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Malawi Failing to Shake-off Corruption as Another Forensic Audit Faults Medical Trust

Malawi Failing to Shake-off Corruption as Another Forensic Audit Faults Medical Trust

BY PIJ REPORTER

Malawi’s fight against fraud and corruption seems to be getting out of hand with almost all public institutions contending with numerous cases bordering on the malaise.

Among others, personal protective equipment worth millions, procured for COVID-19 by Central Medical Stores Trust (CMST), which is the country’s central point of procurement, warehousing, and distribution of medical supplies, has grown legs.

A forensic audit report on emergency COVID-19 response approved by the CMST board has revealed that officials at the procuring entity threw caution to the wind on procurement. The audit has revealed that a million-worth of N95 facemasks cannot be traced.

Health Minister Khumbize Kandodo-Chiponda

Minister of Health Khumbize Kandodo-Chiponda said the ministry will study the report and ensure where necessary disciplinary action is done.

“If there is a need for us to recover the money, we will do so,” she said.

The July 12 2021 Audit report addressed to CMST chairperson Josiah Mayani reveals that in the process K200 million of public funds got lost in illegal contracts, questionable payments, and possible theft of resources procured.

Audit firm Graham Carr which carried out the audits into four contracts about the procurement had one such contract labelled 546, and had the cost of 100,000 facemasks from Reliance Trading Company increased from K147 million to K167. 58 million while the tender was already in motion.

The report says there is no evidence that the procurement directorate communicated to the IPDC, during a meeting held on June 1, that they had already received an invoice from Reliance Trading Company amounting to K167.58 million which was different from the Local Purchase Order amount of K147 million on 26th May 2020 before contract negotiations and IPDC approval.

What is more suspicious is that the same contract showed that out of the 100,000 N95 facemasks which CMST procured from Reliance Trading Company, only 83,420 have been traced to various district health offices, which means that 16,580 masks cannot be traced.

The masks were bought from Reliance Trading at K1,675.80 and CMST invoiced the Ministry of Health K1,770.00 which, when handling fees are included, comes to K29, 436, 600.00.

“This means that Ministry of Health was billed K29, 436,600.00 more for the N95 masks which have not been traced…IPDC failed its duty to closely follow and monitor the actual sequence of events and basically, rubber-stamped the already agreed prices by procurement directorate with the supplier,” reads the report for the 2020/21 financial year, which among others, focused on the PPEs procurement between March 2020 and April 2021.

The report also says 6,900 facemasks out of 64,500 procured from Galaxy Pharmaceuticals cannot be traced. The facemasks cost K1,995.00 per item, which means the Ministry of Health lost K13,765,500.00 in the deal.

The audit report reveals that officials at CMST flouted the public finance management laws and took actions that cost the public body and the taxpayer at large millions at a time the country’s public institutions were under enormous financial strain due to the pandemic.

Besides single-sourcing in contracting, the officials were also releasing information to suppliers before being granted contracts. The officials further issued local purchase orders before approval by their chief executive officer.

In one incident, a CMST official wrote an internal memorandum for the purchase of PPEs on behalf of the Ministry of Health without the Ministry’s authorization.

On May 29, 2020, a CMST officer, wrote an e-mail to a supplier advising him of a further price adjustment of 14 percent following a CMST meeting on May 22 2020 which recommended such.

One of the officials, the report established, called a supplier who was not the lowest bidder for price discounting which was in contravention of the Public Procurement and Disposal (PPDA) Act 2017 which states in Section 44 (4): “Subject to Section 47, no negotiations whatsoever may be held with bidders as to the substance or prices of their bids and Section 47(1)”.

The section states “a procuring and disposing entity may invite the lowest evaluated bidder for negotiations aimed at finalizing the award of the contract.”

“On 8th February, (the firm) offered a price of MK470.00 per each N95 face mask just three days after the same company delivered the same type of face masks at MK1 675.80.

Cover Copy of the Forensic Report

Auditors concluded that CMST lost K168 million in the first transaction.

The report says, the procurement number CMST/G/MMS/019/000549 had not been advertised as required by the set provisions but simply sent an e-mail on April 16 2020 and closed the following day using a list of suppliers which the CMST had.

It further says by February 2021 prices of N95 face masks had drastically gone down and failure to open it up to the public to encourage competition made this procurement to be unnecessarily expensive and not to the best interest of the CMST and the public at large.

It says ‘Fiduciary duty and responsibility was compromised.’

There were no procurement documents or contract for supplier for the supply of 140 000 N95 face masks as provided for in the PPDA Act of 2017 and the Public Procurement Regulations 2020 and the guidance from PPDA dated 15 April 2020 Circular Ref PPDA/01/22.

CMST did not ask for PPDA’s approval of the procurement and effort to rectify the problem did not materialise, says the report.

“This was a complete mis-procurement on the repeat order which is basically a single source type of procurement… as directed by the memo request and e-mail from (another officer).

The requirements of the Public Procurements and Disposal of Asset Act of 2017, Public Procurement Regulations 2020 and PPDA/01/22 were not followed.”

According to the PPDA Act 2017, any contravention of the Act is an offence with a penalty of K5 million or five years of imprisonment.     

CMST spokesperson Herbert Chandilanga

While CMST spokesperson Herbert Chandilanga asked for more time, Centre for Social Accountability and Transparency Executive Director Willy Kambwandira has described the report as well detailed.

“What remains is for authorities to take action on the individuals named. It is unfortunate that such reports come and go, with no action from the relevant authorities,” he said.

“The report clearly says that procurement laws were not followed; then, what next? What we, as an organisation, see is that we will start pushing such cases to court ourselves,” he said.

Kambwandira said authorities should take action against the named officers but bemoaned those previous reports that have failed to bring the needed responses from relevant offices.

“We are not surprised at all as this has been the culture now, for us this is an organised scheme that was plotted to defraud the government. Why should it take an external audit when there are institutional checks and balances at CMST? 

Centre for Social Accountability and Transparency Executive Director Willy Kambwandira

“This is an indication of wide-scale conniving and colluding of public officers. We strongly believe that there are already measures in place, but what we see are tendencies of negligence of duty and intentions to defraud taxpayers. It is a common practice that people in government can do such things and walk away with it.”

Kambwandira asked authorities to take action against individuals and companies that broke the law.

On the other hand, Malawi Health Equity Network Executive Director George Jobe said it was unfortunate that resources meant for the health sector continued to be misused, thereby putting people’s lives at risk.

Jobe also agreed with Kambwandira that those named in the report should face justice as this could just be an example of so many things happening.

“It could even be that our drug budgets are being plundered like that,” he said.