Fifty Five Million United States Dollars for Vehicles in Sirleaf’s Government:  Is this Money Well Spent?

 

Policy Paper (PP-002) Issued By LIPI

 

The Perspective
Atlanta, Georgia
June 18, 2013

1. Introduction

Liberia is a country of unprecendented contradictions. On the one hand, the country is endowed with abundant natural resources, with the current administration claiming to have attracted over $19 billion dollars in foreign investments . Approved Budgeted revenue, excluding donors’ funding, stand at around $672 million for fiscal  year 2012-2013. Yet Forbes magazine relegates Liberia as the 3rd worst place to live on Earth, and the 2nd poorest country in the world. Liberia is amongst the bottom 5th of the Human Development Index. The logic that explains this tragic paradox is simple. Liberian leaders are known  for wasting and lavishing the country’s wealth on their personal luxuries and extravagance, rather than the neccessities that address poverty and strengthen the human development needs of all Liberians.

In this Policy Paper (PP-002), LIPI presents the amounts that have been budgeted and spent on vehicles (cars, Trucks, vans, SUVs, etc), also referenced in the 2012-2013 Budget as "Transportaion Equipment."  LIPI believes that one of the fundamental means to improve accountability and transparency is for Liberians to have a clear understanding of  how much is collected in revenues by the Government and how that money is expended. The Liberian Institute of Public Integrity (LIPI) was organized as a Liberian-owned Think Tank.

The analysis focuses on amounts collected and expended in the National Budget through the Ministry of Finance. Fundings provided by international finanacial institutions and foreign governments are not part of the analysis. LIPI has excluded donor-funded initiatives to indicate how the Liberian Government has used Liberia taxpayers' financial resources.  Financial support provided by foreign donors and financial institutions should be viewed as supplemental, not a substitute.

LIPI believes that one of the shortcomings of the Government of Liberia is a lack of data mining of financial/non-financial information to gain sufficient knowldge about how Government is spending taxpayers money for informed decision making.  Without accurate financial information and sufficient data analysis, it is like budgeting in the dark especially in an environment wherein no performance reports are prepared and submitted to the National Legislature.

The Government misprioritizes and condons wasteful spending, shifting development responsibility to donors and charitable organizaitons.  For example, in the last seven fiscal years, the Liberian Government budgeted US$55.3 million dollars to buy vehicles for officials in ministries, the Executive Mansion, and the Legislative and Judicial Branches of Government. This does not include vehicles donated to  Government by donors such as UNDP, UNICEF, USAID, FAO, WHO, UNIFEM, World Bank, UNMIL and other development partners to be used for health, sanitation, education, local governance, agriculture, security, rule of law, access to justice, development and humanitarian purposes, etc.

Additionally, the $55.3 million budgeted and expended for vehicles does not include 46 institutions that are listed in the National Budget. The budget for each of the 46 institutions is presented in aggregate numbers, not in details, making it difficult to determine how much of their annual budgets were spent on purchasing vehicles. Furthermore, the $55.3 million does not include vehicles purchased by public corporations such as NOCAL, NPA, Maritime, LPRC, RIA, etc.

Public money can be better spent on meaningful people-centered initiatives if managed with responsible political leadership and accountability.  The Catholic Church in Liberia has demonstrated that US$26,000.00 can build and equip a six-bedroom clinic in Tubmanburg, Bomi County. In light of this example, forty  (40) percent of the amount spent on vehicles could have been used to build and equip more than 850 six-bedroom health clinics throughout Liberia if adequate transparency and accountability frameworks were in place for public assets (vehicles) management. This is simple arithmetic!

Rather, from 2006 – 2013, the Liberian Government spent $2.7 millions on vehicles for six offices including the Office of the President, Office of the Vice President, the Supreme Court, Office of the President Pro Tempore, Office of the Speaker and Office of the Deputy Speaker. There is something fundamentally wrong with a country whose expenditure pattern suggests that she has money when her citizens languish in poverty, while the international community largely bears the costs of its development needs.

On top of this large scale purchase of vehicles is the misuse and abuse associated with ownership and maintenance of public vehicles, something that resembles outright theft of public resources. Recently Front Page Africa reported in its May 7, 2013 online edition that the Liberian House of Representatives of the National Legislature “cited authorities of the General Services Agency (GSA), for investigations into the alleged reckless and dubious sale of vehicles and other properties of the government of Liberia. The House’s decision followed a complaint from Montserrado County District 11 Representative Gabriel Nyenkan alleging that the GSA was overly exploiting government by selling vehicles bought at tens of thousands of dollars for as low as US$100.00. Nyenkan contended that selling vehicles which were purchased by the Liberian government for prices between US$60,000-US$80,000 for as low as US$100.00 was unduly exploitative to the state.”

FrontpageAfrica further reported that,“Representatives Henry Fahnbulleh(UP-Montserrado) and Acarous Gray (CDC-Montserrado), in support of the call regretted that there were other government vehicles in perfect working conditions but could not be given to some of the newly appointed officials to use.” Representative Fahnbulleh cited the case of former Montserrado County Superintendent Grace Kpaan who he noted was now using for private purpose, the vehicle assigned to her when she served as superintendent despite her resignation from the post.”

It is alleged that government officials are buying vehicles assigned to them, and obtaining titles in their names for as low as $100 and as high as $1000. These vehicles were purchased with public money from prices ranging from $40,000 to $80,000. Some of the vehilces are only one year old while some are 2 – 3 years old. In response to this scandal, President Sirleaf recently announced that Government was introducing  a Fleet Management Policy for the maintenance of public vehicles which will involve cost-sharing contract with government officials using them.

According to the May 8, 2013 online edition of the New Democrat Newspaper quoting the President, “after fours years, the vehicles become theirs.” The General Services Agency defended this action, claiming that maintaining the vehicles is expensive for government. But President Sirleaf conceded that maintaining the vehicles would also be expensive for most junior officials whose official salary is $3000 and below.

There are serious fundamental flaws in the "ownership" scheme being proposed, as it lacks adequate safeguards to prevent waste and abuse, and does not build on best practice elsewhere. First of all, a “one size fits all” approach of four years in a cost sharing involving all ministries is unrealistic and marred with limitations. There are ministries that have no compelling official function outside of Monrovia and would experience less wear and tear on their vehicles compare to vehicles assigned to a Minister of Public Works or Minister of Internal Affairs. In addition, what is the policy mechanism to address situation of early dismissal or transfer of minister who has had a cost sharing contract prior to his dismissal or transfer to enable s/he recover amount invested. Besides, there is no known comparative best practice that can be cited from other jurisdictions as indication of good asset management practice. So, why is the government pursuing a policy that appears unworkable and a replica of the corrupt system?  Instead there should be a Government-run public auction to sell old vehicles for prices that will be determined based on expert appraisal. After all, used and older vehicles from the U.S and Europe are imported and sold on Liberian markets at similar price range.

2. Methodology
The Government of Liberia  has not been consistent with producing financial information over the years. There is no reconciliation sheet or a crosswalk to document and inform the Liberian people of changes in the reporting basis or format. This makes it rather difficult to perform any meaningful trend analysis of Government expenditiure, without spending hours and hours to dissect, analyze and report year to year numbers. In order to generate accurate trend performance, LIPI had to start from the 2012-2013 National Budget back to the 2006/2007, as in each year there is a revised budget presented in the subsequent  year’s budget.
Table A presents the budget codes. From 2006/2007 to 2011/2012, the budgets detailed capital acquisition in the manner indicated in the left column.

Table A          
                                   

In the 2012-2013 budget, the current minister of finance adopted a new format. First, the title "Capital acqusition" was changed to "Consumption of Fixed Capital." Second, the current minister of finance summarized and aggregated five budget codes into a single budget code, "Transport Equipment." See Table A above.  LIPI initially moved bikes and "other land transport tion means" but later included them after it determined that these codes have been agregated into single code in the 2012/2013 and the restarted 2010/2011 and 2011/2012 budgets.  By adding bikes and "other land transportation means," we were then able to perform "pure play" comparison, an apple to apple comparison.

 Government of Liberia annual budgets are done at the Account level, Department level and rolled up at the Ministry or Agency level. Consumption of Fixed Capital or Capital Acquisition is done at the department level. For instance, the Ministry of Finance has four departments at which Consumption of Fixed Capital is done: Administration, Revenue,  Budget and Expenditure. LIPI  generated the amounts for vehicles by reviewing 199 departments (2006-2013) in 83 Ministries and agencies.

LIPI also extracted six offices and made them stand alone so that comparison can be made amongst the three seats of Government. For instance, the Office of the President and Office of the Vice President are listed part of the Ministry of State. The Supreme Court is listed as part of the Judiciary. The Office of the Pro Tempore is part of the Liberian Senate, while the Offices of the Speaker and Deputy Speaker are part of the House  of Representatives. The Vice President Office has oversight for the Group of 77,  however, budgetary allotment for the Group of 77  was excluded from the numbers reported for the Office of the Vice President. This means that  the figures recorded for the Office of the Vice President do not include amounts for the Group of 77.

 The total amount budgeted for these six offices from 2006/2007 to 2013 are separately presented:
Table B

LIPI further presented separately the budget for the National Police, Bureau of Immigration, National Fire Service and the Drug Enforcement Agency. These agencies were listed under the Ministry of Justice. Given the level of independence they enjoyed, the size of their investments on vehicles skewed the budget for the Ministry of Justice. For periods 2006/2007 to 2012/2013, the following departments are presented separately from the Ministry of Justice: See Table C below:                                               
Table C

LIPI noted that while the budgets of the Liberian government are done at the account level, the actuals are aggregated to the Ministry level and reported. This makes it difficult, if not impossible, for Liberians to do a line by line comparison of budget performance. LIPI, however, noted that in the 2012/2013 budget, the actuals are reported for each budget line only for 2011/2012. In the same budget, the Government reports budget by line for 2010/2011 and 2012/2013 but reports actual by line for  ONLY fiscal year 2011/2012: See Table D below:                        
                       
Table D

This further complicates the analysis and makes the Liberian Government budget not transparent, as it does not report information consistently. Good financial governance indicates that while the financial reports can be aggregated at the level of the Ministry or Agency, there is a usually Required Supplemental Information (RSI) such as a line item budget performance report that measures budget line items against the actuals or a Required Supplementary Stewardship Info (RSSI) . LIPI found it surprising that the Government could present line item actuals for 2011/2012 but could not present line item for 2010/2011.

Additionally, some agencies were in the national budget but their budgets were detailed for only part of the seven periods, making it difficult to get a full accounting of how much was actually budgeted for them. For instance, the Liberian Broadcasting System, National Investment Commission and National Commission on Disabilities' budgets were presented in aggregate in 2005/2006 but detailed thereafter. The Governance Commission (formerly Governance Reform Commission) and the Public Procurement and Concessions Commission's budgets were in aggregate in 2006/2007 and 2007/2008 but detailed in subsequent budgets. LIPI has highlighted these agencies in yellow in the subsequent tables, indicating that a complete picture of their expenditure with respect to vehicles does not exist.

2.1 Ministry of Defense, "Food Stuff"

In review of the budgets, LIPI also noticed that the Ministry of National Defense did not receive any allocation for vehicles for 2010/2011, 2011/2012 and 2012/2013 as indicated on page 294 (298 pdf) of the 2012/2013 budget. But LIPI noted US$863,004 in the 2010/2011 and US$225,000 in the 2011/2012. These amounts are listed as Food Stuff under Consumption of Fixed Capital in the Ministry of Defense's, Department of Armed Forces. Food stuff is not fixed. It is consumption of materials/supplies.

In all prior years, there was a budget line called "Food & Catering Services ( Code 1301-11) under the budget category "Goods and Services," not Consumption of Fixed Capital. This was the most correct means of classification. But by including a budget line under Capital Consumption for "Food Stuff" in the 2012/2013 and without any cross walk or explanation, Liberians could be misled and the trend analysis  skewed, because the composition of what constitutes "Consumption of Fixed Capital" has changed.
3. Analysis and Report
LIPI reviewed the budget for 2006/2007 to 2012/2013. The total amount budgeted and spent for vehicles was $55.3 million, as indicated in Table E below:
Table E

Of the total amount, US$1,030,500 was budgeted and spent on motor bikes. This amount represents only 1.9% of the total $55,319,146 calculated for the entire seven-year period.  LIPI noted that while the budget amounts increased per year from 2006/2007 to 2009/2010, the Government has decreased the budget amounts for the most current three years, with the largest decrease being in 2012/2013. On average, in the seven years, the Government has spent US$7.9 million per year on vehicles.

The Government has budgeted and spent this significant sum of money on vehicles in a country that is continuously begging for donor’s support. Since there is no budget performance report, it is hard to determine whether value was achieved and this amount of money was well spent. An equally important policy consideration is the fact that as of June 2013, the Government does not have a comprehensive asset management system that would include depreciable value (book value) and replacement schedules. But Government is reported selling government vehicles without an asset management system that would assist government to determine when to dispose of vehicles and other assets. Thus far, the selling of government vehicles appears discretionary, at best.

Further, after seven years of buying vehicles, as of 2013, the Government has not even implemented fleet management system, including a property management policy and a procedural manual. In speaking to "young professionals" in Government regarding the concern of abuse of government vehicles, a Liberian daily, FrontpageAfrica reported that "President Sirleaf assured the gathering that the matter will soon be resolved, as a "Fleet Management Policy" is steadily being introduced to address the matter, because government alone cannot afford to assume the cost of maintaining government-assigned vehicles. As the policy takes effect, the President explained, ministers, deputies and assistant ministers will be made to sign cost-sharing contracts with government, for the management and maintenance of these vehicles. After four years, the vehicles become theirs, she said, pointing out that most of the officials concerned earn US$3,000 and below - an amount which is insufficient to sustain them. "

The President's statement comes seven years later, and is a clear manifestation of lack of stewardship for public assets. Liberia has a long history of officials misappropriating Government vehicles. The "fleet management policy" indicated by the President, if implemented, will only officially sanction what has been a common practice in Government, creating a situation where limited resources are expended on the purchase of vehicles for officials which are later personalized. For instance, "Former Deputy Minister for Research of the Ministry of Internal Affairs, Peter Senneh, in the National Transitional Government (NTGL) was "dragged to court following charges of theft of property. The charge (came) in the wake of the failure of the Minister to account for a vehicle that was assigned to him. "

In 'Post-War Reconstruction in Liberia: The Governance and Economic Management Assistance Program ,' it was reported that "many officials of the NTGL administration ... nearly all vehicles assigned to NTLA member offices by the government ‘disappeared’ at the close of the NTLA." It was difficult to make officials to account for these vehicles at the end of their term because of the failure of the Government to implement an asset management system and/or a fleet management system. After nearly seven years and still more spending on vehicles, the situation that put Liberian taxpayers' assets at risk of misappropriation has remained in place.
As of 2013, the Government of Liberia has not produced any information that would indicate the existence of the vehicles on which more than $55.3 million has been budgeted and spent by ministries and agencies. Given further that there is no asset management system or a fleet management system, or a comprehensive policy of how much can be spent on a typical government vehicle and what type of a vehicle an official can purchase, it is hard to indicate how many vehicles US$55.3 million purchased. It seems that every public official can purchase any vehicle he or she wants to drive, as there is no standard set by the Government.
Further increasing the risk of misappropriation is the fact that the there is no standard license plates for Governments. Some Government institutions like the Ministry of Finance uses R.L. plates. Similarly situated entities used different plates. For instance, some autonomous agencies are using R.L. plates, while others are using a combination of their acronyms (like NEC, LACC) and B.C. plates. Some public corporations used B.C. plates, while still others are using P.C. plates. Compounding the problem is the decentralized purchasing system, which has inhibited the General Service Agency from fully documenting, tracking and reporting on all Government of Liberia assets, including vehicles purchased by public corporations and other autonomous agencies.  Decentralization in this specific situation can be useful if a system is put in place to ensure proper monitoring, tracking and accounting of GOL’s assets at the Ministries, Agencies and general public levels. The $55.3 million budgeted and expended for vehicles does not include 46 institutions that are either listed in the National Budget or a public corporation. Liberians do not know much about how the following institutions spent taxpayers’ money, as there is no public information as to how much they have spent on vehicles in the past seven years: See Table F below:

Table F

The following tables (Tables G, H, I & J) show the first, second, third and fourth spenders on vehicles, respectively. Review of available budget documents on the Ministry of Finance's website indicates that the Ministry of Public Works is the biggest spender on vehicles, amounting to US$3.6 million. LIPI did not include any earth moving equipment in the Ministry of PublicWorks:
Table G: First Highest Spenders

Tabel I: Third Highest Spenders

Table J: Fourth Highest Spenders

4. Conclusion
Fixed asset management and Fleet Management System are critical to safe guarding public resources. It is international best practice, which is required by international donors. For instance, USAID Regulations (AIDAR) requires that contractors and recipients of U.S. Government funding provide Procurement and Property Management Policy and Procedure Manuals. This is intended to protect public assets from abuse and theft. Liberian Governments have a known history of officials fleeing with or misappropriating Government properties when they leave office or even when they are still in active service. In seven years of Sirleaf rule, and with such known risks, the present Government has not put in place mechanisms that will ensure full accounting of public assets, especially vehicles, thereby indirectly creating the opportunity for theft of government’s properties.
 
In the absence of a budget performance report, it is difficult to determine whether the $55.3 million is money well spent on vehicles in Liberia, a country that is rated by Forbes Magazine as the second poorest country and the third saddest places to live in 2013. Evidence and reports about abuse of public assets particularly vehicles suggest a disappointing asset management credential for the current Government, as much was expected. So far, there is been a complete lack of stewardship for public assets, especially vehicles.

The current wave of abuse is unwarranted and the operationalization of the Sirleaf proposed cost-sharing approach is neither a solution. If the Government does not take steps to promulgate a “better value for money” asset management policy, a continuation of the cost sharing approach will be assumed as a replication of the unpopular disposal scheme of  Dr. Amos Sawyer led Interim Government of National Unity (IGNU).

5. Recommendation

• The Government of Liberia develops and implements a comprehensive asset management system and holds government officials, past and present, to fully account for the vehicles purchased since 2006.

• The Government of Liberia, as part of its regular financial reports to the National Legislature includes a Required Supplemental Stewardship Information (RSSI), principally on vehicles acquired and disposed of by each agency of Government. Such a RSSI will increase transparency in  Government spending on vehicles, as it will match budgetary allotment to the actual spent on each vehicle purchased.

• The Government of Liberia's Fleet Management system should include a standard on the type of vehicles that can be purchased, with a lower and upper limit per vehicle. By doing this, it will avoid the competitive nature in Liberia as to who can ride the newest and most expensive car in Government. Additionally, a Fleet Management system would stagger and stratified purchasing of vehicles, constraining purchase of vehicles on a schedule replacement basis, rather than the current practice of buying vehicles mainly because they are part of the based budget amounts carried from each fiscal year to the next. 

• As part of its current commitment to obtain performance report from line ministries and agencies, the Ministry of Finance should go further to ensure that there is a performance report on vehicles from the 46 government institutions (including public corporations). There is a need to inform the public about the total number of vehicles and the total cost of the vehicles purchased by these 46 institutions.

• As part of its obligation under the Public Financial Management Act, 2009, the Minister of Finance should demand from all public corporations and autonomous agencies whose budgets are aggregated or missing from the National Budget to present a comprehensive procurement and property management policies and procedural manuals, along with a submission of periodic asset registers so as to determine the number and value of vehicles purchased and maintained by these public corporations and autonomous agencies.

• The Ministry of Finance should provide a reconciliation sheet or a cross-walk whenever there is a change in accounting basis and the format of the budget. By doing so, Liberians can better perform a trend analysis to determine the level of annual changes in budgetary amounts for a particular budget line items. Changing the basis of accounting or the format of the budget and reports without these basic tools to inform the public can distort performance and make the budget and expenditure process less transparent. Transparency is not just about what is reported but also the integrity of the data being reported.

• There should be a government-run public auction to sell old vehicles for prices that will be determined based on expert appraisal.