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Commission won’t take Auditor General’s Treasury bond loss calculations as ‘gospel truth’

The Auditor General’s method of calculation will not be taken ‘as the gospel’ when deciding on a method to calculate a possible loss incurred at the Treasury bond auction of February 27 2015, Commissioner, Justice Prasanna Jayawardena said yesterday.

“Just because the Auditor General has proposed a method to calculate the possible loss incurred by this questioned transaction, we will not take it as the gospel,” Commissioner Justice Jayawardena pointed out. “Nor shall we take what the Monetary Board has to say about it ‘as the gospel’ either,” Justice Jayawardena said.

“We will have to figure out a way to decide on a method and a formula to calculate the possible losses,” Justice Jayawardena pointed out.

Jayawardena said so when attention was drawn to a Monetary Board paper dated March 3 2017, where in which the Monetary Board notes that ‘the assumptions made in the AG’s report seems to be fair as the Public Debt Department practice was to issue Treasury Bonds through direct placements between weighted average yield rate and the cut off yield rate prior to February 21, 2015.’ Some other board papers relating to the same subject were produced to the Commission as well.

Legal Counsel Chanaka de Silva pointed out to the Commission that these documents are provided to give credence to the formulation used by the Auditor General in his loss calculation incorporated in his audit report on the matter.

The Commission needs to look into all the documents and whatever the evidences that may be of assistance to us when deciding upon an accurate method of calculation, Commission Chairman Supreme Court Judge, Justice K.T. Chitrasiri pointed out.

“The question that we have to take into account is, AG Wijesinghe has adopted a certain method of calculation.

It is for us to decide whether that method was reasonable or not. In deciding that, the view of the Central Bank is important and is of assistance to us.” Justice Jayawardena also said.

Meanwhile, counsel Harsha Fernando produced the minutes of the same board papers where another Monetary Board member has expressed thoughts regarding the above content noted.

The evidence was led through Auditor General Gamini Wijesinghe, who was testifying before the Presidential Commission that inquires into the Treasury bond issue for the seventh day.

Commissioner Jayawardena also questioned the witness on a letter prepared by the World Bank regarding the questioned Treasury bond transaction.

The letter was received by the Central Bank Sri Lanka. Asked if he was aware of this letter, AG Wijesinghe said he was.Commissioner Jayawardena asked whether the said letter states that ‘there is no specific method to calculate losses incurred by transactions of this nature’. AG Wijesinghe confirmed so.

He also answered in affirmative when asked if the letter also states that ‘there is no specific formula to calculate losses incurred by transactions of this nature’ as well.

The letter prepared by the World Bank also states that when calculating a loss a ‘counter factual’ should be taken into consideration, it was noted. Asked if he took the direct placement rate as the ‘counter factual’, AG Wijesinghe said it was so.