The Financial Reporting Council Report that got Sanusi suspended

President Jonathan's decision to suspend CBN
Governor, Sanusi Lamido Sanusi yesterday Feb.
20th was based on a report of the Financial
Reporting Council of Nigeria, FRCR dated June 7,
2013. In the report, FRCR ripped apart the 2012
audited financial statement of CBN and exposed
what it termed as 'fraud', 'clear display of
incompetence',and 'excesses and wastefulness of
Sanusi and the CBN.'
The 13-page report claimed a whooping N1.257
billion was spent for 'lunch for policemen'. There
were also bogus payments to airlines to distribute
currency nationwide. The FRCR also claimed CBN
has held an account with a balance of N1.423b
for an unknown customer since 2008. The report
had recommended the sack of Sanusi and his
deputy.

Culled from Punch

The report read: The particulars of the infractions
against Sanusi are:
Persistent refusal and/or negligence to comply
with the Public Procurement Act in the
procurement practices of the Central Bank of
Nigeria.
(A) By virtue of Section 15 (1)(a) of the Public
Procurement Act, the provisions of the Act are
expected to comply to 'all procurement of goods,
works and services carried out by the Federal
Government of Nigeria and all procurement
entities.' This definition clearly includes the
Central Bank of Nigeria.
(B) It is however regrettable that the Central Bank
of Nigeria, under his leadership, has refused and/
or neglected to comply with the provisions of the
Public Procurement Act (PPA). You will recall that
one of the primary reasons for the enactment of
the PPA was the need to promote transparency,
competitiveness, cost of effectiveness and
professionalism in the public sector procurement
system.
(C) Available information indicates that the
Central Bank has over the years engaged in
procurement of goods, works and services worth
billions of Naira each year without complying with
the express provisions of the PPA.
(D) By deliberately refusing to be bound by the
provisions of the Act, the CBN has not only
decided to act in an unlawful manner, but has
also persisted in promoting a governance regime
characterised by financial recklessness, waste and
impunity, as demonstrated by the contents of its
2012 Financial Statements.
Unlawful expenditure by the Central Bank of
Nigeria on 'Intervention Projects' across the
country
(A) the unacceptable level of financial
recklessness displayed by the leadership of the
Central Bank of Nigeria is typified by the
execution of 'Intervention Projects' across the
country. From available information, the bank has
either executed or is currently executing about
63 such projects across the country and has
committed over N163billion on them.
(B) it is inexcusable and patently unlawful for any
agency of government to deploy huge sums of
money as the CBN has done in this case, without
appropriation and outside CBN's statutory
mandate. It is trite that the expenditure of public
funds by any organ of government must be
based on clear legal mandates, prudent costing
and overriding national interest.
Financial infractions and acts of financial
recklessness committed by the Central Bank as
reflected in its audited financial statements of
2012
(A) pursuant to Section 50 of the CBN Act 2007,
a copy of the audited financial statements of the
CBN for the year ended 31st December 2012 was
sent to Mr. President. Based on the issues raised
in the financial statement, a reaction was
requested from you to enable a proper
appreciation of the nation's economic outlook.
(B) the response to this query was further
referred to the Financial Reporting Council of
Nigeria. The review by the council, rather than
allay the fears of government, further confirmed
concern bout the untidy manner in which you
have generally conducted the operations of the
CBN.
Some of the salient observations arising from the
review are;
(A) in a most ironical manner, it has become
obvious that the CBN is not able to prepare its
financial statements using applicable
International Financial Reporting Standards (IFFS)
whereas Deposit Money Banks that the CBN is
supervising have complied with this national
requirement since 2012.
Undoubtedly, this laxity on the part of our apex
bank, apart from calling to question its capacity
for proper corporate governance, is capable of
sending wrong signals to both domestic and
international investors on the state of the Nigerian
economy.
(B) the provisions of the Memorandum of
Understanding (MOU) signed by the CBN and
other Deposit Money Banks on Banking Resolution
Sinking Fund have been breached in a material
manner. For example, a Board of Trustees (BOT)
to manage the Fund has not been constituted
since 2010 when it was established. The CBN has
however continued to utilise the Fund for certain
operations without approval of the said BOT.
(C) contrary to section 34 (b) of the CBN Act
2007 which provides that the CBN shall not,
except as provided in Section 31 of the Act, inter
alia, purchase the shares of any corporation of
company, unless an entity set up by the approval
or authority of the Federal Government,m CBN in
2010, acquired 7% shares of International Islamic
Management Corporation of Malaysia to the tune
of N0.743 billion. This transaction was neither
brought to Mr. President's attention nor was a
board approval obtained before it was entered
into.
(D) the CBN has failed or refused to implement
the provisions of the Personal Income Tax
(Amendment) Act 2007. Accordingly the Pay-As-
You-Earn (PAYE) deductions of its staff are still
being computed in accordance with the defunct
Personal Income Tax Act 2004, thus effectively
assisting its staff to evade tax despite the
generous wage package in the CBN, relative to
other sectors of the economy.
(E) the CBN had an additional brought forward to
General Reserve Fund of N16.031bn in 2012 but
proceeded on a boy age of indefensible expenses
in 2012 characterised by inexplicable increases in
some heads of expenditure during the year.
Examples include:
1. The bank spent N3.086bn on "promotional
activities" in 2012 (up from N1.084bn in 2011).
The bank spent this sum even when it is not in
competition with any other institution in Nigeria;
2. The CBN claimed to have expended N20.202bn
on 'Legal and Professional Fees' in 2011 beyond
all reasonable standards of prudence and
accountability;
3. Between expenses on 'Private Guards' and
'Lunch for Policemen', the CBN claimed to have
spent N1.257 billion in 2012;
4. While Section 6(3)(c) of the CBN Act 2007
provides that the board of the CBN is to make
recommendations to Mr. President on the rate of
renumeration to Auditors, the bank has
consistently observed this provision in breach and
even went to the extent of changing one of the
Joint External Auditors without notifying the office
of the President.
5. In the explanations offered by the CBN
pursuant to presidential directives, it offered a
breakdown of 'Currency Issue Expenses' for 2011
and 2012. Interestingly, it claimed to have paid
N38.233bn to the Nigerian Security Printing and
Minting. Company Limited (NSPMC) in 2011 for
'Printing of Banknotes.' Paradoxically however, in
the same 2011, NSPMC reported a total turnover
of N29.370bn for all its transactions with all
clients (including the CBN).
6. It is significant to note that the external audit
revealed balances of sundry foreign currencies
without physical stock of foreign currencies in the
CBN Head Office.
Questionable write-off of N40bn loans of a bank
The above issues are only a few of the infractions
highlighted by the review and which point to the
gross incompetence and recklessness which
characterised the operations of the CBN in the
period under review.
However, the CBN also claimed that it paid Air
Charter, such as payments to Emirate Airline
(N0.511bn), Wing Airline (N0.425bn) and
Associated Airline (N1.025bn) to distribute
currency by air nationwide. Emirate Airline does
not fly local charter in Nigeria, Wing Airline is not
registered with Nigeria Civil Aviation Authority and
Associated Airline does not have a billion turnover
for 2011 because upon enquiry, the management
claimed that they have no financial statements
and have not had any significant operations for
the past two years that will warrant preparation of
financial statements.
The breakdown also include "Currency Issue
Expenses" of N1.158bn and Sundry Currency
charges of N1.678bn under "Currency Issue
Expenses." As they are in 2011 so are similar
expenses in 2012. These are difficult to
understand.
Other areas of fraudulent activities include
1. Facility Management N7.034bn in 2012
(N5.751bn in 2011.
2. Foreign Bank accounts that have been closed
offshore were still operational in the General
Ledger for over six months after they have been
confirmed as closed accounts by the offshore
banks.
3. The "Know Your Customer" policy is not
properly followed by the CBN to the extent that
the CBN has unknown customer with account
balance of N1.423bn since 2008. The CBN claim
that it is taking steps to obtain the required
details regarding the address of the customer.
Wastefulness
1. Training and travel expenses N9.24bn in 2012
up from N7.65bn in 2011.
2. Expenses on "ATM offsite policy change" came
to N1.045bn.
3. Expenses on "Non Interest Banking" N1.359bn
in 2012 up from N0.977bn in 2011.
The CBN is still very heavy on expenses on
"Project Eagles" spending N0.606bn in 2012 up
from N63m in 2011.
Expense on newspapers, books and periodicals
(excluding CBN's publications) is N1.678 billion in
2012 up from N1.670bn in 2011,

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