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No audit done on debts raised from 2008 to 2015

AG says Central Bank did not disclose transaction details:

No audit has been conducted on Rs.4.7 trillion government debts raised from year 2008 to 2015, the Presidential Commission probing the Treasury Bond issue was told.

The said Rs. 4.7 trillion debts have been raised through direct placements issued by the Central Bank of Sri Lanka, it was revealed as well. It was also observed that this Rs. 4.7 trillion worth transactions have taken place between 15 to 20 Primary Dealers and a few captive sources only.

The Commission questioned Auditor General Gamini Wijesinghe as to why an audit was not conducted for seven years on the Rs. 4.7 trillion government debts raised or the method with which such a large amount of money was raised.

The Auditor General said the Central Bank did not disclose information regarding these transactions. He also explained that the money raised through Treasury bond issuance does not go into Central Bank’s accounts. The Auditor General has attempted to audit the Central Bank debt management since 2004, but their secret principles limited the audits, AG Wijesinghe said.

AG Wijesinghe said legal limitations were another reason for not being able to conduct an audit on the Rs. 4.7 billion. However, it was pointed out the Attorney General has provided a solid ground on which the Central Bank could have divulge secret or market sensitive information to the Auditor General.

Legal Counsel Harsha Fernando pointed out to the Commission that, the Attorney General has sent a letter in 2004 to the Central Bank of Sri Lanka requesting to disclose necessary information to the Auditor General for auditing purposes.

The Commission asked, does that mean the Central Bank has refrained from giving information to the AG’s Department despite Attorney General’s order or whether it suggests that the AG’s Department has not requested for those information since 2004 up until 2016, for auditing purposes.

Meanwhile, it was also pointed out to the Commission that, of the Rs. 4.7 trillion worth direct placements, only a 0.99% has been issued on the market rate. Closer to 45% of these direct placements have been issued below the market rate and 36% higher than the market rate, it was also pointed out.

This information is included in a report prepared by Auditor General Gamini Wijesinghe responding to a request from former Finance Minister Ravi Karunanayake.

Legal Counsel Harsha Fernando led this evidence through the Auditor General H.M. Gamini Wijesinghe yesterday when he was testifying before the Commission for the third consecutive day.

Legal Counsel Harsha Fernando, the legal representative of the Deputy Governor P. Samarasiri pointed out to the Commission that, of the Rs. 4.7 trillion bonds, value of 19.24% bonds issued to the market are unaccounted.

He also pointed out that the Public Debt Department is only allowed to make changes to the market rate from 5 basis points higher or lower.

The Commission questioned Wijesinghe as to what kind of a methodology the AG’s Department followed when preparing the report on the direct placements issued from 2008 to 2015.

Wijesinghe said the AG’s Department requested the Central Bank to send information regarding the direct placements issued by the Central Bank and when the CBSL replied:“We cut and pasted the information submitted by the CBSL to our report as it is.”

The Commission asked Wijesinghe whether he means to say that the AG’s Department did not scrutinise Central Bank’s documents when preparing this report regarding direct placements, to which the AG said they did not.

Commissioner, Supreme Court Judge, Justice Prasanna Jayawardena questioned Wijesinghe on a previous statement he made regarding the direct placement method.

On a previous occasion, replying to a question posed by the Commission, Wijesinghe said he holds the current officials of the Central Bank for continuing with the auction method without changing back to the direct placement method.

Based on this statement, Justice Jayawardena asked Wijesinghe whether he stands by his opinion that the direct placement method should remain, even after it is evident that this same method has paved way for many discrepancies.

Wijesinghe said the issue lies not in the direct placement method but in its application and administration. If the direct placement method is properly executed, it will be the method which can be utilised for the best interest of the government, Wijesinghe said.

The Auditor General is to testify before the Commission today as well.

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