Leaked reports to Libya’s interim government show how assets may have gone astray

By Alex Varley-Winter | 27 March 2013

“We have not received formal confirmation of receipt of these funds”
– PwC report

Libya’s government is unable to account for unfrozen assets of $1 billion, according to documents leaked to Exaro. The reports show that the funds may have gone missing.

The money was due to be paid to public-sector workers in Libya. In addition, the documents reveal that at least $3.5 million failed to reach victims of the conflict.

Two financial reports, one  marked “confidential” by PwC and another prepared by Adam Smith International (ASI), raise transparency issues surrounding how Libya’s interim government, the National Transitional Council (NTC), has managed huge sums in unfrozen assets.

Both documents concern the running of the interim government’s Temporary Finance Mechanism (TFM), which engaged ASI and PwC.

The TFM was founded in May 2011 to give the interim government access to foreign currencies while assets abroad remained frozen. The funds were intended to pay for civil servants’ salaries, fuel and support to victims of the conflict, including flying Libyans abroad for medical treatment.

The reports cover the period from TFM’s foundation to its dissolution on March 30, 2012. In that time, the TFM managed $1.67 billion of loans, unfrozen assets and donations from countries, including America, Canada and Germany. Of this, $1.4 billion was made available to the Libya’s Ministry of Finance and Oil (MFO).

Both leaked reports say that $1 billion was unaccounted for by the NTC, with no explanation to either PwC or ASI on whether the money was used for its stated purposes, or even received by the MFO.

“Transfers have been made to the Central Bank of Libya by SWIFT and certified cheque, however we have not received formal confirmation of receipt of these funds,” PwC’s report states.

It refers to $1 billion transferred to the MFO to pay public-sector salaries, and $10 million for health care.

According to PwC, the money came from unfrozen Libyan assets held by Canada. It was funnelled into Libya via the TFM, and included $56 million for 103 “medical entities”, $366 million for 25 “education entities,” $4 million for six “media entities” and $159 million for 15 “police and judiciary entities”.

PwC’s report of March 2012 said: “We have confirmed the transfers have been made to the Central Bank of Libya as set out in the proposal documents.”

However, it added, there was no formal confirmation of the transfers to the various government entities.

On the $1 billion transfer, ASI said in its report of Spring last year: “As part of the transaction, the MFO agreed to provide documentary evidence of the transfer of funds through the various Treasury accounts, as well as a database of employees paid.”

But it had “not seen any evidence of the commitment being fulfilled.”

PwC’s audit said that the MFO promised in a letter to account for its spending. The audit said: “In this letter, the Ministry of Finance and Oil agreed to take full responsibility for the distribution of the $1 billion to the various government entities.

“According to the letter, the Ministry of Finance and Oil also undertook to provide evidence of the transfer of the various government entities to the State Audit Bureau.”

“As at the date of this report, we understand that this information has not been provided.”

The PwC report also revealed that, of $5.2 million set aside to compensate victims of Libya’s civil war, $3.5 million failed to reach victims. This was blamed on the country’s post-conflict banking crisis.

It said: “Many cheques have not been deposited, as many beneficiaries – in particular, the wives of the wounded, killed or missing – do not have bank accounts, and many banks are not currently setting up new accounts because of the difficulties in the Libyan banking system.”

Peter Young, director of ASI, told Exaro that the use of the money by the MFO was not officially documented despite “constant” contact. He explained: “In Libya, you have a combination of political upheaval, a poor infrastructure and very poor systems inherited from Muammar Gaddafi’s regime that were not designed to focus on transparency or efficiency.”

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