Abstract

Operational problems of an old system of cash management led to Government of Malawi to embark on a Central Payment System (CPS). The CPS is an important financial management activity for strengthening public expenditure and improving financial management in achieving Government goals of financial discipline, accountability and transparency. The overall purpose of the study was to evaluate the effectiveness of the CPS. Specifically, the study purported to assess the extent to which the Government has implemented the Central Payment System. Different experiences as argued by management gurus quoted throughout the study are indicating the following as key features of an effective Central Payment System: extent to which the organisation is able to maintain its quality work, measure of extent to which a decision alternative meets the stated objective regardless of costs involved, efforts to improve effectiveness that focus on identifying what is analysed, improving financial management, transparency and effective accountability of public funds. It has been generally agreed by the authors that indeed an effective CPS is key to financial discipline in management of finance. Apart from the literature, primary research was also conducted. Data was collected through a questionnaire comprised of closed and open – ended questions. Two hundred and thirty questionnaires were sent to officers of Ministries of Agriculture, Education and Health at Capital Hill in Lilongwe, out of which 155 questionnaires were received and used in this study. Three Ministries were selected based on, among other things, their size and role in the economic and social development of the country. Quantitative data were analysed by using Excel Package. Responses to open- ended questions were analysed using content analysis. The study found that the CPS has some positive elements, for example, the CPS purposes are well defined despite the problem that CPS delays process of payments; the system has been successful in controlling over expenditure in Ministries and Departments which is about fifty percent savings and the system has also reduced workload on manual preparation of Bank Reconciliation Statements. However, the study has also revealed that the CPS has some weaknesses that cause the system to be ineffective tool for bringing financial discipline in the Civil Service. The weaknesses are as follows: the system cannot detect ghost workers and duplication of payments. Furthermore, the system lacks internal and supervisory controls at both Ministries and Accountant General Department. The study has therefore, established that although the CPS has some positive elements, in general, the system is not effective. The study’s main recommendations are that Government should train its supervisory and operational staff in operation of the CPS and that internal controls in the system should be reinforced in order to have an effective system which would contribute to Governments objective of reduction of Poverty in Malawi.

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School	: School of Law, Economics and Government
Issued Date	: 2008

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