BoU audit: Key documents on closed banks go missing

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By YASIIN MUGERWA

Kampala. New details from a confidential special audit report into closed banks have revealed what some lawmakers called “games” by officials at the Central Bank after it emerged that some of the vital documents disappeared under unclear circumstances.
In his August report to Parliament, Auditor General John Muwanga said key information/ documents relevant to closure of the defunct banks were not availed, constraining the specific objectives of the special audit into BoU dealings.
Mr Muwanga has also captured these frustrations among the limitations to his findings.
Although for some closed banks like Teefe Trust Bank which was closed in 1993, BoU failed to find the documents and instead promised to keep searching in the achieves,
Mr Muwanga said: “It is possible that documents and information [on the closed banks] exist which were not made available to me or which I was unable to locate,” the Auditor General’s report reads.

Findings
Mr Muwanga has queried BoU officials on missing documents for the closure of Teefe Bank (1993), International Limited (1998), Greenland Bank (1999), The Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Limited to dfcu (2016).
On the controversial sale of Crane Bank , AG found that key information on the recovery of non-performing loans of Crane Bank was not given to him during the audit yet this information was critical in establishing whether proper inventory of the assets and liabilities was undertaken at closure in line with Section 89 (3) of Financial Institutions Act 2004 and Section 32 (3) of the Financial Institutions Statute, 1993.
According to the Purchase and Assumption agreement signed between BoU and dfcu on January 25 2017, clause 1.1.1(ix) provides that all loans and advances of Crane Bank Limited be transferred to dfcu except the insider loans referred to in schedule 2 of the P&A. At the time of P&A, the non¬ performing loans (bad book) was Shs570.3b out of the gross loans of Shs1.1 trillion.
Although the Crane Bank shareholders say BoU illegally transferred Shs570.3b to dfcu, the AG has revealed that the bad book was transferred to dfcu to provide a resource for repayment of the assumed liability of Shs200b and bridge the shareholder’s deficit of Shs439.72b at the date of takeover.
However, since BoU officials did not provide the key documents, the Auditor General said he failed to establish how the consideration of Shs200b was derived from the bad book of Shs570.38b.
The dfcu bank has so far paid Shs98.3b of the Shs200b liability. The AG observed that the valuations of the assets and liabilities of CBL was done by dfcu. AG did not find any valuation report done by BoU. Mr Muwanga has questioned this transaction in his report to parliament.
In what has been interpreted by some legislators on accountability committees as “a veiled attempt by mafias to frustrate the work of the Auditor General”, Mr Muwanga indicated in his report to Parliament that Mr Mutebile’s team did not give him the schedule of loans and the corresponding collateral transferred to dfcu bank. As such Mr Muwanga said: “I was unable to establish the values and categories of loans transferred (performing loans, non-performing loans and fully provisioned/written off loans (bad book).”
Commenting on missing documents the Mr Mathias Mpuuga (Masaka Municipality), a members of the Public Accounts Committee said: “You get a feeling that perhaps the current AG is an outsider. The mafia that camped at BoU cannot trust him with information. It could also be part of the syndicate to frustrate the probe, aware of the polity that played prior to and after the closure of some banks. We are talking about illegal bank closures and assets stripping, aware of the cabal that has been into the business of gathering assets at all costs.”
The audit also found that the Statutory Manager appointed by BoU after they took over the management of Crane Bank in 2016 prepared CBL annual report and financial statements for the year ended December 31, 2016 but these were not signed and the same manager did not provide financial statements for the period January 1, 2017 to January 25, 2017 (P&A completion date).

Asset movement schedules
“I was therefore unable to ascertain the financial performance of CSL during statutory management and its financial position at January 25, 2017. As such, I was also unable to establish the details and values of assets and liabilities transferred to dfcu,” the AG reports adds.
Although asset movement schedules for Greenland Bank, ICB and Cooperative Bank indicating details of assets at closure, assets sold, selling price, period sale, unsold assets, performing and non-performing loans from time of closure to the year 2001 when the liquidation role was outsourced were availed, for the period starting 2002 when the liquidation role was directly performed by BoU, no asset movement schedules were availed. “Therefore, I could not adequately verify the movement of assets of the 3 banks from Shs117.6b at closure to Shs19.7b as at June30, 2016,” Mr Muwanga’s report reads.
On January 30, 2018 and April 10 2018, Mr Muwanga requested for documentation relating to all closed banks specifically the inventory report, loan schedules, customer deposit schedules, statement of affairs and any reports supporting assets and liabilities taken over by BOU.
However, he says BoU officials didn’t avail him with sufficient documentation relating to Teefe Trust Bank to enable him fulfil the specific audit objectives.
Under Section 37 of the National Audit Act, 2008, a person commits an offence who without any lawful justification or excuse, refuses or fails to give to the Auditor General or any person authorised by the Auditor General, access to any property books, records, returns or other documents, information.

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