The General Auditing Commission (GAC) has conducted a compliance audit on the Contractual Agreement between Liberia Petroleum Refining Company (LPRC) and Bea Mountain Mining Corporation (BMMC) for the period from February 1, 2022, to July 31, 2024.
The compliance audit has been conducted in compliance with relevant laws and regulations consistent with the Auditor General’s mandate as provided for in Section 2.1.3 of the General Auditing Commission (GAC) Act of 2014 as well as in accordance with the Petroleum Storage Agreement between Liberia Petroleum Refining Company (LPRC) and Bea Mountain Mining Corporation (BMMC), LPRC Act of 1989 and the Public Procurement and Concession Commission Act of 2010.
Based on the audit work performed, the GAC found that, because the significance of the matters noted in the operations of the Petroleum Storage and Lease Agreement between LPRC and BMMC are not in compliance with the contract terms, stated laws and regulations for the audit period February 1, 2022, to July 31, 2024.
The GAC identified multiple issues of significant materiality that affect the operations of the Contractual Agreement between LPRC and BMMC.
Under expenditure, it uncovers a variance between bills raised and the actual payments of royalties by BMMC. Management did not account for the variance of US$377,367.60 between the bills raised and actual payments of royalties by BMMC.
It states that this variance has a material impact on the Petroleum Storage and Lease Agreement between the Liberia Petroleum Refining Company (LPRC) and Bea Mountain Mining Corporation (BMMC).
According to the GAC Audit Report, Management is in breach of Article III, Section 3.3 of the Petroleum Storage and Lease Agreement between Liberia Petroleum Refining Company (LPRC) and Bea Mountain Mining Corporation (BMMC) requires that the parties put in place an effective and transparent system to ensure accurate documentation and accounting for the quantity of products received and stored in the Bea Mountain AGO Storage Facility.
Management’s action, which led to the variance as noted in GAC’s observation, also contravenes Article II Section 2.1 of the Petroleum Storage and Lease Agreement between LPRC and BMMC, which requires the payment of royalty fees to be made consistent with LPRC standard operating procedures and practices.
It uncovers that LPRC and BMMC entered into a Build, Operate, and Transfer (BOT) agreement in February 2022 for Petroleum Storage and Lease valued at US$17,088,297.02 without evidence of the explicit approval of the President of Liberia.
The GAC says Management violates Section 1 (2) of the July 26, 1989 Act granting exclusive rights to the Liberia Petroleum Refining Company which requires the Liberia Petroleum Refining Company (LPRC) to have the right to designate its suppliers and enter into an exclusive supply agreement with any foreign or domestic corporation, upon the approval of the President of Liberia.”
Non-Compliance with PPCC Provisions:
Management and Bea Mountain Mining Corporation entered into a Build, Operate and Transfer (BOT) agreement for Petroleum Storage and Lease valued at US$17,088,297.02 without compliance with the relevant provisions of the PPC Act of 2005, as amended and restated in 2010.
The non-compliance violates Section 1 (2) of the July 26, 1989 Act granting exclusive rights to the Liberia Petroleum Refining Company for the importation, sale, and distribution of petroleum products.
Unsigned Contracts:
The report further states that there was no evidence that the contract was signed by the Minister of Finance and attested by the Minister of Justice based on the threshold of the contract (US$17,088,297.02).
Management’s action contravenes Count 10 of the Public Procurement and Concession Commission Regulations of 2005 under the caption “Contracts over US$250,000” which states that “The Minister shall take part in the negotiations and signings of contracts over US$250,000 and the contract shall be attested to by the Ministry of Justice. The Procuring or Concession Entity shall comply with the thresholds set out in this Schedule to the Regulation in accordance with the provisions of the PPC Act.”
‘‘These deficiencies are pervasive and increase the risk of fraud and errors, thus compromising the reliability of the terms and conditions of the BOT agreement. Failure to Perform Reconciliations of Petroleum Quantities Lifted Management did not perform any reconciliations of petroleum quantities lifted, bills issued, amounts received, and outstanding balances,’’ the report stated.
‘‘Management is in breach of Article III, Section 3.3 of the LPRC and BMMC which requires that the parties mutually agree to put in place an effective and transparent system to ensure accurate documentation and accounting for the quantity of products received and stored in the Bea Mountain AGO Storage Facility.’’
Meanwhile, the GAC recommends that the Management should regularize the agreement and facilitate full compliance with Section 1 (2) of the July 26, 1989 Act by soliciting presidential approval to guarantee the validity and enforceability of the agreement. ‘‘Evidence of approval of the President should be adequately documented and filed to facilitate future review,’’ the GAC further recommends. But the Management did not respond to the findings and recommendations of the GAC.
Auditor General’s Position:
In the absence of Management’s response, the GHAC maintains its finding and recommendation. The GAC adds that it will follow up on the implementation of its recommendation during subsequent audits.
Risk:
Management may be non-compliant with the PPCC Act of 2005 as amended and restated in 2010. Non-application of the requisite procurement method may impair the achievement of value for money and facilitate fraudulent procurement activities.
Recommendation: Management should facilitate full regularization of the petroleum storage and lease agreement consistent with the PPC Act of 2005 as amended and restated in 2010.
Evidence of the regularization of the petroleum storage and lease agreement should be submitted to the Office of the Auditor General for subsequent review and validation.
Management’s Response:
Management did not respond to the GAC findings and recommendations.
Lack of Engineer’s Report and Certificate of Completion Criteria 1.4.1.1 Article I, section 1.5 of the Petroleum Storage and Lease Agreement states that “the parties hereto mutually agree that an independent engineer (the engineer) shall be designated jointly by LPRC and BMMC, to Supervise and inspect the construction of the Bea Mountain AGO Storage Facility to ensure that the works are carried out in accordance with international standards as well as certify the completion of Bea Mountain AGO Storage Facility. During the construction period, in the event any portion of the work fails to conform with international standards, it shall be corrected by BMMC.”
Observation:
During the audit, it was observed that BMMC appeared to complete the construction of three (3) petroleum storage terminals at a cost of US$17,088,297.02 without evidence of an engineer’s report and certificate of completion to certify that the construction works aligned with the Bill of Quantity (BoQ), engineering specifications and international standards as stipulated in the Petroleum Storage and Lease Agreement.
Risk:
In the absence of an engineer’s report and the certificate of completion for the construction of the BMMC storage terminal, the facility may not be completed based on the approved specifications of the project. This may impair value for money, and resources may be subjected to misapplication and misappropriation.
Recommendation
The LPRC Management should provide copies of the engineer’s report and the certificate of completion of the BMMC Storage Terminal to certify that the construction aligns with the contract specifications and International Standards.
The GAC further recommended that these documents should be submitted to the Office of the Auditor General as part of Management’s response to this Management Letter. Evidence of the engineer’s assessment report and certificate of completion should be adequately documented and filed to facilitate future review.
