Auditors warn of another Malawi grand corruption –Report

Malawi risks to face another “Cashgate”—the financial scandal involving looting, theft and corruption at Capital Hill, the seat of Malawi Government—because government has not taken strong measures to curb the financial management vices, according to auditors—RSM Risk Assurance Services LLP of the United Kingdom (UK).

In the high-level fraud, millions of dollars of public money were channelled into private accounts through companies that provided the government with bills, but no services.

T he forensic auditors of what was initially the K577 billion Cashgate—now reduced to K236 billion—say are disappointed that government did not curb the grand fraud 11 years after it was noted in 2005 under the Democratic Progressive Party (DPP) watch.

In its report of a forensic audit of the government of Malawi covering the period January 2009 to December 2014, the auditors said that the 11-year inaction, especially in procurement mischief, lack of follow ups on red flags and poor cashbook reconciliation increase the risk of.

“On a more general note, many of the issues set out above and in the following paragraphs, are not dissimilar to those that have occurred in Malawi since 2005. Thus, it is disappointing to find that, whilst some improvements have been made, many weaknesses still exist.

“This, in turn, gives rise to concerns over the proper stewardship of the funds and the associated regularity of the expenditure, irrespective of whether these funds are generated from within Malawi or are provided by the international donor community,” reads the report in part.

According to a news reportpublsihed in  Weekend Nation newspaper,  the forensic auditors say bid rigging and manipulated procurements are likely to suck taxpayers even drier.

“It also appeared that the suppliers involved in these practices were often not manufacturers nor did they seem, on the evidence available, to be the most suitable businesses to supply the goods or services required. Of even greater concern, perhaps, is that the evidence we have gathered suggests that ‘manipulated procurements’ have taken place as late as December 2015 and are, therefore, likely to be continuing,” says RSM.

The report said the auditors studied the 50 case files of businesses suspected of receiving government funds without supplying legitimate goods, services or works or in doing so using artificially inflated prices.

“To date, NAO [National Audit Office] has issued 166 subpoenas and 31 requests for information for MDAs [Ministries, Departments and Agencies]. A total of 208 bank accounts based in Malawi relating to the 50 suppliers have been identified,” reads the report.

The auditors also noted that two families were linked to at least 16 businesses both in Malawi and overseas.

According to Weekend Nation report, the Financial Intelligence Unit (FIU)—an institution that was established to curb money laundering which is part of organised crime—said at the current situation it was difficult for the unit to hold institutions accountable on the loss of money in the country.

FIU director Atuweni Juwayeyi Agbermodji said to the paper:“What we have to understand is that criminals commit crimes for financial benefits and it is difficult to deal with the criminals without dealing with the financial crimes.”

Cashgate came to light when an accounts assistant in the Ministry of Climate Change and Environment, Victor Sithole, was allegedly found with huge amounts of money which was not in line with his monthly income.

The scandal was later compounded by the shooting of the former budget director in the Ministry of Finance Paul Mphwiyo on the night of September 13 2013.

A few days later, a number of civil servants were found with stashes of cash hidden in their car boots without proper documentation on how they got the money.

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