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The Board agreed that Liberia has made meaningful progress overall in implementing the 2016 EITI Standard.

Outcome of the Validation of Liberia.

Decision number
2017-28
Decision basis
2016 EITI Standard, Requirement 8.3 EITI Validation deadlines and consequences
24 May 2017

Board decision

The Board came to the following decision regarding Liberia's status:

The Board agrees that Liberia has made meaningful progress overall in implementing the 2016 EITI Standard. The Board’s determination of Liberia’s progress with the EITI’s requirements is outlined in the assessment card below.

The EITI Board agreed that Liberia has made meaningful progress in meeting requirements 1.4, 1.5, 2.2, 2.3, 4.1, 4.7, 6.1, 6.3 and 7.4. The Board also agreed that Liberia has made inadequate progress in meeting requirements 2.6, 4.9, 5.1 and 6.2, and no progress in meeting requirement 4.3. The major areas of concern relate to multi-stakeholder group governance (#1.4), work plan (#1.5), License allocations (#2.2), license registers (#2.3), state participation (#2.6), comprehensiveness (#4.1), barter agreements (#4.3), disaggregation (#4.7), data quality (#4.9), distribution of revenues (#5.1), mandatory social expenditures (#6.1), economic contribution (#6.3), outcomes and impact of implementation (7.4).

Accordingly, the EITI Board agreed that Liberia will need to take corrective actions outlined below. Progress with the corrective actions will be assessed in a second validation commencing on 24 November 2018.  Failure to achieve meaningful progress with considerable improvements across several individual requirements in the second Validation will result in suspension in accordance with the EITI Standard.  In accordance with the EITI Standard, Liberia’s EITI multi-stakeholder group (MSG) may request an extension of this timeframe, or request that Validation commences earlier than scheduled.

The Board’s decision followed a Validation that commenced on 1 July 2016. In accordance with the 2016 EITI Standard, an initial assessment was undertaken by the International Secretariat. The findings were reviewed by an Independent Validator, who submitted a Validation Report to the EITI Board. The NSC was invited to comment on the findings throughout the process. The national secretariat’s comments on the report were taken into consideration. The final decision was taken by the EITI Board.

Corrective actions and strategic recommendations

The EITI Board agreed the following corrective actions to be undertaken by Liberia. Progress in addressing these corrective actions will be assessed in a second Validation commencing on 24 November 2018:

  1. In accordance with Requirement 1.4a, the MSG needs to ensure that stakeholders are adequately represented. In accordance with Requirement 1.4b, MSG members should have the capacity to carry out their duties and the MSG should undertake effective outreach activities with civil society groups and companies, including through communication such as media, website and letters, informing stakeholders of the government’s commitment to implement the EITI, and the central role of companies and civil society. The multi-stakeholder group should also widely disseminate the public information that results from the EITI process such as the EITI Report. Members of the multi-stakeholder group should liaise with their constituency groups. The multi-stakeholder group needs to also agree and publish its procedures for nominating and changing multi-stakeholder
    group representatives.
     
  2. In accordance with Requirement 1.5, the MSG should maintain a current work plan that sets EITI implementation objectives that reflect national priorities for the extractive industries. In accordance with requirement 1.5.b, the work plan must reflect the results of consultations with key stakeholders. In accordance with requirement 1.5f, the MSG should ensure that the work plan is reviewed and updated annually.
     
  3. In accordance with Requirement 2.2, Liberia is required to disclose the following information related to the award or transfer of licenses pertaining to the companies covered in the EITI Report during the accounting period covered by the EITI Report: (i) a description of the process for transferring or awarding the license; (ii) the technical and financial criteria used; (iii) information about the recipient(s) of the license that has been transferred or awarded, including consortium members where applicable; and (iv) any non-trivial deviations from the applicable legal and regulatory framework governing license transfers and awards. This information should be disclosed for all license awards and transfers taking place during the accounting year covered by the EITI Report, including license allocations pertaining to companies that are not included in the EITI Report. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them. Where licenses are awarded through a bidding process during the accounting period covered by the EITI Report, Liberia is required to disclose the list of applicants and the bid criteria.
     
  4. In accordance with Requirement 2.3.b, Liberia is required to maintain a publicly available register or cadastre system(s) with the following timely and comprehensive information regarding each of the licenses pertaining to companies covered in the EITI Report: (i) license holder(s), (ii) where collated, coordinates of the license area, (ii) date of application, date of award and duration of the license, (iv) in the case of production licenses, the commodity being produced. Any significant legal or practical barriers preventing such comprehensive disclosure should be documented and explained in the EITI Report, including an account of government plans for seeking to overcome such barriers and the anticipated timescale for achieving them.
     
  5. In accordance with Requirement 2.6(a), Liberia’s EITI Report must include an explanation of the prevailing rules and practices regarding the financial relationship between the government and state-owned enterprises (SOEs), e.g., the rules and practices governing transfers of funds between the SOE(s) and the state, retained earnings, reinvestment and third-party financing. In accordance with Requirement 2.6(b), Liberia must provide disclosures from the government and SOE(s) of their level of ownership in mining, oil and gas companies operating within the country’s oil, gas and mining sector, including those held by SOE subsidiaries and joint ventures, and any changes in the level of ownership during the reporting period. This information should include details regarding the terms attached to their equity stake, including their level of responsibility to cover expenses at various phases of the project cycle, e.g., full-paid equity, free equity, carried interest. Where there have been changes in the level of government and SOE(s) ownership during the EITI reporting period, the government and SOE(s) are expected to disclose the terms of the transaction, including details regarding valuation and revenues. Where the government and SOE(s) have provided loans or loan guarantees to mining, oil and gas companies operating within the country, details on these transactions should be disclosed.
     
  6. In accordance with Requirement 4.1.a, the multi-stakeholder group is required to agree which payments and revenues are material and therefore must be disclosed, including appropriate materiality definitions and thresholds. The multi-stakeholder group should document the options considered and the rationale for establishing the definitions and thresholds. In accordance with Requirement 4.1.c, Liberia must provide a comprehensive reconciliation of government revenues and company payments, in accordance with the agreed scope. All companies making material payments to the government are required to comprehensively disclose these payments in accordance with the agreed scope.
     
  7. In accordance with Requirement 4.3, The multi-stakeholder group and the Independent Administrator are required to consider whether there are any agreements, or sets of agreements involving the provision of goods and services (including loans, grants and infrastructure works), in full or partial exchange for oil, gas or mining exploration or production concessions or physical delivery of such commodities. To be able to do so, the multi-stakeholder group and the Independent Administrator need to gain a full understanding of: the terms of the relevant agreements and contracts, the parties involved, the resources which have been pledged by the state, the value of the balancing benefit stream (e.g. infrastructure works), and the materiality of these agreements relative to conventional contracts. Where the multi-stakeholder group concludes that these agreements are material, the multi-stakeholder group and the Independent Administrator are required to ensure that the EITI Report addresses these agreements, providing a level of detail and transparency commensurate with the disclosure and reconciliation of other payments and revenues streams. Where reconciliation of key transactions is not feasible, the multi-stakeholder group should agree an approach for unilateral disclosure by the parties to the agreement(s) to be included in the EITI Report.
     
  8. In accordance with Requirement 4.7, Liberia is required to disaggregate disclosure of tax payments.
     
  9. In accordance with Requirement 4.9a, Liberia is required to provide an assessment of whether the payments and revenues are subject to credible, independent audit, applying international auditing standards. In accordance with Requirement 4.9b, Liberia should ensure that payments and revenues are reconciled by a credible, Independent Administrator, applying international auditing standards, and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified. The multi-stakeholder group and the Independent Administrator are required to agree a Terms of Reference for the EITI Report based on the standard Terms of Reference and the ‘agreed upon procedure for EITI Reports’ endorsed by the EITI Board.
     
  10. In accordance with Requirement 8.3.c, the MSG is required to disclose a time-bound action plan for addressing the deficiencies in data quality documented in the initial assessment and the Validator’s Report within three months of Board’s decision, i.e. by 28 August 2017.
     
  11. In accordance with Requirement 5.1, Liberia is required to disclose a description of the distribution of revenues from the extractive industries and indicate which extractive industry revenues, whether cash or in kind, are recorded in the national budget. Where revenues are not recorded in the national budget, the allocation of these revenues must be explained, with links provided to relevant financial reports as applicable.
     
  12. In accordance with Requirement 6.1.a, Liberia is required to disclose and, where possible, reconcile material social expenditures by companies that are mandated by law or the contract with the government that governs the extractive investment. Where such benefits are provided in kind, Liberia is required to disclose the nature and the deemed value of the in kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary be disclosed. Where reconciliation is not feasible, Liberia should provide unilateral company and/or government disclosures of these transactions.
     
  13. In accordance with Requirement 6.2, the MSG must include disclosures from NOCAL on its quasi-fiscal expenditures. The multi-stakeholder group is required to develop a reporting process with a view to achieving a level of transparency commensurate with other payments and revenue streams, and should include NOCAL’s subsidiaries and joint ventures.
     
  14. In accordance with Requirement 6.3, Liberia is required to disclose information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI, including the size of the extractive industries in absolute terms and as a percentage of Gross Domestic Product as well as an estimate of informal sector activity, including but not necessarily limited to artisanal and small scale mining (Requirement 6.3a) and total government revenues generated by the extractive industries (including taxes, royalties, bonuses, fees, and other payments) in absolute terms and as a percentage of total government revenues (Requirement 6.3b).
     
  15. In accordance with Requirement 7.4a, the multi-stakeholder group is required to publish annual progress reports that include a narrative account of efforts to strengthen the impact of EITI implementation on natural resource governance. In accordance with Requirement 7.4b, all stakeholders should be able to participate in the production of the annual progress report and reviewing the impact of EITI implementation. Civil society groups and industry involved in the EITI, particularly, but not only those serving on the multi-stakeholder group, should be able to provide feedback on the EITI process and have their views reflected in the annual progress report.

The MSG is encouraged to consider the other recommendations in the Validator’s Report and the International Secretariat’s initial assessment, and to document the MSG’s responses to these recommendations in the next annual progress report.

Background

Liberia became an EITI candidate in 2007 as part of the government’s drive to improve transparency and management of revenues. A Multi-Stakeholder Steering Group was established, chaired by the Minister of Finance. Under President Ellen Johnson Sirleaf, LEITI evolved from policy to legislation through the LEITI Act in 2009 which mandated EITI participation for companies and government entities. Liberia became the first African country to be designated EITI compliant by the Board in October that same year. LEITI published EITI Reports for seven fiscal years from 2007 to 2014, a post-award process audit for two fiscal years, and a beneficial ownership report. Its EITI Reports cover the mining, petroleum, forestry, and agriculture sectors. Liberia’s latest EITI Report covering 2013-14 was published in June 2016.

The Validation process commenced on 1 July 2016. In accordance with the Validation procedures, an initial assessment was prepared by the International Secretariat. The MSG was invited to comment. Comments were received from the MSG. The assessment was then reviewed by the Independent Validator, who prepared the Validation Report. The MSG was invited to comment on the report with a deadline for comments set for 28 February 2017.

The Validation Committee reviewed the case on 16 February 2017. Based on the findings above, and subject to any additional comments from the multi-stakeholder group being received by 28 February 2017, the Validation Committee agreed to recommend the assessment card and corrective actions outlined below. As per Requirement 8.3.c. this includes a requirement that the MSG agrees and discloses a time-bound action plans for addressing weaknesses in data comprehensiveness and data quality within 3 months.

The Committee also agreed to recommend an overall assessment of “meaningful progress” in implementing the 2016 EITI Standard. Requirement 8.3.c. of the EITI Standard states that:

ii.    Overall assessments. Pursuant to the Validation Process, the EITI Board will make an assessment of overall compliance with all requirements in the EITI Standard.

iv.   Meaningful progress. The country will be considered an EITI candidate and requested to undertake corrective actions until the second Validation.

The Validation Committee agreed to recommend a period of 18 months to undertake the corrective actions. This recommendation takes into account the number of challenges identified and seeks to align the Validation deadline with Liberia’s fiscal year, which starts on 1 July. 

Scorecard for Liberia: 2016

Assessment of EITI requirements

  • Not met
  • Partly met
  • Mostly met
  • Fully met
  • Exceeded
Scorecard by requirement View more Assessment View more

Overall Progress

MSG oversight

1.1Government engagement

The government is fully, actively and effectively engaged in the design, implementation, monitoring and evaluation of the EITI process. The President appears to have a strong commitment to the implementation of EITI in Liberia (LEITI), even though there are concerns that this does not always translate into effective support at the level of line ministries. The LEITI Act is a powerful tool to empower the multi-stakeholder group (MSG).

1.2Industry engagement

Companies are actively and effectively engaged in the EITI process, but only mostly as providers of information. The LEITI Act of 2009 provides an enabling legal environment for EITI reporting and there do not appear to be legal barriers to company disclosure.

1.3Civil society engagement

Civil society in Liberia is able to engage in public debate without restraint, coercion or reprisal, and its representatives are able to operate freely in relation to the EITI process. There are important capacity constraints, but stakeholders are nevertheless engaging and taking part in outreach and efforts to promote public debate, especially at the level of counties.

1.4MSG governance

The LEITI Act and the MSG’s Policy Manual address the requirements of the EITI Standard, but there appear to be deviations in practice. There are also challenges concerning attendance of MSG members, while the lines of accountability between MSG members and the broader constituencies they represent are not always clear or enforced.

1.5Work plan

Although work plans are generally costed and readily available on LEITI’s website, the MSG had not approved a new workplan for 2016-17 as of the start of Liberia’s Validation (July 2016). Consistent delays in approving the annual work plan were a concern but appeared unavoidable given the LEITI work plan’s link to the budget of the Office of the President. The current work plan covering 2015-16, like its predecessors, did not update the objectives of EITI implementation.

Licenses and contracts

2.1Legal framework

LEITI Reports describe the legal environment and fiscal framework for the sector. Additional information on relevant reforms could help track regulatory reforms and their impact.

2.2License allocations

LEITI Reports provide general information on the process for awarding mining licenses and petroleum blocks, on the identity of companies who were awarded licenses in 2013-14 and limited information on non-trivial deviations from the statutory procedures for awarding petroleum blocks. However, there are inconsistencies in the 2013/2014 EITI Report’s description of the number of mining licenses that were awarded in the period under review, and no information on statutory allocation procedures for mineral production licenses, license transfers or non-trivial deviations in the award of mining licenses in the period under review.

2.3License register

Although the 2013/2014 EITI Report does not provide information on all mining licenses and petroleum blocks held by material companies, some of this information was available on the two cadastres available online and through the National Oil Company of Liberia’s (NOCAL) website for petroleum blocks.

2.4Policy on contract disclosure

While Liberia’s EITI Reports do not refer to contract disclosure policy or practice, nor any commentary on planned reforms, LEITI annual activity reports describe the government’s policy and referred to specific legal provisions requiring contracts to be published. The LEITI website provides some mining, oil and gas contracts, although the list of contracts that have been disclosed does not appear to be comprehensive.

2.5Beneficial ownership

Not assessed

The MSG has undertaken some work on beneficial ownership, including publishing a beneficial ownership report covering companies operating in the mining, petroleum, agriculture and forestry sectors in December 2015. While disclosure of beneficial ownership information has been incomplete, with only around half of material companies reporting, the MSG has clearly considered the issue and undertaken work to disclose such information in a phased approach.

2.6State participation

LEITI Reports describe the state-owned enterprise (SOE) in the oil and gas sector, NOCAL, as well as the general rules related to its financial relations with the government, but it do not clarify the level of state ownership in either NOCAL or in mining projects. The 2013/2014 EITI Report does not cover changes in government ownership in the period under review, the rules and practices related to reinvestment and third-party financing, nor the existence of any loans or loan guarantees from the government or NOCAL to any extractives companies.

Monitoring production

3.1Exploration data

The 2013-14 EITI Report provides an overview of the mining and petroleum sectors, including significant exploration activities. However, the lack of a description of informal activities is a concern given the prevalence of artisanal and small-scale mining for gold and diamonds.

3.2Production data

The 2013-14 EITI Report discloses production volumes for each commodity, but it did not provide values of production or average prices for the period under review.

3.3Export data

The 2013-14 EITI Report discloses export values for each commodity, but it does not provide export volumes for the period under review.

Revenue collection

4.1Comprehensiveness

The 2013-14 EITI Report justifies a materiality threshold for selecting companies, but the MSG did not clearly define material revenue streams selected for reconciliation. It listes all material companies and government entities, but does not describe all material revenue streams. While the government appears to have provided full unilateral disclosure for revenues received by Liberia Revenue Authority (LRA), these are disaggregated by company rather than revenue stream and off-budget revenues (for instance those collected by the University of Liberia) are not disclosed.

4.2In-kind revenues

Not applicable

This requirement was not applicable in Liberia in the time under review.

4.3Barter agreements

The EITI Reports do not refer to any contractual provisions for the development of infrastructure for third-party use, despite widespread knowledge of such provisions in five Mineral Development Agreements (MDAs).

4.4Transportation revenues

Not applicable

This requirement was not applicable in Liberia in the time under review.

4.5SOE transactions

The 2013-2014 EITI Report discloses SOE transactions with government, although vaguely. The Report comprehensively disclosed and reconciled statutory payments from the SOE to the Government.

4.6Direct subnational payments

Not applicable

This requirement was not applicable in Liberia in the time under review.

4.7Disaggregation

While the 2013-2014 EITI Report refers to company-level reconciliation sheets available on the LEITI website, these were only available upon request from the LEITI Secretariat.

4.8Data timeliness

LEITI has published its reports in a timely manner.

4.9Data quality

The MSG agreed terms of reference (ToR) for the independent administrator (IA) and reporting templates for the 2013-14 EITI Report, reviewed audit rules and agreed quality assurance procedures for EITI disclosures. Through its work with the General Audit Commission in recent years, the MSG has agreed upon procedures for ensuring the reliability of its data as well as audit requirements for company reporting. However, the MSG’s agreed ToR deviates significantly from the standard ToR agreed by the EITI Board, most notably in removing the scoping and materiality discussions from the MSG and outsourcing it to the IA. The MSG has not based its discussion of assurance procedures on an assessment of actual auditing practices and a number of companies did not provide the required EITI assurances.

Revenue allocation

5.1Distribution of revenues

While the 2013-14 EITI Report describes the general budget-making process and the statutory revenue management procedures, it doesn’t clearly highlight the extractives revenues that were not recorded in the budget nor the allocation of such off-budget revenues. The MSG has not included reference to national or international revenue classification systems in the 2014 EITI Report (only encouraged under Requirement 5.1). In light of the existence of off-budget revenues, the MSG should ensure that future EITI Reports clearly identify revenue streams that are not recorded in the national budget and explain the allocation of such off-budget revenues.

5.2Subnational transfers

Not applicable

This requirement was not applicable in Liberia in the time under review.

5.3Revenue management and expenditures

Not assessed

The MSG has made some attempt to including information on revenue management and expenditures in the 2013-14 EITI Report, although it has not disclosed the management of earmarked extractives revenues.

Socio-economic contribution

6.1Mandatory social expenditures

The 2013-14 EITI Report provides companies’ disclosures of mandatory social expenditures disaggregated by cash and in-kind but it doesn’t disclose the nature of in-kind mandatory social expenditures nor the identity of any non-government beneficiaries. There is no evidence of the MSG’s attempts to reconcile mandatory social expenditures nor of any barriers to such a reconciliation. It is unclear from stakeholder consultations whether the mandatory social expenditures reported in the 2013-14 EITI Report are comprehensive.

6.2Quasi-fiscal expenditures

There is no evidence of the MSG’s discussions related to the existence or materiality of quasi-fiscal expenditures and the 2013-14 EITI Report does not refer to quasi-fiscal expenditures.

6.3Economic contribution

The 2013-14 EITI Report discloses, in absolute and relative terms, the extractive industries’ contribution to GDP and to exports as well as their absolute contribution to government revenues, the mining sector’s contribution to employment and the general location of extractives activities. However, the extractive industries’ relative share of total government revenues and employment in the oil and gas sector is not provided.

Outcomes and impact

7.1Public debate

The MSG has taken steps to ensure that the EITI Report is comprehensible, actively promoted and publicly accessible. Through the organisation of dissemination events and workshops, LEITI has ensured that the EITI has also contributed to public debate, particularly at the subnational level. Public debate has been generated by specific data from EITI Reports, such as information on extractive industry revenues and license allocations. However, there is little evidence that the EITI is providing a platform for discussions and debates about how the mining, oil and gas sectors are managed.

7.2Data accessibility

Not assessed

EITI Reports are accessible through the LEITI website and roadshows, while report summaries have been produced in the past. Machine-readable EITI data is available through the EITI international website, but is not actively disseminated by LEITI.

7.3Follow up on recommendations

While recommendations of EITI Reports are not consistently implemented, the MSG has regularly debated the recommendations – even if the pace of follow-up on EITI recommendations has slowed since 2014.

7.4Outcomes and impact of implementation

LEITI produces an annual activity report that assesses progress in achieving workplan objectives, some of the requirements of the EITI Standard and follow-up on past EITI recommendations, but the MSG does not appear to have used these reports to assess the impact of implementation. While the MSG has held discussions on the impact and outcomes of EITI implementation in Liberia, these have tended to remain ad hoc and informal.

Countries
Liberia