Bombshell: Full Report; Financial and Operational Audit of the Private Sector Development Initiatives

Full Report: Financial and operational audit of the Private Sector Development Initiatives (PSDI) conducted by the Internal Audit Unit (IAU) of the Ministry of Finance and Development Planning.  See Report Below:




Table of Contents

 

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DESCRIPTION

 

Pages

 

1EXECUTIVE SUMMARY

2BACKGROUND

3AUDIT REPORT

3.1OBJECTIVE

3.2SCOPE

3.3METHODOLOGY

3.4FINDINGS AND RECOMMENDATIONS

5CONCLUSION

 

 

 

 

 

 

 

ACRONYMS

BFU                 Budget and Finance

CAG               Comptroller and Accountant General

CBL                Central Bank of Liberia

DMA              Deputy Minister for Administration

DMFA             Deputy Minister for Fiscal Affairs

FM                  Finance Minister

GE FUND       Government Enhancement Fund

GOL                Government of Liberia

IAU                 Internal Audit Unit

LBDI              Liberia Bank for Development Investment

LPSEGF         Liberia Private sector Economic Growth Fund Account

MFDP                        Ministry of Finance & Development Planning

MOF               Ministry of Finance

MOJ               Ministry of Justice

MOU              Memorandum of Understanding

PFM Law       Public Financial Management Law

PPCA             Public Procurement and Concession Act

PSDI               Private Sector Development Initiatives

 

 

 

 

 

 

EXECUTIVE SUMMARY

 

INTRODUCTION AND BACKGROUND

The Internal Audit Unit (IAU) of the Ministry of Finance and Development Planning has conducted a financial and operational audit of the Private Sector Development Initiatives (PSDI). PSDI is a project, that was established in 2014 at MFDP to provide loans to Liberian owned Small and Medium Size Enterprises (SMEs). The loan was meant to financially strengthen Liberian owned businesses, which were expected to repay, and the repayments would revolve or be disbursed to other Liberian businesses.  In so doing, the process would have created jobs and accelerate the participation of Liberian owned businesses in the economy of Liberia.

 

In May 2014, MFDP entered into a Memorandum of Understanding with the Liberia Bank for Development and Investment (LBDI) to partner and establish an account (GE Fund) through which the borrowers shall receive loans. Modus Operandi of the MOU, which was signed, by MFDP, MOJ and LBDI outlines as follows:

 

That the Ministry of Finance shall recommend beneficiaries of the GE Fund to LBDI and submit application packages containing the following: business registration, business proposal/plan, and tax clearance.

That LBDI shall verify the applications and underwrite the loans to the beneficiaries.

That LBDI shall prepare the loan documentation, which shall include the Loan Agreement and Promissory Note for approval.

That LBDI shall open and maintain Small Business accounts for the beneficiaries to which disbursements will be made and collection from the beneficiaries will be achieved.

That the Ministry of Finance and LBDI shall jointly approve all loan documentations.

That LBDI shall establish a desk/unit for verification, underwriting, disbursement, recovery and reporting.

That LBDI shall submit monthly reports to the Ministry of Finance on the management of the GE Fund.

That all repayment of principal and interest by the beneficiaries of the GE Fund shall be credited to the GE Fund account as replenishment.

Following the MOU, the GE Fund was opened and initial amounts of US$ 700,000.00  and US$ 1,000,00.00 were deposited on July 22, 2014 and July December 31, 2014 respectively. Subsequently, on October 2, 2014, an additional US$ 600, 000.00 was also deposited to the account for loan purpose.

During 2014 to 2016, the project disbursed US$ 2,274,400.00 to forty-six (46) borrowers. Documents reviewed showed that out of an initial amount of US$ 1, 991,900.00 that was disbursed to thirty-six (36) customers, only US$ 282,500.00 has been recovered. The recovered amount was re-disbursed to additional ten (10) customers, thereby raising the portfolio to US$ 2,274,400.00. This means that the initial disbursement of US$ 1,991,900.00 is still outstanding.

See appendix 1-2A & 1-2B

Due to the slow recovery/loan repayment, the Internal Audit Unit engaged the process of reviewing the project’s books to ascertain reliability of the process, the existence of said businesses and reasons for delayed repayments.

RESULT OF THE ASSESSMENT

Our review established that there was a memorandum of understanding reached between MFDP and LBDI to coordinately run the loan activities of PSDI, however, customers’ evaluation/vetting was squarely done by MFDP. The evaluation/vetting conducted by MFDP/PSDI Desk provided many loopholes for default. Example, there was no collateral to back the loan, many borrowers used the borrowed funds as start-up for their businesses, while there is no evidence of  comprehensive market survey on file. These created a serious impediment for recovery, thereby defeating the Project’s objective for revolving fund.

Dr. James F. Kollie, former Deputy Minister for Fiscal Affairs MFDP signed all of the loan approvals. It was established that twenty-four (24) borrowers who received loans valued US$ 965,400.00 have not paid any amount towards recovery.

Moreover, twelve (12) businesses received US$ 545,700.00, but could not be located because; they were not visible at point of address. We inquired from few inhabitants of the communities where the businesses were claimed to be operating,   but they too could not confirm the existence of such institutions. Telephone contacts of the individuals who owned these businesses were permanently switched off. See findings below. See details below

 

The review revealed that twenty-one (21) borrowers received US$ 1,159,000.00, but they have repaid only US$ 123,125.00.  Thereby resulting to a balance outstanding of US$ 1,035,875.00.  See details below

Loans Disbursed to staff  Connected Businesses

Loans were disbursed to either businesses owned by staffs of MFDP; or businesses with whom they got close connections, and some of those businesses have not paid a cent against their obligation. The businesses include LELAH INC (US$ 40,000.00), Pure Life Incorporated (US$ 65,000.00), People’s Water Company Liberia   LTD (US$ 65,700.00), South East Water Company (US$ 75,000.00) and Zianab Business Center (US$ 20,000.00).  See details below

Out of forty-six (46) borrowers, only Garson Incorporated, located on 11th street Sinkor paid their full obligation of US$ 150,000.00 plus US$ 10,500.00 interest, amounting to total repayment of US$ 160,500.00. Garson Incorporated account statement revealed that the institution has only US$ 11.00 obligation outstanding.

Liberia Private Sector Economic Growth Fund Account (A/C no. 001USD21322281101)

During the review, we observed that PSDI ran an Operational account titled Liberia Private Sector Economic Growth account (A/C number 001USD21322281101).  From 2014 to 2016, US$ 4,111,450.00 was credited to this account at different intervals. Of the US$ 4,111,450.00, US$ 1,665,454.91 was transferred to the PSDI loan account for loan disbursements, while the balance of US$ 2,445,995.09 was withdrawn on multiple checks transactions. Our attention is drawn to a specific LBDI cheque number 133866, valued US$ 1,648,037.00. We observed that the cheque was written as debit to the LPSEGF account and correspondingly deposited to another account called GOL Operational account (a/c number 02-2-0530000182) at CBL. Details are highlighted in the findings.  See details below

 

AUDIT OBJECTIVE

The objectives of the Audit are listed as follows:

Determine that borrowers are real Liberian business owners, and that there is no incident of conflict of interest,

Ascertain reasons why PSDI loan repayment is slow;

Reconcile all PSDI Bank statements to determine the degree of anomalies;

Determine the reliability and integrity of all financial reports and financial information related to PSDI,

 

Ensure that account(s) were opened by the CAG based on the instruction of the Minister

Ensure that account balances are fairly stated,

Ensure that transactions are processed in compliance with applicable laws and regulations,

Determine that the project’s bank accounts were regularly reconciled;

Determine that all transactions meet the required approvals;

 

AUDIT SCOPE

The audit covers the internal control framework and operational practices of PSDI. The scope also includes all transactions and loan disbursements effected through the PSDI account as of the date the account was opened to the present; July 2014 to April 2017.

 

AUDIT METHODOLOGY AND PROCEDURES PERFORMED:

INTERVIEW OF KEY INDIVIDUALS:

The following procedures were used as guidelines (TOR) for the interview:

Conducted  interviews with key individuals as we deemed necessary;

We conducted open ended interviews with selected key individuals as scheduled;

We took written and signed responses from interviewees as deemed necessary;

We reviewed responses along with PSDI policies and relevant regulations;

DOCUMENT REVIEW:

We reviewed documents including, manuals, borrowers files, business proposals, project   plan, payment requests, bank signature cards, bank statements, returned checks, etc., to the extent necessary to obtain sufficient appropriate evidence in order to make an informed conclusion.




The following procedures were performed:

We performed a compliance review to ensure that approved businesses possessed all required documents such as Business Proposals, Article of Incorporation/Business Registration certificate, tax clearance etc.

We reviewed returned checks and all supporting documents to verify whether all payments were duly approved by the DMA, and who were the beneficiaries of the amounts.

We analyzed the LPSEGF account to ensure value of cash withdrawn by individuals.

We verified whether vendors delivered goods paid for by evidence of delivery notes and physical verification of selected goods listed on the delivery notes. Moreover, we ascertained if procurement was done in line with the PPCA.

We reviewed service contracts to ascertain if there were violations.

We conducted physical field verification of  the businesses who received loans.

 

5.0 Findings

5.1 Condition: Evaluation/vetting was not done by third-party

PSDI is managed by MFDP; Mr. Amos Koukou serves as Coordinator of the project. However, while the MOU calls for collaborative partnership between MFDP and LBDI, vetting of borrowers was carried-out exclusively by staffs of PSDI and approved by the former Deputy Minister for Fiscal Affairs, Hon. James F. Kollie without collaterals.

PSDI’s books revealed that during 2014 to 2016, the project disbursed US$ 2,274,400.00 to forty-six (46) borrowers. Documents reviewed showed that out of an initial amount of US$ 1, 991,900.00 that was disbursed to thirty-six (36) customers, only US$ 282,500.00 was recovered. The recovered amount was re-disbursed to additional ten (10) customers, thereby raising the portfolio to US$ 2,274,400.00.  See

Appendix 1-1 and Images in the Index of the report

Criteria

Section 2.10 (d) of CBL 2014 official Gazette (Vol. XIII) states that institutions involved with lending should have a Credit policy, and such policy should contain requirements for credit file. A credit file should be maintained in such manner as to facilitate proper review of the credit to permit assessment of the borrowers’ repayment prospects. It should contain, at a minimum, the identification of the borrower (name, type of business, connected parties, etc), evidence of the authority to borrow, financial statements, purpose and terms of credit, details of collateral, credit authorization, repayment history and internal credit reviews.

Recommendation

PSDI Policy should be revisited to include all requirements as enshrined in the CBL Gazette. Loan evaluation should be done by the bank(s) with whom the disbursement account is domiciled and such should be stipulated in the MOU between MFDP and the Bank.

PSDI Response

 

5.2 Condition: Twenty-four (24) Borrowers who received loans have not done any repayments against the loans

The Project was meant to build the capacities of Liberian owned businesses, in that repayment amounts would be re-disbursed to additional Liberian owned businesses. However, It was established that twenty-four (24) borrowers who received loans valued US$ 965,400.00 have not paid any amount towards recovery. Additionally, with the exception of , Terravilla Gardens Inc who received US$ 12,500.00 on October 6, 2016, Waisi who received US$ 25,000.00 on July 28, 2016 and New Dimension Fish Farm who received US$ 20,000.00  on July 28, 2016, the remaining 21 borrowers loans have exceeded 365 days and have not paid any amount against their obligations.

We observed that many of the 100% delinquent borrowers used the funds as start-up for initiating their businesses.  See appendix 1-3 attached for details

Criteria

Regulation No. CBL/RSD/004/2014

Non-performing loans and advances for which the principal and/or the interest remain outstanding for three hundred and sixty (360) days or more shall be classified as loss. Loans and advances shall be classified as loss where they are considered uncollectible and of such little value that their continuation as recoverable facilities is not defensible. This classification does not imply that the facility has no recoverable value, but rather it is not practical or desirable to defer making full provisions for the facility even though partial recovery in future may not be entirely ruled out. Loans and advances classified as loss include those to bankrupt companies and insolvent firms with negative working capital and cash flow or those to judgment debtors with no means or foreclosable collateral to settle the debts.

Recommendation

The scheme being revolving funds was meant to stimulate the economy and provide financial leverage for Liberian owned SMEs. Failure to repay against the loans, which have also passed due, should be seen as economic sabotage. Therefore, the twenty-four (24) borrowers, along with Dr. James F. kollie (Former Deputy Minister for Fiscal Affairs) who approved all the loans should be further investigated.

PSDI Response

5.3 Condition: Twenty-one Borrowers received US$ 1,159,000.00 but have paid only 10.6% against the loans.

We observed that twenty-one borrowers received US$ 1,159,000.00, but they have repaid US$ 123,125.00 only. With the exception of Prospect Floors Inc. who received US$ 45,000.00 on April 29, 2016, all of the twenty borrowers received their loans in 2014 and 2015. This indicates that their repayments have either passed due or close to maturity. All of the businesses we visited highlighted the issue of financial difficulties and that their businesses were not doing well.

See Appendix 1-4 for details

Criteria

Regulation No. CBL/RSD/004/2014

Non-performing loans and advances for which the principal and/or the interest remain outstanding for three hundred and sixty (360) days or more shall be classified as loss. Loans and advances shall be classified as loss where they are considered uncollectible and of such little value that their continuation as recoverable facilities is not defensible. This classification does not imply that the facility has absolutely no recoverable value, but rather it is not practical or desirable to defer making full provisions for the facility even though partial recovery in future may not be entirely ruled out. Loans and advances classified as loss include those to bankrupt companies and insolvent firms with negative working capital and cash flow or those to judgment debtors with no means or foreclosable collateral to settle the debts.

Recommendation

The borrowers should be further investigated, and be made to pay the full recoverable amounts as enshrined in the MOU and loan agreements.

PSDI Response

5.4 Condition: Loans disbursed to businesses that are owned or related to MFDP’s staffs

We observed that some loans were disbursed to businesses owned by staffs of MFDP; while some are businesses with whom they got close connections. Moreover, some of the businesses in this category have not paid any amount against their obligation/loan. In our opinion, their action to secure loans from MFDP/PSDI, while at the same time serving as staffs of MFDP constitutes conflict of interest.

The businesses include LELAH INC (US$ 40,000.00), Pure Life Incorporated (US$ 65,000.00), People’s Water Company Liberia   LTD (US$ 65,700.00), South East Water Company (US$ 75,000.00) and Zianab Business Center (US$ 20,000.00).  See details below:

LELAH INC.

Business Manager   : Mr. Prince Gueh, Signatory to the account

OWNERSHIP          : LIBERIAN

Amount received     :US$ 40,000

Amount Paid            :US$ 0.00

Date of Loan            : October 15, 2015

Upon visit to the business site, Mrs. Annah Koukou introduced herself as the wife of Mr. Amos Z. Koukou, who is the Coordinator of PSDI. When she was briefed by the audit team about the loan received by the business from the PSDI, she expressed amazement and shock to hear about such and further stated that she had no knowledge about  such transaction. She also said that Lelah Inc. was a dream to come true but did not materialize thus diverting into the establishment of another business called  Ruzah Entertainment, which is currently located in the R2 community along the Robertsfield highway.

She also told the team that her business manager is Mr. Prince Gueh who was later contacted via phone and admitted that he was managing the affairs of the business. It is important to note that Business registration certificate presented to PSDI as a requirement for loan also carries Mr. Prince Gueh as Business Manager and account signatory of LELAH Inc.

We conducted an interview with Mr. Amos Z. Koukou and brought to his attention what his wife had told us, but he (Mr. Koukou) denied that his wife ever owned any business called LELAH Inc.  Additionally, it is important to note that Mrs. Koukou told us that Lelah was the name of their daughter, but Mr. Koukou again refused to admit same.

PURE LIFE INCORPORATED

OWNER                    : Hon. Romell Watson

Amount received      : US$ 65,000.00

Amount  repaid         :US$  26,450.00

Date of Loan             : November 14, 2014

 

Pure Life Incorporated is a mineral water company located in Sinjay, Ground Cape Mount County. Upon visit to the premises of the water company, which appeared to have stopped operation for some times now, we were informed by members of the neighborhood that it was  owned and operated by Hon. Romell Watson, former Assistant Minister for Administration,  MFDP. We were told that Hon. Watson had travelled abroad and the company was been managed by her mother Mrs. Cleopatra Watson. We contacted Mrs. Watson via telephone and she admitted the business being owned by Hon. Romell Watson, and explained that the business was experiencing some financial challenges, but payments against the loan would continue.

  1. PEOPLE’S WATER COMPANY Ltd

OWNER                     : William Mansfield/Chief Executive Officer

: Theophilus Addy/Chief Financial Officer

Amount Received       : US$ 65,700.00

Amount repaid            : US$ 0.00

Date of Loan               : December 30, 2014

According to documents we read, People’s Water Company Ltd should be located in Klay, Bomi County. We visited Klay, Sinjay and Tubmanburg, but we could not find the water company. We asked inhabitants of the various areas named, but no one had any knowledge of said water company existing in that region of the country. All efforts to call the numbers mentioned on the Businesses documents proved futile, as the numbers were permanently switched off.

Mr. William Mansfield who is chief Executive Officer of People’s Water Company, is also Director for Public Administration Sector, Budget Planning, MFDP. Information we gathered on Friday May 25, 2017 indicates that Mr. Mansfield tendered in his resignation while in the USA.

Mr. Theophilus Addy is Chief Financial Officer of People’s Water Company; during the same period, he served as Assistant Minister for Regional & Sectorial Planning, MFDP. Similar to the case of Mr. Mansfield, we also got reports that Mr. Addy has also resigned his post and travelled out of Liberia.

4.0 SOUTH EAST WATER COMPANY

OWNER                     : Joseph Bright/Chief Executive Officer

: Theophilus Addy/Chief Financial Officer

Amount Received       : US$ 75,000.00

Amount repaid            : US$          0.00

Date of Loan               : November 11, 2014

Southeast Water Company is located in Kanweaken, RiverGee County. We visited the site and saw two water processing machines, few sachets of water and an old truck which we were told was owned by the company. We contacted Mr. Joseph Bright/CEO of the company who was not on scene, inquiring why he has not paid against the loan. He indicated that he suffered losses due to insincere staffs who often made away with proceeds from the sale of water. He also noted that he resumed business two weeks before our visit on May 2, 2017.

It is again important to note that Mr. Theophilus Addy, CFO of Southeast water  company also worked with the Ministry of Finance and Development Planning as Assistant Minister for Regional& Sectorial Planning. He is the same Mr. Addy of the People’s Water Company mentioned earlier.

5.0 Zianab Business Center

OWNER                   : MRS. Zianab K. Dukuly

OWNERSHIP          : LIBERIAN

Amount received     :US$ 20,000.00

Amount Paid            :US$   2,400.00

Date of Loan            : August 27, 2015

Zianab Business Center is owned and operated by Mrs. Zianab K. Dukuly who is  Assistant Director of  Budget and Finance, MFDP. In an interview with Internal Audit, Mrs. Dukuly admitted that she received the money and promised to pay back.

Criteria

Section 1.3.6 of the Code of Conduct- Conflict of Interest:

Conflict of Interest is when a public official, contrary to official obligations and duties to act for the benefit of the public, exploits a relationship for personal benefit.

Section 3.7 of the Code of Conduct- Honesty:

All Public Officials and Employees of Government have a duty to declare any private interests relating to his or her duties and shall, in a way that protects the public interest, take steps to prevent any conflicts which may arise; and shall not deceive, knowingly mislead others, or be influenced by improper means for the purpose of obtaining personal gain or giving undue advantage to others.

Recommendation

All involved should face investigation for violating the Code of conduct, and if found guilty should face penalty associated. Additionally, full repayment of amounts taken should be enforced.

 

PSDI Response

 

5.5 Condition: Twelve (12) Businesses received loans valued US$ 545,700.00 but could not be located

We reviewed “GE Fund” account statement, loan agreements and customers’ files and observed that Twelve (12) borrowers received US$ 545,700.00, repay US$ 4,165.00 but could not be located or reached. We followed-up with a field verification to authenticate the existence of the businesses including all other borrowers who received loans from PSDI. Based on their addresses on books, we did not find or see the twelve (12) businesses at locations stipulated. We tried to contact them using telephone numbers obtained from the borrowers’ files, but their phones were permanently switched off.




However, on May 31, 2015 while concluding the draft report we made further contacts, and were able to reach Mr. Benjamin R. Sanvee, CEO/Sanvee Holdings INC. He told us that we did not see the business at Bong-Mines Bridge as stipulated on the business file because; they have transferred/moved to Sinkor 24 Street. When   questioned on the repayment of the US$ 45,000.00 loan received from the project, he promised to call us back after he shall have consulted his Finance Officer.

See businesses involved:

List of borrowers whose businesses could not be found

 

Criteria

Section 3.2 of the Code of Conduct Integrity:

Public Officials and Employees of Government shall not place themselves under any financial obligations or other situations of conflict that impair, or are likely to impair, the performance of their official duties; and will set out the facts and relevant issues truthfully, and correct any errors as soon as possible. They shall use allotted resources only for the authorized public purposes for which they are provided.

Section 11.10 of the Code of Conduct, Improper Behavior:

No Public Official or Employee of Government shall engage in any act that is fraudulent, embarrassing, profane, obscene, defamatory or otherwise unlawful or inappropriate.

Recommendation

Disbursing loans to institutions that do not exist or cannot be located constitutes deception, integrity issue and fraud. The Actors Dr. James F. Kollie, Mr. Amos Koukou, the PSDI evaluation team and those whose names are mentioned as owners of those entities should be further investigated. This is necessary because these actors should not have been the ones to vet and disburse loans anyway.  This should have been the responsibility of LBDI.

Liberia Private Sector Economic Growth Fund Account (A/c no. 001USD2132284101)

Signatories

Reference to our earlier narration in the Executive Summary of this report, PSDI ran an operational account called Liberia Private Sector Economic Growth Fund account. On January 6, 2014, Hon. Dede D. Sandiman, former Acting Comptroller & Accountant General/RL wrote Mrs. Gloria Menjor, General Manager of LBDI to open at LBDI an account called Liberia Private Sector Economic Growth Fund account (LPSEGF).  Hon. Sebastian T. Muah, former Deputy Minister for Budget and Hon. Dede D. Sandiman were signatories “A” and “B” respectively. The account application form also mentioned Hon. Angela Cassell-Bush as signatory to the account but the signature card only carries Hon. Muah and Hon. Sandiman.

On August 21, 2014, Hon. Amara M. Konneh, former Minister, MFDP wrote LBDI and instructed the removal of Hon. Angela Cassell-Bush and Hon. Sebastian T. Muah from all Government of Liberia accounts domiciled at LBDI. He further designated Mr. Edward Eesiah, former Deputy Minister for Administration, MFDP as temporary signatory “A”.

On October 14, 2014, Hon. Dede D. Sandiman wrote LBDI, instructing the Bank to remove his signature and that of Mr. Eesiah from the LPSEGF signature-mandate card and replace same with Hon. James F. Kollie as “A” and Hon. Sekou A. Sanoe as “B”. On separate occasions, Hon. Kollie designated Hon. Alieu F. Nyei as tempory signatory to the account.

Bank Records

Beginning January 14, 2014 to April 29, 2016, a total of US$ 4,111,450.00 was deposited to the account. See table below:

Deposits to LPSEGF a/c

We also observed that beginning July 22, 2014 to May 5, 2016, US$ 1,454,000.00 was transferred from the LPSEGF a/c to the GE Fund account for disbursements to borrowers.

Total transferred from LPSEGF a/c to GE Fund a/c

The table above shows that US$ 1,454,000.00 was transferred from the LPSEGF a/c to the GE Fund account, which means that the account had a balance of US$ 2,657,450.00 (4,111,450.00-1,454,000.00).

On June 25, 2014, LBDI cheque number 133866, valued US$ 1,648,037.04 was withdrawn from the LPSEGF account to GOL Operational Account (A/C no. 02/205/300001/82) at CBL. Details of the transfer were not available for our review. The withdrawal means that LPSEGF a/c had a balance of US$ 1,009,412.96 (2,657,450.00-1,648,037.04) for PSDI operational use.

Account Operations

5.6 Condition: No Voucher System for US$ 1,009,412.96 operational fund

We reviewed expense documents presented to us by Mr. Amos Z. Koukou and observed that PSDI transactions carried the signatures of Dr. James F. Kollie and Hon. Sekou Sanoe. However, the transactions were not processed through a voucher system, neither did the transactions route through MFDP’s approved processing structure.  Dr.  Kollie approved requests and cheques were raised immediately. This issue was flagged to Mr. Koukou through mail and he admitted in response that voucher system was not put in place for spending the Operational fund.

Criteria

Section P.9 (1) of the PFM Regulation states that all disbursements or payments of public moneys shall be properly supported by pre-numbered payment vouchers.

Recommendation

Dr. James Kollie and Hon. Sekou Sanoe should provide reason(s) why this project was an exception to regulatory compliance. Justification if not satisfactory, should make them personally severally liable for any losses incurred on the project. See Appendix 1-5

PSDI Response

 

5.7 Condition: No Financial Statement, No Cash Plan and Bank Statements not reconciled for LPSEGF account

Financial reports explain the financial position of a project and provide readers traces and understanding of achievements arising from financial spending. Cash plan guides a spending entity of spending lines, while bank reconciliation ensures that unapproved transactions are detected and reversed and determine whether account balances are fairly stated.

We observed that PSDI did not produce any financial report, did not spend against any cash plan and did not reconcile the LPSEGF account. This practice exposed the fund to illegal withdrawals, spending that are not in line with the project’s objectives.

Criteria

Section A.3 of PFM Regulation: Duty to Keep Proper Records and Books of Accounts

(1) Any public officer concerned with the conduct of financial matters of the Government of Liberia, or the receipt, custody and disbursement of public and trust moneys, or for the custody, care and use of government stores and inventories shall keep books of accounts and proper records of all transactions and shall produce the books of accounts and records of the transactions for inspection when called upon to do so by the Auditor-General, the Comptroller General , the relevant internal auditor or any officers authorized by them, or by the Minister.

(2) A public officer who fails to keep or produce any records under this regulation is in a breach of financial discipline as defined in Regulation A.20.

Recommendation




A.20. PFM Regulations: Breach of Financial Discipline

(1) A public officer is in breach of financial discipline if he or his act or omission goes contrary to instructions or directives contained in these Regulations or in accounting instructions or manual for which no variation is permitted except by an appropriate authority.

(2) Any person required to perform any function or duty either under Public Finance

(5) Sanctions for breach of financial discipline shall be consistent with the Civil Service Code, and this may include any of the following:

(a) A written or oral reprimand,

(b) Suspension with loss of salaries and other remunerations,

(c) Demotion in grade with or without reduction in remunerations

(d) Interdiction for a period prescribed in the condition or scheme of service,

(e) Termination or dismissal from employment,

(f) Surcharging the officer with the amount lost and the applicable penalty, if any or

(g)  Prosecution, depending on gravity.

PSDI Response

 

5.8 Condition:  Irregular Payments of Salary

Dr. James F. Kollie, former Deputy Minister for Fiscal Affairs MFDP was written a service contract on the project for three (3) months (July, August and September 2014) for consultancy and he received US$ 5,400 monthly net of tax. At the time the payments were made, Dr. Kollie also served as Deputy Minister for Fiscal Affairs of MFDP and was on MFDP’s payroll while being paid by PSDI. For the three (3) months, Dr. Kollie received total amount of US$ 16,200.00 on LBDI cheques numbers 133792 and 133800.  See Appendix 1-5

 

 

 

Criteria

Section 1.1 (b) of the Code of Conduct states that no person holding public office shall demand and receive any other perquisites, emoluments or benefits, directly or indirectly, on account of any duty required by Government.

Section A.15. Of the PFM Regulation: Unauthorized, Irregular, Fruitless and Wasteful Expenditure

(1) The head of government agency must exercise all reasonable care to prevent and detect unauthorized, irregular, fruitless and wasteful expenditure, and must for this purpose implement clearly defined business processes, identify risk associated with these processes and institute effective internal control to mitigate these risks.

Recommendation

Dr. James F. Kollie should be investigated and made to restitute the full sum of US$ 16,200.00.

PSDI Response

5.9 Condition:  Irregular Payments from LPSEGF

Mr. Amos Z. Koukou, Coordinator for PSDI was paid from the project on a contract basis from March 2014 to March 2017. Mr. Koukou received a monthly net salary of US$ 4,500.00 for 29 months, which amounted to US$ 130,500.00. A reconciliation of the LPSEGF a/c showed that Mr. Koukou received US$ 217,937.50, resulting to a difference of US$ 87,437.5 received in excess of his salary. Mr. Koukou provided documents such as requests and quotes for the use of US$ 60,000.00 he withdrew on February 13, 2015 on cheque number 16852. He disclosed that the funds were used for PSDI county-survey. However, there was no report to prove that there was a survey, and the documents could not account for the total amount.   See Appendix 1-5

Criteria

Section P.9 of the PFM Regulation states the followings:

(1) All disbursements or payments of public moneys shall be properly supported by pre-numbered payment vouchers.

(2) Payments except for statutory transfers and debt service shall be supported by invoices, bills and other documents in addition to the payment vouchers.

Recommendation

Mr. Koukou should provide all documents providing evidence to the US$ 87,437.50 he received or be investigated; full restitution of amount should also be demanded.

PSDI Response

 

 

5.10 Condition:  Irregular Payments from LPSEGF account

On August 28, 2014, Mr. Benedict Roberts withdrew US$ 70,000.00 on cheque number 133794 from the LPSEGF account. We did not see any supporting document to provide evidence for the withdrawal. We invited Mr. Roberts to a meeting but he did not attend and never responded to our communication. See Appendix 1-5

 

Criteria

Section P.10 of the PFM Regulation: Responsibility for Accuracy of Vouchers

Any public officer, including a Minister and head of any government institution, commission, board who signs a voucher, a check, a document or record pertaining to accounts shall ensure that:

(a) There is sufficient evidence that payment is being made for work duly performed, goods delivered or services duly received in accordance with the contract and the price to be paid is in accordance with the contract.

Recommendation

Dr. Kollie, Mr. Edward Eesiah, Dede D. Sandiman and Mr. Roberts should provide all evidential documents to authenticate usage of the US$ 70,000.00 in compliance with laws and regulations. If documents are not provided, they should be further investigated and the amount should be restituted.

PSDI Response

5.11 Condition:  Irregular Payments from LPSEGF account

On March 27, 2015 and April 27, 2015, cheques number 16866 and 16861 valued US$ 10,800.00 (US$ 5,400 and US$ 5,400.00) were written in the name of Hon. Sumo Kupee, Managing Director of Liberia Petroleum Refining Company (LPRC) and withdrawn by one Nathan T. Wilson on March 28, 2015 and Aril 28, 2015 respectively. The transaction was noticed on the bank statement and returned cheques; however, there is no evidence of work performed for the payment. Moreover, we spotted a written Consultancy Engagement Contract dated March 1, 2015 to June 30, 2015 for which he was paid.

Criteria

Section P.10 of the PFM Regulations: Responsibility for Accuracy of Vouchers

Any public officer, including a Minister and head of any government institution, commission, board who signs a voucher, a check , a document or record pertaining to accounts shall ensure that:

(a) There is sufficient evidence that payment is being made for work duly performed, goods delivered or services duly received in accordance with the contract and the price to be paid is in accordance with the contract.

Section 1.1 (b) of the Code of Conduct states that no person holding public office shall demand and receive any other perquisites, emoluments or benefits, directly or indirectly, on account of any duty required by Government.

Recommendation

Hon. Kupee should be investigated for receiving US$ 10,800.00 from the project without any evidence of work performed.

PSDI Response

 

5.12 Condition:  Irregular Payments from LPSEGF account

During the reconciliation of the LPSEGF account, we observed that on June 21, 2014, cheque number 133865-valued US$ 63,850.00 signed by former Minister Muah and Dede D. Sandiman was withdrawn by Mandella Boimah. On June 20, 2014, Mr. Amos Z. Koukou obtained an approval from Dr. kollie to pay the sum of US$ 63,850.00 for Private Sector development Surveys in three (3) counties (Bong, Lofa and Nimba). There is no report to prove that there was a survey, moreover, an invoice valued US$ 25,000.00 for printing 1,000 PSDI Booklets was seen attached to the survey documents but there was no competitive procurement process.

Additionally, Ralph N. Sonkarlay, former Technical Focal Point to Hon. Muah wrote a statement of responsibility to utilize the fund in compliance and provide report.

Criteria

Section A.3 of PFM Regulation: Duty to Keep Proper Records and Books of Accounts

(1) Any public officer concerned with the conduct of financial matters of the Government of Liberia, or the receipt, custody and disbursement of public and trust moneys, or for the custody, care and use of government stores and inventories shall keep books of accounts and proper records of all transactions and shall produce the books of accounts and records of the transactions for inspection when called upon to do so by the Auditor-General, the Comptroller General , the relevant internal auditor or any officers authorized by them, by the Minister.

Recommendation

Sebastian Muah, Dede D. Sandiman, Ralph Sonkarlay and Mendela Boimah should be investigated for the US$ 63,850.00 paid from the project without any evidence of work performed.

PSDI Response

 

5.13 Condition:  Irregular Payments from LPSEGF account

Eleven (11) individuals received US$ 63,160.00 through cheque withdrawals at different intervals. We invited couple of them to an interview, while others could not attend because they had travelled abroad. Amongst those who attended, Mrs. Kpambu Turay, Mr. Dede D. Sandiman and Mr. Ojuku Nyenpan told us that they were seconded to the program to formulate policy framework or strategy that served as blueprint for the project and were compensated as such.

However, we did not see any report(s) or written policy to authenticate work done. We could not also ascertain how long, in terms of days, weeks and months, they worked. See below:

Individuals who received money from LPSEGF account

Date of withdrawal   Name                                                Cheque Number          Amount USD

Apr. 24, 2014                Samuel Jackson                            133845                              5,400.00

May 20, 2014                                                                            133855                              5,400.00

Oct. 8, 2014                   Jesse Korboi                                   133806                              6,540.00

Dec. 5, 2014                  Albert Sherman                            133822                              2,500.00

Oct. 14, 2014                Dede D. Sandiman                       133802                              8,250.00                                    (withdrawal on cell number 0886-528-323)

09/13/2014                                                                               133816                              5,000.00

09/29/2014                                                                               133810                              3,360.00

Oct. 14, 2014                Kpambu P. Turay                          133805                              8,670.00

Oct. 8, 2014                   Mulbah N. Jorgbor                      133809                              6,000.00

Oct. 8, 2014                   William Mansfield                        133813                              6,000.00

Oct. 8, 2014                   Ojuku Nyenpan                            133807                              6,540.00

Oct. 8, 2014                   Dixon Seboe                                  133808                              4,360.00

Apri. 17,2015                Paul Garteh                                    16863                                1,000.00

Jun. 18, 2015                Johnson S. Keamu                       16878                                2,500.00

Total                                                                                                                                        71,520.00

Criteria

P.10 Responsibility for Accuracy of Vouchers

Any public officer, including a Minister and head of any government institution, commission, board who signs a voucher, a check, a document or record pertaining to accounts shall ensure that:

(a) There is sufficient evidence that payment is being made for work duly performed, goods delivered or services duly received in accordance with the contract and the price to be paid is also in accordance with the contract.

Recommendation

Dr. Kollie, PSDI Management and staff involved should provide documents for which they were paid.

PSDI Response

 

5.14 Condition:  US$ 1.6M Transferred from LPSEGF account to GOL Operation Account.

We earlier explained that on June 24, 2014, LBDI cheque number 133866-valued US$ 1,648,037.00 was withdrawn from LPSEGF account and deposited in GOL Operation Account (number 02-2-0-530000-182). Hon. Sebastian Muah and Mr. Dede D. Sandiman signed the cheque, while one Mr. Victor Blama made the deposit. We did not get additional documents to inform us as to how the US$ 1.6M was spent. We contacted CBL through a mail from the FM’s office for the provision of the bank statement, but we have not gotten any feedback.

Criteria

P.10 Responsibility for Accuracy of Vouchers

Any public officer, including a Minister and head of any government institution, commission, board who signs a voucher, a check, a document or record pertaining to accounts shall ensure that:

(a) There is sufficient evidence that payment is being made for work duly performed, goods delivered or services duly received in accordance with the contract and the price to be paid is in accordance with the contract.

Recommendation

Hon. Sebastian Mual and Mr. Dede D. Sandiman should provide information and documents for the utilization of the US$ 1.6M.

 

Conclusion

 

Index

Alice Ziah-Ganta, start-up and Received US$ 75,000.00, paid nothing

Alternative Car Wash-Gbanga, Start-up: US$ 75,000.00, paid US$ 2,030.0

Ma Janet Business Center-Ganta, received US$ 50,000.00 and Paid US$ 0.00

Menwaseh Educational Suport  ENT- Ganta, Recived US$ 36,000.00

Coco Pure Mineral Water, Gbanga, Received 32,000.00, paid $0.00

Ganta Traders, Ganta, Received US$ 54,000.00 and paid US$ 26,500.00

Gedeh Bricks, Kuda Byepass, Grand Gedeh, Received US$ 60,000.00, paid US$ 0.00

Senior Moye, Gbanga, Received US$ 65,000.00, paid US$ 0.00

Tohnlo Women and Youths Training Program, Gbanga, Received US$ 55,000.00, paid US$ 8,050.00

AGRICULTURAL & BLACKSMITHING INC, Gbarnga, Received US$ 50,000.00, paid US$ 1,150.00

CENTER SONGAI LIBERIA, Bensonville, Montserrado Co., Received US$ 100, 00.00, paid US$ 9,590.00

Top Travel Agency INC, Broad & Mechlin St. Received 15,000.00, paid US$ 2,090.00

 

 

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6 thoughts on “Bombshell: Full Report; Financial and Operational Audit of the Private Sector Development Initiatives

  1. The damage has been done. In my opinion, initially the monitoring of the project should have involved the IAU at the MFDP. I strongly think that all is not lost. The effort so far is commanding. What should be done now is to put into place modified monitoring mechanisms to help curb conflicts that have occurred. Those who received monies as dual employees should refund those monies. For example, Dr.James Kollie according to the report received $16,200.00 whilst serving as DMA for the MFDP and was contracted as consultant. This is conflict of interest and he must be made to reimburse the total amount he received.

  2. These are some of the things we been speaking against.There are lots of businesses name mentioned are not business people.The money were not borrowed the the rightful people.
    I recommend that:those people should be prosecuted.

  3. These evil against the suffering masses of Liberia has got to stop.
    The intent of this program is good and rewarding, it would have helpef immensely to take most of our brothers and sisters with business orientati9 from poverty to prosperity. The program would have empowered Liberian businesses to vibrantly contribute to the economic growth of Liberia. What another sad day for Liberia.

  4. I hope this is not the usual Liberian story that comes up like ‘coca kola’ foam and dies down in a short time. Many stories like this came up, but today, NO out come. The public was left in limbo.
    The “fight against corruption” got to be honest and indiscriminate at every level of our society; even in the smallest unit( the family) of society.
    This too is Liberia!!!

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