Malawi ‘Healthgate’ scandal: K4bn vanishes from Ministry, investigations audit reveals

Billions of Kwacha leaked from Malawi’s public health system last year through fraud, payroll manipulation, flawed internal controls andunauthorised payments, a leaked report from the office of Malawi’s Auditor General indicates.

The losses form part of audit queries to the tune of MK4-billion highlighted by the report.

According to the World Health Organisation, Malawi’s health indicators are among the worst in the world, with a high HIV/Aids prevalence and widespread malnutrition.

According to Auditor General Stephenson Kamphasa, the audit – signed in May this year – only covers about 68% of government accounts, asmany ministries and departments failed to submit their financialreports for audit.

Kamphasa also noted that bank reconciliations for June to December2015 and the reconciliations for draw-downs from the PaymentManagement System against cash received at the Reserve Bank holding account were not prepared for the period under review.

The report was submitted to Parliament, the finance ministry andPresident Peter Mutharika, but has not been released to the public. Itimplicates by name several accounting officers it accuses ofdefrauding the government.

The audit queries range from unauthorised payments to suppliers, tomisallocation of funds, payroll manipulation and payments withoutsupporting documents for verification.

In the health department, the following abuses are listed:

• MK399-million (R7,9-million) was paid in allowances paid to healthofficials whose names were not traceable and could not be validated
because of incomplete information.

The report says the names were not written in full and could not bechecked against the database of government employees, adding: “Wetherefore concluded that these individuals were dubiously included inthe programe with intent to defraud the government.”

• MK265-million (R5.3-million) was paid to people who were not bonafide civil servants for such activities as clinical review meetings,palliative care training, and TB and HIV support supervision, whichnormally only involve technical officials from the ministry and otherimplementing partners.

• MK61.5-million (R1,2-million) was paid in allowances to staffmembers who were not entitled to them. These included officials fromthe finance, administration, and human resources departments, as wellas secretaries, messengers and staff from other support departments.

“We believe these officers were included for the sake of drawing theallowances for an assignment [in which] they never participated.[They] should be disciplined accordingly and the funds recovered,”
reads the report.

• About MK75-million (R1.5-million) was paid in daily subsistenceallowances to officials that were not on the approved list and most of
the beneficiaries could not be traced, “indicating an element offraud”.

• The health ministry overpaid MK6-million (R120 000) to workers as a
result of data manipulation. The report says all personnel connectedin connection with this abuse “were interviewed and admitted to havereceived the excess amount”.

In one case, when excess money was paid to a dead man, the supervisor
claimed his wife was the beneficiary. However, the report adds thatthere was no valid evidence for the remittance and “the accountantvanished during the questioning”.

At Dowa district hospital, in central Malawi, a laundry attendantadmitted to receiving extra money in his bank accounts, claiming thatdata entry clerk at the health ministry headquarters in Lilongwe wasresponsible for making irregular changes.

The report points a finger at health officers at the Chiradzulu and Mwanza district hospitals in southern Malawi, where “irregularitiesarose around the payments of arrears … other differences involvedpersonnel from the accounts section and human resource departmentsresponsible for processing salaries”.

At Kamuzu Central Hospital, the country’s biggest referral hospital,it says irregularities were facilitated by a supervisor in theaccounts section, whom it names.

Minister of Finance Goodall Gondwe downplayed the audit findings,saying they did not necessarily mean theft of public fundsbut might indicate a failure by certain officers to follow procedures.

In 2014 the Malawi media splashed an Auditor General’s reportrevealing that billions of kwacha had been stolen from governmentthrough dummy contracts where goods and services were provided atinflated prices or not at all.

The Cashgate scandal led to the suspension of direct budgetary assistance to the Malawi government by foreign aid donors who wantedthe government to tighten its financial controls.

Despite the arrest and jailing of some officials, the aid ban remains in force.

Another audit in 2014 revealed the loss of billions of kwacha throughgovernment mismanagement. No remedial action has been taken to date.

• This story has been supported by the Center for Investigative Journalism Malawi, the National Integrity Platform (Malawi) and the AmaBhungane Centre for Investigative Journalism (South Africa).

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