CBSL debt management not audited for years: AG

The Auditor General’s Department told the Commission set up to inquire into the alleged Bond Scam yesterday (14)that not a single audit relating to domestic debt management at Central Bank of Sri Lanka (CBSL) in relation to Government Securities had been conducted over the years.

Non-disclosure of data relating to Government Securities by the Public Debt Department of CBSL was the cause for such failure, Auditor General, Gamini Wijesinghe alleged.

When questioned by the Commission, Auditor General Wijesinghe explained that the Auditor General’s Department had originally attempted to audit the CBSL in 2004, but there was a conflict with CBSL officials regarding the disclosure of market transactions details on the basis of a ‘Secrecy’ clause.

After the first attempt to audit CBSL procedures, the Finance Ministry had sought the opinion of the Attorney General and subsequently, the Attorney General issuing a clarification the same year (2004) had prevented the audit from taking place quoting the secrecy clause as the reason for it, Mr. Gamini Wijesinghe said.

However, during cross examination by Counsel Harsha Fernando, who appeared for the interests of chairman of the Tender Board, it was discovered that the Attorney General’s clarification (in 2004) on the issue contained no such prevention to obtain certain secret information from the CBSL in the act of preparing an Audit Report by the Auditor General.

Consequently, SC Justice Prasanna Jayawardena questioned the witness as to why the Auditor General’s Department had failed to conduct an audit over the CBSL proceedings since 2004, as no legal barrier existed to stop them from doing so.

In reply, Mr. Wijesinghe was of the view that the Auditor General’s Department had continuously tried to obtain details from the CBSL even after 2004, but had come across much resistance due to nevertheless failed and faced many impediments due to the reluctance of the CBSL officials to cooperate.

However, the Auditor General also told the Commission that he needs more time to confirm the views expressed by him in this regard.

Despite the initial reluctance of CBSL officials the information relating to market transactions relating to the period February, 2015 to March, 2016 were handed over to the Auditor General by the CBSL in order for them to prepare an Audit Report on the controversial bond issuances during that period.

During the proceedings it was also revealed that Government’s debt, borrowed using Direct Placement Method was approximately Rs. 4.7 trillion in the last eight years.

Meanwhile, during the cross examination conducted by Nihal Fernando PC, who appeared for the Perpetual Treasuries, Mr. Wijesinghe said officials of the Monetary Board and officials of the Public Debt Department should be held responsible for failing to issue treasury bonds at least cost to the State, because without replacing a alternation method, the exclusion Direct Placement Method had incurred huge losses to the government.

During further cross examination on the EPF’s participation in the bond auction that took place in February 27, 2015, it was revealed, that despite sufficient fund being available to it the capability of the EPF Department in investing long term bonds (30-year-bonds) at the auction was questionable.

It was also explained during cross-examination with regards to the March 29, 2016 bond auction, that the value of the bids offered by the CBSL initially at the auction was Rs. 40 billion but it had unusually accepted Rs. 77.732 billion in bids exceeding the initial offering by Rs.37.732 billion, of which Perpetual Treasuries Ltd (PTL) had obtained 60 %. It was noted that PTL had obtained bonds worth Rs. 26.41 billion out of the total issuance of bonds worth Rs. 77.732 billion at the auction.

President’s Counsel Nihal Fernando concluding his cross examination suggested that the Auditor General’s report was prepared with enormous errors and thereby it had affected the financial market, foreign investors and his client Perpetual Treasuries Ltd.

Refuting these views, the Auditor General emphasized that his report was prepared responsibly and accurately and therefore he would not withdraw a single word from the Special Audit Report submitted to Parliament on the controversial bond issue.

The inquiry of the Commission appointed by the President to inquire into the Treasury Bond issue comprising Supreme Court Judges K. T. Chitrasiri, Prasanna Jayawardena and former Deputy Auditor General Kandasamy Velupillai will resume sittings today (15). (Shehan Chamika Silva)