The July 2024 Compliance Audit of the Central Bank of Liberia (CBL) by the General Auditing Commission (GAC) is a rehash of classic procedural errors in any large organization but there is no evidence of criminal wrongdoing. We will review the inaccuracies, errors, materiality, and lack thereof in the Compliance Audit, but it is first in order to give a background on the origin of the Report.
The Report covers the period from January 1, 2018, through December 31, 2023. According to the GAC, the audit was conducted in line with Section 2.1.3 of the General Auditing Commission (GAC) Act of 2014, without stating the origins of the authority to audit the CBL. That this compliance audit was done strictly in accordance with the legal mandate of the GAC is at first inaccurate and outlandish.
The Audit is in fact a political tool employed by the Boakai Administration in February of this year to find reasons to illegally remove the top management of the Central Bank including the Executive and Deputy governors. See Frontpage Africa of February 26, 2024. Firstly the audit requested by President Boakai did not take into consideration the legal, economic, financial, and managerial autonomy of the Central Bank.
The audit surrenders the autonomy of the Central Bank to the Executive Branch of Government.
The Act establishing the GAC specifically empowers the Agency to conduct audits of public accounts and funds of the Republic of Liberia. However, central banks all over the world enjoy an autonomy to keep their functions from being influenced by bad actors including those in the executive branch of government. A central bank must be run without corrupting influences from the executive so as to protect the integrity of a country's monetary sector.
The audit mentioned loans and overdrafts made to the Government of Liberia without legislative approval. While the practice is irregular, but the intent was to pay civil servants' salaries in a contentious election year, where public peace was guaranteed by the payments and thus the extenuating circumstances should excuse the procedural error. No funds were misapplied or stolen. Management cited the low collection of government revenues during the periods under review and indicated that national security concerns in an election year necessitated the overdrafts. Salaries were paid. No funds were diverted or misapplied. Further the management of the bank worked with the Ministry of Finance and Development Planning to ensure compliance by creating loan documents to reflect the payments. These transactions predated the Extended Credit Facility Program from the International Monetary Fund. Loan documents are available for auditors to review.
The audit made mention of non-performing commercial bank loans in the amount of 412 million United States dollars.
This was a huge mistake on the part of the auditors. It cited amounts in US dollars that should have been in Liberian dollars, thus there was a gross overstatement of the actual amount they claimed to be non-performing loans. An investigation by the author into the actual amounts by engaging current and former senior commercial bank officials indicate that the amounts were in fact Liberian dollars and meant to stimulate the economy, for example in mortgage schemes, agricultural and construction loans that are part of the bank's mandate to improve macroeconomic stability under the difficult circumstances of Ebola and COVID-19.
Management indicated that there are currently no non-performing loans on the books of the commercial banks. Maturities of the loans were revised to help Liberian borrowers. Clearly if the audit report did not ensure quality assurance to properly document the magnitude of non-performing loans, through simple arithmetic processes, what else did the auditors get wrong?
The audit cited amounts paid as part of the bank's corporate social responsibility posture. But the auditors did not trace the funds to ensure that the named organizations or their financial authorities received the monies in question. Thus no crime was uncovered, and the monies were destined for social causes that could ensure cohesion among Liberians.
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In conclusion, the politically motivated audit of the CBL has not uncovered any crime, misapplication, or diversion of public funds. The only objective achieved so far is the attempt to sully the reputation of consummate professionals who have done extremely well to achieve macroeconomic stability, including improved liquidity within the banking system. That may change now as the named Acting Governor is coming from a banking institution that needs to be closely monitored for possible capital impairment. Whether the conflict of interest presented by this new appointment was not considered by the Boakai Administration is food for thought. And so it goes.
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