Malawi Government Financial Audit: how many billions are unaccounted for?

Beware when an official document of any sort begins with a disclaimer. More often than not, something fishy is going on in the background, and someone somewhere is trying to wash their hands off it.

Last week, the leaked PwC ‘audit’ report (titled ‘Reconstruction of the Malawian Government Cashbook for purposes of further investigation’) which some people (including the Legal Affairs chair Peter Chakhwatha) claim is just an outline or at most a data analysis, revealed that MK577 billion was unaccounted for from Malawi government accounts between 1st January 2009 and 31st December 2014:-

shortfallThis news has shocked many people in Malawi, and media reports are saying theat MP’s are pressing government to publish the real report, and submit it to parliament.

But irrespective of whether the K577 billion truly reflects the total shortfall or not, or whether there is more damning news in the real report, I think it would help with putting things into perspective if we analysed the kind of figures we are dealing with here, in US$ as opposed to Malawi Kwacha (MK) only.

A direct exchange of the MK577,238,840,510.67 on Xe.com  shows the sum to be equivalent to US$1,312,092,746.42 (1.3 Billion dollars). But this is incorrect since devaluation will have altered the power of the Kwacha over the years.

I believe the question which must be asked is how much of this shortfall was unaccounted for in each year during this period?

Meaning to find a less inaccurate dollar equivalent, we need to know how much of the K577 billion went missing in each of the years between 2009 and 2014. But again this method would have limitations since the exchange rate would have varied from month to month during this period, necessitating conversions from month to month.

However, a less inaccurate figure can be obtained by converting the sums in each year with the exchange rate at the time. Thus, looking only at the total value of payments greater than or equal to MK 1 million not in Cashbook as outlined by the PwC report:-

All-Payments greater than MK1 million, on Bank Statement not on Cashbook

a more credible figure of the US$ equivalent can be ascertained by taking averages of historical exchange rates in each year, or better in each month. Using this method, then in 2009, an Oanda conversion of MK21, 313,307,081.36 (21 billion) would have given you between US$146 million and US$154 million. But the statistical number crunching used looks somewhat complex. And I’m neither an Accountant, nor an economist…

An easier conversion as of 1st January 2009, on Xe.com would have equated US$1 to MK142.7, meaning MK21, 313,307,081.36 on that date would have been equivalent to US$149, 357,442. (149 million dollars).

average-fxThus, using average exchange rates such as those on FXtop.com or on Mundi, it follows that MK21, 313,307,081.36 in 2009 was equivalent to US$151,008,268.96. This means that give or take, the Malawi government couldn’t account for at least US$ 150 million in 2009, if we consider payments greater than MK1 million only as shown in the above table!

Who knows what the real figure is if we include sums below MK1 million ??

Similarly, in 2010 US$188,244,090.18 (188 million dollars) was unaccounted for; in 2011 US$112,357,926.19 (112 million dollars) was unaccounted for; in 2012 US$53,806,121.29 (53 million dollars) was unaccounted for; in 2013 US$357, 264,295.90 (357 million dollars) was unaccounted for, and in 2014, US$35, 412,203.75 (35 million dollars) was unaccounted for.

This gives a total shortfall of US$747, 084,637.31 (747 million dollars)

But since we are currently only looking at the total value of payments greater than or equal to MK 1 million not in Cashbook (K217 billion), then, it means if we consider the whole MK577 billion alleged to have been unaccounted for, then we are looking at US$1, 981, 858, 599 (1.9 billion dollars*) which is unaccounted for, assuming a uniform spread in the data.

So the last 6 years, under various Malawian Governments, civil servants and other corrupt types have misappropriated or failed to account for at least US$2 billion.

There you have it.

* [MK577 billion x US$747million divide by MK217billion]

Malawi Cashgate 2.0 in the making: a new IFMIS, into the same old unreformed system

Cashgate 2.0 is in the process of developing. As I write this post the wheels of another scandal are turning. And I hope I am wrong, because the results will not be pretty.

But for any avoidance of doubt, let me say if in 10 years time the then government of Malawi is still grappling with the same corrupt practices in the civil service that are facing the current government, don’t say I didn’t warn you.

After failing to implement the recommendations of various reviews of the IFMIS system, some dating back to 2009 (which I’ll try to share here if time allows), the Government of Malawi has recently published a call for bids to tender to supply a new IFMIS??

So here’s a question, why invest your resources into the purchase of a different system when

(1) The old system is not broken – merely under-utilised, not fully installed/ adopted, and is still open to abuse? Despite various reviews and audits which included recommendations

(2) When you’ve spent over US$10 million + dollars on the old system. Many more millions on audits…

We’ll be asking these questions here, including dissecting the leaked PwC audit report, a copy of which we have seen!

When $10 MILLION DOLLARS + has/ will be spent on different aspects of the current IFMIS, are we really going to spend $10 million every 6 years on new systems?

The old system is not broken, take it from me — ive read the reports, it’s not broken. It’s merely under-utilised, and open to abuse, and instead of deploying it properly, applying the security patches which were recommended by various audits, tests and reviews, you are issuing out another misguided tender?? Wasting money you do not have…

Are the World Bank on board with this latest display of acute idiocy?

Why do you need a new IFMIS, what for!? Where are they getting the money for these things? I thought the country was broke?

Looking at all this, I can’t help but wonder what the likes of Soft Tech and other suppliers will be thinking…azingoti anthu awa ndi zitsiru…Vindele venecho, infact vindele vinandi led by some chief chindele (whoever decided it was sensible to procure a new system). Because where is the logic in bringing in a new system when you never tried to implement the recommendations and patches which were outlined in various reviews of the old system? When you never attempted to fix the leakages of the old system why buy new software?

Apatu njoka zina zikufuna zidye nawo ndalama. Thats the only explanation. This, without a shadow of a doubt is the beginning of another deeper corruption scandal!

Malawi Government, Zodiak radio to Award Best Performing Secondary Teachers

Malawi Government, Zodiak radio to Award Best Performing Secondary Teachers via AllAfrica

The story in the above link is inspiring and president Joyce Banda’s government and Zodiak must be commended for beginning this. While some may say it is an election ploy, I hope this initiative continues after the May elections, irrespective of who is eventually elected, because we need to inspire teachers for them to do their job well.

I have a profound belief that continuity in nation building is what builds nations, not a me me attitude that selfishly sees a leader abandon works in which millions have already been invested – just because it wasn’t their idea….

Abandoning the major and critical projects of your predecessor only reveals your ignorance and selfishness more than anything else. So, in the event that Joyce Banda is not re-elected, it will be foolish for the new president to halt all of Joyce Banda’s major projects.

And you don’t have to agree with each project to continue supporting it, and pushing for its successful completion. So long as there are people who are genuinely being assisted by the project, and so long as the cost is not ridiculously expensive, and unsustainable, those are reasons enough to continue in the positive footsteps of your predecessor – even if he/ she had abandoned their predecessors projects.

Protesters in Lilongwe against nonpayment of salaries by the Malawian Government

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Civil Servants Demonstrations in Lilongwe – Image via Malawi Breaking News

We’ve just received reports that civil servants have gathered in Lilongwe, the capital of Malawi to protest against the government’s decision to send them home early for the Christmas holidays without pay. According to reports, some civil servants have not been paid for two months (November let alone December). If this is widespread, the Christmas holidays may be a very hard time for some.

It seems the actions of donors to withhold budgetary aid are having a serious and far-reaching effects on the operations of the Malawi government, in that not only is the Malawi Kwacha continuing to slip against the dollar, but  while the president continues to travel around the globe, her government has now found itself in a difficult position where it cannot afford to pay its own employees??

This is interesting because, just a few days ago, someone in Malawi informed me that this was going to happen. Further, I was told that the 60% increase of civil servant salaries promised by the government here (see another report here), and for which Joyce Banda received a lot of acclaim, press attention and media coverage, has in fact not been effected??

Further, we are also hearing reports that the government has rescinded a promise to loan civil servants fertiliser, to a current position whereby a civil servant can only receive 2 bags on loan.

Again, we need to verify these reports carefully, but it seems there was an agreement / promise in place that stipulated that as long as a civil servant produced proof that they were into farming, evidence of land and how much they were investing, they were going to be loaned as many bags of fertiliser as they needed.

Battling Corruption & Fraud

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via Nation online : K5bn fraud scam swells to K15bn

When I read the above piece, which concerns an investigation that reveals the extent of fraud and theft in certain government departments, my first thoughts were where did all this money come from? Are there no safeguards or anti-fraud measures to restrict who handles the money? How could there be such widespread theft of public funds in top government departments? And to such a scale???

On the first question, had these funds really been from tax revenues, or had they been donated to Malawi from external sources? If they had been donated, how can Malawi attract international investment when we have thieves operating within the country’s top government departments and arms of the state including the police (according to the article, the fraud occurred within the “..Accountant General, Malawi Police Service (MPS)…State House, Malawi Defence Force (MDF) and other government offices”)? I’m also wondering, since some of these anomalies date back to 2011, what has the current Malawian government done to ensure that those who committed this fraud face the full force of the law, to ensure that such theft is not currently taking place elsewhere, and also that this situation does not occur again?

While the taxpayer has all the reasons to be angry, and demand an explanation over this fraud, including that the people who are responsible for this corrupt act should feel the force of the law (possibly a number of long imprisonments -> SO THAT THE MESSAGE IS CLEAR THAT YOU WILL BE PUNISHED IF YOU STEAL FROM THE STATE), this kind of thing is in my view the main problem why we struggle to attract investment.  Because how can investors trust their money with a country where the police and State House are stealing from the government coffers???

Also, how was the system of anti-fraud bypassed???  Shouldn’t there be several levels of checks? Think about it, its 50 years since independence, why are monies up to this value (K15 billion) going missing over low-level fraud? This is not Somalia!! What are the financial processes, and how is it possible for individuals to bypass them? How did those individuals get ‘personal’ access that did not involve verification from a number of other parties? Or is it a criminal group within these organisations operating together? Further, could it be that there were some accomplices within some of the banks involved (e.g. Reserve Bank of Malawi)? And finally, why was one of those accused transferred, instead of being dismissed and put behind bars?? I think there are far too many questions that must be answered, an opportunity for the present government to show that it means business.

Recommend

1. Editorial: President banda, abolish corruption – revive, enact, declaration of assets bill

2. AfDB says fighting corruption and poverty in Africa go together

3. Exploiting the Poor: Bureaucratic Corruption and Poverty in Africa

4. Corruption and poverty in Africa: A deconstruction

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7. CORRUPTION COSTS MALAWI PRECIOUS AID