VZCZCXRO5007
RR RUEHMA RUEHPA
DE RUEHMV #0936/01 3241724
ZNR UUUUU ZZH
R 191724Z NOV 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0541
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MONROVIA 000936 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: PGOV ECON EFIN LI
SUBJECT: LIBERIA: GOL AUDITS REVEAL PROBLEMS BUT ALSO DEMONSTRATE 
TRANSPARENCY - WILL ACCOUNTABILITY FOLLOW? 
 
REF:  A: 07 MONROVIA 804; B: 07 MONROVIA 737 
 
¶1.  (U) SUMMARY: In an important display of improved economic 
governance, Liberia's independent General Accounting Commission 
(GAC) completed and published the first audit reports of GOL 
institutions since the re-establishment of the GAC in 2005.  Audits 
of several other key government institutions are expected in coming 
months.  The audits are thorough and reveal significant systemic 
weaknesses as well as likely instances of fraud.  The long-awaited 
audits will test the government's commitment to reform as the 
President has vowed to take action when warranted by GAC findings of 
mismanagement or corruption.  Publication of the audits is a 
milestone in Liberia's efforts to create a system of fiscal and 
operational accountability, transparency and probity, but the audit 
results suggest a long road ahead for public financial management 
reform.  END SUMMARY. 
 
¶2.  (U) The GAC formally submitted final audits in October for the 
National Social Security and Welfare Corporation (NASSCORP) for 
2005-06 and 2006-07; the National Housing Authority (NHA) for 
2006-07; the Independent National Commission on Human Rights (INCHR) 
for 2006-07; and a transactional audit of the concession to dispose 
of scrap iron from Bong Mines.  The reports ar thorough and 
professional, highlighting a range of deficiencies ranging from 
procedural weaknesses (lack of accounting policies, inadequate 
documentation, undisclosed revenues, and failure to reconcile bank 
statements) to more serious financial irregularities (public 
guarantees for private loans, improper accounting, unauthorized 
procurements and irregular payments).  Most press accounts have 
focused on a few of the most salacious and simple findings (missing 
cars and exorbitant Board fees) but the full reports are sober, 
well-documented, and published in their entirety on the GAC website: 
 http://www.gacliberia.com. 
 
¶3.  (U) The GAC is finalizing several more audit reports of key 
institutions expected in the coming months, including: 
 
-- Ministry of Finance - overall audit of the Ministry for 2005-06 
and 2006-07, including separate reports on the consolidated revenue 
account and transactional audits of the fiscal outturn for 2006-07; 
 
-- Ministry of Education; 
 
-- Ministry of Health; 
 
-- Ministry of Lands, Mines and Energy; 
 
-- Ministry of Public Works; 
 
-- National Lotteries; 
 
-- Liberia Petroleum Refining Corporation; 
 
-- County Development Funds; 
 
-- Monrovia Transport Authority; 
 
-- National Port Authority; 
 
-- Buchanan Iron Ore scrap contracts; 
 
-- Liberia Telecommunication Authority; 
 
-- National Oil Company of Liberia. 
 
 
¶4.  (SBU) The long-awaited audits arrive roughly 18 months after 
Auditor General John Morlu began work in April 2007 as part of a 
Governance and Economic Management Assistance Program (GEMAP) funded 
project to reform the GAC.  Morlu came under fire in June 2007 for 
his high profile in the press and a series of sweeping accusations 
of corruption within the Sirleaf administration (reftels).  He was 
also criticized for the delay in producing any actionable audits. 
Morlu defended his decision to focus his first year on an extensive 
internal capacity-building program for the GAC, including the 
drafting of a legal framework for the GAC in line with international 
standards, a strategic plan, a comprehensive recruiting and training 
program for 127 staff (all new hires), a code of conduct for GAC 
employees, audit manuals and templates for Ministries and Agencies, 
and partnership with international audit associations.  All the 
initial audits were completed with assistance from Auditor Generals 
in Ghana and Zambia. 
 
¶5.  (SBU) The initial audits highlight the overall weakness in 
Liberia's public financial management systems and practices.  Morlu 
told Econoff November 13 that internal control and accounting 
weaknesses were widespread and institutions being audited had almost 
no idea what records were required.  He acknowledged the audit 
exercise would be a long-term "learning process" for both the GAC 
 
MONROVIA 00000936  002 OF 002 
 
 
and the agencies it audits.  While Morlu showed little patience for 
unqualified accountants and sloppy accounting, he did commend those 
institutions that demonstrated a willingness to learn.  He singled 
out Deputy Minister of Finance for Revenue (MOR) Elfreida Tamba for 
her sincere efforts to collaborate with the GAC to uncover problems 
and seek improvement. 
 
¶6.  (SBU) COMMENT:  The GAC audits are one of the most critical 
elements of GEMAP and the GOL's own efforts to institute sound 
financial management and good governance.  Publication of the first 
audits is a milestone and upcoming audits of key Ministries are an 
important heavily indebted poor country requirement.  However, the 
audits are only half of the equation and the GOL's ultimate 
commitment to reform will be measured by the extent to which it 
follows through on audit findings on both a political and technical 
level.  Politically, the audits will be a test of the government's 
commitment to reform as the President has repeatedly vowed to take 
action when audits uncover mismanagement or impropriety.  For the 
institutions audited, the reports are an opportunity to demonstrate 
a willingness to modernize.  Although the press will likely continue 
to focus on malfeasance, the audits are more a baseline snapshot of 
institutional weakness at the launch of the Sirleaf administration 
than a reflection of the current situation.  The important indicator 
will be the GOL's ability to continue to improve public financial 
management systems.  For the Auditor General, the audits are a 
vindication of his strategic vision for the GAC.  Initially viewed 
as obstinate, Morlu's tenacity now shows impressive results.  The 
test for Morlu will be how he can weather the inevitable backlash 
from those whose weaknesses and improprieties have been exposed. 
END COMMENT. 
 
THOMAS-GREENFIELD