Premier Fails to Account for Forex Transactions

CAMELSA, a firm of Chartered Accountants — which unearthed fraud which could have cost Premier Finance Group the holding company of Premier Bank Corporation (PBC) US$369 000 — said there was no evidence of a reconciliation on the total foreign currency received as commission (5%) on the Reserve Bank of Zimbabwe (RBZ) financing facility agreement.

Camelsa said reconciliation should be made on the 5% foreign currency commission income from the Reserve Bank financing facility agreement to ensure all commission due has been received.

The PBC was last year contracted by the Reserve Bank to mobilise foreign currency from tobacco and cotton merchants on its behalf and to receive a commission of 5%.

PBC mobilised and forwarded a cumulative amount of about US$ 5,2 million to the Reserve Bank under this scheme.

However, since the 5% foreign currency commission income was recorded in the system in local currency there were no reconciliations of foreign currency, actually received. Camelsa was unable to determine whether the bank received its commission in full or not.

“In the absence of reconciliations, all we can tell with certainty is the total foreign currency raised for the Reserve Bank and not whether the commission recognised is consistent with that amount,” Camelsa said.

“A reconciliation of the total commission received in foreign currency terms could not be availed for audit verification,” the audit said.

The audit said the risk created by this development could lead to;

l Failure by the bank to fully account for all commission due to it on the Reserve Bank facility transactions;
l Financial loss due to fraud and errors going undetected;

l Failure to support claims with documentary evidence in the event of disputes between the bank and the RBZ being referred for compulsory arbitration and;

l A repeat of failure to recover commission as experienced in the previous year on transactions of a similar nature.

The audit recommended that management should ensure that there were reconciliations of foreign currency commission received and recognised by the bank and the 5% commission due in terms of the facility agreement.

“The finance department should ensure reconciliations of the foreign currency that should have been received by the bank are done from the time this facility agreement was entered into,” the auditors said.

The audit said there were inadequate follow-up procedures on outstanding foreign currency receipts.
“There should be formal follow-up procedures to ensure that foreign currency receipts owing by customers are fully accounted for,” the audit said.

“Our review of the issues raised in the June half-year audit revealed minimal progress had been made towards recovering foreign currency due to the bank from several clients,” Camelsa said.

Representations from PBC’s risk manager indicated significant amounts of foreign currency were still outstanding. 

The audit said the work subsequently performed by the internal audit department refutes the notion of coupons having been received from Twinleigh in lieu of foreign currency owing by them.

“There is no evidence that files have been opened on any of the cases or that formal correspondence has been entered into between the bank and the respective clients. The recoverability of these receipts is increasingly doubtful as time passes,” said the audit.

The audit said this created a risk of financial loss if the amounts prove to be irrecoverable.

Camelsa said this could also result in penalties being imposed for non-compliance with Reserve Bank directives and guidelines.

“Management should put in place sufficient follow-up procedures to ensure the (PBC) bank gets full restitution when it is owed by clients.

“When the follow-up procedures fail to provide recourse, outstanding cases should be handed over by the financial markets department to the legal department for litigation,” the audit said.

Businessdigest understands that follow up letters have since been sent to clients to invoke settlement and the matter has also been handed over to the legal department.

The audit said foreign currency loans were being advanced to clients without due regard to their current operating environment.

The bank issued foreign currency loans to two companies, namely, Turnall Holdings and Gutsai Stores.

“None of these companies repaid their loans on maturity. In the case of Gutsai the full amount was subsequently paid.

Turnall still had not repaid the loan at the time of audit. The reason given by Turnall Holdings in their letter requesting roll over dated January 16, was that “sales have not gone according to the plan due to the slowdown in activities of the construction industry”, the audit said.

BY PAUL NYAKAZEYA

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