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Logo of Phnom Penh Post newspaper Phnom Penh Post - Fraud at CMAC widespread

Fraud at CMAC widespread

T HE Cambodian Mine Action Centre (CMAC) has admitted last month's discovery that

it had fraudulently obtained $90,000 from the Government was not an isolated case

but was part of a systemic fraud dating back five years.

The controversy came to light in April when the Cambodia Daily reported that last

October CMAC had fraudulently obtained $90,000 from the Royal government by asking

members of Demining Unit Four in Kampong Chhnang to sign pay slips for money they

never received. CMAC management had sought to mollify the concern of its foreign

donors by insisting the fraud had been an isolated, one-time event.

But now Ieng Mouly, Chairman of CMAC's Governing Council, says that fraudulent funds

procurement appear to be common within the organization.

"[Such fraud] is common in Cambodia, but I'm shocked that it was repeated so

many times," Mouly said, who speculated that such fraudulent accounting practices

have been undertaken at CMAC "since late 1994". "CMAC management should

have stopped [the fraud] the first time [it was detected]."

The revelations are likely to put international funding for CMAC in doubt until the

matter is resolved.

It is understood the United States is withholding $1 million in funding until a foreign

financial controller is appointed because of concerns of corruption on the part of

local officials

CMAC Director General Sam Sotha has dismissed the controversy as a cultural misunderstanding,

saying that the procurement method was acceptable by standards of Cambodian culture.

"It's very hard to say that [ fraud occurred], {because] people in different

countries run things in different ways."

According to Sotha, responsibility for the funding fraud lies with Cambodian Ministry

of Finance guidelines that bar the use of Royal funds for CMAC management's international

travel and public relations expenses.

Sotha repeatedly stressed that regardless of how the money had been acquired, it

had in no way been misappropriated.

"In fact I did not know the [procurement] process ... I asked [CMAC's} Assistant

Governor General to pursue the government funds and somehow he got it," Sotha

said. "I know that the money I got from the government was spent on CMAC as

a whole."

However his assurances are too little for people both in and outside CMAC who say

the accounting system has huge potential for abuse and little chance of it being

discovered.

Richard Warren, the UNDP's Program Coordinator for CMAC agreed that the initial claims

that the October fraud involving false pay slips was a one-off were premature.

"I believe there may have been more than one [fraudulent] dispersion of funds,"

Warren told the Post on May 11. "I've had a report from one of [CMAC's foreign]

Technical Advisors who believes he's discovered another request for double signatures."

Paul Mathews, Resident Representative of the United Nations Development Program (UNDP)

which administers a trust fund supplying 90% of CMAC's budget, maintains that the

actual degree of "fraudulence"of CMAC's actions remains open to debate.

"I prefer to use the term 'irregular'," Mathews says of the double-signing

of CMAC pay receipts, "but in the strict sense of the word it is fraud."

One point upon which Mathews does not equivocate is the extent to which the most

recent revelations of CMAC's creative accounting practices bodes ill for the organization's

already strained relations with its foreign donors, who in total fund a whopping

97% of CMAC's operating budget.

"[The allegations] complicate the donor/CMAC relationship by increasing the

amount of money taken out [of Royal government coffers] and because [donors] have

been told that there had only been one such case [of fraudulent fund procurement],"

Mathews explained. "If proven, [such allegations] would demonstrate that [CMAC]

management has not been accurately representing the facts [to donors]."

Sotha expressed doubt at Warren's report of another funding procurement scandal emanating

from Kampot, but promised swift retribution if proven true.

"I can't see that another [funding procurement fraud] has occurred," Sotha

said, adding "If it's proven, I'll check the severity of punitive action at

my disposal."

Ironically, UNDP's Paul Mathews suggests that the CMAC funding procurement scandal

could had been wholly avoidable.

"We'd have preferred that [CMAC] management had come to the donors and said,

'We're having trouble gathering funding from the Royal government, can you intervene?'",

Mathews said.

According to Mathews, recent accounting practices served only to compound donor suspicions

of CMAC emerging from an equally dubious funding request two years ago.

In what Mathews describes as "an exceptional case", in late 1997 UNDP provided

CMAC with US$20,000 to cover the rental payments of CMAC structures, an expense for

which the Royal government is normally responsible for.

"We later found out that funds from the government funds were in fact available,"

Mathews says.

In an attempt to determine precisely if and how much of CMAC funding has been misappropriated,

two audits of CMAC's financial affairs are currently underway.

Both the foreign accounting firm KPMG and a Ministry of Finance investigative committee

are scrutinizing the accounts and receipts related to Cambodian government funding.

The KPMG audit, insisted on by the donors at the CMAC Steering Committee Meeting

in April, got underway on Monday and is expected to be completed within the next

two to three weeks.

In addition, a long-planned audit of CMAC's finances will be initiated later this

summer.

Unfortunately, according to Mathews, CMAC suffers from serious structural flaws in

its financial control systems that make accountability extremely problematic.

"CMAC has not yet had a single, unified budget," Mathews explained. "Instead

there exist [within CMAC] several different budgets for each of CMAC's accounts,

with separate budgets for funds from UNDP, individual donors and the Royal government."

Mathews described CMAC's "highly unusual" budgetary structure as particularly

sensitive to potential manipulation by unscrupulous accountants or administrators.

"The present [CMAC budgetary] structure .. .opens the door to ' double accounting',"

Mathews warns. "I don't know if it's happened, and I hope and pray it hasn't."

Back at CMAC, however, Ieng Mouly points out another peculiar failing of CMAC's financial

control system.

"Since 1993 CMAC has had a statute allowing for an official treasurer, but there's

never been one," he complains. "I feel that there's not been enough intention

from people [within CMAC] to have a treasurer ... perhaps because they think they're

sophisticated enough to handle [accounting procedures] on their own."

Mouly claims to now be in a decisive position to affect badly needed change in CMAC's

faulty financial control structure. In what appears to be the equivalent of a bureaucratic

coup d'etat, Mouly says he now calls the shots at CMAC.

"The new [CMAC] Governing Council has amended the statutes so now I have more

power and Sam Sotha reports to me," he said.

With a newly appointed treasurer already hard at work in the corner of Mouly's office,

Mouly says an independent foreign co-treasurer is soon to follow.

"Once the new treasurer and co-treasurer are appointed, we will consolidate

CMAC's accounts into one unified budget," Mouly promised.

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