LIBERIA: THE BUDGET, LEGISLATORS, MOF, AND GEMAP,

C O N F I D E N T I A L SECTION 01 OF 02 MONROVIA 000591

NOFORN
SENSITIVE
SIPDIS

STATE FOR AF/W
TREASURY FOR RICHARD HALL

E.O. 12958: DECL: 07/31/2018
TAGS: EFIN ECON PGOV PREL EAID LI
SUBJECT: LIBERIA: THE BUDGET, LEGISLATORS, MOF, AND GEMAP,

REF: MONROVIA 409


1. (C) Summary: Director General of the Bureau of the
Budget (BOB),Augustine Ngafuan, expects the budget to pass
this week assuming the full House accepts decisions made by
the relevent legislative committees. If it does not pass
this week, the GOL will be "in a state of crisis." He shared
concerns about plans to merge BOB into the Ministry of
Finance (MOF),noting MOF has not made the operational
changes necessary for a smooth integration. He called for
closing the gap between the executive and the legislative
(and judiciary) branch, despite "integrity issues" in the
legislature. Regarding the post-GEMAP transition at BOB, he
thought year three could see gradual easing of the
co-signatory authority to a system where decisions are made
autonomously and then checked by the GEMAP advisor. He
identified the Ministries of Health and Defense as having the
most effective budget operations, and the Ministries of
Public Works, Education, and Internal Affairs as the worst.
End summary.

Budget approval this week?
--------------


2. (SBU) Econoff and Econ Assistant met July 29 with
Augustine Ngafuan at the Bureau of the Budget for his views
on pending issues. Ngafuan (along with Acting Minister of
Finance Mawolo) has been the GOL's point person at the
legislature presenting the draft budget. He said they are
nearing agreement in committee on priorities and appropriated
amounts, but he hopes members of the full house will
understand and not derail the negotiated draft. (Comment:
This is extremely optimistic. But possible. End comment.)
He also expressed concern that the ongoing controversy about
investment incentives might reduce focus on the budget. He
noted one budget meeting had already been cancelled, last
Thursday, while the House passed the "no confidence" vote
against the Chair of the National Investment Commission
(septel).


3. (SBU) He said if the budget doesn't pass before the end
of the month the GOL will be in a state of crisis. (Note:
The Liberian fiscal year started July 1. The budget was
submitted to the legislature in mid May and there is no
provision equivalent to our continuing resolution. End
note.) BOB, like most other GOL institutions, is already
rationing fuel (the generator is shut off at 11 am every day)
and is running out of other supplies. Although July civil
service salaries are not yet, technically, late, the Sirleaf
administration had made great strides in paying people by
mid-month.

Merger of BOB and MOF
--------------


4. (C) Ngafuan was frank in his concerns about plans to merge
BOB into the Ministry of Finance. Characterizing it as "a
sticky issue," he said "we have to deal with a lot of issues
at MOF first, before a merger" in order to avoid bottlenecks.
One concern is the perception that a clean and transparent
institution -- BOB-- would be merging with one that is held
in less esteem by the public. He also expressed concern that
with revenue, expenditure and accounting functions already
concentrated at MOF, the BOB provides the only counterweight
in the budgeting process.

How to fix the Ministry of Finance
--------------


5. (SBU) When asked what is needed at MOF to improve its
reputation, he had specific proposals:

-- Overhaul the expenditure process. Remove red tape and
rent-seeking opportunities. MOF should conduct a microscopic
analysis of processes, a full operational survey on how to
reduce the number of signatures and improve the quality of
reports. Bank records are not reliably reconciled with MOF
records.

-- Improve relations with the Auditor General. It is
"embarrassing" that simple requests for statements have not
been honored. (Note: Post's previous discussions with the
Auditor General have identified MOF's Deputy Minister For
Expenditure as the source of the obstruction at MOF. End
note.)

-- Reform the opaque payroll process.

MONROVIA 00000591 002 OF 002



-- Overhaul the revenue process. Rotate revenue officers
such as customs agents who have "built an empire." There are
many complaints about customs, the port and other revenue
agencies. There should be consideration given to removing
revenue functions from the Ministry of Finance entirely.


6. (C) More generally, Ngafuan said he would have expected
more intra-governmental consultation before the GOL agreed on
benchmarks with the IMF. He said it is important for the
executive branch in general, but MOF in particular, to close
the gap with the legislators. Despite their "integrity
issues," he said,"it's the legislature we have; we have to
deal with it." He thinks it would be helpful to include
representatives from the legislature (and the judiciary) in
the Poverty Reduction Strategy (PRS) pillar meetings. He
felt the absence of legislative and judiciary representatives
in Berlin left a gap, and said they consider the PRS an
imposition of the executive branch.

BOB transition to post-GEMAP
--------------


7. (SBU) Ngafuan identified capacity building as the most
important challenge facing BOB. He said there has been
tremendous progress, but eventually locals will need to be
given more responsibility. Although he has never considered
GEMAP's co-signatory provision intrusive, it may be time, in
year three of GEMAP, to transition to a system whereby
decisions are checked after the fact.


8. (SBU) The budgeting process needs to take a wider policy
perspective, with program budgeting, more performance focus,
and mid-term forecasts. Budgeting capacity at all the
ministries and agencies needs to be strengthened; the quality
of information is still lacking. They have had assistance in
improving budget classification but could use more refinement
in expenditure codes. There is, he said, no government-wide
accounting standard. Although the revenue code calls for
accrual accounting, "that's a fantasy" -- still far away.
But they should still standardize BOB, MOF, the Auditor
General and the rest of the government.


9. (SBU) When asked, he said the Ministry of Health has the
most robust budget operation, followed by the Ministry of
Defense, which had USG assistance. The worst agency is the
Ministry of Public Works, followed by the Ministry of
Education. He said Education is of particular concern
because it is the biggest, employing half the civil service.
The Ministry of Internal Affairs (MIA) has serious budget
problems, especially at the county level. MIA is responsible
for central government payments to the counties and, he said,
most GOL problems with the legislature arise from concerns
about how MIA's inefficient and non-transparent handling of
funds affects their constituents.
ROBINSON