Knowledge (XXG)

Capital Hill Cashgate Scandal

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automatically links planned budget and actual cash budget demands, allowing managers to efficiently schedule expenditures to minimize cashflow problems and improve public service delivery. Thus, the main reasons for the IFMIS were efficient expenditure control, to provide timely budgeting and accurate financial information across government, to provide a state-of-the-art computerised accounting system and to provide a standardised integrated financial management reporting system across government. A pilot project was launched in five ministries, but was met by many problems, resulting in the termination of the contract with the first supplier. Among the problems encountered during the pilot trial were severe mismanagement, technical problems, funding shortages, disagreements among members of the project (there were three distinct suppliers), insufficient training and staffing cultural challenges, resulting in long delays.
384:"Overall, we have identified funding misappropriation and theft of GoM funds. We have seen funds transferred between unrelated companies, individuals withdrawing funds from unconnected organizations and inflated prices paid to companies with limited or no trading history and very large cash withdrawals. We do not believe the receivers of these funds are therefore the ultimate beneficiary in all cases. However, in our opinion further specific detailed work is needed to support the Malawi Law Enforcement Agencies in investigating these matters across international jurisdictions. In this regard we encourage the international donors to continue to support oversight and thus to support ongoing investigations in order to ensure convictions and, if possible, reparations." 274:"IFMIS generates payments to suppliers entered onto the system. In turn, cheques are raised for payment to suppliers and others which are then printed on Reserve Bank of Malawi (RBM) cheques. This function is currently centralized at the Accountant General’s Department. All the payment vouchers, less the supporting documents from the various Ministries, are manually brought to the Accountant General’s Department for verification before cheques are processed. The IFMIS system is designed to enable the GoM to monitor its budget and cash position." 262:. The report found that "the proposed electronic system, IFMIS, is not being implemented, resented for removing discretionary power to reallocate resources." The report also found that, in addition to rampant fraud and corruption in procurements and disbursements, there were "no adequate records of staff and pensions and advances, leading to problems of ghost workers, especially in the education sector. Staff not paid and not motivated. Incomplete and doctored records: auditing not done." 359:
senior official in the ruling People's Party and Deputy Director of Recruitment and Sensitisation, who eventually became the prime Cashgate suspect. The high-profile arrests continued through October and November, with two other suspects arrested over payments received despite no services provided. By November, more than 50 people had been arrested in connection with the scandal, and on 8 November, the former Justice Minister
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illicit payments from the government between April and September 2013 for goods and services that were not performed. All told, the audit found that an estimated $ 32 million (USD) was stolen during the six-month period under review. In October, 2013, more than 70 people were arrested in connection to Cashgate – many of whom were subsequently tried and convicted. President Joyce Banda also fired her entire cabinet.
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perpetrators because he was on the verge of busting a corruption syndicate. President Banda – then still a member of the DPP – announced a plan to address the loopholes in the IFMIS and investigate the plunder of public resources. She enlisted a Cabinet Commission chaired by the Minister of Good Governance, Christopher Daza, to oversee this plan and communicate its findings to Malawi's donors.
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and enable the money a government receives or spends to be reconciled with the actual funds in the government's bank accounts, countrywide. Due to the vast sums that pass through government bank accounts, it is important that PFM systems be robust and effective at managing government funds (be they raised from taxes, donors, dividends, etc.), detecting and resolving problems.
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to release funds without lawful authority, create and approve unauthorized payments, issue cheques through the Accountant General’s Department and transfer funds into supplier accounts without authorisation." A subsequent audit revealed that, within IFMIS, "a significant number of transactions had been deleted."
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Later in October, the ACB continued to make arrests. Chazika Munthali, the principal accountant in the Office of President and Cabinet, was charged with approving three vouchers totaling MK 1 billion (~US$ 2.3 million) to International Procurement Services, a company belonging to one Osward Lutepo, a
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By December civil society groups were protesting against the government's handling of the scandal, saying the government was not doing enough to get to the bottom of the matter, and to finalise the investigation. There were numerous calls for the president to resign, however President Banda rejected
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In the ensuing days, stories began to emerge that millions of dollars had been embezzled by government officials colluding to defraud the state. Some claimed Paul Mphwiyo was clean, and acting to close the loopholes, others claimed that he was implicated in the corruption. Before long, a web of plots
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Soft-Tech found that "perpetrators were able to transfer funds from the government bank accounts to the vendor accounts for goods and services that were never supplied and then to delete these transactions from the IFMIS system." The government and Soft-Tech believed that "the system was manipulated
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Most governments of countries have Public Financial Management (PFM) systems that they use to manage the flow of funds across various levels of government. These accounting systems enable a centralised and efficient management of government funds (generally income and expenditure) across departments
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Following Cashgate's revelation, the British government sponsored an independent audit into the scandal, focusing on transactions made through Malawi's electronic financial management system. The first audit – released to the public in February 2014 – demonstrated that 16 Malawian companies received
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Later in 2014, the British government provided the Auditor General of the Government of Malawi and the Malawi Law Enforcement Agencies with a second report that summarized 53 Cashgate case files. The total financial loss from Cashgate was found to be slightly higher than previously estimated (up to
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The February 2014 Baker Tilly report found that a total of MK 13,671,396,751 (Malawian Kwacha) was misappropriated during the six-month period of 2013: More than MK 6 billion (45%) in Cashgate transactions; nearly MK 4 billion (29%) in payments with no supporting documents; and MK 3.6 billion (26%)
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Malawi's Anti-Corruption Bureau (ACB) also began an investigation into illicit financial activity among civil servants, and started making arrests in connection with Cashgate. Included in the ACB's initial arrests were Alice Namata, a principal administrative officer in the Ministry of Wildlife and
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In September 2013, Victor Sithole, a young accounts assistant in Malawi's Environment Ministry was found with roughly $ 300,000 (USD) in the trunk of his car. A week later, on 13 September, Paul Mphwiyo, Budget Director in Malawi's Ministry of Finance, was shot by armed men who were waiting for him
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The government of Malawi soon recognized that the IFMIS was vulnerable to misuse and corruption and commissioned Soft-Tech Consulting Limited – the software solutions technology company that initially implemented the IFMIS – to investigate any illegal exploitation of the system. It is believed that
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However, many foreign donors began suspending aid in response to the scandal. On 11 October 2013, Norway froze all budget support to Malawi. In November 2013, Britain followed Norway to delay budget support. The American government said it did not plan to suspend aid since the aid it gives goes to
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That same year, a peer-reviewed article in November 2004 identified 21 issues that needed to be resolved for the IFMIS to work properly. For some reason, those issues could not be resolved. In May 2005, the Government decided to adopt and implement an EPICOR-based IFMIS following the study tour to
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The scandal first came to light in September 2013, when an accounts assistant in the Ministry of Environment was found with several thousand dollars (USD) in his car. A week later, the Budget Director in the Ministry of Finance was shot outside his home, and several other civil servants were found
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were not included, suggesting that they had been implicated in Cashgate. Additionally, approximately 50 bank accounts, including those of government officials, were frozen. People began to speculate whether the two were implicated in the saga because no formal explanation was given as to why they
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The second report demonstrated that Osward Lutepo – who was linked to several businesses implicated in Cashgate – was the primary beneficiary of the scandal, along with a number of other businessmen. Former commander of the Malawi Defence Forces, General Henry Odillo, was also mentioned. Neither
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was financing an IFMIS in Malawi sourced from the CODA Group, to be implemented by a South Africa-based reseller called UES. In 2004, Professor Lise Rakner, a Political scientist and senior researcher at the Chr. Michelsen Institute (CMI) in Norway, the largest centre for development research in
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In 1995 the government of Malawi began implementing a PFM known as an Integrated Financial Management Information System (IFMIS) backed by the World Bank. This system was intended to replace the manual systems that were previously in place. If properly implemented and managed, the IFMIS system
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have long speculated both Mutharikas’ involvement in Cashgate, citing the mysterious murder of the head of Malawi's Anti-Corruption Bureau, a failure to enact financial reforms and suspicious wealth accumulation of high-ranking DPP members. However, no link between either the former or current
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provided the Government of Malawi with a confidential report summarizing individual case files from its original audit. The report – intended to be private and "provided to assist Malawian law enforcement agencies only" – outlines individuals and companies involved in illicit Cashgate-related
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Upon the emergence of a large-scale corruption scandal, Malawi became enmeshed in chaos and speculation. President Joyce Banda's administration maintained that the looting was made possible because of loopholes in the IFMIS, and also suggested that Mphwiyo may have been shot by the scandal's
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British accounting firm Baker Tilly was enlisted by the UK's Department of International Development (DFID) to conduct a forensic audit of possible corruption during the period of September to April 2013. It issued two reports of the audit: the first, made public in February 2014, traced
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approximately $ 32 million (USD) of stolen funds to 16 Malawian companies, though it did not provide specific transactions or names; the second, delivered confidentially to the Government of Malawi, detailed names of companies and individuals involved in dozens of illegal transactions.
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these calls, saying the scandal was a "golden opportunity" for her government to clean up the civil service in Malawi. With support from the British government, she then initiated a forensic audit into Cashgate and began to take action against the scandal.
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In November 2005, the new IFMIS was formally introduced and customised to Malawi's own specific requirements across 50 ministries and government entities. According to the UK-sponsored audit – led by accounting firm Baker Tilly – the IFMIS operated as
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However, reviews of Malawi's IFMIS revealed significant control weaknesses within the system. The GoM suspected that "a number of perpetrators had exploited these weaknesses through collusion, resulting in financial loss to the government exchequer."
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In November, 2014, after signs that Cashgate-related corruption extended beyond the term of the British government's audit, the German government initiated another audit to review potential theft dating back to 2009, under then-President
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Tourism, Robert Nantchito, an accounts assistant in the Ministry of Lands who was working with the Ministry of Trade, and Maxwell Namata. Soon after, one Pika Manondo, a suspect believed to be behind Mphwiyo's shooting was put on an
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Scandinavia published a report in collaboration with researchers from the UK's Department for International Development (DFID) and the Institute of Policy Research and Analysis, titled
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just outside the gate of his house in Lilongwe Area 43. Mphwiyo's wife rushed him to a nearby health clinic, where doctors managed to stabilise his condition. He was transferred to
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NGOs, not directly to the government, and the IMF delayed a loan worth $ 20 million. The aid suspended by the EU, Britain and Norway collectively amounted to around $ 150 million.
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MK 15.5 billion). This report also detailed civil servants, companies, banks, Ministries and other individuals and organizations involved in illicit Cashgate transactions.
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transactions. It found the primary beneficiary of the scandal to be Osward Lutepo, who has since been sentenced to 11 years in prison.
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of how civil servants were siphoning funds from government coffers were rife on social media, blogs and online news sources.
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continue to allege Banda's guilt in the scandal, though there is no evidence supporting this claim. Likewise, Banda and her
968: 756:"The budget as theatre – the formal and informal institutional makings of the budget process in Malawi. Final report" 649: 784: 778:"The budget as theatre - the formal and informal institutional makins of the budget process in Malawi. Final report" 233: 186: 1326: 594: 118: 1550: 229: 1560: 393:
President Peter Mutharika nor former President Joyce Banda were cited in this report as linked to Cashgate.
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The budget as theatre – the formal and informal institutional makings of the budget process in Malawi
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sacked her cabinet. On 15 October, a new cabinet was appointed, and notably the former Finance Minister
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hiding large sums of money, thus unravelling what came to be known as the "Cashgate" scandal.
1117:"Britain suspends aid to Malawi over corruption claims and attempted murder of whistleblower" 1379:"Press Release:ACB Arrests OPC's Principal Accountant Chazika Munthali Over K1bn Plundering" 991:"MaraPost enquiry on Malawi budget director shooting that triggered donor's response Friday" 225: 367:
would be rearrested on 27 January 2014, for money laundering charges, which he has denied.
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Tanzania in March 2005, and a contract with Soft-Tech Consultants was signed in July 2005.
364: 360: 343: 1349:"Interpol puts Malawi's Pika Manondo on 'wanted' list: Suspect in Mphwiyo shooting saga" 1544: 1165:"IMF Delays US$ 20 million loan to Malawi pending Assessment on Capital Hill Looting" 730:"World Bank funds Government of Malawi to implement CODA financial management system" 1256: 1075:. Government of Norway, Government Administration Services, Norway. 11 October 2013 475: 129: 1301:"President Joyce Banda Appoints new Cabinet amid allegations of high level graft" 1278: 1094: 815:. Nwazi T Mnthambala, Deputy Accountant General. 2 December 2007. Archived from 703:. Nwazi T Mnthambala, Deputy Accountant General. 2 December 2007. Archived from 339: 335: 209: 194: 185:
is a financial scandal involving looting, theft and corruption that happened at
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Cashgate remains a high-profile political dispute in Malawi. Current President
650:"Njauju murder was politicaly [sic] inspired - Malawi rights watchdog" 334:
The same week in which Malawi's donors suspended their foreign aid, President
254: 1051: 628: 573: 539: 454: 421: 939:"Malawi budget director Paul Mphwiyo shot in a planned and targeted attack" 352: 363:
was arrested for allegedly masterminding the shooting of Paul Mphwiyo.
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and the next day flown to South Africa for specialist treatment.
1520:"Malawi Government Releases Report That Names Cashgate Figures" 1040:"Malawi official jailed for nine years over 'Cashgate' scandal" 1017:"Malawi 'cash-gate' corruption scandal unfolds like a thriller" 562:"Malawi official jailed for nine years over 'Cashgate' scandal" 528:"Malawi official jailed for nine years over 'Cashgate' scandal" 288:
the cash gate scandal caused financial loss to the government.
98: 56: 15: 1235:"Malawi's embattled Banda says huge scandal is 'opportunity'" 476:"'Cashgate' - Malawi's murky tale of shooting and corruption" 1495:"Audit report on fraud and mismanagement in Malawi - GOV.UK" 1469:"Former Malawi Justice Minister Ralph Kasambara re-arrested" 892:"Audit report on fraud and mismanagement in Malawi - GOV.UK" 867:"Audit report on fraud and mismanagement in Malawi - GOV.UK" 842:"Audit report on fraud and mismanagement in Malawi - GOV.UK" 502:"Audit report on fraud and mismanagement in Malawi - GOV.UK" 1143:"'Cashgate' scandal shows dark side of model African state" 1213:"Malawi Civil Groups Protest Handling of Cashgate Scandal" 1439:"Malawian police arrest ex-minister for attempted murder" 917:"How A Shooting Exposed The Plunder Of Malawi's Treasury" 678:. Reckford Kampanje, Accountant General. 20 November 2004 1323:"Malawi's ACB arrests 2 public officers over K70m fraud" 1257:"Malawi's Joyce Banda sacks cabinet amid corruption row" 732:. UNIT4 Business Software. 28 April 2003. Archived from 237:
President Mutharika and Cashgate has been established.
1095:"Norway suspends budget aid to Malawi over corruption" 783:. Chr. Michelsen Institute, DFID. 2004. Archived from 965:"Smokes and mirrors: Unpacking the paul mphwiyo saga" 380:
in inflated procurement prices. The report concludes:
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Malawi Nyasa Times - Malawi breaking news in Malawi
941:. Malawi Today. 16 September 2013. Archived from 595:"Germany to help Malawi probe 'Cashgate' scandal" 993:. NYASA TIMES. 28 September 2013. Archived from 967:. NYASA TIMES. 18 September 2013. Archived from 1167:. MALAWI VOICE. 24 October 2013. Archived from 1325:. BNL Times. 19 September 2013. Archived from 1279:"Malawi: President Banda Appoints New Cabinet" 919:. Steve Sharra, Global Voices. 15 October 2013 1073:"Norway freezes all budget support to Malawi" 8: 50:Learn how and when to remove these messages 128:. Please do not remove this message until 72:needs attention from an expert in Politics 166:Learn how and when to remove this message 148:Learn how and when to remove this message 124:Relevant discussion may be found on the 1038:Mapondera, Godfrey (11 November 2014). 560:Mapondera, Godfrey (11 November 2014). 526:Mapondera, Godfrey (11 November 2014). 401: 1409:"Malawi Police nab two over cash-gate" 758:. Chr. Michelsen Institute, DFID. 2004 82:may be able to help recruit an expert. 7: 1355:. 28 September 2013. Archived from 1215:. Voice of America. 9 December 2013 1019:. Financial Times. 19 November 2013 342:, and the former Justice Minister 14: 1445:. 8 November 2013. Archived from 1415:. 29 October 2013. Archived from 1281:. All Africa.com. 15 October 2013 283:IFMIS as a Mechanism for Cashgate 31:This article has multiple issues. 1385:. 8 October 2013. Archived from 676:"IFMIS IMPLEMENTATION IN MALAWI" 103: 61: 20: 330:Cabinet Reshuffling and Arrests 39:or discuss these issues on the 1: 1237:. CS Monitor. 4 December 2013 179:Capital Hill Cashgate Scandal 1145:. CSMONITOR. 3 December 2013 1097:. TRUST.ORG. 11 October 2013 189:, the seat of Government of 1303:. FOX News. 15 October 2013 1259:. BBC News. 10 October 2013 1193:. IBTIMES. 19 November 2013 371:Baker Tilly Forensic Audits 130:conditions to do so are met 74:. The specific problem is: 1577: 810:"IFMIS: A Case for Malawi" 698:"IFMIS: A Case for Malawi" 295: 303:Kamuzu Central Hospital 230:Tonse Alliance (Malawi) 386: 276: 382: 272: 623:. 27 February 2014. 449:. 27 February 2014. 416:. 27 February 2014. 296:Cashgate's Unfolding 80:WikiProject Politics 1449:on 19 November 2016 1171:on 30 December 2013 1121:The Daily Telegraph 997:on 12 November 2013 971:on 20 November 2013 945:on 30 December 2013 822:on 28 December 2013 790:on 31 December 2013 736:on 28 December 2013 710:on 28 December 2013 234:People's Party (PP) 117:of this article is 1419:on 10 January 2014 1353:Malawi Nyasa Times 1123:. 18 November 2013 219:Bingu wa Mutharika 1526:. 31 October 2014 1475:. 27 January 2014 1389:on 9 January 2014 1359:on 2 October 2013 1329:on 9 January 2014 617:"The $ 32m heist" 597:. 11 October 2014 482:. 27 January 2014 443:"The $ 32m heist" 410:"The $ 32m heist" 208:In October 2014, 176: 175: 168: 158: 157: 150: 97: 96: 76:Malawi politics.. 54: 1568: 1536: 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Capital Hill
Malawi
Joyce Banda
Baker Tilly
Bingu wa Mutharika
Lazarus Chakwera
Tonse Alliance (Malawi)
People's Party (PP)
World Bank
Kamuzu Central Hospital
Joyce Banda
Ken Lipenga
Ralph Kasambara
Interpol
Ralph Kasambara
Kasambara
"The $ 32m heist"
ISSN
0013-0613
"The $ 32m heist"

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