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 GAC Audit Report: LEC Paid Board Members US$100, 500 in Two years Contrary to Act

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PostSubject: GAC Audit Report: LEC Paid Board Members US$100, 500 in Two years Contrary to Act   Sun Aug 05, 2012 1:00 am

GAC Audit Report: LEC Paid Board Members US$100, 500 in Two years Contrary to Act
By FPA
Monrovia Acting Auditor General Winsley Nanka has completed and submitted to the National Legislature and the President of Liberia two audit reports on the accounts and related financial records of the Liberia Electricity Corporation (LEC) for the fiscal years 2006/2007 and 2007/2008 and the National Postal A
ddress System (NAPAS), Ministry of Posts and Telecommunications for the operating period November 2009 through 30 June 2012.

This brings to Seventy-Six (76), the total number of audit reports submitted to the National Legislature and the President.

Acting AG Nanka noted that it took an unreasonably longer time for LEC’s management to respond to the Draft Management Letter, which impacted on the timely submission of audit report to the National Legislature.

As a result, a follow up on the implementation of recommendations contained in the report were carried out on June 2, 2012. However, management did not make any significant improvement in the deficiencies noted, in terms of implementing the number of issues and recommendations conveyed in this audit report.

The Acting Auditor General noted that board fees paid to Board Members were irregular and contrary to the provisions of LEC’s enabling enactment.

The Act stipulates that LEC board shall receive a stipend for each meeting attended and all expenses incurred in attending meetings. However, the Board members were paid, in addition to board fees per sitting paid to them, a total of US$100,500.00 as quarterly allowances for the period under review.

He further noted that the former Chairman of the LEC Board, Mr. Dunstan L.D. Macaulay and Board member Mr. Augustine Vandi received US$24,000.00 and US$21,000.00, respectively, from the corporation’s accounts for the provision of consultancy services to the corporation.

However, payment records submitted to him did not indicate that the required services for which the amounts were collected from the corporation’s account by the Board Chairman were delivered to the corporation. The payments made to the Chairman of the Board, and a board member are regarded as conflict of interest, and is tantamount to self-dealing.

He noted incidence of non-compliance with provisions of extant regulatory framework such as Executive Ordinance on foreign and local travels, and the Public Procurement and Concession Act (PPC). The infraction noted with foreign travels amounted to US$82,519.00.

Employees social security contributions amounting to L$695,859.80 and US$6,748.65.00 were not remitted to the National Social Security and Welfare Corporation (NASSCORP), as management did not provide evidence on the payment or remittance of the aforementioned amounts. The social security contributions to NASSCORP on behalf of the LEC employees represent their benefits at the time of separation from public service, and if contributions are not remitted to NASSCORP, the workers would be denied their social security benefits when they are separated from the public service.

Acting AG Nanka noted that US$1,200.00 was supposedly paid to some government staff at the Finance Ministry as inducement for facilitating the payment process of LEC’s allotment and vouchers at the Ministry of Finance. The payments were channeled through the Corporation’s former comptroller Mr. Augustine S. Vandi.

Mr. Vandi claimed to have given the money to some staff of the Ministry of Finance for payroll processing, but could not provide evidence of the disbursements made. Acting AG Nanka could not derive any assurance that the payments made to the former comptroller were given to the intended beneficiaries.

Payment of “inducement” to government employees is unlawful, and contravenes section 12.50 (a) of the Penal Law of Liberia which states in part “a person has committed bribery, a second degree felony, if he knowingly offers, gives or agrees to give to another or solicit, accept or agree to accept from another, anything of value as consideration for the performance of his or her official duties”.

Further review of the payment vouchers indicated that Deputy Chief Executive Officer, Mr. Joseph T. Mayah and the former comptroller, Mr. Augustine S. Vandi could not justify the payments made to them in the tune of US$8,100.00 as transportation allowance, whereas they have been assigned vehicles by the corporation.

Acting AG Nanka noted irregularities with nine out of eleven services and work contracts valued at US$224,957.00. These entities; namely, Seek Engineering and Construction Company (two contracts), General Power Construction Company, CM Company, Trans-African Trading Company, Pro-tech Communication Inc., Pump and Tank Maintenance, Electro Shack, and Development Consultants were awarded contracts without meeting the requirements of the PPC Act. As a result, there was no assurance that the services and works obtained from those contracts were procured on the basis of lowest responsive evaluated bids.

The Acting AG further noted that amounts reported by management in the cash book for fuel and gasoline did not agree with disbursement vouchers tallied. His analysis indicated that the figures reported in the cashbook as expenditures on fuel and gasoline incurred during the fiscal year 2006/07 was US$1,536,075.00. However, vouchers tallied for the same period was US$1,109,007.00. This gives an unexplained variance of US$427,068.00.

Additionally 3,475 gallons of gasoline issued to unspecified individuals could not be accounted for, as there was no evidence of receipt of fuel and gasoline by the beneficiaries’ recipients.

For the financial year 2007/08, the LEC did not present to the Acting AG an annual financial statement. As a result, he could not evaluate the performance of management and thus form an opinion on the entity’s financial performance and position for the fiscal year in question.

Section 53.7 of the Executive Law of 1972 requires the Acting AG to name and hold people accountable for mistakes, defaults and frauds in the collection and disbursement of public funds. Overall, both financial and administrative activities undertaken by LEC management during the periods under review were characterized by a number of financial irregularities and major control deficiencies.

The irregularities noted amounted to US$689,053.02 and L$330,473.00, and involved irregular payments of board fees, unaccounted for foreign travel advances and payment of funds for inducement as well as anomalies in procurement of goods and services undertaken by management.

On the forensic audit of the National Postal Address System(NAPAS), Acting AG Nanka recommended that NAPAS’ account be frozen until the full commencement of the project and that requisite financial policy and internal control be put in place and adhered to in order to ensure accountability and transparency in the disbursements of NAPAS’ fund.

The National Postal Address System Project was conceived to work out a plan to improve courier delivery system in Liberia. The implementation of the system was to ensure a house-to-house mail delivery throughout Liberia. The National Postal Address System’s mandate is expected to elapse in five (5) years at which time an efficient and reliable door-to-door mail delivery service will be implemented.

On 20 November 2009, a donor conference was held at the Monrovia City Hall to raise and solicit funds for the National Postal Address System. At that conference, the amounts of US$10,155.00 and L$2,700.00 were raised in cash and financial pledges of US$51,750.00 and L$1,000.00 were made respectively. Of the total amount of pledges, US$25,050.00 has been collected leaving uncollected pledges of US$26,700.00 and L$1,000.00.

For the period under examination, the National Postal Address System (NAPAS) Project was a one-man operation headed by Mr. Numene T. H. Barthekwa. The Acting AG observed that the Project Director of NAPAS, Mr. Numene Barthekwa, was not competitively recruited.

He was selected by the then Acting Minister/Chairman of NAPAS Steering Committee, Mr. Peter N. Ben under the guise that Mr. Yini-Guva Sahn, one of the interviewees who was competitively selected to occupy the position could not come to Liberia in time.

A review of audit documents submitted by NAPAS revealed that taxes in the tune of US$2,663.59 were not deducted from the Project Director Mr. Numene T.H. Barthekwa’s salaries and allowances for the months of November 2010 to June 2011.

The failure to withhold income tax by Minister Fredrick Norkeh and Comptroller Henry S. Shaffa of the Ministry of Posts and Telecommunications was not in compliance with Section 905 of the Revenue Code of 2000. Therefore, the AG has recommended that Minister Norkeh and Comptroller Shaffa pay to the Ministry of Finance the unpaid taxes.

In view of the above, the Acting AG is calling on President Ellen Johnson Sirleaf, Speaker Alex Tyler, Senate Pro -Tempore Findley and the National Legislature, to consider the resolution of the issues raised in the report urgently given their impact on public sector financial management.
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