MZUZU CITY COUNCIL MALAWI CASE STUDYI

1. MZUZU CITY COUNCIL MALAWICASE STUDYI PRESENTED BY KHUMBO YAKWERA NYIRENDA INTERNAL AUDITOR

2. FRAUD CASE AT THE DEPARTMENT OF HEALTH SERVICES • As per the annual work plan of the internal audit section, there were some internal audit activities that were carried out between 7th to 18th May, 2012 in the health department operations. This involved visiting more than 100 bars and bottle store operators where the council is supposed to collect license fees. The following were the objectives.

3. Ensure that all operators had all the required licenses for operating their businesses i.e. liquor, amusement machines, opaque and food licences. • Ensure that licenses issued indeed had all the necessary features e.g. seals, authorized signatures etc. and indeed valid. • Ensure all the required payments had indeed been remitted to council. • Ensure that required regulations are being followed in running these premises

4. OBSERVATIONS The Internal Audit discovered that in some cases a single general receipt was used in two transactions. The original receipt could be photocopied, issue the original copy for say, squatter fees payment which is at Mk100.00 and issue the photocopied one for the bar licenses which in most cases comes up to Mk29, 400.00 (Liquor Mk14.400, food Mk3, 000. Opaque Mk6, 000.00 and amusement machines Mk6, 000.00). In such cases the revenue collector would only remit Mk100.00 squatter fees to the council and pocket the Mk29,400.00. The bottle store owner however, could be issued with licence. This was the case with several bottles stores

5. The second observation was where the records clerk at the health department used to connive with the bottle store operators. She could tell a bottle store operator to pay a lower and different rate at the cashier’s office say, Mk500.00 for the medical examination fees instead of liquor fee charges. She could later insert the general receipt number of the little amount paid on the license and pass it to the director of health services to endorse her signature. The records clerk would later on pocket the Mk28, 900, the difference between amount paid and license from the bottle store operator. The director of health services unknowingly used to sign for several such licences.

6. The third scenario was where this Revenue Collector could reduce licenses fees rates to entice the operator to give him cash quickly. In such cases rates were reduced by half or more. Since the license book and seals were being kept by the records clerk, the two could then easily photocopy a license and issue it to a bottle store operator. In such cases the council could get no single money and more than one million Malawi kwacha has not been accounted for because of such fraud tactics. It was discovered that even those bottle stores which had not been approved by the liquor licensing board and had paid nothing were still able to trade freely just like those who had already complied with recommended regulations.

7. RECOMMENDATIONS MADE TO MANAGEMENT • Since the council had lost a lot of revenue because these frauds, the Internal Audit office recommended to the management to have the two culprits disciplined accordingly i.e. the revenue collector and records clerk. In most cases these are treated as police issues. • Although the council introduced some security features on the licences, audit office recommended for more proper verification before a license issued. Audit office therefore recommended that all licenses and other related documents should be verified by internal audit office before issuing to clients.

8. Internal audit recommended that the revenue collectors should be given the mandate to close bars and bottle stores of all non complying operators.

9. CONCLUSION: • RESIST, REFRAIN, REPORT CORRUPTION • ZIKOMO KWAMBIRI, THANK YOU VERY MUCH • THE END