Audit Report: NOCAL Purchased Swamp Land For US$700K

Audit Report: NOCAL Purchased Swamp Land For US$700K

Monrovia –  The General Auditing Commission (GAC) has wrapped the National Oil Company of Liberia (NOCAL) in series of stinging financial improprieties – most of which occurred during the period in which Mr. Robert A. Sirleaf served as Chairman of the Board of Directors.

The improprieties were discovered during audits covering the fiscal years ended June 30, 2012, 2013, 2014 and 2015. The audit reports have been submitted to the National Legislature.

In the transmittal letter, the Auditor General, Madam Yusador urged Speaker J. Emmanuel Nuquay and the members of the House of Representatives and Pro-Tempore Armah Zolu Jallah and members of the Liberian Senate to consider the implementation of the recommendations conveyed in the reports with urgency given the significance of the findings.

The GAC audit discovered that NOCAL acquired a three acres plot described on a transfer deed dated June 26, 2013 and located in the Sophie Community, Tubman Boulevard, Oldest Congo Town, Montserrado County, for the total amount of US$700,000.

During the field verification on December 16, 2016, the GAC observed that the 3 acre plot was partly swampy.

 NOCAL responded to the GAC finding by saying that “The label used by GAC that the land is “swampy” is inappropriate. GAC has not provided any evidence in the form of a technical evaluation report of the land to validate its assertion.

The official DEED received by NOCAL from the owner of the land in its description does not make any reference to swampland.

"We think GAC used of the phrase “swamp land” is intended to generate sensation around the purchase of the land and not speak to the facts.”

However, the GAC indicated that a letter addressed to NOCAL former CEO Dr. Randolph A. K. W McClain from the Environmental Protection Agency dated August 21, 2014 confirms the GAC observation that “the parcel of Land identified in your project document is part of a major wetland ecosystem that extends from behind the German Embassy continuing towards the Catholic Hospital”.

The communication further stated that “NOCAL should submit a “flood migration plan” an indication that the property is wetland.

Therefore, GAC’s description is not intended to generate sensation but provides an accurate description of the property which is supported by the EPA communication to NOCAL, the report said.

The GAC audit observed that the Management of NOCAL did not provide evidence of fuel usage log for generator in the amount of US$502,206.37 for the period 2011/2012. 

The GAC further stated that the evidence presented by NOCAL Management shows how monthly fuel was distributed but there was no evidence that the employees and board members signed for the fuel.

Further, the GAC report says NOCAL Management provided no generator usage log as evidence that the fuel was used for the intended purpose.

Therefore, Management should be held accountable for the fuel.

Given the deficiencies note in NOCAL’s financial statements, the GAC opines that it did not obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. 

Therefore, it cannot express an opinion on the financial statements of NOCAL for the fiscal years under audit, the reports concluded.

The GAC also observed that NOCAL recorded revenue using the cash basis of accounting contrary to the requirement of International Financial Reporting Standards (IFRS).

 Based on this erroneous recognition method, revenue was understated by US$528,313 (2012), 4, 416,992 (2013) and overstated by US$6,371,787 (2014) and 5,937,204 (2015).

Cumulatively, NOCAL understated its revenue by US$4,945,305 in 2012 and 2013 and overstated by US$12,311,991 in 2014 and 2015. 

According to the GAC, it obtained invoices from TGS-NOPEC (the company that manages the seismic data for Liberia) in order to validate the accuracy and completeness of the Revenue Sharing Report; however, a large number of the invoices were redacted (blocked out).

TGS-NOPEC claimed it could not provide un-redacted invoices because it had confidentiality agreements with parties other than NOCAL whose transactions appeared on the same invoices. GAC could not therefore perform alternative procedures to ascertain the accuracy of the invoices.

For the period July 1, 2011 to June 30, 2012, the total amount not traceable to Revenue Sharing Report amounted to US$27,324,894  (2012), 7,238,956 (2013) and  283,446 (2014).

Cumulatively, the redacted invoices amounted to US$34,847,296.89 during the periods under audit.

Therefore, the GAC  says it could not determine whether US$34,847,296.89 of the redacted invoices were attributable to transactions involving data obtained from blocks outside the territorial limits of Liberia and pertained to other countries.

The report noted significant deficiencies in how NOCAL account for fixed assets. 

For example, NOCAL reported US$4,260,744 as total historical cost of assets for the year ended June 30, 2015, while the Fixed Assets Register had US$2,981,072 leaving variances of US$1,279,672.

Furthermore, Accumulated Depreciation was understated by US$183,108 and Fixed Assets Book Value overstated by U$1,462,780.

Similarly, Depreciation Expense was understated by US$33,524. Furthermore, a comprehensive identification of all assets and aligning of those assets to the general ledgers will attest to the completeness of Fixed Assets, GAC observed.

As this was not the case, the GAC could not validate management’s completeness assertion on Fixed Assets.

The GAC also observed significant deficiencies in fixed assets management for the prior years during the audit.

Further, the GAC noted from the review of sampled payment vouchers that there was no evidence of retirement for the travels made by staff and officials of NOCAL in the total amounts of US$50,565.24, and US$47,865.96 for the periods 2012/2013 and 2013/2014, respectively.

The GAC noted that the Management of NOCAL should ensure that all staff members who under toke foreign travels retire their travel advances timely. In the absence of retirement of travel advances, the entire amount should be recovered from those who failed to submit the travel settlement form.

For those who have left NOCAL, GAC recommended that the entity should also recover the amount from them in line with the Travel Ordinance.

The GAC report further noted that the Corporate By-Laws of NOCAL adopted 2004 has several provisions which undermine the practice of good corporate governance and the efficient management of NOCAL resources.

For example, Article 6 Paragraph 2, states “The Board may by resolution authorize the payment of fees, stipends, honoraria, travel or other allowances to Directors for attending meetings of the board and or traveling in the interests of the corporation.

Nothing herein contained should be construed to preclude any Director from serving the Corporation in any capacity and receiving compensation thereof, provided there is no obvious conflict of interest.”

The GAC report notes that corporate by-laws that bestow upon the Board of Directors multiple benefits and allow Directors to perform additional services for fees which could lead to conflict of interest.

According to the report, NOCAL through its Corporate Social Relations Division awarded social contribution to several individuals, institutions and communities for the construction of clinics, schools, bus terminals, housing units, provision of laboratory equipment. 

However, the GAC observed that projects amounting to US$809, 783 were completed, US$273,533, incomplete and US$127,198.41 were abandoned.

Therefore, the GAC says NOCAL should recover the full amounts of US$34,500.00 and US$92,698.41 disbursed to the Grand Kru Development Union and the Dougbor Group Incorporated, respectively, for the abandonment of the construction of the clinic in Wropluken, Forkpoh District, Grand Kru County and the Bus Terminal in Kakata, Margibi County.