By Bruck Shewarged

The Auditor General office told parliament on Tuesday that the National Bank's gold procurement procedure is widely exposed to malpractices and needs a quick fix urgently.

 Deputy Auditor General Assefa Desta informed MPs that there are several loopholes in the procedure that gave gold scammers ample opportunities to deprive government of millions of birr.

The investigation, which was conducted by the Auditor General office upon the request of the Federal Ethics and Anti-Corruption Commission, found out that although the procurement procedure requires the Bank and gold traders to enter a contract in writing before the transaction is made, one gold trader was able to supply gold to the Bank without signing an agreement.

The audit office also found out that although the Ethiopian Geological Survey Geo-Chemical Laboratory conducts quality inspection and sends the gold to the National Bank in sealed boxes, the National Bank simply receives the boxes which were brought to it by the gold traders and put them aside instead of checking whether the gold is in the boxes or not.

The National Bank used to demand a retention fee of 20 percent of the total amount of the gold in CPO as guarantee for compensation against possible quality problem. But since October 3, 2005 this procedure has been dropped, and problems that arose as a result of quality problems, have not been solved.  

The report shows that gold bullion that has been inspected and given quality assurance certificates by the geo-chemical laboratory at the Ethiopian Geological Survey  must be taken to the National Bank the very day the certificate is issued accompanied by escorts according to an agreement between the two institutions. However, this agreement could not be implemented as the Bank receives gold bullion whenever they were brought to it by the traders without escort, and after 24 hours.

Although the gold procurement procedure requires gold traders to have either trade, investment or gold exploration license, two traders were found to have illegal trade licenses.

The procedures also states that there is no mechanism to make sure that gold bullion has been inspected and is not going to be used by traders for the second time. The investigation, conducted by the Auditor General found out that 38 certified gold bullions found their way into the hands of other gold traders and were inspected as new ones.

According to the report, the Ministry of Mines and Energy failed to compare notes from the National Bank and Geological Service about the amount of gold exported by traders, and gave way to fraud. The investigation later found out that 29 forged quality inspection certificates were handed to the National Bank. The reporter says that had the ministry counter-checked the reports from the two institutes, the necessary corrective measures could have been taken.

The report concluded that the Bank's gold procurement procedure is porous and urged the relevant bodies to come up with a full proof plan.