PSDI Audit Flawed, Unprofessional, Ex-Deputy Minister Slams Liberia Findings
Monrovia – Former Deputy Minister for Fiscal Affairs at the Ministry of Finance and Development Planning (MFDP), Dr. James Kollie, who was wrapped in the middle of the damning draft audit of the Private Sector Development Initiative (PSDI) ‘failed’ loan program, has termed the report as flawed and contrary to professional auditing practices.
Report by Lennart Dodoo – [email protected]
PSDI is a project, was established in 2014 at the MFDP to provide loans to Liberian-owned small and medium-sized Enterprises (SME’s).
The loan was meant to financially strengthen Liberian businesses. In so doing, the process would have created jobs and accelerated the participation of Liberian-owned businesses in the economy of Liberia.
However, auditors at the Internal Audit Unit of the MFDP found out that the PSDI Project which was somehow operated without much publicity was marred by several irregularities, conflict of interest and financial malpractices.
Dr. Kollie served as a consultant to the program and accordingly approved all loans disbursed under the project.
Being a principal actor of the project, President Ellen Johnson Sirleaf recalled him from an official trip last week, urging him to return immediately and aid with investigation during the audit.
The President’s urgent recall of Dr. Kollie came at the brink of FrontPageAfrica publication after the report was leaked to FPA.
In a detailed response to the audit obtained by FrontPageAfrica, Dr. Kollie wrote: “The audit which is the subject of this response is flawed and contrary to professional auditing practices. It seems to lack understanding and appreciation not only of the underlying objectives of the program but also of the operational modalities.
The audit did not follow the normal principles of fairness and due process, as no efforts were made by the auditors to contact those who provided general oversight, including in particular the Deputy Minister of Finance who provided general oversight of the program, as well as appropriate authorities at LBDI…”
Dr. Kollie noted that the investigation conducted by the audit was superficial and not comprehensive and the conclusions thereof were arbitrarily reached without any basis in fact.
Loans Not Approved by MFDP
According to the audit, Amos Koukou served as Coordinator of the project, however, while the MOU between the MDFP and LBDI Bank called for the collaborative effort MFDP and LBDI, vetting of borrowers was exclusively done by staffs of PSDI and approved by Dr. Kollie.
The audit further pointed out that during 2014 to 2016; the project disbursed US$2,274,400.00 to 46 borrowers. Documents reviewed showed that out of an initial amount of US$1,991,900.00 that was disbursed to 36 customers, only US$282,500 was recovered. The covered amount was re-disbursed to another 10 customers, thereby raising the portfolio to US$2,274,400.
The audit recommended that PSDI should be revisited to include all requirements as enshrined in the CBL Gazette. Loan evaluation should be done by the bank(s) with whom the disbursement account is domiciled and such should be stipulated in the MOU between MFDP and the Bank.
However, according to Dr. Kollie, based on the agreement between the Ministry and LBDI with whom the disbursement account was domiciled, he was not involved in the day-to-day operations of the project or vetting of proposals.
He noted in his response that the assertion by the auditor t
hat “vetting of borrowers was carried out exclusively by staff of PSDI and approved by him with collaterals” demonstrates the failure of the auditors to understand the objective of the project and its operational modalities.
Kollie referenced 6.a, 6.b, 6.c, 6d and 6f of the MoU signed with the LBDI.
Section 6.a: That the Ministry of Finance shall recommend beneficiaries of the GE Fund to LBDI and submit application packages containing the following: business registration, business proposal/plan, and tax clearance.
Section 6.b: That LBDI shall verify the applications and underwrite the loans to the beneficiaries,
Section 6.c: That LBDI shall prepare the loan documentation, which shall include the Loan Agreement and Promissory Note for approval and
Section 6.d. That LBDI shall open and maintain Small Business accounts for the beneficiaries to which disbursement will be made and collection from beneficiaries will be achieved.
Section 6.f. States “That LBDI shall establish a desk/unit for verification, underwriting, disbursement, recovery, and reporting.
Dr. Kollie contended that there is nowhere in the audit report that shows that LBDI did not play its assigned role. He further argued that there is no evidence to show that the evaluation of the applications was not done by LBDI.
According to him, his role as project administrator did not include conducting credit appraisals, such as collaterals evaluation and acceptance.
“LBDI had the exclusive responsibility to make such credit agreements, due to LBDI technical capacity to determine whether collaterals presented by potential borrowers met CBL requirement on landing to customers based on collaterals,” his response noted.
He added that it is only after the bank had certified that the benchmarks have been met that the appropriate loan documentations were prepared, signed and sent to the ministry for signature. This, according to him, clarifies the loans were not approved by the ministry.
Cannot Be Held For Delinquent Borrowers
The audit observed that 24 borrowers who received loans totaling US$965,400 and have not made any payment with the exception of Terravilla Gardens Inc., who received US$12,500 on October 6, 2016, Waisi who received US$25,000 on July 28, 2016 and New Dimension, US$20,000 on July 28, 2016, the remaining borrowers 21 borrowers’ loans have exceeded the 365 days and have not paid any amount against their obligations.
The audit also observed that 100 percent delinquent borrowers used the funds as a start-up for initiating their businesses.
The auditors recommended that failure to repay the loans which have passed the 365 days should be seen as economic sabotage and therefore, the 24 borrowers and Dr. Kollie should be investigated for approval the loans.
He, however, noted in his response that the borrowers are distinct and separate from him and there is no evidence that he has any equity of interest neither is he a beneficial owner of any of the 24 borrowers.
“To blame the failure of loan collections on a person whose only responsibility was to recommend borrowers to the bank for detailed assessment and verification of documentations is baseless, totally confusing and speaks volume of the poor quality of the auditors’ conclusion and more important motive of the audit,” he asserted.
The Conflict Of Interest
Dr. Kollie also refused to take the blame for the gross conflict of interest unearthed by the audit on in which several staffs of the Ministry or people connect to staffs of the ministry were given loans and have not been able to pay back.
The audit revealed that the Coordinator of PSDI, Amos Koukou’s wife took a loan of US$40,000.00 and has paid nothing back; MFDP Assistant Minister for Administration took a loan of US$65,000 and repaid US$26,450 since the loan was given on November 14, 2014; Director for Public Administration Sector, Budget Planning at MFDP, William Mansfield’s company – People’s Water Company – received US$65,700.00 in loan and since paid nothing back since December 30, 2014.
Assistant Minister for Regional and Sectorial Planning, Theophilus Addy was also linked to a business which received US$75,000 on November 11, 2014 and has since failed to make any payment.
Zianab K. Dukuly, Assistant Director of Budget and Finance, was found to be the owner of Zianab Business Center which received a loan of US$20,000 and has made payment of US$2,400 only since August 27, 2015.
The audit found this action on the part of the MFDP employees and PSDI Project in violation of Section 3.7 of the Code of Conduct which cites conflict of interest.
But Dr. Kollie said there is no justification to conclude that there is a conflict of interest because LBDI which made the final loan approval were not employees of the Ministry of Finance and had no superior and subordinate relationship with the staffs of the ministry.
“PSDI has no reason to conclude that the projects were not vetted like other projects and a financing decision reached on them like other businesses in the program. “
“Consequently, if those businesses to which loans were granted have not been able to perform consistent with the loan agreement, the proper action is to take recourse to the available remedies provided under our law to recover the loan proceeds,” Dr. Kollie’s response averred.
Kollie’s Double Salary Defense
According to the audit, Dr. Kollie was written a service contract on the project for three months ranging from July to September 2014 for consultancy. He received US$5,400 monthly net of tax and the same time, received a salary as Deputy Minister for Fiscal Affairs of MFDP.
In his clarification, he penned that no salary was received by him from July to September from the Government’s Presidential appointee payroll during the mentioned period.
He revealed that in July 2014 when the reform of the Ministry had taken place and his position as Deputy Minister for Revenue was no longer available due to the transition, he resigned and wrote the Minister to remove this name from payroll at the end of June 2014, however, Minister Amara Konneh at the time, requested him to stay as a consultant for the period to assist with some “unfinished business”.
“So the three months Kollie served before confirmation was completed and final appointment, the only compensation he received was based on the consultancy agreement,” his response to the audit noted.
The Unexplained Us$1.6m
The audit held Sebastian Muah and Dede D. Sadiman liable for an unexplained withdrawal of US$1,648,037.00 from LPSEGF Account and deposited in GoL Operational Account number 02-2-0-530000-182.
According to the audit findings, Muah and Sadiman signed the cheque while one Victor Blama made the deposit; however, there were no additional documents to inform the auditors how the money was spent.
While the audit recommended that Muah and Sadinman be made to provide information and documents for the utilization of the money, Kollie said it is quite awkward that the auditors would be requesting additional documents the funds was returned to government’s consolidated account.
“Once the amount was placed into the consolidated operational account, it then becomes part of the consolidated funds that are used to fund the general operations of government,” the response noted.
He added among other things that, “It is therefore impossible for anyone to spend any penny outside the budgetary process from the consolidated account.”
Sumo Kuppee’s US$10K ‘Justified’
Eyebrows were also raised on cheques number 16866 and 16861 valued US$10,800 on March 27, 2015, and April 27, 2015, respectively written in the name of Mr. Sumo Kupee, Managing Director of Liberia Petroleum Refining Company (LPRC). The auditors found no evidence of work performed for the payment through a consultancy engagement contract was signed between him and the ministry.
In response to the payment made to Kupee, Dr. Kollie clarified that during the period Prof. Kupee was paid by PSDI, he was neither a member of the Senate nor Managing Director of the LPRC.
According to Kollie, Kupee was engaged by the authority at MFDP based on his experience in public economic and financial management in Liberia.
“He had a valid contract to provide advisory consultancy. There were certificates of completion or invoices on each payment request indicating the work done,” Dr. Kollie indicated in his response.