13 June 2017

Liberia: Loan Borrowers Disappear?

An audit report conducted by the Internal Audit Agency (IAA) on the Private Sector Development Initiative (PSDI) at the Ministry of Finance and Development Planning (MFDP) has indicated that 24 borrowers, who received cash loans amounting to US$965,400,are yet to repay the money, as stipulated by the arrangement.

According to the report, an additional twelve (12) businesses received an amount of US$545,700, but none of those businesses are seen anywhere in Liberia. The audit report also disclosed that telephone contacts of the individuals, who owned these businesses, were permanently switched off.

The loan, through the Private Sector Development Initiative (PSDI), was intended to financially strengthen Liberian owned businesses, which were expected to repay, and the repayments would revolve or be disbursed to other Liberian businesses.

PSDI is a project established in 2014 at the MFDP to provide loans to Liberian owned small and medium sized enterprises (SMEs).

The process would have created jobs for Liberians and accelerated the participation of Liberian owned businesses in the economy.

According to the audit report, from 2014 to 2016, the project disbursed US$2,274,400 to forty-six (46) borrowers. The report also reveals that Dr. James F. Kollie, former Deputy Minister for Fiscal Affairs (MFDP), signed all the loan approvals while serving in the position.

"Documents reviewed showed that out of an initial amount of US$1,991,900 that was disbursed to thirty-six (36) customers, only US$282,500 has been recovered. The recovered amount was re-disbursed to an additional ten (10) customers, thereby raising the portfolio to US$2,274,400. This means that the initial disbursement of US$1,991,900 is still outstanding," the report disclosed.

Out of forty-six (46) borrowers, only Garson Incorporated, located on 11th Street, Sinkor, believed to be owned by Dr. James Kollie, paid its obligation of US$150,000 plus US$10,500 interest, amounting to a total repayment of US$160,500. Garson Incorporated's account statement reveals that the institution has only an US$11.00 obligation outstanding.

In May 2014, MFDP entered into a Memorandum of Understanding with the Liberia Bank for Development and Investment (LBDI) to partner and establish an account (GE Fund) through which the borrowers would receive their loans, the report said.

During the audit, it was discovered that the vetting conducted by MFDP-PSDI Desk provided many loopholes for default.

The auditors uncovered that there was no collateral to back the loan and that many borrowers used the borrowed funds as start-up for their businesses stressing that there was no evidence of comprehensive market survey on file.

This, the auditors said created a serious impediment for recovery, thereby defeating the project's objective for the revolving fund.

The modus operandi of the MOU, which was signed by MFDP, MOJ and LBDI, outlines that the Ministry of Finance shall recommend beneficiaries of the GE Fund to LBDI and submit application packages containing business registration, business proposal/plan, and tax clearance, among others.

The report also said loans were disbursed to either businesses owned by MFDP staff, or businesses with whom they have close connections, and some of those businesses have not paid a cent against their obligation.

Businesses that benefitted from the loan include LELAH INC (US$40,000), Pure Life Incorporated (US$ 65,000), People's Water Company Liberia LTD (US$65,700), South East Water Company (US$75,000), and Zianab Business Center (US$20,000).

"From 2014 to 2016, US$4,111,450 was credited at different intervals. Of the US$4,111,450, US$1,665,454.91 was transferred to the PSDI loan account for loan disbursements, while the balance of US$2,445,995.09 was withdrawn on multiple check transactions," the audit report said.

According to the report, the auditors noted that their attention was drawn to a specific LBDI check number 133866, valued at US$1,648,037. "We observed that the check was written as debit to the LPSEGF Account and correspondingly deposited to another account called GOL Operational Account (A/C Number 02-2-0530000182) at the CBL."

As a means of allowing staff at the Ministry of Finance and Development Planning to benefit from the loan, a memorandum dated October 5, 2014 and under the signature of Dr. James Kollie to Dede D. Sandiman, Officer-in-Charge/Comptroller & Accountant General Office was issued.

"As per the directive of the Minister of Finance and Development Planning, I am requesting your action for honorarium in favor of staff on the listed as below who were involved in the formulation of the framework, compliance, requirement for businesses approved for loan and vetting of applicants for loan under the Private Sector Development Initiative," the memorandum instructed.

The MFDP staff, who benefitted from the loan in 2014, included Doris B. Quellie, US$7,100.00, former Customs Commissioner Dixon Seebo, US$4,360.00, William Mansfield, US$6,000.00, Mulbah Jorgbor, US$6,000.00 and Ojuku Nyenpan, US$6,540.00.

Other beneficiaries of the PSDI loan, who were staff of the Finance Ministry, are Jesse Korboi, US$6,540.00, the Officer-in-Charge/Comptroller, to whom the memorandum was written Dede D. Sandiman got US$8,250.00, Sekou A. Sanoe, US$5,000.00 and Kpambu P. Turay, US$8,760.00

Dr. James Kollie, who was Deputy Minister for Fiscal Affairs at the time, has denied any wrongdoing.

Dr. Kollie: "My attention is being drawn to an ongoing audit of the Private Sector Development Initiative (PSDI) over which I provided general supervision when I served as Deputy Minister of Finance. I am grateful to the President for affording me the opportunity to respond fully to the claims, assertions and accusations made in the draft audit report.

"Although I was the subject of the audit, contrary to best practice, and until only a few days ago, I was never notified or interviewed by the auditors. My first encounter with the auditors was on June 2, a day after the draft report was issued.Of course, these are challenging political times for our country. As such, it is easier to pass public judgments before we hear all the facts, and or muddle what ought to be important professional engagements with political motivations. I fully understand that this is the country in which we live and these are ongoing consequences of a life in public service."

Kollie further said in a statement posted on his Facebook page that he served the Ministry of Finance and Development Planning with dedication and professionalism, and conducted businesses there within the boundaries of the law and acceptable best practices.

"As such I intend to cooperate fully, as I have always done, to assist in satisfying this ongoing audit as well as reconfirm my continued commitment to financial probity and high standards of accountability in our country," Dr. Kollie stressed.

Few days after the report was submitted to President Ellen Johnson Sirleaf, she expressed shock and said officials at the Ministry of Finance & Development Planning were making loans to themselves in violation of the law.

She said while the process is still ongoing, "We can say with a high degree of confidence that such a scheme set up at the PDSI is clearly a conflict of interest and will be dealt with by the full weight of the law."

As a result of the report, President Sirleaf ordered the principal administrator of the program during the audit period, Commissioner of Maritime Affairs James Kollie to return to Liberia from his official trip to assist in the audit and answer all of the issues associated with it.

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