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. Last Updated: 07/27/2016

Parliament, Not Deloitte Can Fix CB

The fight over who will audit the Central Bank is over, and parliament has brushed aside the arguments of Viktor Gerashchenko and handed him Deloitte & Touche CIS. Gerashchenko had wanted PricewaterhouseCoopers, so much so that he even told parliament some nasty fibs about Deloitte & Touche.

For example, he suggested that Deloitte & Touche does not use international accounting standards, and he tried to paint the company as a regional player only involved in France and "French-speaking Africa" (never mind that Deloitte & Touche is one of the Big Five international accounting firms and is the auditor of the World Bank.)

So now Deloitte & Touche will take over as auditor of the Central Bank and will be paid $350,000, plus 10 percent of all expenses. We can’t say we are thrilled with the idea of a built-in incentive for Deloitte & Touche to run up expenses — the more they spend, the more they earn — but otherwise, we don’t have much opinion one way or another about whether PwC or Deloitte audits Gerashchenko’s bank.

That surprises some. Given that we have often expressed concern about secrecy and shenanigans at the Central Bank, some have asked us, wistfully, if the "new auditor" can now put things in order.

Unfortunately, no. Fixing the Central Bank is beyond the mandate of Deloitte, just as it was with PwC. That’s not the job description: These "auditors" are only allowed to see what Gerashchenko lets them see.

We went through this with the FIMACO revelations: FIMACO was a Channel Islands shell company through which the Central Bank funneled billions of dollars, earning profits that have never been accounted for.

FIMACO is just one part of the bank’s foreign commercial empire, which includes quasi-private banks from Paris to Singapore — and which to this day remains unreformed. When the FIMACO scandal broke, the International Monetary Fund demanded an accounting. Gerashchenko complied by giving PwC guarded access to carefully selected bits of information. PwC wrote a guarded report based on it that later came to be called "an audit," and which Gerashchenko waved about as exoneration.

The only institution with the power to audit Gerashchenko’s independent Central Bank is parliament’s budgetary watchdog, the Audit Chamber. But the chamber’s auditors have in the past complained of obstruction, and Gerashchenko over the years has managed to suppress — we would argue illegally — the more aggressive audits.

Those who want a better Central Bank should look not to Deloitte & Touche’s appointment — that’s small potatoes — but to heartening talk of a stronger Audit Chamber.