MoF HIPC Audit Report: The 5 Million Dollars Question

By Paul C. Collins, MSc(Econ), CPA, FCCA

The Perspective
Atlanta, Georgia
May 26, 2010


After following the discussions surrounding the US$ 5million mentioned in GAC’s audit report of the Ministry of Finance, and following numerous calls from students and acquaintances for my opinion of AG John Morlu, the quality and professionalism of his audits, the situation at MOF, the culpability of Minister Ngafuan, the position of the Liberian Institute of Certified Public Accountants, etc, I have decided to read the MOF HIPC AUDIT report in order to address the central issue in the report that everybody seems to be mostly concerned about, which is the culpability of Minister Ngafuan regarding the US$5 million.

First, let me clarify here that I do not seek to provide support for any individual or institution, neither is my comment a reflection of the position of the Liberian Institute of Certified Public Accountants (LICPA). I have met, for 10 minutes, Minister Ngafuan back in 2006, following which I wrote two articles, Papa Na Come- with 30 bucks (a budget analysis that criticized the government budgetary allocations), and Fighting Corruption- an effective approach, both of which were published by I have also met AG Morlu twice in his office, and have had direct interactions with his audit teams that have done work at the Central Bank of Liberia. In short, I really don’t know these guys except for what I read about them in the papers.

Coming back now to the audit report, I am not going to provide clarification on every issue or audit finding contained in the report, and they are many, ranging from weak internal control systems, poor intra-ministry coordination, non-compliance with procedures and regulations, etc., etc., to non implementation of previous audit findings. I will only provide clarification on what the AG’s report says about Minister Ngafuan’s culpability regarding the US$5m unaccounted-for expenditure. I will therefore begin with my professional interpretation of what AG Morlu says in his audit report; then I will provide clarification on what the AG’s report does not say that the public including politicians and others are claiming he says in his report concerning the US$5m. In order to make this very easy to read and grasp, I will not indulge in a lengthy professional discourse of the matter. I will attempt here to hit the nail on the head and save you a lot of reading time.

So what does the AG say in his report about the US$ 5,028,548.00? Excerpts from the AG’s report, pages 40 and 41, Sections 230 through 237 under the caption, Unaccounted For Expenditure: “…total expenditure incurred by the three departments of MOF, excluding basic salaries of the Ministry for the FY 2007/2008, amounted to US$5,028,548.00.” The AG further writes, “…my review of PVs presented for audit revealed that the three MOF departments could not account for the entire US$5,028,548.00.” Note that the AG uses the word, entire. The AG then writes, “…the vouchers I validated amounted to only US$4,224,256.65.” Now this was during the preparation of the draft audit report. Following the draft report that showed the variance of US$806,291.35, additional vouchers were validated by the AG, about which he (the AG) wrote: “MOF has, since the receipt of its draft management letter, submitted 24 vouchers with value US$530,524.69, out of the unsupported expenditure of US$804,291.35. Director Konjay is yet to provide remaining supporting documents for US$273,749.31.” You will note that there are typos in the exact figures here, and the calculations in the AG’s table on page 41 do not exactly add up, but my focus is not to dwell on such trivialities, but on the meat: according to the AG’s report, is the Minister of Finance culpable for not accounting for US$5m?

My question to the general public is, is a CPA (Certified Public Accoutant) who is also a Fellow of the ACCA (Association of Chartered Certified Accoutants- UK) needed to provide translation that the amount to be accounted for is not US$5m but US$273,749.31? Or are people deliberately misrepresenting the facts of what the AG’s report says? I could try in Grebo, er, I mean English, but clearly the amount in question according to the AG is US$273,749.31, which is 5% of total expenditure excluding payroll, or 4% of total expenditure including payroll.

When an auditor uses the words “unaccounted for”, what exactly is s/he saying? S/he is basically saying that sufficient, competent evidence has not been provided to determine what exactly happened. In this case, the AG has said in his recommendations that “MOF management should require that the Budget and Finance Director, Konjay account for the expenditure totaling US$806,291.35 for FY 2007/2008 which were not supported with vouchers and other related documents”. This recommendation was made in the draft report, and repeated in the final report, even though the AG also writes that the figure is now reduced to US$273,749.31.

The AG, in my opinion, and following best practice, should have appropriately revised his draft report after receiving responses and additional evidence, so that his final report does not give so much confusion about the true state of affairs, but instead reflects the state of affairs as at the report signing date and time (INTOSAI Code of Ethics and Auditing Standards Chapter 4.0.8.b. Reporting Standards in Government Auditing). Best practice also requires the AG to hold an exit conference with the auditees to discuss ALL his findings so that additional clarification where relevant can be discussed across the table. When a draft report is submitted, or a management letter is submitted to the auditee, and after the auditee shall have responded to the draft report and management letter, both auditor and auditee are required to discuss the report before it is finalized. From all indications, this did not happen. As a result, the final report does not focus on the final state of affairs as at the audit signing date, but creates confusion about what exactly is unaccounted for.

So did somebody embezzle or misappropriate US$273,749.31, (not US$5m)? It was the MOF which, in its own report asserted that it had spent US$5m. Certainly, that figure must have come from a detailed list of expenditure, which required supporting vouchers and other documentation, US$273,749.31 of which the AG did not see at the date of signing the final audit report. Did the AG carry out alternative tests to get assurance that this amount was actually spent, and the nature of such expenditure, by reviewing returned checks, reviewing bank statements, reviewing expenditure reports of the spending departments, reviewing the payment collection log book containing signatures of payees, etc.? The AG does not say. Is it possible that MOF could find the missing vouchers, just like they were able to find 24 previously missing vouchers valued at US$530,524.69? Very possible.

Is Minister Ngafuan culpable or has he stolen anything? The Minister clearly was not at the Ministry at the time, so he could not have been responsible for what transpired during the period when he did not have any responsibility for the happenings at the MOF.

Is his signing of the report conclusive evidence that he is responsible for the unaccounted for expenditure? To answer this question, we need to know during whose stewardship was the report prepared- Sayeh’s or Ngafuan’s. Going by the AG’s audit report, the MOF fiscal outturn report was prepared during Minister Ngafuan’s stewardship, but clearly from information gathered from the existing records. By signing the report, which only he could have signed since he was the Minister at the time the report was prepared, Minister Ngafuan takes full responsibility for what he signed.

Could Minister Ngafuan not sign the report until he was convinced the information in the report presented the true and fair state of affairs and happenings at the Ministry? The Minister had the choice of conducting a full internal verification to obtain absolute assurance that everything was 100% correct and supportable with appropriate documentation. Would this have been practical? I do not believe so, especially when one takes stock of the fact that the HIPC audit needed to have been done before April 2010, in order to ensure Liberia achieved all the triggers to meet the completion point in June 2010. So does this mean Minister Ngafuan stole US$273k? No. It only means Minister Ngafuan’s team needs to find the missing vouchers.

In the US, a similar situation transpired, and this is what the Press Release of the U.S. Auditor General (Gene Dodaro) said on February 26, 2010 of the US Government’s 2009 Consolidated Accounts (

“…the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between agencies, and the ineffective process the federal government uses to prepare the consolidated financial statements...”

“Dodaro also cited material weaknesses involving improper payments estimated to be at least $98 billion, information security across government, and tax collection activities. He noted that four major agencies—DOD, the Department of Homeland Security, the Department of State, and NASA—did not get clean opinions.”

So you see, Minister Ngafuan has company in the person of US Treasury Secretary Timothy Geithner. The only difference is that nobody is accusing Timothy Geithner of stealing more than US$98 billion.

Our challenge in Liberia is that there are serious systemic deficiencies that must be addressed. The GAC has a critical role to play in this endeavor, and can only succeed if it takes a professional approach, devoid of prejudice, bias, adversity, and incompetence. The INTOSAI Code of Ethics and Auditing Standards, to which the GAC subscribes, is very clear on how Supreme Auditors and their Institutions must conduct themselves. The GAC needs to go back to those standards and apply them judiciously. It is not only professionally wrong to play on the gullibility of the Liberian people, but also morally unacceptable.

© 2010 by The Perspective

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