Unit (CIAU) of the Ministry of Finance, Economic Planning and Development has revealed that district councils abuse almost 21 percent of their development budgets.
This comes against the background that district councils have complained that major funding cuts by the central government have paralysed their operations.
The audit covered a sample of about K1 billion that was utilised by councils in the 2015/16 fiscal year to establish whether development budgets—comprising district development budgets and infrastructure development funds—were used for the intended purpose.
The audit was also done to identify control weaknesses in development budgets’ management and come up with recommendations on how to address the identified weaknesses.
Reads part of the report: “The audit concluded that there was gross abuse of development budgets because 21 percent of sampled resources were not used for the intended purpose, which was way above the five percent predestined audit threshold for abuse of resources.”
While confirming that there is abuse of funds in the councils, Minister of Local Government and Rural Development, Kondwani Nankhumwa, attributed the situation to lack of capacity among personnel in the councils due to the recruitment freeze imposed by the government.
Nankhumwa was hopeful that the situation would improve once the recruitment freeze is lifted and appropriate personnel have been employed.
The report notes that almost all councils made expenditures that were ineligible, as provided for in the guidelines on the utilisation of development budgets.
The audit report indicates that there were cases of incomplete projects that were fully paid for and some which were abandoned by contractors.
According to the findings, payments were not stipulated in the contracts and no advance payment guarantees were furnished by the contractors, which created a high risk of losing the funds that were already paid as well dilapidation of the uncompleted projects with the passage of time.
The report cited Karonga, Ntcheu, Mangochi, Chiradzulu and Mwanza as some of the districts that implemented projects that were sub-standard—in terms of depriving the community of quality services—because the councils failed to monitor the projects.
“Most of the projects implemented were not included in the districts’ development plans. As a matter of fact, other councils did not even have the development plans, and this led to initiation of unfeasible projects, especially in terms of cost, which were subsequently abandoned by contractors,” reads the report.
It has indicated that most of the councils failed to comply with various laws and guidelines on financial management and procurement, notably the Public Procurement Act.
In its recommendations, the CIAU says projects under development budgets should be derived from district development plans and formulation of the plans should be one of the prerequisites for accessing funds under development budgets by the councils.
The unit has also said the councils should address the findings of the audit as a matter of urgency, including recording of all funds that were not used for the intended purpose as well as completing all projects that were fully paid.
The report has also recommended that the Treasury should withhold subsequent funding for development budgets to councils that will not demonstrate commitment to address the audit findings.
Commenting on the report, Secretary to the Treasury, Ben Botolo, on Thursday said the Treasury cannot start punishing councils which misappropriated the funds until after the National Audit Office (Nao) has looked into the reports and made recommendations.
“The audit report by internal audits department at my office was just a management process,” Botolo said.
Botolo said the reports were sent back to Nao, which is expected to report to Parliament’s Public Accounts Committee (Pac), which would summon the concerned councils and the Treasury would only act thereafter.
Ntcheu District Commissioner, Smart Gwedemula, disclosed that his office last week received a management letter on the issues surrounding misappropriation of the funds and, as the controlling officer, he is yet to respond to the letter.
He pointed out that, since he has been in office for six months, he is yet to look into the issues.
“I will surely respond to the management letter and whoever misappropriated the funds would be brought to book,” Gwedemula said.
Karonga District Commissioner Richard Hara defended his council by saying that, at the time the auditors conducted their audit, some of the projects were not complete and the district is pulling out all the stops to complete the projects that are mentioned in the report.
Meanwhile, Chairperson of the Budget and Finance Committee of Parliament, Rhino Chiphiko, has said corruption is endemic in almost all districts in the country.
“Budget lines are not respected. Procurement guidelines are not followed. Internal procurement committees are corrupt. District commissioners are part and parcel of the corrupt rot. [There is] no value for money for all procurements. The Public Finance Management Act is not respected. [We have] all sorts of rot. The government is not serious in applying penalties to offenders. District commissioners are simply transferred from one district to another when they are found stealing money,” Chiphiko said.
In an interview yesterday, Pac chairperson, Alekeni Menyani, disclosed that “our committee will scrutinise the reports towards the end of this month”.
In a separate interview, Nao spokesperson, Rabson Kagwamminga, said his office had not received a copy of the audit report, but they would probe the councils further once they receive it.
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