Wild and Illegal Spending

New Democrat (Monrovia)

11 May 2011

Several Ministries, Agencies Exceed Budgetary Allocations With No Documentation-Audit Reveals

Several ministries and agencies (M&As) exceeded their budgetary allocations outside the confines of the law, in the millions of US dollars in fiscal years 2006/2007 and 2008/2009, the General Auditing Commission, in its ‘Anti-Deficiency audit of the Ministry of Finance, has revealed.

The extra-budgetary expenditures, in most cases lacking appropriate documentation, came from ‘General Claims,’ constituting 20% of the budget, an amount having no specific budgetary line, the GAC audit revealed.

The shining stars that exceeded their allocations are the Ministries of State for Presidential Affairs, Defense, Education and Internal Affairs, the audit further revealed.

It indicates that the Ministry of Education accounted for US$2.4 million or 58.72 percent of the illegal expenditure, whilst the Ministry of State and Presidential Affairs also accounted US$1.3 million or 32.36 percent in the extra-budgetary expenditures over its annual allocation.

According to the audit, the Ministry of Defense exceeded its annual appropriation by US$1.9 million or 109.26 percent, while the Ministry of Education exceeded its annual appropriation by US$4.6 million or 44.88 percent.

“It is instructive to note that the General Auditing Commission, through the Auditor General, challenged the reported figures assigned to the GAC by the Ministry. The Minister of Finance informed the Auditor General that the excess expenditure for GAC was done in error, but refused to correct the error, although it was recommended that the adjustment be effected,” the audit indicates.

A number of agencies, such as the Union of the Disabled, in a previous audit, rejected claims that they were allotted US$1.6m, and affirmed that they received only US$150,000.

The Liberia Agency for Community Empowerment (LACE) also challenged the figures, while former Assistant Minister Althea Browne agreed that the figures reported against GAC, LACE, et cetera were wrong, but again no corrections were made, the audit indicated.

“As indicated in the audits of the 2006/2007 Consolidated Accounts that the expenditure reported for the GAC by the Ministry of Finance was in excess of actual expenditure. The former Minister of Finance responded that it was an error in posting that an amount of US$165,000.00 was wrongly charged to the GAC. Similar challenges were made by MCC, LACE, and Union of Disabled etc”.

Amongst other recommendations, auditors want the Minister of Finance to be held accountable and made to provide the substantive authority, material justifications and supporting documents for the illegal expenditure of US$23.6 million in 2006/2007 and US$8.7 million in 2008/2009, amounts which were incurred by ministries and agencies above their respective adjusted appropriations.

But according to the audit, Finance Ministry officials, in their response, said: “There is no basis to request the Minister of Finance to provide any substantive justification for any illegal expenditure as there was none. This incorrect conclusion was arrived at due to either a lack of information about provisions of the Budget Transfer Law of 2008 and Section 2212 of the Revenue Code of Liberia Act 2000, or failure to recognize these legal provisions if such alignment enhances the attainment of specified national goals.”

Amongst the agencies that exceeded budgetary allocations is the National Commission on Disabilities, with US$1.3 million or 1,746.23 percent. Liberia Agency for Community Empowerment also exceeded its annual appropriation by US$1.4 million or 715.91 percent, while Monrovia City Corporation exceeded its original annual appropriation by US$1.4 million or 421.51 percent.

Annex (1b) displays the remaining dollar amounts for the institutions that constituted the biggest violators of the Appropriation Act of 2006/2007.

The M&As budgetary performance in terms of staying within the limits of their appropriation improved significantly as compared to that attained in 2006/2007 because there were six M&As which posted a total of US$4.1 million in illegal expenditure as indicated in Annex (3).

Aside from the impact of the change in accounting basis for reporting expenditure that occurred in the fiscal year, the performance observed represented a reduction in monetary terms of US$24.6 million in illegal expenditure or 85.5 percent over that reported for 2006/2007, the audit report indicated.

Total expenditure reported by the six M&As in the 2007/2008 Fiscal Outturn Report was US$35.1 million, whereas their appropriation approved by the National Legislature totaled US$31.0 million. Ref. Annex (3).

The improvement observed could be partly attributed to a change in the basis of accounting for expenditure in the 2007/2008 Fiscal Outturn Report.

In the 2006/2007 Fiscal Outturn Report, the Ministry of Finance, as per Note (4) of the Fiscal Outturn Report, reported a change in the basis of accounting for expenditure from cash to commitment basis in 2007/2008.

As observed in 2007/2008, for the six M&As that recorded illegal expenditure in 2007/2008, though MOF submitted a supplementary budget of US$10 million approved by the National Legislature for the fiscal year, the AG indicated: “My review did not sight any documentation supporting such supplementary budget as requested by the M&As, Presidential endorsements received for the M&As supplementary budgets and respective approval of the National Legislature for the excess expenditure recorded, as is required by Section 2210 of the Revenue Code of 2000.” This code is the legal framework under which the expenditure was made for the indicated period.

The audit cited the practice in 2006/2007, when US$3.14 million of the US$4.1 million illegal expenditure recorded in 2007/8 was presented to the National Legislature in the budget for fiscal 2008/2009, and by the passage of that budget, the US$3.14 million received an implied approval of the National Legislature.

But such implied approval of the National Legislature cannot be justified because the dictates of Section 2210 of the Revenue Code of 2000 runs contrary to it, the audit report argued.

Whereas for fiscal 2008/2009, of the 80 M&As that received appropriation, 23 of them, including two general claims accounts, exceeded their original appropriation by US$8.7 million.

But this budgetary performance, compared to the performance recorded in 2007/2008, represented a somewhat decline of US$4.6 million in monetary terms, the audit suggested.

Again, because of the reversal of the basis of accounting from commitment to cash basis in the fiscal year, the AG said: “I could not determine budgetary performance recorded for the fiscal year 2008/2009 as compared to fiscal year 2007/2008.

The total appropriation approved by the National Legislature for the 23 M&As (including two general claims accounts) for fiscal 2008/2009 was US$86.6 million, whilst total expenditure incurred by them was US$95.3 million in the fiscal year, as reported by the Fiscal Outturn Report in Ref. Annex (4).

Of the US$8.7 million illegal expenditure recorded in fiscal 2008/2009, US$1.0 million was allotted the National Legislature in the budget for fiscal 2009/2010, as has been the practice in previous years, and by the passage of that budget, the US$1.0 million received an implied approval of the National Legislature (Ref. Annex 4).

However, Section 2210 of the Revenue Code of 2000 as amended by the Budget Transfer Law of 2008 prohibits such implied approval of the National Legislature and demands that such supplementary budgets be prepared by the Director of Budget, the supplementary budgets be audited, transmitted to the President, who in turn, where appropriate, submits to the Legislature for approval, the AG indicated.

As was observed in the immediate preceding fiscal years, evidence of this compliance was again not observed for the 23 Ministries and Agencies (including two general claims accounts) involved, he pointed out.

According to the audit report, analysis of allotments issued to 45 M&As and two general claims accounts in fiscal 2006/2007 against their respective recorded expenditure as reported by the 2006/2007 Fiscal Outturn Report indicated that every one of the 45 M&As and two general claims accounts registered expenditure of $20.5 million above their respective allotments as shown in Annex 8).

Total allotments issued to the M&As in 2006/2007 was US$93.5 million, whereas their recorded expenditure totaled US$113.9 million.

The audit also noted that the adjusted appropriation for fiscal 2006/2007 as presented in the 2007/2008 budget when compared with the adjusted appropriation contained in the 2006/7 Fiscal Outturn Report, revealed that 23 M&As posted a variance of US$7.4 million.

The AG: “My review of the adjusted appropriation and allotment for fiscal 2007/2008 indicated that there were nine M&As, including one general claims line item, combined exceeded their implied legislative authorization by US$1.4 million as shown in Ref. Annex 9”.

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