By Kondwani Magombo

Lilongwe, August 18, Mana: The 2019-2020 Financial Year flashes into the minds of Nkhotakota District Council management staff with unpleasant recollection. It was the year that the Governance to Enable Service Delivery (GESD), a five-year US$100 million World Bank-funded project, put councils under microscope to assess their performance in service delivery, and determine which ones should get project’s Performance Based Grant (PBG).

A tool called Local Authority Performance Assessment (LAPA) was used and Nkhotakota, alongside three other districts, scored very poorly on the audit report scale, which has four classifications namely, unqualified opinion (top status), qualified opinion, disclaimer, and adverse opinion (lowest status).

Nkhotakota district council got adverse opinion – the worst status on the scale and, alongside Nchinji, Blantyre and Thyolo, they lost the opportunity to tap from the GESD’s Performance Based Grant (PBG).

Nkhotakota district council and its population saw a total sum of MK337million, which could have supplemented the council’s District Development Fund (DDF), escaping through the fingers.

“It was a very bad experience and it weighed heavily on us to think that we had deprived the people of Nkhotakota funds that could help in improving service delivery in the district,” explains the council’s Director of Finance (DoF), Khumbo Masankhula.

According to the DoF, there were four main issues that the council fell short on: valuation of non-current assets; failure to provide supporting documents for some figures which were material in the financial statements; miscalculation of some balances in the statement of the financial positions; and failure to remit payee to Malawi Revenue Authority.  

But rather than draining the council’s energy to rise and remain standing, the adverse opinion score only succeeded in making Nkhotakota District Council management stronger than ever before.

From the adverse opinion, Nkhotakota put its house in order and, alongside three other councils across the country, the council attained unqualified opinion status in the subsequent financial year of 2020-2021.

Unqualified opinion audit report, according to National Local Government Financing Committee (NLGFC) financial analyst, Sara Banda Chizinga, is the top classification on the audit reporting scale and it means that “auditors have gone through all financial statements and that, in the auditors’ assessment, the financial statements are free from material misstatements, and also that the statements are showing a true and fair view”.

Nkhotakota district council continues to walk tall after making it again, alongside seven other councils that have attained unqualified opinion audit report for the 2021-2022 financial year.

“The adverse opinion audit report was a big wakeup call and, as council, we told ourselves that it would never happen again,” explains Masankhula. “So, we started preparing proper books of accounts and putting everything in order and here we are: It’s exciting news and we are happy that we are now able to access the GESD’s Performance Based Grants. The people of Nkhotakota are happy too.”

While the unqualified opinion status remains a must for all councils in the country as it is a prerequisite for them to tap into GESD’s PBG, for Nkhotakota it is a thing to die for as the council’s next most ambitious leap depends on the attainment of another unqualified opinion.

“We just have to make it again – it is critical for us,” explains Masankhula. “The council is in the process of releasing a bond to raise financing for big investments, including construction of an industrial park. So, we are working with some stake holders like Malawi Stock Exchange and one of the requirements for us to go to the market and issue a bond is that we secure unqualified opinion for 3 financial years.”

Elsewhere in Chitipa and Phalombe, the councils’ DoFs and their respective managements are basking in a similar glory, having steered their councils to safer grounds by attaining unqualified opinion audit report twice in a row i.e. in 2020-2021; and 2021-2022 Financial Years.

For Chitipa, the council’s DoF, Gift Msowoya, admits that the journey has not been all smooth to get where the council is regarding proper documentation and records keeping.

“When I came here in 2021, I found that many things were not in order: the cheques were handwritten, and a number of accounting staff did not know how to go about their job in terms of transacting,” explains the DoF.

“So the first thing that I did was to put in internal controls that could help better management of public financial resources,” he adds.

The number of councils obtaining unqualified opinion audit report has doubled to 8 i.e Chitipa, Rumphi, Nkhotakota, Lilongwe, Ntcheu, Phalombe, Thyolo and Nsanje, in 2021-2022 Financial Year, from four i.e Chitipa, Nkhotakota, Dowa and Phalombe, in 2020-2021 Financial Year.

Like it has been the case with Nkhotakota and Chitipa district councils, the attainment of unqualified opinion audit report for two consecutive years has been a big energizer to Phalombe and the population the council serves.

The status has not just enabled Phalombe qualify for GESD Performance Based Grant for service delivery, it has also enabled the council win public trust and donor confidence, according to the council’s DoF, Martin M’baya.

“The unqualified opinion status is very crucial to us as a council: Currently we are submitting a proposal to EU worth MK1billion and the unqualified opinion audit report is a requirement,” explains M’baya.

Chitipa, Nkhotakota, Phalombe, and the rest of the other councils that have attained the most sought-after unqualified opinion status in the 2021-2022 Financial Year are all touting teamwork and visionary leadership at council level as key to their success.

“I owe it to the team that I work with; I provide all the required technical skills to the people that I supervise and, together, we make sure that we are following the procedures that are laid out in the financial management manual,” explains Nkhotakota DoF, Masankhula.

The winning councils also confess that they could not have attained the unqualified opinion status without the support of GESD through the NLGFC whose financial analysts have always worked with the councils, providing guidance.

NLGFC Financial Analyst, Sara Banda Chizinga, applauds the councils for attaining the unqualified opinion audit report, a status she says requires dedication, hardworking, and special attention to all the procedures making sure that all the assets, the liabilities and transactions, payments, receipts, are in place and have been accounted for.

Chizinga advises that the process starts at budget level where councils need to put in much effort as whatever they budget is what they implement.

She explains: “Councils need to make sure that all the transactions are in line with what they budgeted for to avoid over expenditures; they need to be within the budget. And then after that they need to make sure that all the transactions are being captured within the IFMIS, which we currently have in all the councils.

“Councils should, also, make sure that they have strong internal controls, for instance: fuel should be accounted for; they should have proper records filing, ledgers, allowances, payment vouchers – all should have supporting documentation.”

In terms of fixed assets, Chizinga says councils should make sure that all the donated assets are recorded and accounted for, and that all the assets that are purchased are accounted for.

All government guiding instruments such as Procurement Act, Local Government Act, Public Finance Management Act, and other guidelines must be followed by councils, according to the analyst.

But while it is every council’s dream to attain the unqualified opinion audit report and attract not only GESD funds but other donor funds as well, some factors may affect progress in the councils.

Chizinga cites transfers as being among the factors that can affect progress in council’s attainment of the top audit score.

“Mostly when there are transfers, say, when someone has started within the year and it happens that amid preparation of financial statements the person has been moved, it becomes a challenge for the one who has come in to start preparing the financial statement,” she observes.

But Chizinga is quick to point out that with dedication and hard work, councils can get themselves from a mess (adverse opinion) to safety (unqualified opinion audit report), a precedence which other councils like Nkhotakota have just set.

Out of the 28 councils in the country, three councils, namely Balaka, Machinga and Zomba have completely missed the GESD Performance Based Grant for the subsequent funding after scoring poorly in the 2022 LAPA.

Mana/km/scm