Parliamentary Public Accounts Committee (PAC) questioned the HELB’s fixed deposit accounts maintained at the two Dar es Salaam based banks following an audit report by CAG covering 2014/15 questioning the Fixed Deposit Reserves (FDR).
PAC members said the TPB’s finances are weak with low capital base hence not conducive for HESLB to invest its FDR while that of Bank M was faulted because of its limited network in the country. HESLB has invested 3.4bn/- at Bank M for three months at an interest rates of 14 percent and 3.1bn/- at TPB for six months at an interest rate of 15 percent.
Ruling party legislator for Sikonge Joseph Kakunda said: “We do not see the reason why Higher Education Students' Loans Board invested such an amount at Tanzania Postal Bank while knowing that the bank’s capital is so weak.”
The CAG report said auditors failed to connect the decision made by the management to invest 6.5bn/- in Bank M and Tanzania Postal Bank during the year 2014/15.
The CAG report noted: “We were not provided with any evidence of the assessment of the market intelligence information where HESLB relied in reaching to a decision to invest with Bank M and Tanzania Postal Bank.”
In spite of having an investment policy, there is no clear procedure that explains how banks or financial institutions should be engaged to bid for fixed deposits. We noted that only email correspondences are used to communicate with banks and financial institutions for the activity, the CAG report pointed out.
The CAG further said that the HESLB did not provide any evidence to substantiate rating of the quoted banks, saying there is no clear criteria on how to decide which banks should be invested in or a clear process that substantiate invitation for quotations from all interested banks.
“HESLB will rate all the banks and financial institutions according to the strength of their core capital, among other things, and group them into four categories from A to D. We were not provided with any evidence to substantiate ratings of the quoted banks,” the CAG report stressed.
CAG report pointed out that the HESLB financial regulation requires the management to develop the investment policy with the purpose of guiding it and the board making decisions, monitoring and evaluation of board’s assets.
The CAG report advised HESLB: “We recommended the management to comply with the investment policy and follow the procedures for investment in FDRs and on making decisions of where and what time to invest.”
“The management should also prepare and keep an investment register for proper record keeping of the information pertaining to FDR,” the CAG audit report stressed.
Responding to the observations, HESLB Chief Accountant Juliana Mero said: “We chose to invest in Tanzania Postal Bank and Bank M due to high interest rates that they provided, but we are now investing in Bank of Tanzania (BoT) on treasury bills and government bonds.”