CAG`s audit queries on BoT: Ballali survives fiery Bunge interrogation -Admits excessive payments in legal fees -But not clear on gold mine company dealings THISDAY REPORTER Dodoma BANK of Tanzania (BoT) Governor Dr Daudi Ballali was yesterday grilled for several hours by a parliamentary watchdog committee in Dodoma over allegations of funds mismanagement and misuse that have been hounding both him and the bank for several months now. Among other things, members of the parliamentary finance and economic affairs committee asked Ballali to explain away excessive legal fees amounting to over 8bn/- that the BoT paid to one local law firm in the name of Mkono and Company Advocates for services rendered to the bank. The governor was pressed upon to clarify on several key audit queries on the central bank accounts raised by the latest report of the Controller and Auditor General (CAG). Under the Bank of Tanzania Act of 2006, the CAG is a statutory auditor for the central bank. Although the CAG's report gave the central bank a clean certificate of audit for the 2005/06 financial year, it also raised poignant question marks over a number of BoT payments made during the same period. These include the more than 8bn/- in legal fees that had been paid to Mkono and Co. Advocates by June 30 last year for services rendered in relation to the long-running Valambhia case. Our sources say several members of the Bunge Committee, chaired by former cabinet minister Dr Abdallah Kigoda, pinned down Ballali on the matter and demanded a detailed answer. The BoT supremo is said to have responded by acknowledging that the fees were indeed excessive, and assured committee members that the bank's management would discuss the matter with the law firm in question with a view to cutting down the ongoing payments. He also managed to stave off committee questions on CAG queries with regard to payments from the central bank's external commercial debt account; the subject of a pending, deeper special audit ordered by the government at the behest of the International Monetary Fund (IMF). However, according to our sources, Ballali was not so convincing on the subject of BoT's involvement with both Mwananchi Gold Company Limited and Meremeta Gold Mine Company Limited, which was also underlined in the CAG's report. ''The governor acknowledged to committee members that BoT is a shareholder in Mwananchi Gold, and extended a loan to that company on the basis that gold refining is an important activity for the national economy, and moreover the law governing central bank operations allows for such loans to be extended,'' said a reliable source. But the source added that despite direct questioning from committee members, Ballali failed to explain clearly what Mwananchi Gold offered as collateral for the loan, or to identify who exactly are the company's other shareholders (apart from BoT). ''All he said was that the loan is fully secured�but there was no other explanation aside from that,'' the source said. No representative from the National Audit Office was present at yesterday's session as committee members continued to delve deeper into the CAG's report on the BoT accounts. The Bunge Committee's eventual endorsement of the report came on the heels of fresh reports that the deputy opposition leader in parliament, Dr Wilbrod Slaa (Karatu - CHADEMA), is getting set to table a private member's motion in the House for the formation of a parliamentary probe team to investigate the central bank. The much-awaited special audit ordered by the government in tandem with the IMF is also in the process of selecting an international auditor able to meet the targeted deadline for conclusion of the exercise, announced as October this year. According to recent THISDAY findings, the government has suspended all payments from the BoT's external payment arrears account pending the audit which, based on its terms of reference, will centre on assessing all transactions from the EPA account during 2005/06, as well as verification, monitoring, and control procedures related to the account. The IMF on its part has also strongly recommended a 'safeguards assessment' of financial controls and management of resources at the BoT, which is to complement the planned special audit. According to IMF policy guidelines, a 'safeguards assessment' is a diagnostic exercise carried out by IMF staff to ''help prevent the possible misuse of IMF resources and misreporting of information.''