Police in K14 billion cashgate scam – Malawi News

Malawi Police Service (MPS)  has been caugt up with the financial malfeasance with published reports  says  the service is involved in , an unexplained K14 billion expenditure.

According to a report in Malawi News, the Secretary to the Treasury has an investigative audit on the Integrated Financial and Information Systems (Ifmis) central payment system which implicates the police in the cashgate scandal.

A report, which is a major part to the ongoing investigations issued in October, 2012 entitled ‘Interim Report to The Secretary to the Treasury on Investigative Audit of Ifmis – Central Payment System’ prepared by the National Audit Office, has telling revelations of how MPS, the Malawi Defence Force and state residences abused the central paying system.

Way back on November 1, 2011, the Ministry of Finance, through the then Budget Director Dalitso Kabambe, informed the then Auditor General Reckford Kampanje of suspected fraud in the central paying system which called for immediate investigation.

Bophani: Police caught up in cashgate scam

“The suspected fraud involved a network of officers in the Accountant  General’s department, Malswitch, the police and some commercial banks,” observes the audit report.

According to the report, the National Audit Office instituted an investigative audit to identify suspected fraud and recommended solutions to the identified weaknesses.

One such identified weaknesses was that, although the system was designed to reject any processing and passing of cheques if there were insufficient or no funds in the budget line, the major challenge with the system was that it was not yet connected to the banking system and that cheque authorisation was manually signed.

Since cheques could be processed on manually prepared vouchers  and the payment would always be honoured by banks, this weakness was further aggravated by government arrangement with a consortium of three commercial banks, NBS, Standard Bank and Malawi Savings Bank, to dispense government cheques without control mechanism.

With the consortium of banks government disregarded the central payment system introduced in 2005 where individual ministries and departments had specific accounts with credit ceiling authorities which could limit the extent of payment.

The arrangement, the report says, was that this consortium of commercial banks were authorised to honour all government cheques at any of their branches for any amount without any limit on behalf of the Reserve Bank of Malawi (RBM).

“For example, on MPS account, cheque No 154424 dated 30/09/2010 was cashed for staff with an amount of K500,000,000. The role of the RBM was simply to refund all what was disbursed by the commercial banks without control mechanism,” explains the report.

It says since the payments were made outside the system, there was no expenditure control over public funds.

MPS took advantage of this loophole and despite its Treasury funding of around K5 billion in 2009/10 fiscal year in line with the budget, it spent in excess of K14 billion, according to the audit report.

MPS is implicated in all the shady deals  ministries and departments were found wanting. Government lost money, through what it termed ‘payments outside Central Payment System’, amounting to K12,599,813,627.97.

Accoridng to the paper, Police is also implicated in ‘payments vouchers  not produced for audit’ amounting to K57, 022,444,946.38. It is also on the list of institutions that made payments that were not supported with liquidation documents amounting to K3,630,730,493.15.

Besides there are ‘payments to banks without details of beneficiaries’ where government lost K2,872,359,510.63.

The audit report says an examination of the central payment system cashbooks, payment vouchers  and cheque dispatch registers at MPS revealed a number of payments made to various commercial banks without indicating details of the beneficiaries and the purpose of payment.

“No documentary evidence was produced to ascertain the propriety and accountability of the payments and between July, 2010 and September, 2011, a total amount of K2,872,359,510.63 was paid to 12 commercial banks without details and purpose,” the audit states.

According to a summary of total payments to individual commercial banks and financial institutions, the police paid NBS Bank K949, 190,364.99; Standard Bank K730, 500,164.61; National Bank K499, 348,091; Malawi Savings Bank K339, 847,142.56; First Merchant Bank K123,379,301.16; OIBM K62,845,591.33; Eco Bank K39,811,958.80; Nico K27,314,663.44; Izwe Loans  K32, 038,538.97; Finance Cooperative Limited K31,397,024.71; Inde Bank K27,761,796.11; and First Discount House K8,924,944.63.

The Police also made payments for procurement without Internal Procurement Committee (IPC) authority a total of K6,339,963,395.81 and, together with other government institutions, the police blew K5,767,357,389.59 in payments made to suppliers of goods without evidence of delivery, while K753,139,253.29 was paid for fuel without evidence of delivery.

Malawi News sought a comment from law expert Justin Dzonzi who said “the fact that the police may be investigating financial malpractices within its own rank and file raises legitimate concerns that the same may not be done impartially or competently.”

The police investigation committee on Cashgate is headed by Deputy Inspector General of Police Nelson Bophani.

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