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Comments of the National Bank of Tajikistan on special audit
The special audit is made by the international audit company Ernst & Young according to the financial program of the Government of the Republic of Tajikistan. This audit company was selected by the National Bank of Tajikistan on the base of competitive bidding from international audit companies of high reputation.
The audit purpose consisted in definition of degree of reliability of the information reflected in the balance sheet of the National Bank of Tajikistan and recommending actions to improve management of assets and accounting.
The audit was made in September-November of 2008 and it has covered the activity of the National Bank of Tajikistan from 2004 to August of 2008. The results of audit made were officially submitted to the National Bank of Tajikistan after its full cost payment and it was given on April 8 in the web-site www.nbt.tj.
It is noticed in the audit report conclusion that there are some shortages in management of assets and decision making on loan attraction and extension to banking system. In particular, opinions of the members of the Board were not often taken into consideration at decision-making on allocation of credits to Joint-Stock Company Credit Invest.
Within the operating instructions the Chairman of the bank had opportunity to make the corresponding decision independently and without the account of opinions of members of the Board. Also collisions of interests were said to be not considered at decision-making that has served participation of interested party in decision-making.
In this connection and on the basis of suggestions of the audit company made audit of the National Bank of Tajikistan, amendments and supplements will be made to the existing Laws «On the National Bank of Tajikistan» and «On Bank and Banks Activity». At present the consideration of received suggestions is still in progress in the Majlisi Namoyandagon of Majlisi Oli of the Republic of Tajikistan and their adoption for the next months is expected. The amending acting Laws will allow organizing properly management of the National Bank of Tajikistan and providing a transparency and rights of all members of the Board as they provide inclusion of veterans of a banking, scientists and experts in banking to the Board of the National Bank of Tajikistan.
The audit also has inspected an order of use of the means directed on cotton sector and the arrangement of accounting in companies investing cotton-growing branch.
It became known that the National Bank of Tajikistan in 1997 – 2007 attracted certain funds from foreign countries for the financing of cotton sector, which have been extended as credit to such companies as HIMA, Tamer INB, firm Оlimi Karimzod, Khujand-Invest- Cotton and etc. These companies have given the main part of funds to farms involved and have used the rest for construction of factories and mills. Cotton growing farms for various reasons annually could not return a part of the debts therefore their outstanding debts sum for several years has grown and it made USD 589 million together with debts of intermediary firms as of December 31, 2009 from which more than 65 % of debts is due from the farms and 35 % from the investment companies.
There were revealed lacks in the system of accounting, calculations between companies, storage and representation of financial reports. The auditor company made audit of the National Bank of Tajikistan also notices in the report that due to shortage of time and incomplete coverage of existing operations checked by their work carried out it cannot draw the exact conclusion. The auditor company does not accuse separate persons in the report.
The economic situation of those years demanded attraction of certain funds for support of production branches and considering the given circumstance the National Bank of Tajikistan have attracted more than USD 2 billion for financing of cotton sector of economy. Though the given funds have been involved as if for cotton sector, but actually they have been used as well for financing of other branches. A part of these funds (about USD 400 million) have been directed by different ways on maintenance of the state and local budgets. For various reasons cotton growing farms being the basic users of loans could not return all sum. At present there are two programs implementing in the republic on settlement of debts of cotton growing farms for the sum of USD 30 million.
Also it is noticed in the audit report that the credits for the amount of 870 million somoni extended to farms initially have not been reflected in the balance of the bank. The given funds according to existing materials through Joint-Stock Company Credit–Invest and the above-named companies have been used for crediting of cotton growing farms.
Other shortages noted in the audit report mainly concern the order of accounting arrangement, correct reflection of operations in the balance of companies, order of cotton sale and pricing for machinery and combustible mixtures.
The International Monetary Fund, which insisted on making special audit, has positively assessed the activity of the Government of the Republic of Tajikistan and the National Bank of Tajikistan on results of the audit and has approved the Poverty Reduction and Growth Facility Program on April 21, current year within framework of which it will be issued USD 120 million for supporting the anti-recessionary program of the Government of Tajikistan.
The National Bank of Tajikistan with a view of management and accounting systems improvement has prepared the Actions plan, which is implementing. A part of given Actions plan, such as an interdiction of the activity not connected with functions of the National Bank of Tajikistan, supporting transparency of its management, internal audit system improvement are already implemented. The rest of requirements namely amending and supplementing acting laws, audit of balance sheet of the bank for 2008-2009, improvement of monetary policy and etc. are under consideration.
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