Malawi cash-gate: The truth is on holiday!

From September, 2013, the country’s media has been awash with stories on the infamous cash-gate. Cash-gate is the word that has been coined following the discovery of a nefarious syndicate that comprised public servants, bankers and entrepreneurs, which led to the pilferage of millions of public funds.

Ever since, the conventional media has faced stiff competition in its reportage since the social media has dominated as a platform for scoops. Malawi, being a nation that is making strides in terms of development, has been caught off-guard with the absence of cyber laws or any legal instruments to mitigate unethical postings on the e-media, including social chat rooms and forums like Facebook and Twitter.

In this regard, the cash-gate incident has been used as a means of settling scores on one hand, and advancing schemata that can cement national development on the other.

Upon serious analysis, it has been noted that the cash-gate incident of 2013 was precipitated by the events that unfolded upon the instituting of the cash budget in 1994. In addition, it should be noted that the dawn of democracy created an opportunity for the public servants who might have had fiendish mind to loot the national coffers.

From 1994, cases of corruption and fraud have dominated, not necessarily because the human race has been bent on theft, but it’s due to the fact that the free media has used its existence to expose any incident that is newsworthy. While in the one party state the media was strictly controlled and less free to expose corruption and theft.

At the same time, we have noted that the introduction of IFMIS was as a result of prior actions leading to HIPC debt relief. IFMIS had challenges at implementation stage that included; HRMIS and debt service module and improper budgeting by spending agencies.

Consequently, budget provisions are exhausted before the end of the financial year leading to a lot of deliberate misallocations. And the common problem of power blackouts continues to be a challenge. Of course, the list is long.

Indeed, the truth is on holiday as far as the cash-gate is concerned. Other reports that have taken advantage of the fact that the truth is on holiday like ‘License to Loot’ by UK based barrister at law Z. Allan Ntata have hinged on items from the social media and mere uninvestigated cases that have been featured in the media since the whole episode attracted started.

The ‘License to Loot’ report has failed to give a background to the genesis of cash-gate and its content comprises mere allegations and imaginations on an issue that has its background to the cash budget introduction and subsequently the IFMIS platform. Instead, it focused its contents in trying to bring in the polity and other private persons.

In this regard, ‘License to Loot’ is basically trying to amplify various comments that have emerged from September 13, 2013. We have attempted to bring out comments in a form of various exposé from people of all walks of life, and these include diplomats and the recent IMF mission to Malawi.

We have captured these comments from Malawi’s authoritative media-The Nation Publications Limited- publishers of The Nation, Weekend Nation and Nation on Sunday. This also includes The Times Group, which comprises the Malawi News, Daily Times, The Sunday Times, Times TV, Business Times and Weekend Times.

Our humble and sincere role is to bring out the truth because from September 13, 2013, the truth has been on holiday. For instance, there is no haulage company that has a fleet of more than 350 vehicles in Malawi, yet other reports like ‘License to Loot’ are insinuating this illusion.

In the meantime, more than 68 arrests have been effected, 33 bank accounts have been frozen, a lot of property has been attached, and more than18 cases are before the court of law. Already, the Assets Declaration Bill was passed in October, forensic audit and upgrading of IFMIS platform is in progress and positive results are already registering.

President Dr. Joyce Banda dissolved cabinet and two ministers were dropped, including Minister of Finance. A former Justice Minister is on remand at Zomba Central Prison for being suspected of having played a role in the shooting of the Budget Director.

The government of Malawi has drawn a Matrix of Actions to correct the situation and this is being done in close collaboration with the development partners. The State President has taken the lead in fighting corruption, as has been the case with her warning statements in every State of the National Address.

In June, this year before the cash-gate breakthrough, the State President informed the EU Head of Delegation and the British High Commissioner to Malawi about her intentions to review the IFMIS platform.

On September 7, 2013 the State President told a galaxy of economists at their annual conference in the lakeshore district of Mangochi that the IFMIS platform deserved to be reviewed. The State President tasked the Attorney General and the Minister of Justice the with the retouching of the Assets Declaration Bill.

From the above, it’s very unfair and folly to assume that there was a license to loot and indeed the truth was on holiday. We sincerely hope that the picnic for the truth is now over with what we have outlined in this publication.

CHALLENGES OF THE IMPLEMENTATION OF INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM (IFMIS)

 BACKGROUND

In November 2005, Government of Malawi embarked on the implementation of the EPICOR based IFMIS using its own resources. The aim of IFMIS was to improve and strengthen public expenditure management to bring about fiscal discipline.

It started with connectivity of few ministries as a pilot phase. A year later, more ministries and departments got connected to IFMIS. The connectivity was affected to ministries that were already on Government Wide Area Network (GWAN).

Ministries and departments not on GWAN were processing their payments using Date Centre in the Accountant General Department (AGD)

Three Regional Centre Payment Offices (CPOs) were established to handle accounting transactions for the respective regions. These CPOs were established in the regional Treasury Cashiers (RTCs), namely Mzuzu, Zomba and Blantyre.

Three independent sites were operational, namely Police Headquarters, Malawi Defence Force (MDF) and State Residences.

To date almost all sites at Central Government level are online.

In local Assemblies, rolled out to seventeen sites using serenic navigator solution.

Sharing of passwords: Officers usually share passwords when they are on holiday or during funerals.

OBJECTIVES OF IFMIS

IFMIS was set up with the following objectives in mind:

• To integrate all accounting modules;
• General Ledger;
• Accounts Payable;
• Accounts Receivable;
• Commitment planning and control including production of Local Purchase Orders; and Cash Management, Cash flow planning and forecasting
• To provide Government with an upgraded and state of the art computerized accounting system;
• To ensure that other sub systems are properly interfaced with IFMIS. For instance, Human Resources Management Information System (HRMIS) and Debt service sub system;
• To enable Government reduce domestic borrowing and accumulation of arrears; and
• To assist Government in the production of timely and reliable financial data.

ACHIEVEMENTS OF IFMIS

• Fiscal discipline has been achieved
• Creation of arrears has been minimized
• Re-alignment of expenditure to budgetary provisions has been improved
• Congestion in processing and payment of pensions has been minimized
• Timely production of accounts including appropriation accounts
• The Active Planner (Budget module used by Budget Division of the Ministry of Finance) has been fully integrated with IFMIS
• Disaster Recovery Site (where data between the two sites is mirrored) has been installed
• Connectivity with Malawi Revenue Authority (MRA) is operational
• Adoption of Government Financial Statistics (GFS) coding
• With fast developments in the ICT industry, it became critical to upgrade both EPICOR as well as its operarting environment including storage media for data base from 7.2 to 7.3.5 version. The task was of paramount importance in view of the Disaster Recovery Site installation where data between the two sites is mirrored. The upgrade was completed in February, 2008.
• The AGD has established a DRS which is fully operational.
• Connectivity between the main site and DRS is through fibre connection installed by MTL. Data synchronization is on real time.

MCC – USAID through Casals and Associates funded the procurements of the Virtual Private Network (VPN) for the National Assembly, National Audit Office and Regional Treasury Cashiers.

The installations enhanced data transfer between main servers at AGD and the foregoing centres. The Anti Corruption Bureau has also been availed with this facility.

CHALLENGES OF IFMIS

There have been some challenges the Department has had to contend with since inception of IFMIS. These challenges include:

• Interface with other subsystems such as HRMIS and Debt Service module
• Improper budgeting by spending agencies. As a result, budget
• Provisions are exhausted before the end of the financial year, leading to a lot of misallocations
• The problem of power blackouts continues to be a challenge due to high generator maintenance and operating costs. It further disrupts the processing of transactions
• Training: as a Department, we have not managed to train everybody on IFMIS, especially managers in line ministries. Resistance to automated system is still a challenge despite efforts
• Through training, meetings, workshops and streamlining of functions
• Lack of interest by managers on the system. For instance,
• Non-approval of payments and transactions (approvals left to junior staff)
• Most managers don’t access reports despite having rights and capacity to do so using Intelligent Explorer facility.
• Ownership aspect. Ministries and departments are supposed to own the hardware part of the system, while Accountant General Department owns the software as well as championing the roll-out process. Spending agencies are not procuring equipment though they continue to complain over lack of adequate equipment.
• Non-adherence to prescribed regulations on Central Payment System, i.e. maturity period for a cheque to be cashed requires submission of cheque list to the Commercial Bank. Yet ministries and departments present cheques before submission of the cheque list.
• Huge expenditure transactions are still outside IFMIS, i.e. Development Part I, Foreign Missions and Public Debt are captured through cash controls Timely production of expenditure reports. While the IFMIS software was able to generate generic accounting reports for use by management in ministries and departments, the installation could not produce specialized reports for monitoring budget performance. The problem has since been resolved in that the budget officers and application team have been trained in the use of FRX and crystal reporting tools. The training has afforded the AGD staff the opportunity to produce highly specialized reports on demand
• Connectivity Problems. Government Wide Area Network (GWAN) delayed to be rolled out to the City Centre in the following institutions, National Assembly, and Anti Corruption Bureau. This challenge has been resolved through installation of virtual Private Network (VPN).
• Equipment has also been a major challenge. The department does not have adequate financial resources to procure all the required equipment.
• Realigning of expenditure to budgetary provision. The exercise causes a lot of frustrations, as cheques cannot be issued in the absence of budget lines and funding.

WAY FORWARD

• E-procurement and e-sourcing. Once customization is completed, sourcing of goods shall be done electronically
• IFMIS roll out to the rest of District Assemblies will continue on availability of funds. Connectivity issues will also be looked into.
• IT Help Desk service management to be established, to help record problems and solutions
• Training aspect. In an attempt to reduce dependency on the supplier, AGD has lined up certification training programmes to be funded by the AGD. The training coverage will include EPICOR certification, and other technical training programmes such as SQL, Citrix, and CISCO networking among many.
• Planning has been made to train senior management and end users.
• Asset and Inventory Management module is about to be activated as part of system enhancement
• System Alerts are currently being configured as part of system enhancement
• Purchase and commitment module is being enhanced so that commitment should also be on the budget.
• With the fast changing IT environment Government will upgrade the system from version 7.3.5 to 9.0 during the 2010/11 financial year.
• Government has adopted Government Financial Statistics coding structure implementation in 2010/11 financial year.

CONCLUSION

IFMIS projects worldwide face a lot of challenges and frustrations and therefore require commitment from staff as well as support from policy-makers. It is pleasing to observe that in Malawi, IFMIS has received strong support from policy-makers and high-level commitment from implementing staff.

CASH GATE QUOTES

1. “It is too early and there is no solid basis to say that Government has completely messed up. So much is going on and until all the investigations have been completed and Government fails to act on the investigations and then we say that Government has failed,” said Blessings Chimsinga, Chancellor College Political Analyst, Nation on Sunday, November 17, 2013.

1. This is an opportunity for President Banda to start on a fairly clean slate, re-stump her authority and begin to curve out an enduring legacy as the President who went after corruption and burst it open until it bled into whimpers.

1. It is a goal that has overwhelming local and international support – and political dividends. It is also a goal that is not just the right thing to do, but also a smart political move.

1. The President must tap into the collective national anger for both political cover and capital to go where none of her predecessors have dared to go. It will be another first for her – assuming she really wants to do it. Ephraim Munthali, Columnist of Cut The Chaff, Weekend Nation, Saturday, October 19, 2013.

1. “The courts just like every Malawian have a responsibility of supporting course of action on the scandal to ensure that the country gets back on the track. I think people must be prosecuted to send signals to those that may want to do the same, that if they do it things will not be ok for them” Dr Maxwell Mkwezalamba, Finance Minister-The Daily Times, 25 October, 2013.

1. “Social programmes which are donor funded through other means such as health, education and food security would not be affected by the delay in donor funds disbursement,” Sara Sanyahumbi Cabs Chairperson assuring the nation following her organisation’s decision to withhold aid, The Nation– Friday November 8, 2013.

1. “The IMF welcomes the recent announcement by government on reductions in the travel budget and in other lower priority expenditure items.” It also commended the policy reforms initiated in May 2012, saying they have produced positive results. IMF mission chief, Tsidi Tsikata commenting on the recent austerity measures introduced by government through the Minister of Finance. The Nation-Thursday, 22 November 2013.

1. “Given the significance of free and credible elections for Malawi’s democratization process, and the complexity of holding tripartite elections, EU decided to increase its financial support towards preparations for these elections,” said EU Ambassador and Head of delegation to Malawi Alexander Baum assuring The Nation, Friday November, 2013.

1. “Government should immediately rotate officials to different positions and geographical areas, especially high ranking officials. Long time work in the same positions and place is creating relationships inside and outside government which encourage and help conceal corruption fraud and favoritism.” Malawi Law Society statement published in The Daily Times – October 6, 2013.

10. Chairperson for CONGOMA Voice Mhone expressed happiness that President Joyce Banda invited its members to be part of the discussions pertaining to the capita hill cash-gate scandal, saying no other government has given them a chance to be involved in such issues before. CONGOMA Hails Government. The article quoted Congoma Board chairperson Voice Mhone. The Nation, October 22, 2013.

11. “We need to emphasize that looting is not corruption. We need to be careful by not asking them to look for something they are not responsible for. My opinion is that what we have is a system failure and structural inadequacies; corruption is difficult to solve and it’s the methodology, which effectively shields the big.” Dr. Jessie Kabwila MCP spokesperson, Nation on Sunday, October 27, 2013.

12. “Even members of her (President’s) family if they are found to be part of the problem they have to be punished. We want well-investigated cases where we are likely to secure convictions and be able to recover all looted funds. The President is looking at the possibility of ten percent recovery and forfeiture of all property coming as a result of this looting,”  Fahad Assani-Minister of Justice and Constitutional Affairs. The Nation, October 18, 2013.

13. “This project was discussed and agreed earlier, but it was approved by the board in the shadow of the recent developments at Capital Hill. We are signing the protocol at a time when the government is working on the issues of fraud and abuse of public resources.” The resident representative of the African Development Bank-Andrew Mwaba of AfDB at a $4.6m (K1.8 billion) grant signing ceremony towards public finance management institutional support project- The Nation, 20 November, 2013.

14. “It is extremely important that as a region (SADC) should be fully aware of the initiatives that the government is putting in place to address the problem of plundering of resources by public officers” Foreign Affairs Minister, Ephraim Chiume briefing reporters in Lilongwe at the end of an extraordinary SADC council of ministers meeting. The Daily Times, October 25, 2013.

15. “But for those who care, this mess should have been a watershed, a point that would have revamped the country for good and engender a revolution to our systems and reclaim public trust until that happens, no announcements of arrests alerts will make anyone swoon with hope.” The Daily Times, 25 October 2013, commenting on arrests alerts in cash gate fall out not being enough.

16. “We have suspended IFMIS to stop the bleeding that has led to public funds being stolen. We hope that by then we will be able to detect all defects,” said Ndilowe. Chief Secretary to government Hawa Ndilowe speaking on the suspension of IFMIS as one of the measures to seal loopholes in the looting of government coffers and dissolving of the cabinet by the president. The Nation, October 11, 2013.

17. “ICAM has noted the steps announced by the government towards addressing the fraud incidents which include the position taken to engage forensic auditors. In our view engaging internationally reputable forensic auditors to assist with investigations is appropriate as a first step towards addressing the current challenge,” said Institute of Chartered Accountants in Malawi (ICAM) Chief Executive Evelyn Mwapasa backing the move made by government in instituting a forensic audit on the cash gate scandal, The Daily Times, October 10, 2013.

18. “The dissolution of cabinet is a step ahead in dealing with the Capital Hill plunder and we applaud the government for that,” said the General Secretary for the CCAP Blantyre synod Rev. Alex Maulana speaking at the 80th anniversary of the St Columba CCAP in Blantyre, on the steps taken by the government in addressing the cash gate scandal, The Daily Times, October 14, 2013.

19. “For a long time we have been focusing on providing aid to Malawi, considering our historic links, but we feel adding investment as a major part of our relationship we will make a huge difference. We already held initial talks with President Joyce Banda when she visited Scotland recently and the future looks promising,” Scotland’s Minister of External Affairs and International Development – Humz Yousaf, The Daily Times, November 12, 2013.

20. The Daily Times of November 11, 2013 reported that, “The British High Commissioner to Malawi, Michael Nevin suggested that there were people who were trying to use the local media to deflect attention away from on-going investigations on corruption in the public service in Malawi.”

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