- Cabraal was appointed from July 1, 2006 to June 30, 2010 and was given an extension of six years from July 1, 2010 to June 30, 2016
- Shifting loyalties he joined President Mahinda Rajapaksa as chief economic adviser and contributed to the “Mahinda Chintana
In Forensic Audit, the term ‘forensic’ means; ‘pertaining to, connected with, or used in courts of law or public discussion and debate’; ‘application of scientific methods and techniques to the investigation’; ‘use of knowledge and techniques derived from various sciences, as ballisticsand medicine, in the investigation of crime’- Ref. various dictionaries.
A Bond Scam in Sri Lanka is no longer a criminal act; the law was amended by yahapalanists to bring the legislation under Civil Procedure Code, because they loved their cronies, kith and kin more than the state coffers.
Diyawanna ‘authorities’ on Forensic Audit and Coronavirus are having field days. They who gave direct instructions to Public officials in the past, are now summoning media briefings to air their views on areas absolutely beyond their depths, as the former ‘your obedient servants’ now desist phone conversations with political masters. Former Governor of the Central Bank, Ajith Nivard Cabraal challenges the authorities to handover the investigations on alleged Bond Scams to the CID. Ravi Karunanayake, the former Minister of Finance in Yahapalanaya government claims the FA has absolved him, even blamed the authorities for accusing him on falls or trumped up charges. The infamous Central Bank of Sri Lanka [CBSL] Treasury Bond issuance saga and the latest revelations on it by the Forensic Audit report covering the 2005 to 2014 period under Rajapaksa administration [Ajith Nivard Cabraal was the Governor], about a loss of Rs 10.4 billion to the Bank. The FAs were carried out pursuant to the proposal of the PCoI to inquire in to the issuance of Treasury Bonds during January 1, 2002 to February 28, 2015 by the Public Dept Department of the CBSL.
"The cost of forensic audits was approximately Rs.300 million. The contract was permitted by the Cabinet of Ministers on a proposal presented by Mangala Samaraweera, Minister of Finance"
A ministerial tender board ratified CBSL selection of KPMG India and BDO India LLP, leading international providers of financial services, to carry out part of the forensic audit on the Treasury Bonds issuance as recommended by the PCI into the CBSL. It was revealed, soon after the appointment, that KPMG India sought more funds to carry out the audit in lieu of the many recorded conversations that have to be written down by the auditors and the need for officers with language skills in the company. Therefore, the auditors would like to outsource the transcribing of the conversations to another party. CBSL Governor Dr. Indrajit Coomaraswamy once told a newspaper that the CBSL had concluded the process of selecting five forensic audits and out of them, one audit was handed over to KPMG India. The Governor explained that the audit firm would have to ‘decode’ and transcribe millions of sound tracks before auditing them.
‘There were in total five audits where the procurement has been done and one of them was being carried out by KPMG India,” he has said. The cost of forensic audits was approximately Rs.300 million. The contract was permitted by the Cabinet of Ministers on a proposal presented by Mangala Samaraweera, Minister of Finance.
FLAWED Or Half-Baked?
The auditors found that CBSL has invested Rs.500 million in Srilankan Airlines shares, an asset that has been reduced to a book balance of Rs 100/-. The terms of reference says, Cover the period from 2002 to 2016, however, the auditors have been deprived of the facility of studying the records pertaining to the first three years from 2002 to 2005, period covering Ranil Wickremesinghe’s Premiership; the report does not carry any explanation or reasons for this lapse. The study sheds light on some irregularities in EPF interest operations. The very heavy and technical nature of the study needed more specific information to prevent misconstructions. The report wrongfully interprets and blames the Bank for violating the Establishment code of 1985 [EC]—they had little knowledge that the CBSL is exempted from the EC, and governed under a special, bank disciplinary code. The audit only calculates the losses, ignoring the profits made during the period in question; this would naturally make them arrive at wrong conclusions. Prices fluctuate daily, hourly, in the stock markets, preventing an investigator from assuming a single price leading to inaccurate conclusions. Out of the total direct placements, 94.4% have been with captive funds [NSB, EPF, ETF, BC and PB] and only the balance 4.5% was with private Primary Dealers[PD], meaning quite a large slice of the ‘loss’ by CBSL subscribe to gains by state banks and state funds owned by people. No PD during this period made exhorbitant profits like in the 2015/16 period.
"The report wrongfully interprets and blames the Bank for violating the Establishment code of 1985 [EC]—they had little knowledge that the CBSL is exempted from the EC, and governed under a special, bank disciplinary code"
India Ban KPMG Affiliate
India sought to ban KPMG affiliate BSR and Associates for five years, alleging lapses in their audits of Infrastructure Leasing and Financial Services, which the Indian government took control of in 2019. India’s ministry of corporate affairs told a law tribunal that the company “miserably failed” to perform their duties as auditors for IL and FS Financial Services. Confirming the above, Business Today reported in June 2019:India is pushing for a five-year ban on Deloitte and KPMG over allegations the firms helped conceal bad loans at Infrastructure Leasing and Financial Services, a major infrastructure and finance group whose default last year triggered a credit crisis. …India’s Ministry of Corporate Affairs filed the petition against Deloitte and KPMG affiliate BSR and Associates at the National Company Law Tribunal. A ban, under Section 140 of the Companies Act, that would bar the companies from auditing in India for five years.”
However, the CB audit was awarded to them prior to the ban.
“The method used to calculate losses in the pre-2015 and post-2015 eras by forensic auditors is flawed.” -Dr.W A Wijewardena, former Deputy Governor of CBSL.While former Deputy Governor Dr. Wijewardena opined his view, the Former Governor of CBSL, Ajith Nivard Cabraal [July 1, 2006 – January 9, 2015] issued a statement in response to Audit report tabled in Parliament stating:
“In 2015, I went before the DEW Gunasekera COPE Committee and provided details about my relatives in the Banking Sector. I had also provided a clear explanation about my relatives in the banking sector, through a media statement, in 2007, and it was carried in newspapers on August 12, 2017. Hence, there was no need for Rs.300 million “Forensic Audit” to reveal this.” 12th governor in the CBSL’s 69-year history, AjithNiward Cabraal was appointed from July 1, 2006 to 30 June, 2010 and was given an extension of six years from July 1, 2010 to June 30, 2016. He also served as chairman of the monetary board which is responsible for setting monetary policy- A chartered accountant, Cabraal after a short stint with the UNP; entered politics contesting the Western Provincial Council elections in 1999 as a member of the UNP and was a council member till 2004. Shifting loyalties he joined President Mahinda Rajapaksa as chief economic adviser and contributed to the “Mahinda Chintana.”
"The infamous Central Bank Treasury Bond issuance saga and the latest revelations on it by the Forensic Audit report covering the 2005 to 2014 period under MR regime [Ajith Nivard Cabraal was the Governor], about a loss of Rs 10.4 bn to the Bank "
The Forensic Audit reports on the Bond Scam submitted to Parliament last week says that there was no evidence to establish any collusion between former Governor Arjuna Mahendran and Arjun Aloysius, Head of Perpetual Treasuries Ltd; and that the documentary and digital evidences as well as number of voice recordings did not suggest that Mahendran could be directly implicated in sharing insider information with Aloysius. Mahendran, who is a Singaporean, is wanted by the Criminal Investigation Department for his association with the scam.
Several important matters have been unearthed by the Auditors; but serious flaws in the methodology adopted have caused concerns as per knowledgeable men in the field: the use of share prices which are not in existence, and prices assumed based on unrealistic data, they say, cannot stand in a court of law. [a violation of the defined features of Forensic audit]. Experts opine that, instead of submitting it to the Parliament, the audit report should have been referred to a team of professionals for review and comment. Have they added another 300 million to the actual losses already incurred?