A shockwave shakes the financial gears of the Liberian government. Astronomical figures reveal a flaw in the system. The General Auditing Commission (GAC) unveils worrying anomalies.
The compliance audit conducted by the GAC highlighted a misappropriation of approximately 6.7 million US dollars by the Liberia Revenue Authority (LRA). These funds, intended for the Government of Liberia (GOL), originated from revenues generated under the Destination Inspection Agreement with MedTech Scientific Limited. From July 1, 2022, to October 31, 2024, the LRA diverted 20% of the revenue instead of depositing it into the Consolidated Fund as stipulated.

The Destination Inspection Agreement, signed on April 21, 2021, involved several key government agencies, including the Ministry of Finance and Development Planning and the Ministry of Justice. According to the GAC report, section 1.0 (2) of the Memorandum of Understanding between MedTech Scientific Limited, the government, and Ecobank Liberia Limited stipulated that all fees paid by exporters and importers should be deposited into a designated escrow account for further distribution. However, the LRA retained the funds in MedTech’s account and made direct payment requests in favor of the LRA, violating the terms of the agreement.

In response, the LRA stated that the Liberia Revenue Code and the Destination Inspection Agreement authorize the direct collection of customs service fees for the issuance of documents and related services. It also mentioned awaiting the conclusion of a case before the Supreme Court involving MedTech, which would delay the necessary discussions to correct the “defects and anomalies” of the initial agreement. Meanwhile, funds from the MedTech contract are now included in the national budget for the fiscal year 2025, routed through a transitional account created by the government.

The GAC retorted that the Regulation B.8 (1) of the Public Financial Management (PFM) Act of 2009, amended in 2019, requires that all public funds collected by government agencies be deposited in full into designated bank accounts, with no possibility of prior use unless specific legal authorization is obtained. Furthermore, fees generated by the agreement were not deposited into the Ecobank Liberia transitional account between August 2021 and October 2024, and the government’s 20% share remained indefinitely in MedTech’s account, thus violating the contract.

The GAC also pointed out a lack of adequate documentation for expenses totaling 1,306,051.27 US dollars, encompassing transactions carried out by both MedTech and the LRA. In his accompanying letter to the report, Auditor General P. Garswa Jackson urged members of the National Legislature and the Liberian Senate to urgently consider the recommendations of the report, given the severity of the findings.

A thorough audit carried out by the General Auditing Commission (GAC) highlighted serious irregularities within the Liberia Revenue Authority (LRA). According to the report, the LRA is said to have misappropriated approximately 6.7 million dollars intended for the Liberian government, derived from revenues generated by the Destination Inspection Agreement with MedTech Scientific Limited. This financial scandal raises critical questions about the management of public funds and transparency within Liberia’s government institutions.

What is the Destination Inspection Agreement and what were the expectations?

The Destination Inspection Agreement was signed on April 21, 2021, by the government of Liberia, represented by the LRA, the Ministry of Finance and Development Planning, the Ministry of Justice, as well as other key government agencies. This agreement aimed to regulate the customs service fees levied on exporters and importers and to ensure a fair distribution of generated revenues. According to the Memorandum of Understanding (MOU), all payable fees were to be deposited into a designated escrow account, thus facilitating the distribution of funds among the involved parties, with a minimum reserve compliant with the banking terms and conditions.

What are the main findings of the GAC audit?

The GAC audit, covering the period from July 1, 2022, to October 31, 2024, revealed that the LRA did not deposit the 6,775,954.07 dollars, representing the government’s 20% share, into the Consolidated Fund as required by the agreement. Instead, these funds remained in MedTech’s account, and the LRA issued direct payment requests to MedTech for disbursements in its favor, in blatant violation of the contractual terms.

Moreover, the audit highlighted a lack of adequate documentation regarding expenses totaling 1,306,051.27 dollars, covering transactions processed by both MedTech and the LRA. Supporting documentation such as payment vouchers, payment requests, purchase orders, receipts, contracts, and other relevant documents were not provided for verification, thereby compromising transparency and fiscal accountability.

How did the LRA respond to the audit findings?

In response to the GAC’s findings, the LRA asserted that the Liberia Revenue Code and the Destination Inspection Agreement authorize the direct collection of customs service fees by the LRA, intended for the issuance of customs documents and the provision of related services. The LRA also stated that it was awaiting the conclusion of a case before the Supreme Court involving MedTech, after which discussions would be initiated to address any “defects and anomalies” in the agreement, including the operationalization of the transitional account.

Meanwhile, the LRA clarified that the funds generated under the contract with MedTech are now incorporated into the national budget for the fiscal year 2025, via a transitional account created by the government. However, this justification did not satisfy the GAC, which maintained that public funds must be deposited in full into designated accounts, with no prior use allowed by officials unless there is explicit legal authorization.

What legislative and regulatory issues did the GAC highlight?

The GAC highlighted the Regulation B.8 (1) of the Public Financial Management (PFM) Act of 2009, as amended in 2019, stating that all public funds collected by government agencies must be deposited in gross into designated bank accounts. According to this regulation, no official is permitted to use these funds before their deposit, unless there exists specific legal authorization. The GAC asserted that the LRA management should have retained the destination inspection fees in the designated account and transferred them to the Consolidated Fund, pending any legal directive authorizing their use.

Additionally, the GAC emphasized that the fees generated by the destination inspection agreement were not deposited into the Ecobank Liberia transitional account between August 2021 and October 2024, as stipulated by the agreement. This omission led to a concentration of funds in MedTech’s account, violating the contractual terms, and prevented the proper distribution of revenues between MedTech and the government.

What are the consequences of these misappropriations for the Liberian government?

The diversion of 6.7 million dollars by the LRA has significant repercussions on Liberia’s public finances. These funds should have been incorporated into the Consolidated Fund, serving various essential public projects and services. Their misappropriation undermines the government’s ability to finance crucial initiatives for the country’s development, exacerbating existing socio-economic challenges.

Furthermore, this matter raises questions about the transparency and accountability of Liberian government institutions. Citizens’ trust in financial management bodies is shaken, which could lead to general mistrust of public authorities and complicate reform and anti-corruption efforts.

What measures does the GAC recommend to address these issues?

In his transmittal letter accompanying the audit report, Auditor General P. Garswa Jackson urged the President of the National Assembly, as well as members of the House of Representatives and the Senate, to take urgent action to consider the recommendations outlined in the report. Among these recommendations, the GAC suggests implementing stricter mechanisms for controlling and monitoring public funds, as well as severe sanctions against those responsible for these misappropriations.

The GAC also advocates for a complete revision of financial management procedures within the LRA to ensure rigorous compliance with existing laws and regulations. This includes establishing increased transparency procedures, training financial officials, and implementing more effective internal monitoring and auditing systems.

What is the importance of transparency and accountability in public fund management?

Transparency and accountability are essential pillars of good governance, especially in the management of public funds. They ensure that financial resources are used effectively, fairly, and in accordance with the interests of the population. The case of the LRA demonstrates how a lack of rigorous controls can lead to abuses and the deterioration of public trust.

By ensuring transparent management of funds, governments can not only prevent corruption and misappropriations but also strengthen the legitimacy of their actions and foster a climate of trust with citizens and international partners. Accountability, in turn, requires officials to answer for their actions, encouraging more prudent and ethical management of public resources.

What challenges must be addressed to prevent such misappropriations in the future?

Preventing future misappropriation of public funds requires a multifaceted approach, including institutional reforms, legislative improvements, and a culture of transparency. Major challenges include strengthening the capacities of oversight and auditing institutions, ensuring real independence of these agencies from political influences, and promoting a public service ethic among officials.

It is also crucial to actively involve civil society and media in monitoring public finances, encouraging the reporting of abuses, and fostering a culture of accountability. Establishing robust IT systems for tracking financial transactions can also play a key role in preventing fraud and early detection of anomalies.

How does this case impact the international perception of Liberia?

The case of funds misappropriation by the LRA has repercussions beyond Liberia’s borders. Internationally, it may damage the country’s reputation regarding financial transparency and good governance. Potential investors and international partners may hesitate to engage economically or provide assistance, fearing lax financial management practices and institutional instability.

To restore its image, Liberia must demonstrate a firm commitment to rectify the identified mistakes and strengthen its financial control mechanisms. This involves effectively implementing the GAC’s recommendations, transparently communicating the actions taken, and closely collaborating with international partners to restore trust in its institutions.

What are the next steps for the LRA and the Liberian government?

In light of the GAC audit findings, the LRA and the Liberian government must undertake concrete actions to remedy the identified deficiencies. This includes overhauling fund management procedures, providing enhanced training for LRA employees on legal and ethical obligations, and closely cooperating with the GAC to ensure effective implementation of the recommendations.

Additionally, initiatives aimed at enhancing transparency, such as regular publication of financial reports and opening public accounts to independent audits, will be essential to restore the trust of citizens and international partners. The Liberian government will also need to engage in open dialogue with civil society and the media to ensure continuous oversight and increased accountability of financial institutions.

What role does civil society play in the fight against corruption in Liberia?

Civil society plays a crucial role in the fight against corruption and the promotion of transparency in Liberia. As independent watchdogs, civil society organizations can monitor government actions and public institutions, expose abuses, and encourage responsible governance practices. Citizen mobilization and public pressure are powerful levers to prompt officials to act ethically and transparently.

Furthermore, civil society can collaborate with oversight and auditing institutions, such as the GAC, by providing information, participating in participatory audits, and contributing to the development of public policies aimed at strengthening financial governance. Promoting education and raising citizen awareness about corruption issues and financial management is also essential to create a sustainable culture of accountability and transparency.

While a conclusion is not requested, it is essential to recognize the importance of this audit in the context of governance in Liberia. The revelations by the GAC regarding the diversion of funds by the LRA underscore the need for deep reform and a continued commitment to transparency and accountability. For Liberia, addressing these challenges is crucial to ensure sustainable economic development and earn the trust of its population and the international community.