REPUBLIC OF MALAWI

STATEMENT BY HIS EXCELLENCY, PROF. ARTHUR PETER MUTHARIKA,

PRESIDENT OF THE REPUBLIC OF MALAWI

AT THE LAUNCH OF THE PUBLIC FINANCE MANAGEMENT REFORM

PROGRAMME

FRIDAY 10TH APRIL, 2015.

Your Excellency, the First Lady, Madam Gertrude Mutharika;

Right Honourable Saulos Chilima, Vice President of the Republic of Malawi

All Cabinet Ministers and Deputy Ministers here present

All senior government officials here present Members of the Press;

Distinguished Ladies and Gentlemen;

It gives me pleasure to be here this morning as we are launching the Public Finance

Management Reforms Program. As you will recall, on 11th Feb 2015, I launched the

Public Service Reform agenda and some Ministers committed to an improvement in the

delivery of services to the public. Alongside this program, I have directed the Minister of

Finance, Economic Planning and Development to lead the Governments pursuance of the Public Finance Management Reform Program.

Ladies and Gentlemen,

Today, I wish to address you, as senior officials of the civil service, on this crucially

important program, particularly as regards your duties and responsibilities.

Let me first share with you my views on the civil service, which I consider to be a central

piece of the Governmental system. There is an adage that says; Show me a country that has a dedicated civil service, and I will show you a country that will succeed to achieve

its goals of providing quality services to the public and one which will achieve the

needed accelerated economic development. I could continue with the adage that says; Show me a country whose civil service is dedicated to the conduct of a disciplined public finance management, and I will have no difficulty to show you a country with an

effective and achieving Government. You will have observed that the meaning of these adages is that you, as senior civil servants, are essential agents of the economic

development of this country, provided that you conduct a sound Public Finance

Management System. It is because of this that I regard my meeting with you to be

important to the welfare of this country. There is no doubt in my mind that the ability of

our country to accelerate economic growth and to uplift the lives of the majority of

Malawians relies on how dedicated you are to your duties, and how ethical you are in the

management of public finances and the physical assets of the Government. The civil

service in Malawi is crucially important for the attainment of a transformed and a

developed Malawi.

Ladies and Gentlemen

There was a time when our civil service was the envy of most countries in our region for

its dedication, efficiency, discipline and integrity. This was a time when the pride of a

civil servant and his aspirations was his contribution to the effectiveness of his unit,

department or ministry. He exuded with confidence when he was satisfied of his

contributions, regardless of his own lamentable personal welfare. You will agree with me

that these attributes have progressively declined. The mindset of the civil service appears

to have changed somewhat, despite the fact that we now have a far better educated cadre.

It is sad that most people now take pride in the acquisition of personal material gains

from their official positions, and no longer take the protection of public resources as an

accomplishment of their duty towards society. A lot more people take more time on their

personal businesses than they do on their official jobs. A few go further by maintaining

their official jobs only because it facilitates their private businesses. As Malawians, we

should be embarrassed to honour through court proceedings what some civil servants did

during the cashgate scandal. There is little or no dedication to official duties. Concerns of

personal welfare, at the expense of dedication to duty is what has gone wrong for the

once disciplined civil service. This has progressively led to an increased abuse of public

funds up to 2013 when this urge to abuse public funds culminated into what has been

dubbed a cashgate scandal.

Ladies and Gentlemen,

I want to appeal to you that you and I must make it a conditional goal to resume the noble

attributes of the earlier civil service; it is mandatory that we should reform the public

service and the public finance management system. A study of what has gone wrong has

highlighted a number of factors that has brought down the civil service to a point where

cashgate could be tolerated within the Government system even at the highest levels. The

first is that, progressively, there has been a continued and ever growing culture of non-

compliance of our own laws, rules and regulations that provide a framework within

which public finances have to be managed. We still have an excellent framework of

financial laws, rules and regulations that follow well established international standards

of public finance management. When these were observed, and complied with, financial

frauds were rare and resources were protected with pride by supervisory staff such as

yourselves. This was the time when the reputation of the civil service in Malawi was

considered to be one of the best in Africa. Regrettably, these laws, rules and regulations

have been ignored progressively with impunity by politicians and the public servants,

particularly those who are entrusted with managing resources. The result has been a

persistent erosion of accountability of funds, and a lack of control of expenditures. More

and more resources are lost through financial malfeasances and fraud, and budgets are

never taken seriously. The non-compliance culture has been compounded by the laisse

faire attitude of the political leadership which I intend to address separately. Lack of

supervision and negligence of duty by many senior officials has gone unpunished,

contrary to the provisions of our laws. There have been, for instance, occasions when

units in a ministry have congregated to plan how money can be shared through fraudulent

travels. Although senior people were aware of such practices, they did nothing to prevent

these malfeasances. The Public Finance Management Reform Program seeks to reverse

this non-compliance culture. We must resolve to make such reforms work. Secondly, it is

evident that lack of political will and leadership has undermined the public finance

management framework of rules and regulations, including laxity in enforcing

procurement procedures. We will have to reverse this trend as well. It is simply

unbelievable how we have allowed the usurpation of perks such as officials cars whose maintenance is a drain of public resources. In most cases, these cars are being used for

personal gains and, at the end of self-proclaimed periods, the officials buy the cars at

token prices. The whole system of Government has accepted this without question, even

in times of financial difficulties. Thirdly, the introduction of electronic technology

(IFMIS) into the Public Finance Management System is incomplete, not fully understood

and not used by senior civil servants. As a result, IFMIS is only operated by a younger

generation of officials. This has added to the laxity of the senior civil servants to enforce

Public Finance Management rules and regulations. In some cases, there has been an over

reliance on IFMIS, which has led to untold losses of funds than was the case during the

manual system days. It is well known that the Introduction of IFMIS was done

haphazardly, rendering the proper use of the system impractical. The requirements of the

system were not properly defined and EPCOR, the software system of IFMIS, was

introduced without customization to Malawi conditions. The training on the use of IFMIS

was not done, particularly for the supervisors. As a result the supervisors remain IFMIS

illiterate. Controlling Officers disregarded the need to safeguard the system to an extent

where they easily shared passwords with their junior officers. It is for this reason that the unscrupulous junior officers looted funds while the supervisors either shared or

watched helplessly. The public finance reform management program reforms will have to

redesign IFMIS so that it can be comprehensive and can use a software that is customised

to the Malawi conditions. In short therefore, the public finance management reform

program envisages the restoration of financial discipline by enforcing compliance of the

service with the laws, rules and regulations for governing the management of financial

resources in Government. It seeks to train civil servants on what this framework is about

and why it is necessary, and will introduce an IFMIS that is comprehensive and

customised to the local conditions of Malawi. In order to achieve these objectives, we

have decided to embark on the following program: 1. To rehabilitate the Public Finance

Management System to ensure that it is conducive to expenditure control, financial

accountability and transparency, and be able to generate financial reports that reflect the

actual management of financial resources. For example, because of the incompatibility of

the IFMIS and the system that is used at the Reserve Bank of Malawi, the needed bank

reconciliations between the Accountant Generals Department and the Reserve Bank of Malawi were never possible therefore, and it has proved impossible to account for the

resources that flow in and out of the public financial system. As a result of the reforms

that we have already instituted, this is now possible. Secondly, although all financial

receipts by the Government are mandated to be credited to the Malawi Government No. I

Account, IFMIS itself did not include this account. Worse still, resources from the

Malawi Revenue Authority that flow into the Reserve Bank of Malawi were

(infrequently), transferred into the No. 1 account. These serious anomalies and clear

blemishes of the public finance system have since been rectified in the course of the

conduct of reforms that have progressed intensively and well. The main result is that it is

now possible to conduct bank reconciliations. However, there are other blemishes

relating to various accounts of MDAs at commercial banks that need to be subjected to

similar reviews so that reconciliations relative to these accounts can also be conducted.

Donor withdrawals from Malawi were particularly caused by revelations that, in the

absence of bank reconciliations, accounting of resources was not possible nor were

financial reports credible. These shortcomings have now been rectified.

The reforms, therefore, will include the rehabilitation of the public finance system to

ensure proper accountability, transparency and control of the financial flows.

2. In order that the accounting staffs comply with the financial laws, rules and regulations

routinely, it is being decided to conduct courses at the MIM as used to be the case at

Mpemba Staff Training College. These would be attended by staff at various levels in the

civil service so that they can be conversant with the financial procedures, rules and

regulations that are expected to guide them in the conduct of their work. We also intend

to feature ethical courses aimed at reorienting the mindsets of participants. At such

courses, the proper use of IFMIS by the operating staff as well as the supervisory senior

staff will also be conducted. The senior staff, including controlling officers (Principal

Secretaries) and directors of finance, will be expected to attend workshops and refresher

courses very soon to remind them of what is expected of them.

3. The Central Internal Auditing service is being reformed and revitalised as a

compliance tool of the government. To begin with, we will introduce qualified internal

auditors from the private firms in 10 large ministries to train official internal auditors and

establish proper internal auditing practice. To avoid the likely personnel familiarisation

between the accounting staff and internal auditors, the latter will rotate every six months.

In conclusion, let me emphasize that we will conduct this program as our on-going efforts

to re-establish fiscal discipline. I will expect regular reports on its progress. I would

therefore remind Controlling Officers that, with immediate effect, we will exercise

punitive provisions of the Public Finance Management Act against those of you who will

continue fiscal infractions. This country cannot afford another cashgate. Please do your

jobs and be assured that I will do mine. With these remarks, I declare the Public Finance

Management Reform Program officially launched and I wish you all success in the

implementation of this program.

I thank you for your attention.

May God bless us all.