Tobacco Control Audit exposes extravagant and stupendous financial irregularities

Tasked by the Board of Commissioners to conduct an internal investigative audit of the all-important Tobacco Commission, the results exposes extravagant over-expenditure and other stupendous financial irregularities of the government institution’s budgets for the fiscal year 2022-2023.

In her summary, Internal Audit Manager, Rhoda Zaniku indicates that the Commission’s majority of votes were over utilized by more than its planned activity budgets — revealing that the budget for enforcement, liaison, monitoring, and evaluation was overspent by K22 million (K22,151,682) indicating a 357% negative variance.

The audit found that billboards worth K25 million (K25.452,00), representing 89% of the actual cost of enforcement, liaison, monitoring, and evaluation charges, was not budgeted for the fiscal year 2022–23.

The engagement also noted that the supplier of the billboard by the name Optima Group requested an 80% advance payment which the Tobacco Commission granted 70% — “contrary to the Secretary of Treasury instructions which banned suppliers demanding payments before delivering goods or services”.

“While the international travel-market promotional budget had a 341% budget deficit; international travel (conventions) was also overspent with a 40% surge with tobacco media publicity overspending with a 204% shortfall.”

The internal audit section observed that the Commission’s international travel-market promotional had a 341% budget deficit, totalling K187,305,023 while a trip to China, costing K126,368,784.31, was not included in the budget for the fiscal year 2022–2023.

“The statutory corporation’s compcontroller did not duly approve the China travel request rather Ministry of Agriculture cleared the Ministry delegates,” says the report.

“The audit also found that despite being reminded by the compcontroller in a letter with the reference number C1/18/07 dated November 4, 2022, three out of five delegates did not follow the expenditure control procedures by traveling in business class.

“Internal Audit further found that the Commission lacks a gift policy that would serve as a guidance for buying gifts for local and foreign officials [but] K944,241 was not budgeted for and was spent on gifts for foreign dignitaries while in China.

“The audit assignment has observed that international travel trips in the year 2022/23 undertaken by Tobacco Commission officials and other government delegates were more than a maximum three trips in line with the expenditure control measures of the government circular Ref. No. frr: SPC/S/001 unless for special circumstances, like emergencies with prior approval from the Secretary to the President & Cabinet office of the President.

“It has also been observed that Tobacco Commission officials and other delegates used business class conflicting with the government circular Ref. No.: SPC/S/001 which outlines officials travelling within the African region to travel on economy class which applied to statutory corporations as well.”

On the same international travel for conventions, it was also overspent, with K5,967,508 — representing a 40% surge also exceeding the maximum of three trips as well as travelling in business class rather than economy class, in violation of the government circular SPC/S/001.

“The exercise noted that the Commissioner who travelled to Portugal for International Tobacco Growers Association annual meeting had trouble to access the funds amounting to K1.5 million in his cash passport.

“Management assisted him with cash and the commissioner refunded the money in two instalments — receipt number 783852 and 783880.”

The budget for tobacco media publicity was also not spared as it was overspent with K30,342,200.45, representing 204% shortfall.

“On 17th June, 2022, the Commission signed a contract with the Malawi Broadcasting Corporation (MBC) at cost of K163,081,779.40 for Pamajiga programs — the activity which was not budgeted for in the 2022/23 financial year, which represents 75.27%.

“The exercise also noted that there were no proper guidelines on rates of allowances given to media personnel — hence they ranged from K20,000 to K100,000 depending on the activity.

“Liquidation of allowances amounting to K1,1 million for media personnel, were not properly reconciled.”

Also abused was the budget for tobacco consultative meetings that was also overspent with K51,065,115, representing a 104% budget deficit and that 61.16% was spent on allowances for commission staff and Members of Parliament to sensitize the public on the new bill (Tobacco Industry Act).

The budget for motor vehicle running maintenance was also overspent with K22,843,111, representing a 46% budget deficit and the audit “further observed that some motor vehicles which were supposed to be serviced by the authorized dealer (under free service offer) were serviced by a private garage — which is contrary to the Tobacco Commission fleet management policy”.

The policy’s section 16 states that all vehicles on the Commission’s fleet shall be maintained by an authorized dealer at a prescribed interval and that upon approval of the Chief Executive Officer or his designated officer, the Commission’s vehicles may be referred to other reputable garages for specific attention such as vehicle body repairs, and where — owing to the age of the vehicle, dealer maintenance may not be cost-effective.

The cost for car tracking system amounting to K5,136,514.94, which was installed for all commission vehicles, were not budgeted for in the financial year 2022/2023; and that some vehicles which were marked to be disposed of were serviced prior to its disposal, which is contrary to Procurement and Disposal of Asset Policy of the Commission.

The budget for motor vehicle running cost for fuel was as well overspent with K13,489,515, representing a 16% shortfall and that fuel for genset was not budgeted for in the financial year 2022/2023.

Internet and VPN budget was overused, with a 20% deficit being K14,347,875.00 while K10,061,850 for MIFI & IP address, representing 14% adverse, was not budgeted for and leaving K4,286,025, which represents 6% adverse for the actual Internet cost.

The report indicates that the Commission was mandated to collect and manage afforestation levy on behalf of all industry stakeholders through which it collected K173,316,738.80 — meant for re- afforestation activities.

The Commission planned for K8 million towards 2022/2023 re-afforestation activities and also received a request from Department of Forestry to fund some of the activities during national tree planting day that was held in Mangochi.

The Internal Audit team reveals that the Commission had no policy or guidelines on how to use the afforestation levy and that reforestation levy which was collected from tobacco industry on behalf of government (K105, 881,907.52, which was committed to planting tree exercise.

But only K4.4 was used to procure tree seedlings representing 4.2% of the total expenditure and the materials bought for the function was very expensive — golf shirt with two logos bought at K34,000, T-shirt with two labels bought at K24,000.

Also on focus was Platinum Events, which is the subsidiary of Optima Group and both companies tendered for the same contract for provision of golf shirts and T-shirts and the company requested the advance payment of 60%, which the Commission granted contrary to the Secretary of Treasury instructions that “payment for goods and services received shall be effected upon verification and confirmation that goods were received or that services were rendered”.

The audit team reminds the Board of Commissioners that Public Procurement & Disposal of Assets Act requires a procuring entity to formulate an Internal Procurement and Disposal Committee (IPDC) which appoints an evaluation team responsible to make all bid evaluations and select the best successful bidder to be awarded the contract of supply of goods or services.

“PPDA Act requires the procuring entity to procure from only registered suppliers with the PPDA and that values up to K100 million to be approved by the IPDC.

“The audit exercise noted that there was no evaluation process when procuring some goods and service [and] that the IPDC used the fixed team to evaluate process of procuring of goods and services.”

The majority of the Commission’s budget votes were overspent with 40 of the 72 total votes cast by the Tobacco Commission spent in excess, or 56% of them, in violation of Treasury regulations and the Public Finance Management Act.

Zaniku concludes that the Tobacco Commission’s management “must abide to the approved budget for their planned activities or seek approval from the relevant authorities stipulated in the Public Finance Management Act and other statutory guidelines”.

“Management must abide to circulars issued by government’s press release, accounting manual, treasury instructions, laws and regulations and all relevant instruction that affect statutory corporation.”

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