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Program Management Unit :PMAU)

Implemented by theMin7stry of Agriculture (MOA)

Smal holder Tree Crops Revitaizat on Support (STCRSP) Project

Management Letter

For the year encec June 30. 2017

Content:

1 7RANSM T7AL LETTER2.0 CISTRIBUTION REPORTS =OR FARMNG TOOLS3 0 INVEN-ORY REORT4 B DGET VS ACTUAL AND ANA'YSS Or- VARIANCES, AND REPORTING5 0 PROJECT ACCOUNTING SOFNARE :TOMPRO6-0 PROCJREMENT:PURCHASE PROCEDURES

PKF Liberia PFAccountants &

March 143. 2018 business advisers

To the Program Management Unit (PMU)STCRSP Project

Dear Sirs:Management Letter

For the vear ended June 30. 2017

In the -:urse of our audt of the Financial S:aterTnts of the oroject "Smallholoe Tree CropsRev.'alza:ion Support (STCRSP Projeet Tpiemen:ed by the Program Mana gement Urit(PMU) of the Misty of Agricubure f,rthe vear erded Junie 30 2017 zerain ma-ers affe. ngthe p'c'cts systems oaoor ng ad -er-a z;ctro s came to cur nowce. 'e oring these :o y-rattertiro and e-ý:crage yc :D cev'ise ways zv wich the,Y can be reTecieo whe,e coss bue as awa0 ' stoengverg :e 0 eral syste! of Dpe.a:icra co-tro:s a: the En:y. Eac- of tl otsraised : t s letter is fo' owd oy recrimenca: ;on fe' or e.al.a: or rugard:ng the ex:en::cwnich you may des re te Inccrporate tiorn as a:cceptable so uo-s whIe talng u!y n:z acccuntthe cost :nat *he suggested soLtions may necessarly e-ta 1

0.r aud: proced..res 'ur ne proct oc-oen:-ated p- rialay n eval_atr` these sys:erns cfaccojrting and rea( co-itrols coera: ng a: tne Smal he:der T-e- Creos evi:c t cn SWJ-t,S¯ASr F-cjec: on w - we e led to- the pu-ose of cete-Tr- ou- aucit p,credues n scar as operaticns f the r:oject n quest on s concemed Acci'g y our adi: may ro: havece-tified, and the ccormn:s in this |oter rìay not be a eornprerensI.e recrd of al the

weaknesses that may ex st at t-e PMU a-d in pa- cular, 1e oroject tu v-ir. hs engagementre ates ý.--erflore. oLr wok shul rot be re Jed uoo-1 exc:usive v to ciscove- al defalcations orsi-i ar rreu ar-ties, ai:ough theå- isciosure r' they do exis: or a Dervasive basis. is ie v teresult *ror the ajeit tes:s we underlake

T-e res onsibi'iy 4or the rnaitera-ce of an acq..: system of internal ccntr s as wo l as for:e ce Deti:n and detection of i-eguari:ies ~ess w t :e Managemen: of the STCRSP Project.Hcwever ou auci, was Dlanned so that we CUld t-ave a reasonable expe:ation cf dete:ngmale-al rnsstatements n the fina-ia sta:een:s 7esu ting from regularities, if a-y.'ve *ake :is ooporer ty to tanr 'ou or the cpe-atien we 7eceivec froT you and -rembe-s Ofvou staf du-ng the course of Ou.r aJi: yo. req.i-e any f rthe- nforration or exp'anation nre a: on to the rnatters referred to in this lette, please do not -esitate to contact us.

has been a DlCasLre being Cf serIce 7o ~he Program Maragernen: Unit iPMU: n particuar andthe M ris-y o Agricul e r general

Yours truly

P KF - L ibeiiaAccountants &business advisers

3

STCRSP Project

Management LetterFor the year ended June 30, 2017

1.0 Systems review

1.1.1 We exa-ined the acco .n:ir records and internal controls which underlie theStateme--ts of Recelots and Payments of the Smallholder Tree CropsRevitalization Support (STCRSP) Project regarding the ope,ation of the projectmentioned above for te period ended June 30. 2C17- The purpose of the revewwas to determine the adcquacy of the contros for the operations of the pro,ect andto enabe us test for compi ance erewth as we: as other specific gude inesprovided n the Projec- Document.

Our audit procedures certain only to the project actvrties covered by thisengagement and for the pe-ods specificaly indicated and not the overa operazion'sof the PMU or the N' -isrv of Agriculture.

2.0 Distribution Reports for Farming Tools

Accoc -g to the F nanc a Procedure Manual, w thin three working days foowingreturn from m:ssion, staff members are -ec, red to orepare a back-:o-lofice or

rission report to be somitted to the Pro.ect Coordinator and PNU Director aongwith their travel expense claIms After revew., the report is returned to tne traveler

for action and/or fling i the appropriate record fles A copy is sent to te M&EOfficer for consideration

During our Audit we have observed that the below 'isted items totaling amountUS$190,904.60 were purchased by the STCRSP;WB and the M&E Officer Therehave been no indicat on of adherence to the distribution processes as required undercontract. Requested for distribution reports but the management is yet to provide therepor. Furthermore, to say, there is also no indication of receipt of farming tool byfarmers. n the case where farmer sign upon receipt of their farming material fromSTCRSP. Below is the list of suppliers from whom material were acquired for onwarddstribution to farmers:

> Agrcu tura Inputs (SOCODEVI)Acr,cu ura Inputs Suppiies (SRC)

> Agncu tural Inputs (SOCODEV> Agricultural Inputs( COCOA FARMERS);w Agricultural nputs/ Supplies

In the absence of a report that ca.. be va7idated, :s possicle that the farming too.swere not delivered to all the STCRSP farmers thereby the project not gettng valuefor money.

4STCRSP Project


2.1 Recommendation

STCRSP management should ensure that the M& Officer and those responsiblefor distribut on provide distribution reports with evidence of recipients' names,signatures, contact numbers and the village for validation to authenticate thedist-rbution going forward-

2.3 Management's Response:

The PCU has recuested the d stributlin reports from our implementing partnersSOCODEVI & SRO). Sa e is done with our M&E Officer who supervsed the

dstribution on behalf of the PCU.

3.0 Inventory report

As par of our audit Drocedures we conducted a physical count of nventory items nthe storero-m of STCRSP. During our count, we observed discrepancies betweenthe physical count and reported ba.ances in the inventory log book, Firtherinvestigation and scrutny of' :he records proved clear y, that inventory items werenot logged in whn procured and logged out when !ssued to department or otherfunc:ionaries or sectors of t.e Pro ect Because of the discrepancies in :he recordshuge variances were observed between the physical count and the recordsmaintained by the Project

in t.e absence of a proper and updatec log bock te fo owing are likely to occur:

N/ Goods claimed delivered could be u.nderstated;1 Goods could be diverted to personnel use;v/ Value for money could be not measure in this regard.

3.1 Recommendation:

That the Project Management Unit (PMU) instftute measure (s) whereby inventoryitems can continuously be counted and reconciled with records. Second!y, a senior

eve person shou d review a sample of inventory items against the re evant recordsat least every three months Adequate intema control system in place thatsafeguard and keep accurate records of inventory or stock when procured andissued.

3.2 Management's Response:The PCU take note of the recommendation and will enforce the po icies (internacontrol) already in place effectively.

5STCRSP Project


4.0 Budget VS Actual and analysis of variances, and Reporting

We requested but have not received budget vs actual variance for variance betweenbudget arc actua performance. This document which is very essentia givesexplanaticn of vaniances between budgeted and actua of activities level Cver orunder spent during the Project per od With this, users become aware of what drivesan activty line. The document a so gudes the Programme Management Unit (PMU)and Project CoordinatTon Unt PCU) n making decision for the fo" owving year In theabsence of tnis very essentia analysis. donor, partners and the very ProjectCoordination Un -may encounter difficulty in making projection for the fol owing year.

4,1 Recommendations:

We recommend that Program Management Unit (PMUI) should ensure th*a- theProject Coordination Uni (PCU) provide analysis of variances arising from thebudget against the actual actual activities

4.2 Managements Response:The PCU as embarked on this requiremen Going forward, our financial office i Iensure that the variance analysis narration is attached to each quar:er report

5.0 Project accounting software (TOMPRO)

Section 1C.3.1 of PMU Operations Manua on accounting systems prov des thatPMU/PCU /PlU shou d use the TOMPRO accounting software to record, process,and report financial transactlons and data Tc software was design so as to helpthe PMU1PCUlPIU mirimize the mar.n of errors in the preparation and fairpresentation of financial statements.

It was observed that the required Project accounting software system (TOMPRO)had not been used by the project coord nation unit (PCU) that was recommendedby the World Bank. Instead, the Project accountant prepared monthly financialreports through Excel Spreadsheets, a micro soft office- Exce is susceptible tomanipulaton, therefore f nancial info7mat:on is unlikely to be reliable,

Deviation from said recommended sof-ware, and gce ines does not ory causecbstruction 'r achieving the Project's objective but also brings expenditure data intoquestion and ridicule.

6STCRSP Project


5.1 Recommendation:

Program Management Unit (PMU shou d ensure tnat its Project Coordination Unit(PCU) -STORCP uses the approved accounting software -TOMPRO This webe;eve will provide credible and reliab i einancla lnforraion to users and do.nols ofthe Project fund.

5.2 Management's ResponseRecommendation acknowledged. The Pro ect Coordinat:on Unit is currentlyimplerrintCng the recomme-ca'ion by recording all of the financial data from theinception of the project. T Ts process is expected to be completed o or before May1. 2016.

6.0 Procurement/purchase procedures

We noted that payment request or memorandum were circu arzec orior to theinvoicing of the supp'Ier- For examp le purchase of 130 pieces oz Diamond smallscale at unit price of USS120 totaling USS 13,000 from Bulding Materia s Center(BMC) on Payment; payrnen' instruction of STCRSP sent sooner than crec t invoicefrom vendor. Payment Instruction date was June 23, 2016 why credit invoice carriedJune 24, 2016.

Also, : was observec t -at there were a number of t.ansactiois, expenditures whichwere processed unaut-orized. Scome of these transactions a.e detaled below intable,

Ref AmountDate Description # $US

Aug 25, 2'10 Paiy-nent r cyo aHi L.x 'ck-up 1176 30.950Aug 25 2316 P yien o' Consultart 16- or t-aring or Lata Ce:rk 1162 19,985

g26 2' P: oHymentoHlh breedccoa cedrg 1170 20,522-44Aug 17 y2016 01 1214 251337Cec 24, 2016 Payment ofofir &tic' s :pples 1358 21 _N

117,521

The relevance of the inte-a' control over the processing of payment is :o ers ethat goods or materia!s paid for are indeed delivered n ful and there are noshortage(s) of receipts. T-s breach of policy ever though not frequently observed.needs valuable attention to prevent reoccurrence.

7STCRSP Project


6.1 Recommendations

STCRSP s oud e sure that p0 ices are adhered to. Tis is of good practice andbest that the bidding process be allowec in contemporary competit:ors amongvencors which encourages factors sc as cost and qa :y.

6.2 Management's Response

The PCU take note of the recommendalion and will enforce the po icies effectivelyor the approva of the payment vouchers. On the other hand, the issue of the datein relation to the purchase of the '30 p eces of Diamond small scale from Bui dingMaterial Center could be due to error when the date was recorded by the vendor orour staff.

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