Maravi

Chifungula criticises Indeni over engagement of auditors

Chifungula criticises Indeni over engagement of auditors
By Mwala Kalaluka
Fri 05 Feb. 2010, 04:00 CAT

AUDITOR General Anna Chifungula yesterday described as unethical the decision by Indeni Petroleum Refinery to engage their auditors, Price Waterhouse Coopers (PWC) as share valuators prior to the government’s assumption from Total of a hundred per cent shareholding in the refinery.

During a submission by energy permanent secretary Teddy Kasonso on audit queries cited by the Auditor General against Indeni for the 2007 financial year before the parliamentary public accounts committee (PAC), Chifungula said the engagement of Price Waterhouse Coopers on the valuation of Indeni in view of Total’s pullout from the contract management arrangement with the government had created a conflict of interest.

“Price Waterhouse Coopers are your auditors. How then can they go and value your shares when they are auditing your books of accounts? That is unethical,” Chifungula said.

Committee chairperson Emmanuel Hachipuka said what had happened was a very big problem given Indeni’s insolvency at the time.

“There are serious issues of professional integrity,” he said.

When Indeni chief accountant Thomson Chikumbi tried to respond to the observation, Hachipuka curtailed him on the basis that he was not the right person to give a response.

In his submission, Kasonso said the K29 billion that was queried in the Auditor General’s report was a government grant to the company to help in undertaking rehabilitation works.

He said this money was one of the four installments towards recapitalisation of the company.

Kasonso said the Memorandum of Understanding (MoU) between the government and Total where it was agreed that each partner should pay US $22.5 million towards rehabilitation works, was signed pursuant to the company Act.

“The liquidity of the company was very poor and management used its discretion to settle debts,” he said.

On the Auditor General’s query that Indeni did not comply with tender regulations in awarding a contract to a US-based company to carry out works at the refinery, Kasonso said the decision must have been made at the shareholder level.

But he said the contractor was a specialised and internationally reputed company and had a proven track record in the kind of work they were engaged to do.

“This therefore, technically is not a single source procedure,” said Kasonso.

However, Hachipuka said it was clear that Kasonso’s answers were not satisfactory as he was trying to justify why certain regulations were flouted.

“You are a monopoly in your operations. Unfortunately, you have to operate within procedure. If you look at the answers here, you are taking advantage of the fact that you are a monopoly,” he said. “There is no board that is beyond procedure. The Auditor General said you flouted procedures… we will show you item by item that your answers are not satisfactory.”

Hachipuka said compliance to the public financial regulations when undertaking procurements at Indeni should be seriously adhered to now that it was under total government ownership.

Hachipuka also asked Indeni acting managing director Maybin Noole and Chikumbi to explain why the company got a high interest loan of US $4.7 million to pay for salaries during the time the refinery was gutted.

Noole said after the plant was gutted the company management made a pledge to maintain all the employees and during this time AGIP from Italy were the ones managing the company before Total took up 50 per cent shareholding of the parastatal.

“Total MD offered to talk to Total head office to give us the loan,” he said.

Chikumbi assured the committee that the remaining balance on the loan would be liquidated within twelve months.

Following the response, Hachipuka said the Indeni management had given the committee sufficient information to use against the Secretary to the Treasury.

“Clearly these were bad decisions,” said Hachipuka.

Labels: ANNA CHIFUNGULA, AUDITING, AUDITOR GENERAL, INDENI

posted by MrK @ 5:19 PM