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Auditor General Rejects Fresh BoU Audit On Shs478bn Injected Into Crane Bank

The Auditor General (AG) has rejected a request from Deputy Governor Bank of Uganda, Dr. Louis Kasekende to carry a fresh inquest on the Shs478 billion the Central Bank is reported to have injected into Crane Bank after the takeover.

Responding to Kasekende’s letter dated March 11, 2019 requesting the AG to carryout out a fresh audit, the AG, John Muwanga (in featured photo) in his letter dated April 4, 2019 to Kasekende said he couldn’t carry out the verification because the report on the same subject was already with the Speaker.

Kasekende

“Regrettably, I am unable to undertake the verification since the report has been issued to the Rt. Hon. Speaker of Parliament on February 18, 2018. Any additional verification on the already issued report can only be undertaken with the authority of parliament. We will keep the documents and wait for further communication from COSASE,” Muwanga’s letter reads.

It is also  copied to the Speaker, Rebecca Kadaga and the chairperson, Committee on Commissions, Statutory Authorities and State Enterprises (COSASE).

Kasekende had requested the AG to undertake a verification of documents that had not been availed during the audit.
During the probe, Dr. Kasekende said when they put CBL in receivership, they acted as lender on side and borrower on the other side, something the Committee Chairman Abdu Katuntu said created controversy in terms of accountability and transparency.

The MPs argued that BoU officials should have used a private or official receiver to manage CBL instead of doing it themselves. Interestingly BoU wants CBL shareholders to refund the Shs478 billion yet they did not enter into any contract with CBL’s shareholders.

CBL shareholders led by Sudhir Ruparelia told the probe that they would not pay that money since they don’t know where it came from, who received and how it was used. BoU officials have no documentation about the use of the money. CBL needed Shs157 billion to stay afloat even as BoU spent Shs478 billion on its liquidation.

BoU on the other hand has not presented any accountability of the money it says it spent as liquidity support to CBL as well as other service costs related to its liquidation.
The probe of BoU by the MPs was a result of the Auditor General John Muwanga’s report on commercial banks which faulted BoU for the closure of banks without following proper guidelines. Some of the other banks closed include; Teefe Trust Bank, Global Trust Bank Uganda, International Credit Bank, Cooperative Bank and Greenland Bank.

AG did a special Audit Report on the Shs478 Billion Injected into Crane Bank Limited by Bank of Uganda and it pinned the Central Bank officials for failure to account for Shs478 billion it injected in Crane Bank Limited (CBL).
The Auditor General carried out the audit as the ordered by parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) on December 20, 2018.
The Bank of Uganda officials during their exit meeting with COSASE failed to account for Shs478 billion they say they spent as liquidity support and other intervention costs on CBL receivership between October 20, 2016 and January 25, 2017.

Muwanga in the report says out of Shs478 billion injected into CBL, a sum of Shs157.9 billion had been recovered from Dfcu Bank and CBL Non-Performing assets leaving an outstanding balance of Shs320.8 billion at the time of writing the report.

CBL at the time it was sold to Dfcu Bank at Shs200 billion only needed about Shs157 billion to remain afloat.

However, Muwanga notes in the report that much as BoU has a financial crisis management plan which provides for decision-making in the event of a systemic shock to the banking sector, the plan does not provide the process of injection of liquidity support to financial institutions during the statutory management period like it happened with CBL. MPs told BoU Governor Emmanuel Tumusiime-Mutebile and his staff who were appearing before COSASE to ensure that the loophole is closed.

According Muwanga in his August 27, 2018 report on seven defunct banks, BoU presented about Shs466.6 billion as money injected in CBL as liquidity support but in his scrutiny of documents, he established that about Shs459.50 billion was spent for this purpose, leading to a variance of Shs7.1billion.

Dr. Kasekende told COSASE that the money was spent as; telegraphic transfers (TTs) and LC payments, Real Time Gross Settlement (RTGS), clearing and cash requirement requests.
An extra Shs12.2 billion was also spent on service providers including MMAKS Advocates who pocketed about Shs4.2 billion. The latest report on Shs478 billion spent on CBL did not however audit the Shs12 billion paid by BoU to service providers, reasoning that it was extensively dealt with by the MPs.

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