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THE GOVERNMENT OF LIBERIA MINISTRY OF HEALTH AND SOCIAL WELFARE AUDIT OF THE HEALTH SECTOR POOL FUND FOR THE PERIOD MARCH 15, 2008 TO JUNE 30, 2009 SEPTEMBER 2009

THE GOVERNMENT OF LIBERIA MINISTRY OF HEALTH AND SOCIAL WELFARE AUDIT OF THE HEALTH SECTOR POOL FUND FOR THE PERIOD MARCH 15, 2008 TO JUNE 30, 2009

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LIST OF ABBREVIATIONS AND ACRONYMS

Abbreviations Meaning

ADEC Accounts/Data Entry Clerk AHA Africa Humanitarian Action AMA Assistant Minister for Administration ANC Ante Natal Care ARI Acute Respiratory Tract Infection ARV Anti-Retro Viral BoB Bureau of the Budget BPHS Basic Package of Health Services County Health Officers CA Chief Accountant CHT County Health Team CHW Community Health Worker CMO Chief Medical Officer DFID Department for International Development DMA Deputy Minister for Administration DOTS Directly Observed Treatment, Short Course Expanded Program of

Immunization EOC Emergency Obstetric Care EY Ernst & Young EYGAM Ernst & Young Global Audit Methodology FRA Fiduciary Risk Assessment GDN Good Delivered Note GoL Government of Liberia GRN Goods Receiving Note HMIS Health Management Information Systems Integrated Management of Childhood

Illnesses Maternal and Child Health IA Internal Audit IOUs I Owe You IPSA International Public Sector Accounting Standards JFA Joint Financial Agreement LIBR National Reference Library LPO Local Purchasing Order MCH Maternal and Child Health ME Monitoring and Evaluation MERCI Medical Emergency and Relief International MoF Ministry of Finance MOHSW Ministry of Health and Social Welfare MSG Monitoring and Steering Group NACP National AIDS Control Program NBDC National Budget and Disbursing Chief NHP National Health Plan NPA National Programme Accountant NPFA National Procurement, Fixed Assets, Stores and Payroll Accountant OFM Office of Financial Management OIC Officer in Charge (PHC clinic) OPD Out Patient Department


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LIST OF ABBREVIATIONS AND ACRONYMS (CONT’D)

Abbreviations Meaning

PA Physician’s Assistant PCT Project Coordination Team (MOHSW) PD Procurement Director PF Pool Fund PFA Pool Fund Accountant PFM Pool Fund Manager PFS Pool Fund Secretariat PFSC Pool Fund Steering Committee PHC Primary Health Care PMU Pentecostal Missions Unlimited PPCC Public Procurement and Concessions Commission, Act 2005 PPG Payment Policy Guidelines PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper PwC PricewaterhouseCoopers RH Reproductive Health RN Registered Nurse SGBV Sexual and Gender Based Violence SIFC Senior International Financial Controller STI Sexually Transmitted Infection TB Tuberculosis TBA Traditional Birth Attendants TM Traditional Midwives TOR Terms of reference TTM Trained Traditional Midwives UNHCR United Nations High Commissioner for Refugees UNICEF United Nations Children’s Education Fund VCT Voluntary Counseling and Testing WHO World Health Organization


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TABLE OF CONTENTS

SECTION

PAGE REF

1.

TRANSMITTAL LETTER

1

2.

EXECUTIVE SUMMARY

• Background of the assignment • Scope of the audit and methodology • Audit objectives • Pre-audit steps • Output of the audit • Financial highlights • Oversight governance • Status of financial management • Summary of key findings and recommendations • Conclusion

2-11

3.

FINANCIAL STATEMENTS A. Health Sector Pool Fund Account

• General Information • Independent Auditors’ report • Balance sheet • Statement of income and expenditure • Statement of cash flows • Notes to the financial statements

B. Health Sector Pool Fund and Disbursement Account

• Receipts and Payments Accounts • Independent Auditors’ report on compliance

12-26

4.

MANAGEMENT LETTER

• Matrix of significant audit findings • Internal control issues and recommendations • Financial management issues and recommendations • Compliance issues and recommendations

27-61

5

FRAUD, ERRORS AND IRREGULARITIES

62

6

LESSONS LEARNT AND NEXT STEPS

63-64

7

APPENDICES

• List of Pool Fund Steering Committee and Program Coordination Team

• List of some documents reviewed • Summary of activities and funding received • Persons contacted during the course of the audit • Copy of bank confirmation response letter • Management verbatim comments

65-76

TRANSMITTAL LETTER

Ernst & Young Chartered Accountants G15, White Avenue Airport Residential Area P.O. Box KA 16009, Airport Accra, Ghana Tel: +233 2177 4275 / 9868 / 9223 / 2091 Fax: +233 2177 8894 www.ey.com

A member firm of Ernst & Young Global Limited Partners: Ferdinand A. Gunn, Wilfred Okine, Kwadwo Mpeani Brantuo, Victor C. Gborglah

1

September 21, 2009 The Deputy Minister of Administration Ministry of Health and Social Welfare Capital Bye Pass Monrovia, Liberia Attention: Hon. Vivian Cherue, Dear Hon. Cherue, MINISTRY OF HEALTH AND SOCIAL WELFARE AUDIT OF THE HEALTH SECTOR POOL FUND FOR THE PERIOD ENDED JUNE 30, 2009 We are pleased to present our final audit report on the audit of the Ministry of Health and Social Welfare Health Sector Pool Fund for the period March 15, 2008 to June 30, 2009. Our report is structured as follows:

• Section 1: This transmittal letter.

• Section 2: Executive summary.

• Section 3: Financial statements and reports thereon. A. Pool Fund Account. B. Pool Fund Disbursement Account.

• Section 4: Management letters.

• Section 5: Fraud, Error and Irregularities.

• Section 6: Lessons learnt and next steps.

• Section 7: Appendices.

We would like to express our appreciation to the management and staff of the Ministry of Health and Social Welfare and the Pool Fund Secretariat for their cooperation and assistance during the course of the audit. Yours truly, Kwadwo Mpeani Brantuo PARTNER Email: [email protected] For: Ernst & Young

Chartered Accountants Accra

http://www.ey.com

mailto:[email protected]

EXECUTIVE SUMMARY


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1.0 Executive summary 1.1 Background of the assignment

The Government of Liberia (GOL) acting through the Ministry of Health and Social Welfare (MOHSW) is committed to ensuring the accessibility of effective health services at every level of the health system. However, the large number of health actors in Liberia presents an enormous challenge to achieving alignment behind the National Health Plan (NHP) and has resulted in excessive transaction costs for the government in addition to posing associated risks of high levels of aid duplication and inefficiency.

In close consultation with its Development Partners, the Government of Liberia (GOL) therefore established a Health Sector Pool Fund in March 2008. This is a closely supervised or co-managed pool fund, under the oversight of a Pool Fund Steering Committee (PFSC), chaired by the Minister of Health and Social Welfare. The MOHSW has established a Pool Fund Secretariat (PFS) is managed by PricewaterhouseCoopers (PwC) Associates Africa Limited, a firm of chartered accountants, which is an integral part of the MOHSW Office of Financial Management (OFM) that is responsible for providing centralized accounting, disbursement, and financial reporting services for all funds that are managed by MOHSW.

1.2 Contributing donors

Donors who have signed up Joint Financing Agreements (JFA) with the GoL and contributing to the Pool Fund include: § United Kingdom’s (UK) Department for International Development (DFID); § Irish Aid; § United Nations Children’s Education Fund (UNICEF); and § United Nations High Commissioner for Refugees (UNHCR).

In accordance with the JFAs, allocations from the Pool Fund are based on proposals initiated by MOHSW for the purpose of implementing the NHP. The proposal must initially be discussed and agreed by the PFSC, which will ensure consistency with the aims of the NHP and review of performance, reporting and audit, as outlined in the JFA.

1.3 Scope of the audit and methodology

We were engaged to perform the audit of the operations and transactions of the financial resources made available for the MOHSW Health Sector Pool Fund for the program of work by all sources based on the JFA entered by contributing donors and the Government of Liberia. The audit covered the period March 15, 2008 to June 30, 2009. Although the Pool Fund was established in March 2008, the audit period was extended June 30, 2009, to align the pool fund fiscal year with that of the MOHSW. We executed the audit in accordance with International Standards on Auditing (ISA) and conformed to the International Standards on Auditing and International Organization of Supreme Audit Institutions (INTOSAI) and guided by the relevant provisions of the JFA, MOUs, the provisions of the PPCC Act 2005, and the conditions of the relevant financing agreements. The audit covered only the Pool Fund and not the activities and operations of entire MOHSW.


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1.3.1 Objectives of the audit

♦ The primary objective of the audit is to provide reasonable assurance to the

management of the MOHSW Health Sector Pool Fund that, the financial reports give a true and fair view of the financial position of the Health Sector Pool Fund as of June 30, 2009 in accordance with International Public Sector Accounting Standards. Also, we have expressed a separate independent opinion on the degree of compliance with the Health Sector Pool Fund procedures for the fifteen (15) month period then ended.

♦ The Pool Fund (PF) financial reports consist of the receipts and transfers from the Pool Fund Main Account into the Pool Fund Disbursement Account and onward disbursements and payments/ expenditures from the Pool Fund Disbursement Account for activities of the external recipients. Recording of transactions from the PF main account are done by the PF Secretariat whilst that from the Disbursement Account are performed by the Office of Financial Management (OFM).

1.3.2 Our Methodology

The Ernst & Young Global Audit Methodology (EYGAM) is mainly risk based and control focused and is generally in accordance with International Standards on Auditing (ISA) and INTOSAI. We focused primarily on the control environment and the control procedures regarding the MOHSW Health Sector Pool Fund. We also examined various terms, conditions, certain statutes of GoL and agreements with certain third parties including Donors to the Pool Fund. We carried out the following key steps to ensure our audit objectives were achieved: ♦ Performed reviews and tests to ensure that funds have been used in accordance with

the provisions of the JFA, Memorandum of Understanding (MOU) and the conditions of the relevant financing agreements with due attention to economy, effectiveness and efficiency, and only for the purposes for which the financing was provided under the MOU and relevant financing agreements;

♦ Reviewed personnel costs, goods, services and capital expenditure have been financed in accordance with the relevant financing agreement;

♦ Examined all necessary supporting documents and records, and ensured accounts have been kept in respect of all Pool Fund and project related activities (including expenditures reported) and clear linkages exist between the underlying books of account and financial reports thereon;

♦ Ascertained the bank account reconciliation for all Pool Fund transactions have been prepared and reviewed by a responsible and independent official;

♦ Ensured the MOHSW Pool Fund financial reports have been prepared in accordance with International Public Sector Accounting Standards 2 (IPSAS2) and give a true and fair view of the funds financial situation; and

♦ Verified all procurement of goods, works and services for the Health Sector Pool Fund were done consistent with the provisions of the PPCC Act 2005.

♦ Ensured that payments have been made in accordance with the JFA, the Health Sector Pool Fund Procedures Manual and other financial agreement rules and instructions exclusively for eligible expenditures, with due attention to economy, effectiveness and efficiency and only for the purposes for which the financing was provided.

Our review did not cover the entire operations of the MOHSW but the Health Sector Pool Fund and those of processes of the Ministry which to a large extent imparted on the operations of the Health Sector Pool Fund.


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1.4 Pre-audit steps

As part of our pre-audit activities and steps, we reviewed the following documents:

♦ Terms of reference (TOR) of the Health Sector Pool Fund audit. ♦ The Joint Financing Agreements (JFA) between the contributing donors and the

MOHSW; ♦ The National Health Plan (NHP) 2007- 2011; ♦ Public Procurement and Concession Commission (PPCC) Act 2005; ♦ Social Welfare Plan of Action in draft for the period 2009/10 – 2010, March 2009; ♦ Social Welfare Policy in draft; March 2009; ♦ Payments Policy Guidelines; August 2008; ♦ Health Sector Pool Fund Procedures Manual; August 2008; ♦ Financial Management Procedures Manual; October 2008; ♦ Minutes of PFSC meetings from; April 2008 to July 2009; ♦ OFM Staff Handbook; ♦ Unaudited Financial Statements of MOHSW for the nine months period to March 31, 2008; ♦ Annual report on the Health Sector Pool Fund through to June 2009; ♦ Ministry of Health and Social Welfare Quarterly reports on the Health Sector Pool Fund; ♦ Grant agreements with Sub- recipients; ♦ Proposals of Sub-recipients submitted to PSFC; and ♦ Fiduciary Risk Review of the Health Sector Pool Fund July 2008 etc. ♦ MOHSW audit report by the General Auditing Commission. (www.gacliberia.com)

1.5 Output of the audit

In accordance with the terms of (TOR) reference for the assignment, we have issued in final form the following reports:

♦ an independent audit opinion on the MOHSW Health Sector Pool Fund financial reports

and the notes to the financial reports thereon for the fifteen month period ended June 30, 2009; and

♦ a separate opinion on the Pool Funds Disbursement commenting on the degree of compliance with Health Sector Pool Funds Procedures Manual relating to the project management, PPCC Act 2005, Joint Financing Arrangements and the NHP.

These financial statements include the Balance Sheet, Income and Expenditure Account

and the Receipt and Payment Account and the notes that form an integral part of these financial statements.

The above opinions are unqualified.

♦ A management Letter which highlights:- ♦ observation on the accounting records, systems and controls that

were examined during the course of the audit; ♦ specific deficiencies identified and areas of weakness in the financial

management systems and controls as well as recommendations for their

improvement; ♦ the degree of compliance of each of the financial covenants on the financing

agreements and other relevant applicable Liberia laws and regulations; and ♦ other relevant and practical recommendations to assist in correcting the

existing weaknesses identified in the short, medium and long term.

http://www.gacliberia.com)


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1.6 Financial highlights

1.6.1 Inflow of funds

Receipts of the Health Sector Pool Fund are basically contributions received from participating donors into the Health Sector Pool Fund Account. These currently include: DFID, Irish Aid, UNICEF and UNHCR. Based on the agreements signed with sub-recipients, moneys are released into the disbursement account and paid to the sub-recipients to implement activities of the NHP. We present a summary of the inflows from the inception of the Health Sector Pool Fund from March 15, 2008 up to June 30, 2009.

Donor US$

United Kingdom’s DFID 6,737,176 Irish Aid 2,829,929 UNICEF 750,000 UNHCR 420,000 Total

10,737,105

Out of the receipts of US$10,737,105 as presented in the table above, an amount of US$2,984,578 was transferred by the PFS to the OFM disbursement account for onward payments to sub-recipients. We have so far received confirmations of the DFID and Irish Aid transfers totaling £4,000,000 and £2,000,000 respectively.

1.6.2 Expenditures

These are payments to sub-recipients for the implementation of activities targeted at NHP strategic priorities for which proposals had been initiated by the Program Coordinating Team (PCT) and approved by the Pool Fund Steering Committee (PFSC). Expenses for the period audited classified according to the priorities stipulated of the NHP include:

Expenses per NHP priorities US$

Basic Package of Health Services 1,516,400 Human Resources for Health 452,055 Infrastructure Development 57,377 Support Systems 223,814 Other expenses 80,044

2,329,690


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1.7 Oversight governance

Oversight supervision of the MOHSW Health Sector Pool Fund is performed by the Pool Fund Steering Committee (PFSC). Membership of the PFSC is open to any donor who has entered into the Joint Financing Agreement with the Ministry of Health & Social Welfare and a group of representatives from across the spectrum of the health sector, including the WHO, UNFPA, World Bank, Liberian Business Association, the European Commission, and the non-governmental community. The committee has five permanent members from the Government of Liberia, including the Minister of Health and Social Welfare, the Chief Medical Officer, the Minister of Finance, the Minister of Education, and the Minister of Planning & Economic Affairs. The Minister of Health and Social Welfare serves as chair of the PFSC and one donor serves as the co-chair. The Steering Committee is supported by a Secretariat managed by the Pool Fund Manager; PricewaterhouseCoopers Associates Africa Limited (PwC). The Steering Committee meets regularly to discuss and review proposals for allocation of Pool Funds, to review reports and annual progress, as well as appoint annual auditors of the Pool Fund. All meetings of the PFSC have been well attended and committee members have maintained a 100% quorum rate (every meeting has been attended by a majority of members) and a record of the key decisions maintained. These have been reviewed by us.

The PFSC supervises the allocation and utilization of the Pool Fund are consistent with the national priorities contained in the National Health Plan and in line with applicable laws and regulations. As part of its oversight approach, the PFSC reviews and gives approvals to written proposals and budgets for funding initiated by the PCT/ MOHSW. It performs fiduciary risk assessment of projects and explains how the identified risks could be mitigated and possible recommended supervision. The Office of Financial Management (OFM) is expected to build the financial management capacity of MOHSW and also ensure transparency and accountability in the use of public resources. The OFM handles all financial management aspects of the Health Sector Pool Fund. These systems and procedures are expected to be decentralized to the county level. As part of its efforts in strengthening the control environment and operations of the MOHSW, the Ministry has set up a Monitoring and Evaluation Unit, which will support all projects including the Health Sector Pool Fund.

The PFSC with the recommendation of the PFM has exercised the provisions of Section 9 of the JFA with donors of obtaining independent auditors’ reports on the Health Sector Pool Fund from external auditors.

1.8 Status of financial management

The Office of Financial Management (OFM) is a capacity building project which aims at transparency and accountability in the use of public resources. Our assessment of the financial management systems revealed some notable improvements in the financial reporting, internal control structure and procedures. This conclusion is based on our assessment of the financial control environment, accounting procedures, samples of transactions tested and interviews with some key personnel of the MOHSW as part of our audit procedures. Our audit strategy was designed to cover all significant risks and control areas of the Health Sector Pool Fund. Inspite of the significant improvements noted in the general controls, we have also identified certain weaknesses in the financial management system which we have reported for the necessary corrective measures to be made.

We have summarized these weaknesses and provided related remedies for management consideration. These issues have been presented in our summary of key findings and recommendations.


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1.9 Summary of significant audit findings and recommendations

For convenience, the findings from our audit exercise have been grouped as follows: ♦ Internal control findings and recommendations; ♦ Financial management issues and recommendations; ♦ Compliance issues and recommendations; and ♦ Other findings and recommendations.

Internal control findings 1. Bank reconciliation statements for the Pool Fund and the Pool Fund Disbursement Account were

not prepared for some months contrary to section 3.3 of the Health Sector Pool Fund Procedures Manual which requires bank reconciliations of the Health Sector Pool Fund and Pool Fund Disbursement bank accounts to be undertaken and reviewed monthly as part of project financial reporting. In other months, the bank reconciliation statements were prepared, there were instances where both the preparer and reviewer did not sign off and date the bank reconciliation statements. Control over the accuracy of cash and bank balances is thus reduced as errors or omissions in the bank statements or in the cash book risk not being detected on a timely basis. Management of the Pool Fund should ensure that bank reconciliation statements are prepared on a regularly basis preferably monthly on all bank accounts. Both the preparer and the reviewer should sign off and date the bank reconciliations as evidence of work done. (Ref. 1.1 page 27).

2. MOHSW Payment Policy Guidance requires that particulars of checks issued should be entered in a

check register maintained by the OFM. We however noted instances where checks issued were not recorded in the check register. There is a potential risk that missing check leaflets may go undetected for a long time. It would also be difficult to keep the audit trail of check payments and receipts in respect of Health Sector Pool Fund transactions. The check register being maintained should be regularly updated. (Ref. 1.2 page 29).

3. Contrary to Section 3.6 of the Health Sector Pool Fund Procedures Manual which requires that

details of all disbursements be entered in a disbursement register and hard copies filed on a project by project basis, we noted during the course of our review that a separate disbursement register was not maintained for the Pool Fund. Monitoring of disbursements made out of the Pool Fund accounts to various projects becomes difficult thus affecting the timely preparation of reports for donors and other external purposes. A separate Pool Fund disbursement register should be maintained to closely monitor all Pool Fund disbursements. (Ref. 1.3 page 30).

4. Review of reports submitted by external recipients also revealed that invoices and payment

vouchers raised by the external recipients were not stamped “paid” or crossed after payment had been effected. There exist the risk of multiple payments being made with the same invoices and also this practice exposes the payment system of the external recipients to the risk of fraud. The OFM should educate the external recipients to stamp “paid” or cross the payment vouchers and supporting documents after payments have been effected. (Ref. 1.4 page 31).

5. Section 3.2 paragraph 3.2.4 of the Financial Management Procedures Manual of the Ministry of

Health and Social Welfare dated October 2008 authored by PricewaterhouseCoopers provides that check payments greater than US$100,000 must be signed personally by the Minister of Health and Social Welfare. We however noted instances where check payments exceeding US$100,000 were approved by the Deputy Minister of Administration. Clearly, if this provision is not practicable for the Minister to personally sign these checks and the PVs as required by the Financial Management Procedures Manual, it should be revised so the question of compliance does not arise. (Ref. 1.5 page 32).


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6. Payments amounting to US$140,083.75 and US$38,518.26 were paid as incentive to health

workers on behalf of Global Fund and Clinton Foundation respectively between April and June 2009. We however did not sight any formally documented evidence of approval from the Pool Fund Steering Committee authorizing these payments. There exists the risk that Pool Funds being misapplied which will invariably affect the attainment of the project objectives of the Health Sector Pool Fund and the National Health Plan. The OFM should take steps to recover the amounts paid to these Funds. Going forward, the management of the Pool Fund should review the Financial Management Procedures Manual to include emergency payments such as these to give guidance to officials of the Health Sector Pool Fund. (Ref. 1.6 page 33).

7. Our review revealed that the Cashier visits the bank regularly to cash various sums of money. The bank located in the central city business area is very crowded and thus poses a risk of theft and robbery of the cash withdrawn. There also exist the risk of the cash being stolen or the Cashier attacked by thugs and the money taken away from her. Much as this may appear remote, it is worth considering and taking precautions for the future. Management may consider insuring both the Cashier and the cash in transit in the future. The results of each count should be formally documented. (Ref. 1.7 page 34).

8. We noted that surprise cash count exercises were not being carried out during the period under review. There is the risk that the physical cash could be given out to people in the form of IOUs and soft loans. Surprise cash count exercises should be regularly conducted on the Cashier to reduce the risks associated with handling cash. (Ref. 1.8 page 35).

Financial management issues

1. We counted an amount of US$3,700 realized from the sale of bid documents paid to the Cashier for the construction of 10 primary health clinics under the Pool Fund which was not paid back into the Pool Fund bank account nor the MOHSW account. There is the risk that Pool Fund could be misappropriated as moneys received may be used for other non project related purposes. The OFM should ensure that moneys received by the Cashier are deposited at the bank on the same day intact or first thing in the morning following the day the moneys were received. (Ref. 2.1 page 37).

2. Pool Fund money with the Petty Cashier was co-mingled with MOHSW funds and paid out as petty cash for MOHSW related expenses. Funds earmarked for Pool Fund project purposes may be misapplied for unapproved expenditures. The OFM should ensure that Pool Fund’s moneys with the Cashier are deposited at the bank intact and promptly. (Ref. 2.2 page 38).

3. Incentives paid to certain health workers under the Human Resource Pillar of the National Health Plan were not liquidated before subsequent payments were made to them contrary to the provisions of the Health Sector Pool Fund Procedures Manual on liquidation and subsequent payments. There is the risk that unused program funds may be misapplied if previous disbursements are not accounted for in a timely manner. The OFM in the foreseeable future should disburse funds early and insist that the Counties liquidate previous disbursements before subsequent payments are made. (Ref. 2.3 page 39).

4. Instances were noted where incentives to certain health workers refunded to the Cashier were not deposited into the bank until after 15 days. Significant sums of money may be lost if the Cashier’s office is broken into. Funds could also be misapplied or lost through teeming and lading or carry over fraud. Again, the OFM should ensure that refunds paid to the Cashier are deposited in the bank account the same day or first thing in the morning following the day the moneys were received. (Ref. 2.4 page 41).

5. We noted that disbursements made by the OFM to external-recipients for activities to be executed were recorded and subsequently reported as actual expenditures.


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6. Reported expenses might not correlate with the actual activities performed with the risk of

misappropriation of resources. Also, value for money might not be achieved. There should be appropriate mechanisms to avoid virements on the part of the external recipients. (Ref. 2.5 page 43).

Compliance issues 1. Instances were also noted where laid down procurement procedures were not followed as directed

in the PPCC Act 2005. In the bid evaluation for CD Dunbar Memorial Hospital - Gbarnga, Bong County for instance, the following exceptions were noted:

§ The advert published indicated “Request for Proposal” instead of Invitation to bid for

renovation works; § Bidders were requested to make a non- refundable fee of USD300 each to the Design

Consultant instead of to the MOHSW; § The bidding process was initiated by the End User Department (Department of

Planning, Development and Research) and not the Procurement Unit.

7. The PFM should ensure that the Procurement Unit of MOHSW complies with the provisions of the PPCC Act 2005 and the JFAs at all times. (Ref. 3.1 page 44).

2. Expenditure details per the Pool Fund Disbursement Account were not categorized or presented in line with the expenditure headings of the National Health Plan (NHP). It makes it difficult to match actual disbursements against the reported expenditure details. We believe that in the long term the IT Consultants could explore the possibility of reviewing or tailoring the current Chart of Accounts to accommodate this line of thinking. (Ref. 3.2 page 46).

3. The Joint Financing Agreements (JFAs) with the contributing partners under the section on

Procurement of items makes a provision for only goods instead of goods, services and works as contained in the PPCC Act 2005. (See Section 23, 26 and 34 of the PPCC Act 2005). The activities funded by the Pool Fund generally involves the procurement of goods, services and works and not only goods as stipulated in Section 6 of the various JFAs so signed. This provision in the JFAs on procurement appears inadequate and clearly do not cover all the procurement of items as defined in the PPCC Act 2005. Addendum could be issued to include the procurement of works and services in the JFAs. (Ref. 3.3 page 47).

4. The MOHSW does not have a formally documented accounting policies and procedures manual

which can be adopted for all projects including the Health Sector Pool Fund. Without a formally documented accounting policies and procedures manual to act as a general guide in recording, classifying, summarizing and analyzing accounting transactions, errors could be committed and like items also risk being treated differently which can eventually affect the financial reporting of the Ministry. The fundamental accounting concept of consistency also risk being defeated. A formal manual should be adopted which would normally provide Accounting Officers and other stakeholders with direction and guidance in connection with the accounting treatment of transactions, procedures and reports that should be uniform and consistent within the Ministry. (Ref. 3.4 page 48).

5. The MOHSW does not have an Internal Audit function to strengthen the internal control system of

the various projects in particular and the Ministry in general. Clearly, the absence of the IA function makes the management of the Ministry lose out its watchdog role. There exists the risk that errors, omissions and fraud could be perpetuated easily without being detected promptly. In the absence of the IA Unit, the M & E and the Procurement Units should be strengthened by being given more logistical support and resources to operate. (Ref. 3.5 page 49).


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6. Documents such as Project Project Proposals submitted to the Pool Fund Steering Committee,

Minutes of Pool Fund Steering Committee (PFSC), Quarterly and annual reports of the Pool Fund, Minutes of the Program Coordinating Team (PCT) and Minutes of the Health Coordinating Committee (HCC) did not bear any evidence of approval. These documents after approval could be altered without trace. Documents should be practically signed off and also dated as evidence of approval. (Ref. 3.6 page 50).

7. No evidence of field visits to monitor and report on the activities of the external recipients and

projects funded by the Pool Fund were conducted by the ME or the PFM during the period under review. Resource misapplied may go unnoticed for a long time. Management should resource the ME to adequately perform its function appropriately within the Ministry. (Ref. 3.7 page 51).

8. Payment voucher number OFMD1033 dated 20 January 2009 raised for the payment of support

to health facility service provision to MERCI amounting to US$109,488 did not bear any evidence of authorization by the Deputy Minister of Administration contrary to the Payment Policy Guidelines and the Financial Management Procedures Manual of the Ministry of Health and Social Welfare dated August 2007 and October 2008 respectively. Unauthorized payments may be made from the Pool Fund Disbursement Account which may result in significant loss of funds if this is allowed to continue. The OFM should ensure that payment vouchers are duly authorized and approved by the senior official or his/her designate before payments are effected. (Ref. 3.8 page 53).

9. Pro forma invoice amounting to US$67,788.50 for the second payment for support to health

facility service provision to Medical Emergency & Relieve Cooperative International (MERCI) on June 29, 2009 was not prepared contrary to the provisions in the Health Sector Pool Fund Procedures Manual. Disbursement made from the Pool Fund Disbursement Account may not be in accordance with project objectives and the disbursement schedule agreed in the grant agreement. Funds may be disbursed for purposes other than those stated in the grant agreements. The Office of the Financial Management (OFM) and the Pool Fund Manager (PFM) should ensure that all disbursements are supported by properly approved pro forma invoices. (Ref. 3.9 page 54).

Other issues 1. Review of the Health Sector Pool Fund Procedures Manual, the MOHSW Payments Policy

Guidelines and the Financial Management Policies and Procedures Manual, revealed that there is no guidance or mechanisms put in place that would help in their possible revisions in a timely manner in the foreseeable future. There could be sections of the manuals which do not seem practical in the operation of the Project which will have to be reversed. Clearly, after the Phase I, there could be certain provisions that should definitely be revisited but we did not sight any such formally documented mechanisms for the revision of the manual. (Ref. 4.1 page 56).

2. The Monitoring and Evaluation function and benchmarks were not considered in the request for

proposals and selection of external recipients that received moneys from Health Sector Pool Fund in the Phases I and II respectively. We could not obtain assurance on the technical execution of the activities of the external recipients in meeting their targets as the field monitoring of these external sub-projects during the period under review were not carried out. (Ref. 4.2 page 57).

3. Representatives at the PFSC meetings had not been consistent in terms of officers who attend

their meetings. The practice appears not to facilitate efficient decision making as some members do not have the institutional memory of issues discussed to enable them contribute fully in the deliberations at such meetings. (Ref. 4.3 page 58).


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4. No formal IT Policy manual that give guidance on the use of anti-virus, back up procedures and

password management. There may be inconsistencies in the basis of applying certain IT related control procedures. Management should put in a place a formally documented IT policy to provide guidance on the use and management of anti-virus, back up procedures and password management. (Ref. 4.4 page 59).

5. Our review also revealed that the OFM does not have a backup server and in addition no log is

maintained as proof of backup having been performed. We also observed that the current server had its backup slots empty. The OFM could lose critical data and the cost of its disaster recovery could be excessive. The OFM should backup its data on a regularly basis, Management should consider having a separate backup server in the future. (Ref. 4.5 page 60).

6. 6. Our examination also revealed that an independent audit report was not included in the

eligibility criteria for selecting future external recipients. (Ref. 4.6 page 61). 2.0 Conclusion

The Government of Liberia acting through the Ministry of Health and Social Welfare (MOHSW) is committed to ensuring the accessibility of effective health services at every level of the health delivery system. Nonetheless the large number of health sector actors in Liberia presents an massive challenge to achieving alignment with the priorities of the National Health Plan (NHP); 2007 – 2011 and has resulted in high transaction costs for the GoL and high risks of duplication and inefficiency. A number of Development Partners (DPs) including the UK DFID, Irish Aid, UNICEF and UNHCR have established the Health Sector Pool Fund through Joint Financing Agreements (JFAs) signed with the GoL. Through a technical assistance, the DFID has established the Office of Financial Management (OFM) Project which handles all the financial management aspects of the Projects of the MOHSW and also strengthen the financial management capacity of the Ministry. The administrative function of the Pool Fund is being handled by PricewaterhouseCoopers (PwC) Associates Africa Limited. The operation of the PF is co-managed by the Pool Fund Steering Committee. Moneys from the PF are advanced to external recipients to carry out approved budgeted activities. On the premise that the MOHSW has no internal audit function and weak monitoring and supervision of field projects, the Monitoring and Evaluation Unit needs to be adequately resourced to strengthen the internal control environment of projects including the PF. Although there is a financial management and accounting systems in place, the Senior International Financial Advisor needs to organize more advance training sessions on these systems for the key staff of the OFM to enable them optimize their usage. Immediate efforts should also be made to update all the manuals used by the Health Sector Pool Fund. We also expect that to strengthen the existing controls, our recommendations should be worked on in the short, medium and long term. From our audit work, we have identified significant weaknesses, highlighted above which could impact significantly on the operation of the Health Sector Pool Fund and we therefore call on the management of MOHSW to initiate the appropriate plans to correct these deficiencies and also re-enforce the areas of strength like retaining the competent team for the Fund, continue with the capacity building effort, updating the relevant Project manuals etc.

FINANCIAL STATEMENTS HEALTH SECTOR POOL FUND ACCOUNT AND INDEPENDENT AUDITORS’

REPORT AND OPINION THEREON


TABLE OF CONTENTS PAGE

REFERENCE GENERAL INFORMATION 12-13 INDEPENDENT AUDITORS’ REPORT ON THE HEALTH SECTOR POOL FUND FINANCIAL STATEMENTS AND OPINION THEREON

14-15 BALANCE SHEET

16 STATEMENT OF INCOME AND EXPENDITURE

17 STATEMENT OF CASH FLOWS

18 NOTES TO THE FINANCIAL STATEMENTS

19-23 HEALTH SECTOR POOL FUND ACCOUNT AND DISBURSEMENT ACCOUNT RECEIPTS AND PAYMENTS ACCOUNT.

24 INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

25-26


September 2009 E 12

GENERAL INFORMATION

POOL FUND STEERING COMMITTEE (PFSC)

Hon. Augustine Ngafuan, Minister of Finance Hon. Amara Konneh, Minister of Planning & Economic Affairs Hon. Joseph Korto, Minister of Education Hon. Walter T. Gwenigale, MOHSW Susan Ngongi, Country Representative, UNICEF Rose Gakuba, Country Representative, UNFPA Elisa Cavacece, Representative, Irish Aid Alex Harper, Country Representative, DFID Callista Chen, Representative, World Bank Leon Banks, Representative, UNHCR Nestor Nydayimirie, Representative, World Health Organization Chris McDermott, Health Team Leader, USAID Juan-jose Casanova-Arasa, Representative, European Commission Clavenda B. Parker, Representative, Liberian Business Association Lawrence Oduma, Country Director, Merlin Bernice Dahn, Chief Medical Officer, MOHSW S. Tornorlah Varpilah, Deputy Minister for Planning, Research & Development, Ministry of Health & Social Welfare Vivian Cherue, Deputy Minister for Administration, MOHSW Joseph Geebro, Deputy Minister for Social Welfare, MOHSW Mr. Jacob Hughes; Pool Fund Manager, PwC

PROGRAM COORDINATION TEAM (PCT)

Hon. Bernice Dahn; Deputy Minister/CMO; Health Services, MOHSW Hon. Vivian Cherue; Deputy Minister Administration, MOHSW Hon. Tornorlah Varpilah; Deputy Minister; Planning, Devt. & Research, MOHSW Hon. Joseph Geebro; Deputy Minister; Social Welfare, MOHSW Hon. Moses Pewu; Assistant Minister; Health Services, MOHSW Hon. Jessie Duncan; Assistant Minister; Health Services, MOHSW Hon. Malike Konneh; Assistant Minister; Administration, MOHSW Hon. Nmah Bropleh; Assistant Minister; Planning, Devt. & Research, MOHSW Hon. Stanford Wesseh; Assistant Minister; Planning, Devt. & Research, MOHSW Hon. Bendu Tulay; Assistant Minister; Social Welfare, MOHSW Dr. Julia Brown, Director of Human Resources, MOHSW Dr. Saye Baawo; Director of Health Services; MOHSW Mr. Ka-Rufus Morris; Director of Procurement, MOHSW Md. Genevieve Barrow; Director of OPS, MOHSW Mr. David Sumo; Manager; Supply Chain, MOHSW Dr. Rose McCauley; Program Manager; BASICS, MOHSW Md. Arabella Greaves, Program Manager; HSRP, MOHSW Mr. Abraham Gerard; Manager; Infrastructure, MOHSW Mr. David Logan; Program Manager; LCM, MOHSW Mr. Jacob Hughes; Pool Fund Manager, PwC Mr. Toagoe Karzon; Comptroller, OFM, MOHSW Mr. Alex Nartey, SIFC, OFM, MOHSW Dr. Joel Jones; Program Coordinator, NMCP/ MOHSW Dr. Catherine Cooper; Program Coordinator, NLTCP/ MOHSW Dr. Benjamin Vonhm; Program Coordinator, NACP/ MOHSW Mr. Thomas Nagbe; Program Manager, EPI/ MOHSW Md. Lydia Sherman, MOHSW Mr. Momolu Sirleaf; External Aid/ MOHSW

THE GOVERNMENT OF LIBERIA MINISTRY OF HEALTH AND SOCIAL WELFARE- HEALTH SECTOR POOL FUND AUDIT REPORTS FOR THE PERIOD MARCH 15, 2008 TO JUNE 30, 2009

September 2009 E 13

GENERAL INFORMATION (CONT’D)

OFFICE OF FINANCIAL MANAGEMENT

Mr. Luc Moens; Project Director, PwC Mr. Felix Tamattey; Project Manager, PwC Mr. Alex Odoi Nartey; Senior International Financial Controller, MOHSW Mr. Toagoe Karzon; Comptroller, MOHSW Mr. Emmanuel Blagaye; Budget Accountant, MOHSW Ms. Annette D. Doe; Program Accountant, MOHSW

POOL FUND SECRETARIATE

Mr. Jacob Hughes; Project Manager, PwC Mr. Daniel Quampah; Project Accountant, PwC

BANKERS Ecobank Liberia, Ashmun & Randall Street, Monrovia, Liberia



14

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF THE HEALTH SECTOR POOL FUND STEERING COMMITTEE AND DONORS OF THE MINISTRY OF HEALTH AND SOCIAL WELFARE - HEALTH SECTOR POOL FUND Report on the financial statements We have audited the accompanying financial statements of the Ministry of Health and Social Welfare – Health Sector Pool Fund which comprise the balance sheet as of June 30, 2009 and the statements of income and expenditure and cash flows for the fifteen (15) month period then ended, and a summary of significant accounting policies and explanatory notes. Management’s responsibility for the financial statements Management of the Health Sector Pool Fund is responsible for the preparation and fair presentation of the financial statements in accordance with International Public Sector Accounting Standards 2 (IPSAS 2) and relevant provisions of the of the Joint Financing Agreements (JFA) and Memorandum of Understanding (MOU). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and International Organization of Supreme Audit Institutions (INTOSAI). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion In our opinion, the financial statements referred to above present fairly in all material respects the financial position of the Ministry of Health and Social Welfare - Health Sector Pool Fund as of June 30, 2009 and the statements of income and expenditure and cash flows for the fifteen (15) month period then ended in accordance with International Public Sector Accounting Standards 2 (IPSAS 2) and relevant provisions of the Joint Financing Agreements, Memorandum of Understanding and other applicable laws and regulations of the Republic of Liberia and in are conformity with the basis of accounting described in Note 2 to these financial statements.

Ernst & Young Chartered Accountants Accra Date: September 21, 2009


September 2009 E 16

HEALTH SECTOR POOL FUND BALANCE SHEET AS AT JUNE 30, 2009 ASSETS EMPLOYED Notes

June 30, 2009

US$

Current assets

Advances due from Counties 3 174,229 Cash and bank balances 4 8,310,435

8,484,664 FUND BALANCE Financed by:

Accumulated fund 8,484,664 Signed on behalf of the Pool Fund Steering Committee: Date: September 21, 2009 Date: September 21, 2009 The notes 1 to 12 form an integral part of these financial statements


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17

HEALTH SECTOR POOL FUND STATEMENT OF INCOME AND EXPENDITURE FOR THE FIFTEEN MONTH PERIOD ENDED JUNE 30, 2009

The notes 1 to 12 form an integral part of these financial statements.

Note June 30, 2009 US$

Income

Donors contributions

5

10,737,105

Other income 6 77,249

10,814,354

Expenditures per project activities

Basic package of health services 7 1,516,400 Human resources for health 8 452,055 Infrastructure development 9 57,377 Support systems 10 223,814 Other expenses 11 80,044

2,329,690 Excess of income over expenditure 8,484,664 ACCUMULATED FUND FOR THE FIFTEEN MONTH PERIOD ENDED JUNE 30, 2009 June 30, 2009

US$ Beginning balance as at March 15, 2008 - Excess of income over expenditure 8,484,664 Closing balance as at June 30, 2009 8,484,664


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HEALTH SECTOR POOL FUND STATEMENT OF CASH FLOWS FOR THE FIFTEEN MONTH PERIOD ENDED JUNE 30, 2009

June 30, 2009 US$ Cash flows from operating activities Increase in net assets

8,484,664

Adjustments to reconcile changes in net assets to net cash from operating activities:

Bank interest income (77,249) Bank charges 73,780 8,481,195 Increase in advances due from Counties (174,229) Tax paid on bank interest income 5,289 Net cash flows from operating activities

8,312,255

Cash flows from investing activities Bank interest income 77,249 Bank interest expense (73,780) Tax paid on interest income (5,289) Net cash from investing activities

(1,820)

Increase in cash and cash equivalents 8,310,435 Cash and cash equivalents as at March 15, 2008 - Cash and cash equivalents as at June 30, 2009 4 8,310,435 The notes 1 to 12 form an integral part of these financial statements.


September 2009 E

19

NOTES TO THE FINANCIAL STATEMENTS

1. ACTIVITIES

The Health Sector Pooled Fund was established in March 2008 with the signing of a Joint Financing Agreement (JFA) and Memorandum of understanding between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Liberia. Subsequent JFAs were signed by the Irish Aid, United Nations Children’s Education Fund (UNICEF) and United Nations High Commissioner for Refugees (UNHCR) with the Government of Liberia. The objectives of the Health Sector Pool Funds are in threefold:

(i) To help finance priority unfunded needs within the National Health Plan (2007-2011);

(ii) To increase the leadership of the Ministry of Health and Social Welfare (MOHSW) in the allocation of health sector resources; and

(iii) To reduce the transaction costs associated with managing multiple different donor

projects.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting The financial statements have been prepared in accordance with the modified cash basis of accounting as required by the Ministry of Health and Social Welfare (MOHSW) Financial Management Procedures Manual, the Health Sector Pool Fund Manual, relevant conditions stipulated under the Joint Financing Agreements (JFAs), the Memorandum of Understanding (MDUs) with the contributing donors and in compliance with International Public Sector Accounting Standards 2 (IPSAS 2). This implies that all expenditures are expensed whether they are revenue or capital in nature and receipts are recognized when funds are received from the contributing donors.

Pool Fund Secretariat (PFS) and the Office of Financial Management (OFM)

The Pool Fund Secretariat (PFS) which is responsible for the administrative function of the Fund and is handled by PricewaterhouseCoopers. All financial management of the fund including onward disbursement of funds to beneficiaries and monitoring is done by the Office of Financial Management (OFM) at the Ministry of Health and Social Welfare.

Reporting currency

Financial reports have been presented in United States of America Dollars (US$). Transactions denominated in other currencies are translated into US Dollars and recorded at the rates of exchange ruling at the date of transactions. Balances denominated in other currencies are translated into US Dollars at the rate of exchange ruling at the reporting date.


September 2009 E

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NOTES TO THE FINANCIAL STATEMENTS (CONT’D) Cash and cash equivalents

Cash and cash equivalents are defined as cash and bank balances, bank overdrafts and investments in marketable securities that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and bank balances, 91-day treasury bills and fixed deposits.

3. Advances due from Counties

June 30, 2009

US$

Advances due from Counties 174,229 This refers to Health Worker Incentives paid to Counties which were refunded on July 2, 2009 (US$137,061) and August 17, 2009 (US$37,168) respectively. These amounts have been validated by us.

4. Cash and bank balances

June 30, 2009

US$

Pool Fund Account 7,746,768

Disbursement Account 563,667

8,310,435 5. Donor contributions

June 30, 2009 Date Donors US$ March 31, 2009 United Kingdom’s DFID 2,763,388 March 27, 2009 United Kingdom’s DFID 3,973,788 December 29, 2008 Irish Aid 2,829,929 June 06, 2009 UNICEF 750,000 March 31, 2009 UNHCR 420,000

10,737,105


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21

NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 5(i). Pledges from contributing donors

Balance outstanding as at

June 30, 2009 Donor

Contributions

Contributions received

DFID £4,000,000 £4,000,000 - Irish Aid €4,000,000 €2,000,000 €2,000,000 UNICEF $750,000 $750,000 - UNHCR $420,000 $420,000 -

6. Other income

June 30, 2009 US$ Bank interest received – Pool Fund Account 72,088 Bank interest received – Pool Fund Disbursement Account 5,161

77,249 7. Basic package of health services

June 30, 2009 US$ Support to partner service provision Phase I 445,569 Support to partner service provision Phase II 1,070,831

1,516,400 8. Human resources for health

June 30, 2009 US$

Incentive payments to health workers 286,643 Medical Doctors program 3,386 Rehabilitation of Curran Lutheran Nursing and Midwifery School 162,026

452,055


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22

NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 9. Infrastructure development

June 30, 2009 US$

Construction of 10 PHC Clinics 1,500 CemONC/C.B Dundar 55,877

57,377 10. Support systems

June 30, 2009 US$

National Reference Laboratory 204,846 Social Welfare Contribution 18,968

223,814 11. Other expenses

June 30, 2009

US$

Bank charges – Pool Fund Account 72,558

Bank charges – Pool Fund Disbursement Account 1,222

Pool Fund audit – Advertisement for expression of interest 975

Tax on bank interest – Pool Fund Account 5,289

80,044


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NOTES TO THE FINANCIAL STATEMENTS (CONT’D) 12. Project allocations

Project activities

Allocated1

Disbursed2

Payments3

US$ US$ US$

Curran Lutheran Hospital Midwifery School 211,504 211,504 162,026

National Reference Laboratory (LIBR) 683,040 371,517 204,846

Support to Partner Service Provision Phase I 445,569 445,569 445,569

Social Welfare 75,000 63,226 18,968

Medical Doctors Program 1,927,440 18,000 3,385

Support to Partner Service Provision Phase II 1,175,142 1,057,954 1,070,831

CemONC/C.B. Dunbar 552,767 276,984 55,877

Construction of 10 health clinics 1,143,400 7,600 1,500

Pool Fund Audit – Advert for expression of interest

- - 975

Support to Partner Service Provision Phase III 953,334 - - Health Worker Incentive, Policy and Payroll Software 954,263

532,224 460,872

8,121,459 2,984,578 2,424,849

1 Allocated – Total budget approved by the Pool Fund Steering Committee. 2 Disbursed – Funds transferred from the Health Sector Pool Fund account to the MOHSW Pool Fund Disbursement account. 3 Payments – Funds paid by the MOHSW Office of Financial Management (OFM) from Disbursement Account to fund recipients for agreed project activities.

HEALTH SECTOR POOL FUND ACCOUNT AND DISBURSEMENT ACCOUNT

RECEIPTS AND PAYMENTS FOR THE FIFTEEN MONTH PERIOD ENDED JUNE 30, 2009


September 2009 E

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HEALTH SECTOR POOL FUND ACCOUNT AND DISBURSEMENT ACCOUNT RECEIPTS AND PAYMENTS ACCOUNT FOR THE FIFTEEN MONTH PERIOD ENDED JUNE 30, 2009

Receipts

Pool Fund Account

Pool Fund Disbursement

Account

US$

US$

Receipts from Donors 10,737,105 - Receipts from Pool Fund Account - 2,984,578 Bank interest received 72,088 5,161

10,809,193

2,989,739

Payments per project activities

Curran Lutheran Hospital 211,504 162,026 National Reference Laboratory (LIBR) 371,517 204,846 Support to partner service Phase I 445,569 445,569 Social welfare 63,226 18,968 Medicals doctors program 18,000 3,386 Support to partner service provision Phase II 1,057,954 1,070,831 CemOnc/C.B. Dunbar 276,984 55,877 Construction of 10 health clinics 7,600 1,500 Health worker incentives 532,224 460,872 Bank charges 72,558 1,222 Tax on interest income 5,289 - Pool Fund audit – Advert for expression of interest - 975

3,062,425

2,426,072

Balance as per books

7,746,768

563,667



25

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE TO THE MEMBERS OF THE HEALTH SECTORPOOL FUND STEERING COMMITTEE AND DONORS OF THE MINISTRY OF HEALTH AND SOCIAL WELFARE - HEALTH SECTOR POOL FUND We have audited the financial statements of the Ministry of Health and Social Welfare - Health Sector Pool Fund as of and for the fifteen (15) month period ended June 30, 2009 and have issued our draft report on it dated September 21, 2009. Compliance with the terms and conditions of the Joint Financing Agreements (JFAs), laws and regulations and the Pool Fund Procedures is the responsibility of the Pool Fund Management. As part of obtaining reasonable assurance about whether the PF financial statements is free of material misstatement, we performed tests on the Pool Fund Secretariat and the Office of Financial Management’s compliance with provisions of Joint Financing Agreements, laws and regulations and the Pool Fund Procedures. However, our objective was not to provide an opinion on overall compliance with those provisions. Accordingly, we do not express such an opinion. Material instances of noncompliance are failures to follow requirements or violations of agreement terms that cause us to conclude that the aggregation of misstatements resulting from those failures or violations is material to the financial statements. The results of our test disclosed the following material instances of noncompliance which have been discussed separately in detail in the management letter. Procurement procedures were not followed as stipulated in the PPCC Act 2005, in the bid evaluation for CD Dunbar Memorial Hospital- Gbarnga, Bong County as the bid was wrongly advertised and the Procurement Unit was not involved in the ignition process. There was no evidence of approval on PV No. OFMD1033 dated January 20, 2009 for US$109, 488 paid to MERCI for the support to health facility service. Also, a Pro forma invoice amounting to US$67,788.50, dated June 29, 2009 for the second payment to MERCI did not bear evidence of authorization. Field visits to monitor and report on the activities of the external recipients by the ME or the PFM during the period under review were not performed. Instances were noted where checks above US$100,000 were signed by the Deputy Minister of Administration contrary to Section 3.2 paragraph 3.2.4 of the Financial Management Procedures Manual dated October 2008. We considered these material instances of noncompliance in forming our opinion on whether the MOHSW Health Sector Pool Fund financial statements present fairly, in all material respects, and in accordance with the terms of the JFAs, laws and regulations and the Pool Fund Procedures and in conformity with the with the basis of accounting described in Note 2 to the Pool Fund financial statements and this report does not affect our report on the Pool Fund financial statements dated September 21, 2009.

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26

This report is intended for the information of the Pool Fund Steering Committee and the Donors. However, upon release by the MOHSW, Health Sector Pool Fund Steering Committee or the donors, this report is a matter of public record and its distribution is not limited.

Ernst & Young Chartered Accountants Accra Date: September 21, 2009

MANAGEMENT LETTER

• Matrix of significant findings 1.0 Internal control findings and recommendations 2.0 Financial management findings and recommendations

3.0 Compliance findings and recommendations

4.0 Other findings and recommendations

THE GOVERNMENT OF LIBERIA MINISTRY OF HEALTH AND SOCIAL WELFARE- AUDIT OF THE HEALTH SECTOR POOL FUND FOR THE PERIOD MARCH 15, 2008 TO JUNE 30, 2009

MATRIX OF SIGNIFICANT FINDINGS We deem the results of our audit work in the form of the findings as an integral part of the entire audit process. For convenience and to give all readers of these report a “One Stop Point” of our findings, we have presented below a matrix of these findings. INTERNAL CONTROL FINDINGS Bank reconciliation statements not prepared and reviewed for certain months Check payments not recorded in check register Disbursements register not properly maintained Invoices and other supporting documents submitted by External recipients not stamped “paid” or cancelled by them Authorization limit for check signing not adhered to No authorization from the PFSC sighted for payments made on behalf of Global Funds and Clinton Foundation Cashier and cash in transit not insured Non performance of surprise cash counts FINANCIAL MANAGEMENT FINDINGS Moneys from sale of bid documents not banked intact Pool Fund moneys used to pay for MOHSW petty cash expenses Liquidation and subsequent payments of incentive to health workers not done Incentive to health workers refunds not banked on a timely basis Disbursements reported as actual expenditures COMPLIANCE FINDINGS Procurement procedures not followed Expenditures not categorized per the National Health Plan Inadequate description of procurement items in JFA No formally documented accounting policies and procedures manual Absence of an Internal Audit function Key documents not signed as evidence of approval Field activities not monitored No evidence of authorization of payment voucher Pro forma invoice not sighted Project proposals not signed off by the PFSC OTHER FINDINGS No documented procedures or guidance on the review of existing manuals Monitoring and evaluation Unit role in the procurement process Selection criteria of external recipients did not include external audit Representatives at PFSC Meetings No formal IT Policy Manual No backup server

THE GOVERNMENT OF LIBERIA MINISTRY OF HEALTH AND SOCIAL WELFARE- AUDIT OF THE HEALTH SECTOR POOL FUND FOR THE PERIOD MARCH 15, 2008 TO JUNE 30, 2009

TABLE OF CONTENTS PAGE

REFERENCE 1.0 Internal control findings and recommendations 27 - 36 2.0 Financial management findings and recommendations 37 - 43 3.0 Compliance findings and recommendations 44 - 55 4.0 Other findings and recommendations 56 - 61


September 2009 E 27

1.0 INTERNAL CONTROL FINDINGS AND RECOMMENDATIONS 1.1 Bank reconciliation statements not prepared and reviewed for certain months Observation

We noted that bank reconciliation statements were not prepared for some months during the period under review. There were also instances where prepare or reviewer did not sign off and date the reconciliation statements. This was the case at both PFM and OFM as presented in the tables below. Pool fund bank account Po Pool fund disbursement account Cause Management attributed this to delays in receiving bank statements from Ecobank Liberia. The first bank statement for the Health Sector Pool Fund received in July 2008 covered the period March to June 2008. Criteria Section 3.3 of the Health Sector Pool Fund Procedures Manual stipulates that reconciliations of the Health Sector Pool Fund and Pool Fund Disbursement bank accounts shall be undertaken and reviewed monthly as part of project financial reporting processes. Bank reconciliation statements serve as a control tool that ensures that errors or omissions in cash and bank transactions are completely and accurately captured in the cash book. Bank reconciliation statements should be prepared on a monthly basis for all bank accounts including dormant accounts and outstanding reconciling items investigated. Implication There is reduced control over the accuracy of cash balances as any errors or omissions in the bank statements or in the cash book would not be detected in a timely manner. Recommendation Management should ensure that bank reconciliation statements are prepared regularly preferably on a monthly basis for all bank accounts both active and dormant. To ensure that the bank reconciliation statements are properly prepared, it should be reviewed by a senior official independent of the reconciliation process. Both the preparer and reviewer should sign off and date the bank reconciliation statements.

Year Months

2008 March, April, May, August 2009 February, March

Year Months

2008 March, April, May, June, July, August, October, November 2009 January


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Management action plan

The Accpac set up does not allow reopening of closed periods for processing of transactions which includes preparation of bank reconciliation statements if bank statements delays unduly.

The MOHSW Pool Fund Disbursement account was a dormant account which changed title and signatories from Primary Health Care Division to MOHSW Pool Fund Disbursement account on May 23, 2008.

The Health Sector Pool Fund account received its first bank statement in July 2008. This statement covered the period March to June 2008. One bank reconciliation statement was prepared to cover this period due to the minimal number of transactions and the fact that the Accpac does not allow closed periods to be updated retroactively.

The Pool Fund Accountant and the Senior International Financial Advisor arranged with Ecobank in March 2009 to receive all bank statements within the first 2 weeks of the subsequent month to ensure that bank reconciliation statements are prepared monthly and on time.


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1.2 Check payments not recorded in check register Observation

We noted that some checks issued under the Fund were not recorded in the check registers of the OFM and PF. Examples of these exceptions noted are presented in the table below.

Date Check No. Register Payee Amount

US$ 30/6/2009

00854117

Pool Fund

MOHSW Pool Fund Disbursement Account

67,789.00

29/9/2008 00866957 OFM Jacob Hughes 3,385.60 18/5/2009 00866991 OFM Annette Beihor 45,600.00 20/7/2009 00103723 OFM Annette Beihor 45,600.00

Cause

This was attributed to an oversight on the part of the Cashier. Criteria MOHSW Payment Policy Guidance requires that particulars of checks issued are entered in a check register maintained by OFM. The particulars in the register should include the check date; check number, payee name, amount, recipient name, signature and date of receipt. Also, the maintenance of a check register helps to keep track of all checks received and issued.

Implication There is a potential risk that missing check leaflets could go undetected. It would also be difficult to keep the audit trail of check payments and receipts in respect of Pool Fund transactions.

Recommendation The check register should be updated promptly with details of all checks issued and received by the Pool Fund Secretariat and the OFM respectively in order to strengthen the existing controls over the cash and bank component. Management action plan

This observation is noted. However, it is not practicable for the OFM to keep a separate check register for each of the 65 bank accounts being handled and one register will continue to be used for all. Further, checks will be coded in the register for ease of reference. Pool Fund checks will be prefixed with PF e.g. PF-023467, PF-234789 and Earmarked checks with EM e.g. EM-202378, EM-503462.

Auditor’s comments

We are not calling for a separate register for each of the 65 bank accounts. What we are recommending is for the Pool Fund Secretariat to have a separate check register from that kept by the OFM. Both registers should be kept up to date all the time.


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1.3 Disbursements register not properly maintained Observation

We noted during the course of our review that a separate disbursement register was not maintained for the Pool Fund disbursements. We observed that all disbursements from the Ministry of Health for the Government of Liberia payments, program payments and Pool Fund payments were all recorded in one disbursement register. Cause OFM management realized that it is impracticable under the present circumstances to keep separate check registers for 65 MOHSW bank accounts. Criteria Section 3.6 of the Health Sector Pool Fund Procedures Manual requires that details of all disbursements shall be entered into a disbursements register and hard copies filed on a project by project basis. Implication This is non compliance with certain provisions of the Pool Fund procedures manual. It will be difficult to monitor disbursements made out of the Pool Fund Account to various projects and also prepare timely reports for donors and other stakeholders. Recommendation Management should ensure that all Pool Fund disbursements are entered into a separate disbursements register and hard copies of all supporting documents filed as appropriate on a project by project basis in order to comply with the provisions in the Health Sector Pool Fund procedures manual. Management action plan

This observation is noted. However, with the limited space for the OFM and keeping 65 bank accounts it is not practicable to keep separate check registers for each bank account. That will mean keeping additional 65 books. One book will continue to be used for all checks. Further, checks will be coded in the register for ease of reference. Pool Fund checks will be prefixed with PF e.g. PF-023467, PF-234789 and Earmarked checks with EM e.g. EM-202378, EM-503462.


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1.4 Invoices and other supporting documents submitted by External recipients

not stamped “paid” or cancelled by them Observation

We observed that supporting documents attached to payment vouchers including invoices and receipts submitted by the external recipients were not stamped ‘’paid” or cancelled after payment had been effected. Examples are shown in the table below:

Date PV No. Payee Amount

US$ 2/14/2009 001 MERCI 11,676.00 6/15/2009 036 MERCI – Purchase of fuel 8,0001.00 6/292009 033 MERCI – Salaries of Project staff 12,276.00 6/13/2009 027 MERCI – Vehicle/generator repair 1,335.00 6/18/2009 1049 AHA – Training & Seminar 12,865.00 6/25/2009 1061 AHA – Incentives 27,785.00 4/11/2009 0984 AHA – Incentives 25,813.00

Cause

This control measure was not communicated to the external recipients when their proposals were approved.

Criteria Best practice requires that all supporting documents including receipts, invoices should be stamped “paid” or cancelled after payments have been effected to minimize the risk of multiple or duplication of payments and fraud. Implication The risk exists that multiple payments might be made with the same supporting documents and also this practice exposes the payment system to risk of fraud. Recommendation Management should ensure that all invoices and other supporting documents are stamped “paid” or cancelled after payments have been effected. This will strengthen the internal check mechanisms surrounding the payment system in place at the sub or external recipients. Management action plan

The observation is noted.

Management has planned to educate the external Pool Fund recipients on the importance of implementing this recommendation and ensure compliance. This control measure is already in place at OFM.


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1.5 Authorization limit for check signing not adhered to

Observation The Financial Management Procedures Manual of the Ministry of Health and Social Welfare dated October 2008 and prepared by PricewaterhouseCoopers provides that check payments greater than US$100,000 must be signed personally by the Minister of Health. We noted instances where payments greater than US$100,000 were signed by the Deputy Minister of Administration. We have provided the examples of these payments in the table below:

Date

Description

Check No.

Payee

Amount

US$ 7/11/2008

Continuation of essential healthcare services

866958

Africa Humanitarian Action

222,785

16/2/2009

Support to health facility service provision

866966


364,734

8/8/2008

Continuation of essential healthcare services

866954


222,784

29/5/2009

Payment for support to health facility service provision

866993


419,645

Cause The Minister is not a signatory to the MOHSW Pool Fund Disbursement account. He has delegated the signing of checks to the Deputy Minister for Administration. Criteria The Financial Management Procedures Manual of the Ministry of Health and Social Welfare dated October 2008 prepared by PricewaterhouseCoopers provides under Section 3.2 paragraph 3.2.4 that “check payments greater than US$100,000 must be signed personally by the Minister of Health.” Checks for lesser amounts however are required to be signed by the Minister of Health or by anyone to whom he delegates the responsibility. Implication Clearly, if this provision is not practicable for the Minister to personally sign these PVs and checks as required by the Financial Management Procedures, it should be revised so the question of non compliance does not arise.


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Recommendation The Office of the Financial Manager (OFM) of the Ministry of Health and Social Welfare (MoHSW) should review the Financial Management Procedures Manual which requires the Minister to sign all payments. In this way, the financial management of the Health Sector Pool Fund could be strengthened.



This will be documented and included in the upgraded OFM Financial Management Manual.

1.6 No authorization from the PFSC sighted for payments made on behalf of Global Funds and Clinton Foundation Observation We noted that a total of US$ 140,083.75 and US$ 38,518.26 were paid as incentive to health workers on behalf of Global Fund and Clinton Foundation respectively between April and June 2009. We however did not sight any evidence of approval from the PFSC authorizing these payments.

Cause Management explained that as the proposal for incentives to health workers was originally approved by the PFSC, they did not see the need to seek approval for these specific payments. Criteria Sound financial management practice requires that payments outside the normal course of business of an organization should be approved by the highest decision making body; such as the board of directors, of that organization. In this way, payments outside the normal course of business are properly scrutinized to ensure that the organization does not incur expenditures that are ineligible. Implication If this practice is allowed to continue, Pool Funds may be misapplied which will invariably affect the attainment of the objectives of the Health Sector Pool Fund and the National Health Plan. Recommendation Pool fund contribution toward incentive payments were made earlier that projected, in place of Global Fund and Clinton Foundation contributions that were paid later.


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Management observation

All health workers receiving incentives are Ministry staffs. The Pool Fund Steering Committee approved US$720,163.00 to meet shortfalls in paying health worker incentives.

No incentives were paid on behalf of GFATM or Clinton Foundation (constituting some sort of loan), as the staffs are Ministry staff and the amount paid was within the limit of approved pool fund allocation.

The issue was simply that the Global Fund and Clinton Foundation made their contribution to the incentive shortfall at a later date.

Management action plan Pool fund, OFM and other donors should strengthen the planning of sequential contributions towards paying Ministry health worker incentives. Auditor’s comments Global Funds and Clinton Foundation refunded a total of US$137,061 and US$37,168 on July 2, 2009 and August 17, 2009 respectively into the Pool Fund Disbursement Account.

1.7 Cashier and cash in transit not insured Observation Our review revealed that the Cashier visits the bank regularly to cash various sums of money at different times. To walk through this process, we also made a visit to the same bank and noted that the bank (Ecobank) is located at the central business area of Monrovia. The environs of the bank is very crowded and thus poses the cashier to the risk of theft and robbery of the cash withdrawn. Cause Management explained that much as they are aware of the risk exposure, they have not really, they have not really considered the mitigating factors yet. Criteria Best practice requires that where physical cash is carted to and from bank premises, adequate measures such as insuring both the Cashier and the cash in transit should be under taken to protect the organization against any loss of funds should the Cashier and/or the cash in transit be burgled or stolen. Implication There exists the risk of the cash being stolen if additional safety measures are immediately put in place. There is the other risk of the Cashier being attacked by thugs and the money taken away from him or her.


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Recommendation Much as our concerns and observations may appear remote, it is worth considering and taking precautionary measures for the future. Management should consider insuring both the Cashier and the cash in transit. Management action plan


Management is presently in consultation with insurance companies providing similar services to financial institutions for the purpose of evaluating the “cost and benefit” of implementing this recommendation. Best practice in cash management where minimal cash is kept at the cash office or handled by MOHSW staff will inform management decision on this matter.

1.8 Non performance of surprise cash counts Observation

Our examination revealed that no surprise cash count exercises were carried out on the Cashier during the period under review. From our experience, we believe that the results of these surprise cash counts can be very revealing and should therefore be instituted and accordingly compiled with.

Cause The financial management procedures manual does not give any guidance on the performance of regular and surprise cash counts.

Criteria Best financial management practices requires that surprise cash counts to be performed by the management to effectively monitor the daily cash held so as to prevent or detect any possible theft or fraud. Implication There is the risk that the physical cash could be given out to people in the form of IOUs and other soft loans without the practice being noticed by the management. Recommendation Surprise cash counts should be performed periodically by management and the results should be properly documented. Any exceptions noted should be promptly investigated.


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Management action plan This observation is noted.

OFM will institute surprise cash count immediately. Key OFM and internal audit staff will conduct surprise and regular cash counts. Cash count certificates will be verified by the Comptroller and approved by the Senior International Financial Advisor (SIFA).


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2.0 FINANCIAL MANAGEMENT FINDINGS AND RECOMMENDATIONS

2.1 Moneys from sale of bid documents not banked intact

Observation

We noted that an amount of US$3,700 realized from the sale of bid documents for the construction of 10 primary health clinics under the Pool Fund were not paid into the Pool Fund bank account in a timely manner. We have presented in the table below some of the instances we noted during the course of our review:

Month Purpose Amount

US$ April 2009 Construction of 10 primary health clinics 2,300 July 2009 Construction of 10 primary health clinics 1,400 Sub-total

3,700

Cause

The Financial Management Procedures Manual dated October 2008 does not give any guidance on how frequent other incomes received by the OFM should be banked.

Criteria

In line with best practices, other income received by the OFM as long as it is cash should be banked intact and in a timely manner. Implication This increases the risks of misappropriations as the moneys received may be used for other purposes. It also reduces the time cash is on deposit with the bank and therefore reduces the amount of potential interest income.

Recommendation

Management should take a decision on how often cash received by the Cashier from other sources should be banked. This should also be formally documented in the Procedures Manual. This control mechanism will prevent the Cashier from holding too much money in the safe with all its associated risks therein.



The financial management procedure manual is currently being updated. Gaps identified will be considered in the revised manual which is expected to be presented in draft within four weeks.

OFM has decided to maintain minimal cash on hand by banking all cash received within two days. Also, we recognize recent improvements in physical security within the ministry and the provision of a metal safe, installation of two steel doors and the location of the cash office (concrete ceiling) to secure cash on hand.


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2.2 Pool Fund moneys used to pay for MOHSW petty cash expenses Observation

We noted that $3,700 cash received from the sale of bid documents for the Construction of 10 Primary Health Clinics project to funded by the Pool Fund was co-mingled with MOHSW cash and paid out as petty cash for certain MOHSW related expenses.

Description Amount

US$ Pool Fund income – Sale of bid documents 3,700.000 MOHSW income – Sale of bid documents _1,000.00 Total

4,7000.00

An amount of US$1,625 belonging to the Poof Fund was used to pay for MOHSW petty cash expenses. Cause

The Ministry’s petty cash float had run out at the time and there were office expenses to be paid. Since the Pool Fund cash was available that was used.

Criteria For proper financial reporting, the Pool Funds and Ministry’s funds should be separately matched to their expenses. In this regard, the Funds of the Ministry and that of the Pool Funds should not be mixed up.

Implication Funds earmarked for Pool Fund project purposes may be misapplied for unapproved expenditures. Recommendation In instances where the OFM has no funds to meet petty cash expenses, proper documentation should be made before such transactions are carried out. Management action plan

Pool Fund does not have a petty cash arrangement. Funds donated to the Pool Fund are received into the Health Sector Pool Fund account at the Ecobank. Transfers are made from this account to the MOHSW Pool Fund Disbursement account based on proposals for specific projects approved by the PFSC.

The cash in question was raised from the sale of bid documents for a specific project. The $3,700 has been banked into the MOHSW Pool Fund disbursement account in line with management decision to bank all cash received within two days.


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2.3 Liquidation and subsequent payments of incentive to health workers not done

Observation

We noted that incentives were paid to certain health workers under the Human Resource Pillar of the National Health Plan. Contrary to the provisions of the Health Sector Pool Fund Procedures Manual on liquidation and subsequent payments, we noted that incentive payments were made to the health workers whilst the previous disbursements were not fully accounted for or liquidated. We have presented examples of these payments in the table below;

Date Description Name of county Amount Status

US$

18/05/09

Payment of incentives for the month of April 2009

Grand Gedeh County Health workers

8,787.90

Not fully retired before subsequent

disbursements were made on 23/06/2009

18/05/09


Bong county Health workers

25,856.24



18/05/09


River Gee County health workers

15,535.59



18/05/09


Maryland county Health workers

21,262.22



18/05/09


Margibi County Health workers

18,296.71



Cause

Management explained that disbursements made to counties took a longer time to liquidate hence the decision to disburse funds and allow the counties to liquidate by the end of August 2009.

Criteria

The Health Sector Pool Fund Procedures Manual under liquidation and subsequent payments requires that prior to any subsequent disbursements from the MoHSW’s Disbursement Account, all previous disbursements/expenditures must be accounted for with financial reports to substantiate receipts together with satisfactory evidence of Program reports.


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Implication There exists the risk that unused Program Funds may be misapplied if disbursements are not accounted for in a timely manner. Recommendation We recommend that the provisions of the Health Sector Procedures Manual should be adhered to in managing the Pool Funds. In the foreseeable future, the OFM should disburse the funds early and insist on its liquidation before subsequent disbursements are made to the counties. Management action plan Management noted that the completion of incentives payment and liquidation by all counties before new payments are processed for the subsequent month was impracticable. This is due to the difficult terrain in which some Counties operate; the long distances between health facilities; and the limited access to transportation and the nature of the roads. Also, these payments were made at the time MOHSW was moving away from quarterly to monthly incentive payments.

Management decided that it was unfair to hold back incentive payments to counties that have fully complied with the incentives procedure due to justifiable delays on the part of counties having challenges liquidating incentive payments on time. However, incentives processed for subsequent months were released to each county after receipt of incentive liquidation reports for the previous month.

Reconciliation of Pool Fund incentive payments from April to June 2009 will be completed and submitted to management on September 18, 2009.


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2.4 Incentive to health workers refunds not banked on a timely basis

Observation We noted that incentives paid to health workers under the Human Resource Pillar of the National Health Plan were sometimes refunded to the Cashier due principally to unavailability of some of the health personnel at the Counties. We however noted that when these moneys are received, they are not deposited by the Cashier into the bank account on a timely basis. We have presented examples in the table below:

Date Received

Name of paying

officer

Receipt Number

Amount

received

Dated deposited at

the bank

Number of days elapsed

US$ June 8, 2009

Augustine Weh

431

4,828

June 22, 2009 15 days

June 8, 2009

Dominic Togba

437

2,265

June 22, 2009 15 days

June 8, 2009

Elaine Wleh

430

1,482

June 22, 2009 15 days

June 4, 2009

William Pewu

423

225

June 22, 2009 19 days

June 12, 2009

Kerson Saykor

436

11,105

June 22, 2009 11 days

August 25, 2009

Daniel Brown

518

475

Not yet deposited as Sept 03, 2009

8 days August 20, 2009

Augustine Weh

515

5,111



Callau Jabbeh

505

150



Satta Mckay

505

1,175



Korwan Flomo

512

350



Nathaniel Brown

512

350


17 days Cause Disbursement reports from the counties are not submitted on time for reconciliation hence the need to keep the refunds till the final reconciliations is completed. Also, there is no formal policy on banking of refunds in the OFM’s Financial Management Procedures Manual.


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Criteria Stronger internal controls over the cash management system require that whenever cash or Check is received by the Cashier, a receipt should be issued to cover the amount. The cash or check so received should be deposited on the same day or first thing on the day following the day the cash or check was received. Implication There exists the risk that significant sums of funds may be lost if the Cashier’s office is broken into. Funds may be misapplied or lost through teaming and lading or carry over fraud. Recommendation Management should ensure that refunds received by the Cashier are deposited in a timely manner to avoid the risks associated with holding large sums of cash in the office. Also, the OFM’s Financial Management Manual procedures should be updated to include refunds to Cashier. Management action plan The observation is noted.

Management allowed some time for payment to staff who were unable to receive monthly incentives on time due to circumstances beyond their control. This is to facilitate the payment process and minimize the risk of moving cash to and from the bank.


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2.5 Disbursements reported as actual expenditures

Observation We noted that disbursements made by the OFM to external recipients for activities to be executed were recorded as actual expenditures as soon as the funds are disbursed to the external recipients. Cause We are yet to be furnished with any explanations for this condition. Criteria Best financial management practice requires that disbursements for activities to be performed should initially be treated as advances and accounted for as expenditures upon completion of the activity and retirement of expenses. Implication Reported expenses might not correlate with the actual activities performed with the risk of misappropriation of resources. Also value for money might not be achieved. Recommendation The OFM should ensure that only actual expenditures for activities executed are recorded as project expenses. Management action plan

It is our policy that all those one-off payments are treated as expenditures because of the numerous transactions we undertake but with demand for liquidation. On liquidation any cash balance returned is entered into the ledger to reduce the cost. Advance ledgers are maintained for the regular programs we deal with as a policy. This is now our draft policy.


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3.0 COMPLIANCE FINDINGS AND RECOMMENDATIONS 3.1 Procurement procedures not followed

Observation

We noted some instances where the procurement procedures were not followed in line with the PPCC Act 2005. In the bid evaluation for CD Dunbar Memorial Hospital- Gbarnga, Bong County for instance, the following were some of the exceptions we noted:

§ The advert published indicated “Request for Proposal” instead of invitation to bid for

renovation works; § Bidders were requested to make non- refundable fee of US$300 each to the design

consultant instead of to the MOHSW; § The bidding process was initiated by the End User Department (Department of

Planning, Development and Research) and not the Procurement Unit.

In the related bid evaluations, we also noted that adequate time was not given to the Procurement Unit to source for other competitive alternatives, compelling the Procurement Committee to buy from the only available source.

Cause

The Procurement Director explained that the initial process of the above bid took place before he assumed office. Also, User Departments do not make adequate planning for their procurements to be made thus making it difficult for effective sourcing for items to be procured.

Criteria

The signed JFAs requires that the Ministry undertakes all procurement in accordance with its procurement rules, guidelines and procedures, monitored by the Pool Fund Manager. This is further emphasized in the Health Sector Pool Fund Procedures Manual that the PFM should monitor all procurement activities supported by the Pool Fund to ensure they are carried out in line with the principles of value for money and transparency and in full compliance with the GOL PPCC Act 2005.

Implication

The condition noted above is in non compliance with the requirements of PPCC Act 2005 and the JFAs signed with donors.

Recommendation

The PFM should ensure that in the foreseeable future the Procurement Unit of MOHSW complies with the PPCC Act 2005 and the provisions in the JFAs at all times.


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Management observation This observation was based on the note for the file prepared by the two Procurement Specialists from UNDP & Crown Agents assigned to build capacity at the Ministry of Health who noted the breach of procurement procedures exhibited by the Infrastructure Unit who executed the procurement for the construction of C.B. Dunbar Hospital. Measures have already been put in place by the present procurement Unit to avoid reoccurrence of this.


It is advisable that all heads of units/departments familiarize themselves with the PPCC Act and procurement procedures in general. This will assist the procurement Unit carry out its task more efficiently and effectively as some of the breaches on the procurement procedures are due to interference by other units who do not want to comply with the procedures and not because the Procurement Unit is not following the Act or the procedures.


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3.2 Expenditures not categorized per the National Health Plan

Observation

We noted that expenditure details per the Pool Fund Disbursement Account were not presented in line with the expenditure headings of the National Health Plan (NHP).

Cause

The SIFC explained that the expenditure details per the Disbursement Account were in line with the Ministry of Health and Social Welfare chart of accounts which is not categorized in line with the NHP.

Criteria

According to the Health Sector Coordinating Committee/Working Group on Funding Mechanisms document of December 2007, Page 6, Section 3 – Control of Fiduciary Risk and Accounting, Pool funds will be given a unique source of code for tracking purposes, and all pool fund expenditure will be similarly coded, allowing for accurate financial reporting and auditing.

Effect

It makes it difficult to match actual disbursements against the reported expenditure details.

Recommendation

We recommend the PCT should consult with the ACCPAC accounting software consultants to revisit the existing chart of accounts and try to synchronize it with the National Health Plan. In this way, users of the PF financial statements could link it to the NHP.


The MOHSW financial management manual being currently upgraded is based on Government of Liberia (GoL) chart of accounts (CoT). All ministries and agencies are mandated to use the chart of accounts for accounting purposes. There is more work to be done by the ministry to turn this CoT to meet the NHP.

As a project within the MOHSW, the Pool Fund is under obligation to comply with the GoL CoT. It is not clear if the account lines in the National Health Plan were approved by the Budget Bureau of Liberia. However, discussions with the Accpac consultant will consider the feasibility of this recommendation to ensure that updates to the chart of accounts facilitate reporting along the four pillars of the NHP.


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3.3 Inadequate description of procurement items in JFA

Observation Per our review of the Joint Financing Agreements (JFAs) with the contributing donors, procurement of items makes a provision for only goods instead of goods, services and works as contained in the PPCC Act 2005.

Cause No explanation was given for this lapse of control.

Criteria According Sections 23 and 26 respectively of the PPCC Act 2005: (i) Services means services which are intellectual, technical or advisory nature and

include consultancy services. (ii) Section 26 also defined works as work associated with the construction,

reconstruction, demolition, repair or renovation of a building or structure or surface and includes site preparation, excavation, assembling, installation of plant, fixing of equipment and laying out of materials, decoration and finishing, and any incidental activity under a works contact. These are further described in Section 34 of the PPCC Act 2005.

Implication The activities funded by the Pool Fund involves the procurement of goods, services and works and not for only goods as provided for under Section 6 of the JFAs we reviewed. This provision in the JFAs on procurement seems misleading and did not cover all the procurement of items defined in the PPCC Act 2005.

Recommendation

An addendum could be issued to include the procurement of services and works in the JFAs in line with the PPCC Act 2005. On the other hand, the Section on procurement should be carefully worded to cover the provision of Goods, Services and Works.


Your observation is noted.

The JFA shall be amended to include all types of procurement.


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3.4 No formally documented accounting policies and procedures manual

Observation Our examination revealed that MOHSW does not have an accounting policies and procedures manual to which can be adopted for all projects including the Pool Fund. This manual would normally provide Accounting Officers of the Fund, with direction and guidance in connection with the accounting treatment of transactions, procedures and reports that should be uniform within the Ministry.

Cause We were made to understand the Public Sector of the Government of Liberia is in the process of developing an accounting policies and procedures manual to be adopted by all the Ministries.

Criteria The basic purpose of an accounting policies and procedures manual is to provide Accounting Officers and other key officials with direction and guidance on the accounting treatment of transactions, procedures and reports that should be uniform and consistent within the Ministry. Implication Without an accounting policies and procedures manual to act as a guide in recording accounting transactions, errors committed go unnoticed and like items risk being treated differently.

Recommendation The GOL should expedite action in completing the public sector accounting policies and procedures manual to be used by all government ministries, departments and agencies.


The following manual and guidelines are in operation:

1. Pool Fund Procedures Manual 2. OFM Financial Management Guidelines 3. MOHSW Payment guidelines

The OFM Financial Management Guidelines is being upgraded. The final draft is expected in 4 weeks.


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3.5 Absence of an Internal Audit function

Observation We observed that the MOHSW does not have an Internal Audit Unit to assist in strengthening the internal control system of the various activities and processes in the Ministry.

Cause We were made to understand that the Ministry is about setting up the internal audit function but this is yet to materialize.

Criteria An internal audit function strengthens the internal controls put in place by management and provides assurance over those processes. An effective internal audit function helps to detect control weaknesses, errors and also prevents fraud in a timely manner.

Implication The risk exist that errors, omissions and fraud can be perpetuated easily and not detected in a timely manner.

Recommendation

As a matter of urgency management of MOHSW should consider establishing an Internal Audit Unit for the Ministry. As part of the formation of an internal audit Unit, experienced professionals should be employed to perform the function and that sufficient resources should be allocated to the Unit to gain maximum benefit from its operation.

Management action plan Your observation is noted.

The set up of the internal audit function is in progress.

Two Senior Executive Service staff trained in internal audit skills has been assigned to the MOHSW. To fully establish the internal audit unit, management is in the process of recruiting the director. The draft internal audit charter and TOR are being reviewed by MOHSW management.


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3.6 Key documents not signed as evidence of approval

Observation We observed that some key documents including the following were not signed of as evidence of approval.

♦ Proposals of External recipients; ♦ Minutes of Pool Fund Steering Committee (PFSC); ♦ Quarterly and annual reports of the Pool Fund; ♦ Minutes of the Program Coordinating Team (PCT); ♦ Minutes of Health Coordinating Committee (HCC).

Cause No reason was given for this control lapse.

Criteria Best practice normally requires that all approved or final documents be duly signed and dated by the designated approving officials as evidence of approval.

Implication

There risk exists that such documents could be altered and may go unnoticed. It also exposes the system to the risk of manipulation and irregularities.

Recommendation We recommend that henceforth management should ensure that all approved documents are duly signed and dated as evidence of their approval.


Your observation is noted.

This observation shall be raised with the Steering Committee as a recommended procedure. The Steering Committee shall decide whether to adopt the recommendation.


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3.7 Field activities not monitored

Observation During the course of our review, we did not sight any evidence of field visits, monitoring or reports on activities of external recipients that received funding under the Health Sector Pool Fund.

Cause We were made to understand that the Monitoring and Evaluation Unit which is tasked to perform the field monitoring of projects has only been set up recently and no monitoring on the field projects of the Pool Fund has been performed so far.

Criteria The monitoring and evaluation of field activities provide assurance on progress of work done or otherwise against the agreed targets and ensures that resources are utilized with due attention to economy, efficiency and value for money. It also helps in strengthening the internal control function of the projects undertaken by the external recipients and other parties.

Implication The risk exists that resources might be misapplied by external recipients or the external recipients could use the Pool Fund resources to finance other non project related activities.

Recommendation Management of the MOHSW should ensure that in the absence of an Internal Audit Unit, the Monitoring and Evaluation Unit is adequately resourced to perform its function as appropriate within the Ministry.

Management observation

Thank you for this comment. The issue of M&E was raised during audit discussions, but not whether Pool Fund activities had ever been. M&E does indeed need to be strengthened, but the following field visits were undertaken to monitor pool-funded activities:

PF 001- The Chief Medical Officer, Training Coordinator and Pool Fund Manager reviewed progress at Curran Lutheran Hospital in September 2008.

PF 002- The Minister for Health, Representative of the World Health Organization and Pool Fund Manager reviewed progress on opening the National Reference Lab in June 2009.

PF 003- No exceptional monitoring was done.

PF 004- This allocation was for a consultant who worked within the MOHSW building.

PF 005- The Cuban Doctors project has not yet started; however one fact-finding mission to Rwanda was carried out by the Deputy Minister for Administration and the Pool Fund Manager.


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PF 006- No exceptional monitoring was done.

PF 007- The CB Dunbar Hospital construction was awarded in March 2009 and the project was monitored by the Deputy Minister for Planning and the Pool Fund Manager in May 2009. The Infrastructure Director carried out periodic visits during the same period.

PF 008- PHC clinic construction contracts have not yet been awarded.

PF 009- The Pool Fund Accountant carried out sample tracking of incentive payments (a validation exercise at the health facility level) in April/May 2009

PF 010- No monitoring done.


The Ministry has recently established a Monitoring and Evaluation Unit that shall begin the process of monitoring and evaluating NGO’s receiving pool funds.


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3.8 No evidence of authorization of payment voucher

Observation We observed that payment voucher number OFMD1033 dated 20 January 2009 raised for the payment of support to health facility service provision to MERCI amounting to USD109,488 did not bear evidence of authorization by the Deputy Minister of Administration. Cause We were made to understand that this was an oversight on the part of management. Criteria The Payment Policy Guidelines and the Financial Management Procedures Manual of the Ministry of Health and Social Welfare dated August 2007 and October 2008 respectively require the Deputy Minister for Administration to authorize payments by signing off on the payment vouchers and also sign checks before payments are made. Implication There exists the risk that unauthorized payments may be made from the Pool Fund Disbursement Account which may result in significant loss of funds if this practice is allowed to continue. Recommendation The Office of the Financial Manager (OFM) of the Ministry of Health and Social Welfare (MoHSW) should ensure that payment vouchers are duly authorized by the Deputy Minister of Administration or her designate. The Minister or her designate should sign off and date the payment vouchers as evidence of review and authorization. Management action plan

The payment in the amount of $109,488 to MERCI was approved by the Chief Medical Officer whose position is equivalent to that of the Deputy Minister for Administration (DMA). As the DMA was out of the country the voucher was not sent to the AMA who was acting as DMA for approval due to oversight. The payment voucher including the Pro Forma Invoice approved by the CMO is attached for further consideration.


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3.9 Pro forma invoice not sighted

Observation We did not sight the pro forma invoice amounting to USD67,788.50 for the second payment for support to health facility service provision to Medical Emergency & Relief Cooperative International (MERCI) on 29 June 2009. Cause No explanation has been given for this control lapse. Criteria The Health Sector Pool Fund Procedures Manual provides that after each project has been approved by the PFSC and grant agreement with external recipients signed by the MoHSW, a pro forma invoice must be submitted in accordance with the disbursement schedules and approved by the OFM and PFM respectively before disbursements are made. Implication Disbursements made from the Pool Fund Disbursement Account may not be in accordance with project objectives and the disbursement schedule so agreed in the grant agreement. Thus there exists the risk that funds may be disbursed for purposes other than those stated in the grant agreements. Recommendation The Office of the Financial Manager (OFM) and the Pool Fund Manager (PFM) should ensure that all disbursements are supported by properly approved pro forma invoice detailing the total budgeted amount, amount received thus far, the amount to be disbursed and the balance on the budget. Management action plan

The observation is noted. The pro forma invoice for the amount of US$67,788.50 was initially attached to the voucher. We believe that the document may have been detached and mixed up with other documents presented to the auditors. We are still in search of the Pro forma Invoice, which will be presented to you as soon as it is found.


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3.10 Project proposals not signed off by the PFSC

Observation We noted that project proposals were sent to the PFSC for approval. However noted when the project is approved (which is documented in the minutes of meetings of the PFSC), the PFSC does not sign off the project proposal documents as evidence of approval. Cause Management explained that as the project proposals were approved by the PFSC and documented in the minutes of meetings, they did not see the need to sign off the project proposal documents. Criteria The Health Sector Pool Fund Procedures Manual requires the PFSC to review and approve written proposals for funding submitted by the MoHSW to ensure that the proposals are consistent with the National Health Policy and the National Health Plan. The PFSC does this by initialing on all pages and signing off the proposal documents as evidence of review and approval. Implication There exists the risk that subsequent changes to the approved versions of the proposal documents may go undetected if they are not initialed and signed off as evidence of review and approval. Also, it becomes difficult to authenticate if the approved proposals are consistent with the National Health Plan and the National Health Policy. Recommendation We recommend that the Chairman of the PFSC and the PFM should sign off and date the approved proposal documents. Each page of the proposal should also be initialed and dated by the signatories. Management action plan

This observation is noted.

This observation shall be raised with the steering committee as a recommended procedure.


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4.0 OTHER FINDINGS 4.1 No documented procedures or guidance on the review of existing manuals

Observation

Per our review of the Health Sector Pool Procedures Manual, the MOHSW Payments Policy Guidelines and Financial Management Procedures Manual, we did not sight any guidance or mechanisms put in place that would help in their possible revision in a timely manner. Clearly, after the Phase I, there could be certain provisions that should definitely be revisited but we did not sight any such mechanisms.

Cause

It might be due to an oversight.

Criteria

Best practice requires that financial and procedural manuals developed should include as part of the manual, procedures or guidance for their revision in the face of difficulty in their practical application or national/ global changes in accounting practices.

Implication

Some sections of the manuals which do not seem practical in the operation of the project are not revised. In the event of the adoption of accounting standards for all government departments, agencies and ministries in Liberia, reviewing these manuals might be difficult.

Recommendation

Management should ensure that the consultant who developed the manuals provides guidance to aid their timely and regular revision. This would help management make changes to such areas of the manuals where their practical application appears redundant.



However, we would like to indicate that the manuals developed by the MOHSW are the result of efforts to compliment improvements in Public Financial Management. The Public Financial Management Act of 2009 passed recently and the regulations being developed will be considered to ensure that there is alignment between the Act and the upgraded OFM Financial Management Guidelines.


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4.2 Monitoring and evaluation Unit role in the procurement process

Observation

We noted that the Monitoring and Evaluation function and benchmarks were not considered in requesting in for proposals and selection of external recipients that received moneys from Pool Fund in the Phases I and II respectively.

Cause

We were made to understand that the Monitoring and Evaluation Unit of the MOHSW was non existent at the time of selecting of external recipients for the Phases I and II.

Criteria

Best practice requires the Monitoring and Evaluation inputs in specifying the benchmarks, indicators, targets, method of monitoring, periods of monitoring and reports to be generated from the monitoring process. Its function helps to strengthen the control environment of projects and provides assurance on the set indictors, targets and benchmarks. The Unit’s inputs into the selection process, makes it clear to external recipients as to what is expected of them in executing their respective sub-projects.

Implication

We could not obtain assurance on the technical execution of the activities of the external recipients in meeting their targets as the field monitoring of these external sub-projects during the period under review were not carried out.

Recommendation

Management should adequately resource the Monitoring and Evaluation Unit to carry out the field monitoring of the projects of the MOHSW including the Pool Fund.



Management will institute measures to ensure that the M & E unit is adequately resourced for timely monitoring of project activities by County Health Teams (CHTs) and external recipients of Pool Funds


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4.3 Representatives at PFSC Meetings

Observation

We observed that representatives at the PFSC meetings had not been consistent in terms of officers who attend the meetings.

Cause

Representatives are usually nominated by the stakeholder institutions.

Criteria

Consistency of member representatives would make decision taking faster as members shall have the institutional memory of issues and it is easier to build on these matters put on the table.

Implication

The practice appears not to facilitate efficient and prompt decision making.

Recommendation

As a much as practicable, there should be consistency in attendance of member representatives at meetings thus making the decision making process more efficient and consistent.


This observation is noted.

This observation shall be raised with the steering committee.


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4.4 No formal IT Policy Manual

Observation We did not sight a formal IT Policy manual that gives guidance on the use of anti-virus, backup procedures and password management. We however sighted a draft IT policy guide prepared by the Project IT Administrator but we were made to understand the document was not used because it had not been approved. Cause We understood that PwC was to bring in its IT policy document for adoption by the project but this is yet to be done. Criteria Best practice requires organizations to have a formally documented IT Policy manual in place to provide guidance on effective implementation and management of IT its systems and procedures including efficient financial data processing.

Implication There may be inconsistencies in the basic application of certain IT related control procedures. Recommendation Management should as soon as practicable put in place a formally documented IT policy to provide guidance on the management of the anti virus, backup systems and password managements to PFS and OFM. Management action plan A copy of the draft OFM IT policy was made available to the auditors. The review of the IT Policy by PwC is complete and the approved copy has been made available to the audit team.


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4.5 No backup server

Observation Our review revealed that OFM does not have a backup server and also no log is maintained as proof of backup having been performed. In addition, we noted that the current server had its backup slots empty. We deem the existing backup systems generally inadequate considering the volume of data processed by the OFM.

Cause There is no formal policy regarding system backups. Criteria Best practice requires organizations to keep proper and adequate backups of their operations and transactions to enable it recover its data in case of unanticipated occurrence. Implication There is a risk that OFM could lose critical data and the cost of its disaster recovery could be very expensive. Recommendation We recommend the following with respect to the existing IT systems: § Backup should be properly organized; § Tapes should be used for taking backups; § The backup scheduler in the PCs and laptops be reconfigured to enable automated

backups to take place daily onto the Server; § There should also be at least two full-backups performed on a daily basis on the servers and at least one tape stored offsite daily.

Also, in order to gain confidence that the systems could be restored if necessary, a system restoration from these tapes should be performed on a regular basis. Management should consider having a backup Server in the future. Management action plan


The OFM Project Manager will be duly informed of this gap to ensure timely implementation of this recommendation.


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4.6 Selection criteria of external recipients did not include external audit

Observation

We observed that selection criteria for external recipients did not include external audit and as such all external recipients that received funding under the Pool Fund were not subjected to any external reviews.

Cause

No explanation was offered for this lapse of control.

Criteria

External reviews provide independent assurance over projects being executed. It also validates the authenticity of reported expenses and rate of delivery of the projects. It ensures that moneys have been utilized with due attention to economy, efficiency and value for money.

Implication

The risk exists that external recipients may not have the control procedures and environment to sustain the relationship they have with the Health Sector Pool Fund into the future.

Recommendation

Management should consider the external reviews as part of the selection criteria for external recipients that receive funding from the Pool Fund. Simply, the evaluated to look out for external recipients who the own external auditors and must show copies of the latest audit reports.



This will be discussed at the steering committee meeting and included in future project proposals if accepted.

FRAUD, ERROR AND IRREGULARITIES


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We did not note any significant findings during the course of our review regarding fraud, errors and irregularities that have the potential of impacting on the audited financial statements of the Health Sector Pool Fund of the Ministry of Health and Social Welfare of Liberia for the fifteen (15) months period ended June 30, 2009.

LESSONS LEARNT AND THE WAY FORWARD


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LESSONS LEARNT AND THE WAY FORWARD

As part of part Ernst & Young’s audit approach, we carried out visits to the external recipients and also conducted interviews with some of their key personnel to enable us identify any weaknesses in the operations of the Pool Fund. Also from the results of our detailed tests, we have made the following observations on the HSPF going forward.

1. When key documents including manuals, proposals, minutes of meetings etc. are approved,

these should be signed or initialed and dated as evidence of approval. By so doing, third party reviewers can easily distinguish between the original documents and the draft copies.

2. In using the Pool Fund to pay for other project expenses, prior approval should be sought from

the PFSC and when refunded such amounts should be banked intact. This process should be formally documented as much as practicable.

3. Management should put in appropriate measures to prevent the possible loss of cash either due

to theft or robbery. Among other things, the Cashier and cash in transit from and to the local banks should be insured.

4. For health worker incentives refunded to the OFM, the Comptroller should ensure that this is

banked in a timely manner by the Cashier.

5. Considering the fact that in the management reports, the disbursements are classified as actual expenditures, the activities of external recipients should be closely monitored to ensure that resources are not vired so the proposed activities are carried out strictly as planned.

6. Monitoring and evaluation of projects was not performed for Phases I and II. Since the MOHSW

does not have an internal audit function, the newly created Monitoring and Evaluation Unit should be adequately resourced to strengthen the existing control procedures of the projects at MOHSW, including the Pool Fund. We noted that there were no project monitoring and evaluation reports to enable us satisfy ourselves to the delivery of goods, services and works on the part of the external recipients.

7. Many key documents were still in draft form including the Social Welfare Policy Manual, Pool

Fund IT Policy Manual, M & E documents, Procurement Standard Operating Procedures (PSOP), etc. Management should expedite action in completing work these documents into their final forms.

In spite of the above, we have noted some positive aspects of the Health Sector Pool Fund and the

MOHSW in general, which we need to highlight. These include the following:

1. The PF and OFM both have teams with competent leadership. We noted there are still efforts to continue with the capacity building effort for the team.

2. The Pool Fund Project has some basic manuals to serve as general guide to all stakeholders

of the Program.

3. Management made available some key documents for our review as part of the pre-steps eg. JFAs, MOUs, NHP 2007- 2011, OFM Staff Handbook, PPCC Act 2005, etc.


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4. The Deputy Minister responsible for the Pool Fund and the Deputy Minister for Social Welfare were readily available to meet with the audit team. Also, the PF and OFM teams were also readily available to provide the requisite information and respond appropriately to questions

and queries in a timely manner; 5. Our interaction with the key executives of external recipients also revealed the following positive impressions about the Pool Fund:

i. They believed that the Pool Fund concept is laudable and it should be continued into the

foreseeable future;

ii. The Pool Fund is a timely intervention as it serves as support in the Liberia recovery effort and seems to be filling many social gaps;

iii. The close monitoring mechanisms of the PF especially on the role of the PFSC and PCT

brings accountability and responsibility to bear on the Project;

iv. The implementation of the PF to a large extent at the county level involves the people at the grass root level and this encourages community ownership;

v. The PF is another great way where the national resources of Liberia are fairly shared or

distributed.

APPENDICES


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List of Pool Fund Steering Committee APPENDIX i

No. Name Position Organization

1 Augustine Ngafuan Minister Ministry of Finance

2 Amara Konneh Minister Ministry of Planning & Economic Affairs

3 Joseph Korto Minister Ministry of Education

4 Walter T. Gwenigale Minister Ministry of Health & Social Welfare

5 S. Tornorlah Varpilah Deputy Minister for Planning, Research & Development

Ministry of Health & Social Welfare

6 Vivian Cherue Deputy Minister for Administration


7 Joseph Geebro Deputy Minister for Social Welfare


8 Susan Ngongi Country Representative

UNICEF

9 Rose Gakuba Country Representative

UNFPA

10 Elisa Cavacece Representative Irish Aid

11 Alex Harper Country Representative

DFID

12 Leon Banks Representative UNHCR

13 Callista Chen Representative World Bank

14 Nestor Nydayimirie Representative World Health Organization

15 Chris McDermott Health Team Leader USAID

16 Juan-jose Casanova-Arasa Representative European Commission

17 Clavenda B. Parker Representative Liberian Business Association

18 Lawrence Oduma Country Director Merlin

19 Bernice Dahn Chief Medical Officer Ministry of Health & Social Welfare


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List of Program Coordinating Team (PCT) Members APPENDIX ii

No. Name Position

1 Hon. Bernice Dahn Deputy Minister/CMO; Health Services, MOHSW 2

Hon. Tornorlah Varpilah

Deputy Minister; Planning, Development and Research, MOHSW

3 Hon. Vivian Cherue Deputy Minister; Administration, MOHSW 4 Hon. Joseph Geebro Deputy Minister; Social Welfare, MOHSW 5 Hon. Moses Pewu Assistant Minister; Health Services, MOHSW 6 Hon. Jessie Duncan Assistant Minister; Health Services, MOHSW 7 Hon. Malike Konneh Assistant Minister; Administration, MOHSW 8

Hon. Nmah Bropleh?

Assistant Minister; Planning, Development and Research, MOHSW

9

Hon. Stanford Wesseh

Assistant Minister; Planning, Development and Research, MOHSW

10 Hon. Bendu Tulay Assistant Minister; Social Welfare, MOHSW 11 Julia Brown Director of Human Resourcs; MOHSW 12 Saye Baawo Director of Health Services; MOHSW 13 Ka Rufus Morris Director of Procurement; MOHSW 14 David Sumo Manager (Supply Chain), MOHSW 15 Rose Macaulay Program Manager; BASICS, MOHSW 16 Toagoe Karzon Comptroller; OFM, MOHSW 17 Alex Nartey Senior International Financial Advisor; OFM, MOHSW 18

David Logan

Program Manager; Liberia Coordinating, Mechanism, MOHSW

19 Jacob Hughes Manager; Pool Fund Secretariat; PWC 20

Arabella Greaves

Program Manager; Health System Reconstruction Project, MOHSW

21

Joel Jones

Program Manager; National Malaria Control Program, MOHSW

22

Catherine Cooper

Program Manager; National Leprosy &TB Control Program, MOHSW

23 Benjamin Vohnm Program Manager; National Aids Control Program, MOHSW 24

Thomas Nagbe

Program Manager; Expanded Program of Immunization, MOHSW

25 Genevieve Barrow Director of OPS, MOHSW 26 Abraham Gerard Manager; Infrastructure, MOHSW 27 Toagoe KarzoN Comptroller, OFM, MOHSW 28 Lydia Sherman MOHSW 29 Momolu Sirleaf External Aid/ MOHSW


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List of Persons contacted during the audit APPENDIX iii

No. Name Institution Position

1

Hon. Vivian Cherue

MOHSW

Deputy Minister; Administration, MOHSW

2

Hon. Joseph Geebro

MOHSW

Deputy Minister; Social Welfare, MOHSW

3

Jacob Hughes

MOHSW – Pool Fund Secretariat

Program Manager

4

Daniel Quampah


Pool Fund Accountant

5

Adjoa Adae


Pool Fund Accountant

6

Alex Nartey

MOHSW – Office of Financial Management

SIFC, OFM

7

Loiuse Gray

MOHSW – Office of Financial Management

Accounts Officer

8 Annette Beikor MOHSW Cashier 9 Ka-Rufus Morris MOHSW Procurement Director 10

Jacob Wapoe

MOHSW

Assistant Procurement Director

11 Toagoe Karzon MOHSW Comptroller 12 Oliver Pratt MOHSW PCT Co-ordinator 13

George P. Jacobs

MOHSW

Monitoring & Evaluation Officer

14

Elisa Hamouda

MOHSW

Monitoring & Evaluation Specialist

15

Dr. Kedir Wajiso(MD, Mph)

African Humanitarian Action (AHA)

Country Director

16

Mr. Jack R. Munyakazi


Admin & Finance Officer

17

Mr. Raymond F. Kromah


Programs Director

18

Clarence Massaquoi

Pentecostal Mission Unlimited (PMU)

Project Co-ordinator

19

Notee T. Buegar

Pentecostal Mission Unlimited (PMU)

Accountant

20

Dr. Tete Korboi

Medical Emergency Relief Cooperative International (MERCI)

Executive Director

21

Suzzie Doe

Medical Emergency Relief Cooperative (MERCI)

Accounts Officer

22 Dr. Konuwa Curran Lutheran Mission Medical Director


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List of documents reviewed APPENDIX iv

Documents Author Date reviewed

Public Procurement & Concession Commission, September 2005

GoL September 2, 2009

Social Welfare Plan of Action for the period 2009/10 – 2010/11, March 2009

MOHSW

August 21, 2009

Social Welfare Policy March 2009

MOHSW

August 21, 2009

National Health Policy, National Health Plan 2007 - 2011

MOHSW

August 18, 2009

Payments Policy Guidelines, August 2007 MOHSW Office of Financial Management (OFM)

August 18, 2009

Health Sector Pool Fund Procedures Manual August 2008

MOHSW

August 18, 2009

Financial Management Procedures Manual October 2008

MOHSW

August 27, 2009

Phase 2 Allocations to Support Partner Continuation of Essential Health Services, October 2008

MOHSW

August 27, 2009

Joint Financing Agreement between • Ministry of Health & Social Welfare and UNHCR • Ministry of Health & Social Welfare and Irish Aid • Ministry of Health & Social Welfare and DFID • Ministry of Health & Social Welfare and UNICEF

GoL and UNHCR GoL and Irish Aid GoL and DFID GoL and UNICEF

August 28, 2009 August 28, 2009 August 28, 2009 August 28, 2009

Minutes of Pool Fund Steering Committee meeting minutes from April 2008 to July 2009

MOHSW Pool Fund Steering Committee

August 26, 2009

Unaudited Financial Statements of the Ministry of Health & Social Welfare for the nine months to March 31, 2009.

MOHSW – Health Sector Pool Fund

August 29, 2009

Annual Report on the Health Sector Pool Fund through June 30, 2009

MOHSW

August 29, 2009

Health Sector Pool Fund cash book – March 2008 to June 2009


August 26, 2009

Health Sector Disbursement cash book – March 2008 to June 2009


August 29, 2009

OFM Staff Manual PWC & MOHSW August 26, 2009 Fiduciary Risk Review of the Liberian Health Sector Pool Fund

PWC

August 29, 2009

OFM Technology Policy MOHSW September 2, 2009 Proposals of External Recipients submitted to the PFSC

PCT

August 28, 2009

Grant Agreements with External Recipients

MOHSW and External Recipients

August 29, 2009


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Copies of bank confirmation response letters APPENDIX V


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Copies of Donor confirmation response received APPENDIX vi


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• •

REPUBLIC OF LIBERIA MINISTRY OF HEALTH & SOCIAL WELFARE

P. O. BOX 10-9009 1000 MONROVIA 10, LmERIA

WEST AFRICA Office of The Deputy Minister for Administration Ref No.

Kwadwo Mpeani Brantuo Ernst & Young G1S, White Avenue, P. O. Box KA 160091 Airport Residential Area. Accra, Ghana.

Subject: Ministry of Health and Social Welfare response to E&Y Management Letter on the Pool Fund Audit for the Period March 2008 to June 30, 2009

I am pleased to present my compliments and have the honor to submit our written comments and management action plans in response to the issues raised on the Pool Fund audit for period March 2008 to June 30, 2009.

We thank you and the E&Y team sincerely for the cooperation extended to our staff during the engagement. We look forward to finalizing this report within the agreed timeline.

Ja b Hughes Pool Fund Manager

1

MANAGEMENT RESPONSE TO E&Y POOL FUND AUDIT FINDINGS FOR THE PERIOD MARCH 2008 TO JUNE 30, 2009

1.0 Internal Control Findings

1.1 Bank reconciliation statements not prepared and reviewed for certain months Management action plan The Accpac set up does not allow reopening of closed periods for processing of transactions which includes preparation of bank reconciliation statements if bank statements delays unduly. The MOHSW Pool Fund Disbursement account was a dormant account which changed title and signatories from Primary Health Care Division to MOHSW Pool Fund Disbursement account on May 23, 2008. The Health Sector Pool Fund account received its first bank statement in July 2008. This statement covered the period March to June 2008. One bank reconciliation statement was prepared to cover this period due to the minimal number of transactions and the fact that the Accpac does not allow closed periods to be updated retroactively. The Pool Fund Accountant and the Senior International Financial Advisor arranged with Ecobank in March 2009 to receive all bank statements within the first 2 weeks of the subsequent month to ensure that bank reconciliation statements are prepared monthly and on time. 1.2 Check payments not recorded in check register

Management action plan This observation is noted. However, it is not practicable for the OFM to keep a separate check register for each of the 65 bank accounts being handled and one register will continue to be used for all. Further, checks will be coded in the register for ease of reference. Pool Fund checks will be prefixed with PF e.g. PF-023467, PF-234789 and Earmarked checks with EM e.g. EM-202378, EM-503462 1.3 Disbursement register not properly maintained

Management action plan This observation is noted. However, with the limited space for the OFM and keeping 65 bank accounts it is not practicable to keep separate check registers for each bank account. That will mean keeping additional 65 books. One book will continue to be used for all checks. Further, checks will be coded in the register for ease of reference. Pool Fund checks will be prefixed with PF e.g. PF-023467, PF-234789 and Earmarked checks with EM e.g. EM-202378, EM-503462

2

1.4 Invoices and other supporting documents submitted by external

recipients not stamped “paid’ or cancelled. Management action plan The observation is noted. Management has planned to educate the external Pool Fund recipients on the importance of implementing this recommendation and ensure compliance. This control measure is already in place at OFM. 1.5 Authorization limit for check signing not adhered to

Management action plan The observation is noted. This will be documented and included in the upgraded OFM Financial Management Manual. 1.6 No authorization from PFSC sighted for payments made on

behalf of Global Funds and Clinton Foundation. [All health workers receiving incentives are Ministry staffs. The Pool Fund Steering Committee approved $720,163.00 to meet shortfalls in paying health worker incentives. No incentives were paid on behalf of GFATM or Clinton Foundation (constituting some sort of loan), as the staffs are Ministry staff and the amount paid was within the limit of approved pool fund allocation. The issue was simply that the Global Fund and Clinton Foundation made their contribution to the incentive shortfall at a later date.] Management action plan Pool fund, OFM and other donors should strengthen the planning of sequential contributions towards paying Ministry health worker incentives. 1.7 Cashier and cash in transit not insured

Management action plan The observation is noted. Management is presently in consultation with insurance companies providing similar services to financial institutions for the purpose of evaluating the “cost and benefit” of implementing this recommendation. Best practice in cash management where minimal cash is kept at the cash office or handled by MOHSW staff will inform management decision on this matter.

3

1.8 Non performance of surprise cash count


This observation is noted. OFM will institute surprise cash count immediately. Key OFM and internal audit staff will conduct surprise and regular cash counts. Cash count certificates will be verified by the Comptroller and approved by the Senior International Financial Advisor (SIFA). 2.0 Financial Management Findings 2.1 Monies from sale of bid documents not banked intact Management action plan The observation is noted. The financial management procedure manual is currently being updated. Gaps identified will be considered in the revised manual which is expected to be presented in draft within four weeks. OFM has decided to maintain minimal cash on hand by banking all cash received within two days. Also, we recognize recent improvements in physical security within the ministry and the provision of a metal safe, installation of two steel doors and the location of the cash office (concrete ceiling) to secure cash on hand 2.2 Pool Fund monies used to pay for MOHSW petty cash expense Management action plan Pool Fund does not have a petty cash arrangement. Funds donated to the Pool Fund are received into the Health Sector Pool Fund account at the Ecobank. Transfers are made from this account to the MOHSW Pool Fund Disbursement account based on proposals for specific projects approved by the PFSC. The cash in question was raised from the sale of bid documents for a specific project. The $3,700 has been banked into the MOHSW Pool Fund disbursement account in line with management decision to bank all cash received within two days.

4

2.3 Liquidation and subsequent payment of incentive payments to health workers not done Management action plan Management noted that the completion of incentives payment and liquidation by all counties before new payments are processed for the subsequent month was impracticable. This is due to the difficult terrain in which some Counties operate; the long distances between health facilities; and the limited access to transportation and the nature of the roads. Also, these payments were made at the time MOHSW was moving away from quarterly to monthly incentive payments. Management decided that it was unfair to hold back incentive payments to counties that have fully complied with the incentives procedure due to justifiable delays on the part of counties having challenges liquidating incentive payments on time. However, incentives processed for subsequent months were released to each county after receipt of incentive liquidation reports for the previous month. Reconciliation of Pool Fund incentive payments from April to June 2009 will be completed and submitted to management on September 18, 2009. 2.4 Incentive to health workers refunds not banked on a timely basis. Management action plan The observation is noted. Management allowed some time for payment to staff who were unable to receive monthly incentives on time due to circumstances beyond their control. This is to facilitate the payment process and minimize the risk of moving cash to and from the bank. 2.5 Disbursements reported as actual expenditures Management action plan It is our policy that all those one-off payments are treated as expenditures because of the numerous transactions we undertake but with demand for liquidation. On liquidation any cash balance returned is entered into the ledger to reduce the cost. Advance ledgers are maintained for the regular programs we deal with as a policy. This is now our draft policy.

5

3.0 Compliance Findings 3.1 Procurement procedures not followed Management action plan It is advisable that all heads of units/departments familiarize themselves with the PPCC Act and procurement procedures in general. This will assist the procurement Unit carry out its task more efficiently and effectively as some of the breaches on the procurement procedures are due to interference by other units who do not want to comply with the procedures and not because the Procurement Unit is not following the Act or the procedures. 3.2 Expenditures not categorized per the National Health Plan Management action plan The MOHSW financial management manual being currently upgraded is based on Government of Liberia (GoL) chart of accounts (CoT). All ministries and agencies are mandated to use the chart of accounts for accounting purposes. There is more work to be done by the ministry to turn this CoT to meet the NHP. As a project within the MOHSW, the Pool Fund is under obligation to comply with the GoL CoT. It is not clear if the account lines in the National Health Plan were approved by the Budget Bureau of Liberia. However, discussions with the Accpac consultant will consider the feasibility of this recommendation to ensure that updates to the chart of accounts facilitate reporting along the four pillars of the NHP. 3.3 Inadequate description of procurement items in JFA Management action plan Your observation is noted. The JFA shall be amended to include all types of procurement. 3.4 No formally documented accounting policies and procedures manual Management action plan The following manual and guidelines are in operation: 4. Pool Fund Procedures Manual 5. OFM Financial Management Guidelines 6. MOHSW Payment guidelines The OFM Financial Management Guidelines is being upgraded. The final draft is expected in 4 weeks.

6

3.5 Absence of Internal Audit function Management action plan Your observation is noted. The set up of the internal audit function is in progress. Two Senior Executive Service staff trained in internal audit skills has been assigned to the MOHSW. To fully establish the internal audit unit, management is in the process of recruiting the director. The draft internal audit charter and TOR are being reviewed by MOHSW management. 3.6 Key documents not signed as evidence of approval Your observation is noted. Management action plan This observation shall be raised with the steering committee as a recommended procedure. The steering committee shall decide whether to adopt the recommendation. 3.7 Field activities not monitored Thank you for this comment. The issue of M&E was raised during audit discussions, but not whether Pool Fund activities had ever been. M&E does indeed need to be strengthened, but the following field visits were undertaken to monitor pool-funded activities: PF 001- The Chief Medical Officer, Training Coordinator and Pool Fund Manager reviewed progress at Curran Lutheran Hospital in September 2008. PF 002- The Minister for Health, Representative of the World Health Organization and Pool Fund Manager reviewed progress on opening the National Reference Lab in June 2009. PF 003- No exceptional monitoring was done. PF 004- This allocation was for a consultant who worked within the MOHSW building. PF 005- The Cuban Doctors project has not yet started; however one fact-finding mission to Rwanda was carried out by the Deputy Minister for Administration and the Pool Fund Manager. PF 006- No exceptional monitoring was done. PF 007- The CB Dunbar Hospital construction was awarded in March 2009 and the project was monitored by the Deputy Minister for Planning and the Pool Fund Manager in May 2009. The Infrastructure Director carried out periodic visits during the same period. PF 008- PHC clinic construction contracts have not yet been awarded. PF 009- The Pool Fund Accountant carried out sample tracking of incentive payments (a validation exercise at the health facility level) in April/May 2009 PF 010- No monitoring done.

7

Management action plan The Ministry has recently established a Monitoring and Evaluation Unit that shall begin the process of monitoring and evaluating NGO’s receiving pool funds. 3.8 No evidence of authorization of payment voucher Management action plan The payment in the amount of $109,488 to MERCI was approved by the Chief Medical Officer whose position is equivalent to that of the Deputy Minister for Administration (DMA). As the DMA was out of the country the voucher was not sent to the AMA who was acting as DMA for approval due to oversight. The payment voucher including the Pro Forma Invoice approved by the CMO is attached for further consideration. 3.9 Pro forma invoices not sighted Management action plan The observation is noted. The pro forma invoice for the amount of $67,788.50 was initially attached to the voucher. We believe that the document may have been detached and mixed up with other documents presented to the auditors. We are still in search of the Pro forma Invoice, which will be presented to you as soon as it is found. 3.10 Project proposals not signed off by the PFSC Management action plan This observation is noted. This observation shall be raised with the steering committee as a recommended procedure. 4.1 No documented procedures of guidance on the review of existing manuals Management action plan The observation is noted. However, we would like to indicate that the manuals developed by the MOHSW are the result of efforts to compliment improvements in Public Financial Management. The Public Financial Management Act of 2009 passed recently and the regulations being developed will be considered to ensure that there is alignment between the Act and the upgraded OFM Financial Management Guidelines.

8

4.2 Monitoring and evaluation unit role in the procurement process Management action plan The observation is noted. Management will institute measures to ensure that the M & E unit is adequately resourced for timely monitoring of project activities by County Health Teams (CHTs) and external recipients of Pool Funds 4.3 Selection criteria of external recipients did not include external audit Management action plan The observation is noted. This will be discussed at the steering committee meeting and included in future project proposals if accepted. 4.4 Representatives at PFSC meetings Management action plan This observation is noted. This observation shall be raised with the steering committee. 4.5 No formal IT Policy Manual Management action plan A copy of the draft OFM IT policy was made available to the auditors. The review of the IT Policy by PwC is complete and the approved copy has been made available to the audit team. 4.6 No backup server Management action plan The observation is noted. The OFM Project Manager will be duly informed of this gap to ensure timely implementation of this recommendation.