0 Auditor General’s Draft Report on Ministry of Public Works for FYs 2009/10 to 2011/12 AUDITOR GENERAL'S REPORT ON THE MINISTRY OF PUBLIC WORKS FOR FISCAL YEARS 2009/10 TO 2011/12 AUGUST 2014 Yusador S. Gaye, CPA, CGMA 0 Auditor General Ensuring Accountability of Public Resources 1 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 Republic of Liberia The Honourable Speaker of the House of Representatives and the President Pro- Tempore of the House of Senate: We have undertaken the audit of the Ministry of Public Works’ (MPW) financial statements for the fiscal years ended July 1, 2009 through June 30, 2012. The audit was conducted under the Auditor General’s statutory mandate, as provided for under chapter 53.3 of the Executive Law of 1972. Findings conveyed in this report have been formally communicated to the Management of the Ministry of Public Works (MPW). Where responses have been provided by the Ministry of Public Works on the report’s findings, these have been evaluated and incorporated in this report. Given the significance of the matters raised in this report, we urge the Hon. Speaker and the members of the House of Representatives and Hon. Pro- Tempore and members of the Liberian Senate to consider the implementation of the recommendations conveyed herein with urgency. Monrovia, August 2014 1 Ensuring Accountability of Public Resources 2 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 TABLE OF CONTENT 1 EXECUTIVE SUMMARY ……………………………………………………………………………..6 1.1 Background ………………………………………………………………………………………………………………….6 1.2 Significant Findings and Recommendation ……………………………………………………………………… 7 1.2.1 Operational Matters ………………………………………………………………………………………………..7 1.2.2 Internal Control-Related Matters ……………………………………………………………………………. 8 1.2.3 Financial Matters ………………………………………………………………………………………………….. 9 1.2.4 Administrative Matters …………………………………………………………………………………………..10 1.2.5 Accountability Statement ……………………………………………………………………………………….11 2 DETAILED REPORT ………………………………………………………………………………..12 2.1 Introduction ……………………………………………………………………………………………………………….12 2.2 Mandate of MPW ……………………………………………………………………………………………………….. 12 2.3 Key Personnel of MPW ……………………………………………………………………………………………….. 12 2.4 Audit Objectives ………………………………………………………………………………………………………….13 2.5 Audit Methodology …………………………………………………………………………………………………….. 13 2.6 Limitation of Responsibility …………………………………………………………………………………………. 14 2.7 Limitation of Scope ……………………………………………………………………………………………………. 14 2.8 Detailed Findings and Recommendations ……………………………………………………………………… 15 2.8.1 Operational Matters ……………………………………………………………………………………………… 15 2.8.2 Internal Control-Related Matters …………………………………………………………………………….24 2.8.3 Financial Matters …………………………………………………………………………………………………..30 2.8.4 Administrative Matters …………………………………………………………………………………………..40 3 ACKNOWLEDGEMENT …………………………………………………………………………….53 4 ACCOUNTABILITY STATEMENT…………………………………………………………………54 5 TABLE OF ANNEXES ……………………………………………………………………………….55 2 Ensuring Accountability of Public Resources 3 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 ACRONYMS USED Acronym Meaning AG Auditor General AOM Audit Observation Memorandum GAC General Auditing Commission GOL Government of Liberia MPW Ministry of Public Works IAA Internal Audit Agency IAU Internal Audit Unit ICIF Internal Control Integrated Framework COSO Committee of Sponsoring Organization of the Treadway Commission ITC Information Technology and Communication IPSAS International Public Sector Accounting Standards PAN Personnel Action Notice LIPA Liberia Institute of Public Administration ISSAI International Standard of Supreme Audit Institutions SSF SSF Entrepreneur, Inc. CHICO China Henan International Cooperation Group CICO China Chongqing International Cooperation WASH Water Sanitation and Hygiene IIU Infrastructure Implementation Unit PFM Public Financial Management PPCA Public Procurement & Concession Act DMA Deputy Minister of Administration GPA Grade Point Average MOU Memorandum Of Understanding GIMPA Ghana Institute of Management & Public Administration MOF Ministry of Finance CSA Civil Service Agency GSA General Services Agency 3 Ensuring Accountability of Public Resources 4 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 AUDITOR GENERAL'S CONCLUSION ON THE MINISTRY OF PUBLIC WORKS FINANCIAL TRANSACTIONS AND RELATED RECORDS OF ACCOUNTS FOR THE FINANCIAL YEARS 2009/10 through 2011/12 The Ministry of Public Works management did not compile financial statements for the financial year 2011/12 under review. Financial statements prepared for the 2009/10 and 2010/11 fiscal years were not prepared on the basis of IPSAS Cash Basis Accounting and the Regulation I.11, PFM Regulations, 2009 as prescribed by the Government of Liberia. The MPW did not provide General Ledger, Trial Balance and full disclosure notes as basis of the financial statements produced. As a result, we could not validate the annual expenditure of US$20,819,065.62, US$29,805,179.97 and US$ 34,970,606.58 disbursed respectively within the three financial years, 2009/10, 2010/11 and 2011/12. The MPW management failed to maintain and present a Fixed Assets Register for the financial years 2010/11 and 2011/12. The fixed assets register prepared for the financial year 2009/10 did not include vital information such as names of vendors and the acquisition cost of the assets. The Ministry of Public Works entered into forty seven (47) Roads and bridges; one hundred forty seven (147) wells and thirty (30) latrines construction contracts with various contractors in the fifteen Counties of Liberia. Twelve (12) of those roads construction projects reviewed failed to implement fully the scope of work for which funds were received from the Ministry. Payment vouchers and contracts in some instances could not be provided for our review. Some of the in completed and abandoned projects were the results of non-coordinated contracts terms enforcement on the part of the MPW administration. The Resident Engineers’ reports for three (3) of the twelve (12) failed projects could also not be provided for our review to ascertain the level of works implemented by the contractors. The amount paid for the twelve projects totaled US$2,122,929.12 for roads and bridges projects; however, the terms of the contracts were not fully implemented. In the absence of the Resident Engineers’ reports, the former Deputy Minister for Technical Services of the Ministry of Public Works, Jenkins J. Mends-cole signed certificate of completion for Finda Architecture which failed to implement fully the contract terms for which funds were paid from the Ministry’s account. Four out of six contractors hired to construct wells and latrines failed to deliver as required under their respective advance payment works. Those four contractors are Aquifer Services, Youth Care Inc, Zakimah Continental Holding Company, and General Fabrication and Construction Business Corporation in the amounts of US$14,022.75, US$30,955.20, US$45,582.00 and US$61,716.00 respectively to be accounted for by the four companies for their failure to construct the wells and latrines. During an analysis of forty-two (42) payment vouchers for fuel and lubricants selected for review from a population of 90 external payment vouchers with a total value of US$2, 551,429.65, we observed that payment voucher number MPW-409-000091 in favor of Ducor Petroleum for fuel 4 Ensuring Accountability of Public Resources 5 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 and lubricants supplied with a value of US $307,684.00 as arrears were processed and paid by the Ministry of Finance through a budgetary transfer in FY 2010/2011, from a line item, roads and bridges instead of the amount being paid from General claims/Domestic Debts given that the debt was incurred by the Ministry of Public Works in 2007/2008 fiscal year for the supply of fuel and gasoline Based on the audit work performed, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for the conclusion. Accordingly, we do not express any conclusion on the available accounts and related records of the Ministry of Public Works for the financial years ended June 30, 2010, 2011 and 2012. Monrovia, August 2014 5 Ensuring Accountability of Public Resources 6 Auditor General’s Report on Ministry of Public Works for FYs 2009/10 to 2011/12 1 EXECUTIVE SUMMARY 1.1 Background 1.1.1 The audit of the Ministry of Public Works (MPW) was commissioned by the Auditor-General (AG) on March 4, 2013, under the statutory mandate of the Auditor-General as provided for under Chapter 53.3 of the Executive Law of 1972. The audit covered three financial years of the Ministry, July 1, 2009 to June 30, 2012. It was undertaken by a Team of Auditors drawn from the GAC. 1.1.2 The mandate of the MPW, as provided for under Chapter 27 of the Executive Law of 1972, includes, among others, to design, construct, improve and maintain, directly or by contract, all highways, streets, roads, bridges and storm sewers. The MPW may also undertake directly or by contract, the construction of sanitary sewers, hospital, public buildings, and other public works which are built for other Ministries or agencies of the Government, exclusive of public authorities. 1.1.3 The audit objectives were derived from the GAC's enabling enactment as well as the MPW's objectives as stipulated in the Ministry’s vision and mission. GAC’s