ASSIGNMENT OBJECTIVES & SCOPE
 
BNR (Banque Nationale du Rwanda, central bank) commissioned Ernst & Young to
conduct a special audit of BACAR whose objectives were to:
 
(i) Clarify the situation of existing deposits before April 1994 
(ii) Verify the conditions of the re-opening of BACAR  in 1995, including the repurchase
of shares from the Banque Continentale de Luxembourg
(iii) Verify the various increases in the shareholding of the main shareholder of the Bank
(iv) Verify transfers made in favor of members of the Permanent

Committee of Board of Directors
 

OUR APPROACH TO THE ASSIGNMENT
 
The key task performed during the assignment are summarized below:
 
Obtained an in-depth understanding of operations and the events in the 1994 through
discussions with management and reviewing the procedures relating customer deposits
Determined the availability, or otherwise, information and documentation relating to the period under review.
Compared the trial balances at 6 April 1994 and 12 July 1994 and identified and
categorized all accounts into four categories:
I. Same account balances in both trial balances,
ii. Differing account balances
iii. Accounts in 12 July trail balance not present in 6th April For category (i), no further
work was done since the accounts matched the balances.

For category (ii), where account balances differed from those as at 12 July 1994,
documentation was sought relating to all entries on the accounts.
There were no category (iii) items For category (iv), we verified support documents with
a view to determining their authenticity and also verified the account transactions thereon.
Assessed the banks exposure, based on information available, litigation arising from
aggrieved customers relating to withdrawals and deposits during the war period. Also
reviewed correspondence relating to customer complaints.
Reviewed the source of credits on the accounts of the majority shareholder so to obtain
satisfaction as to their authenticity.

Summarized our findings and recommendations.
 
 
 
CONCLUSION
 
Based on the findings of this assignment, it is evident that VK and/or his related parties
have substantially been the ultimate beneficiaries of the Frw 2.817 billion extracted from
the new customers accounts. The following factors need to be taken into account;
 
The lack of support documentation
 
There was no account opening documentation relating to the new accounts opened in
the period from 6 April 1994 to 12 July 1994 and for all subsequent transactions in these
accounts. Further, it is practically impossible to physically to locate the individuals as a
result of the lack of customer information. It appears that none of these depositions have
ever physically come to withdraw funds; none have issued chouse from their accounts
(in fact no cherub books have been issued from these accounts) and in general appear to
be non-existent. For most transactions there is a distinct lack of paper trail to assess the
nature of the transaction.

The findings in this report are therefore based on the representations from management,
alternative audit testing such as comparison of amounts,circularization of accounts, etc.,
and other corroborative audit evidence. There is a possibility albeit remote, that the
findings may change where new audit evidence becomes available.

The limited utilization of sophisticated data interrogation techniques
 
Sophisticated data interrogation techniques may provide more information on the
transactions that have occurred in relation to the reduction in depositors balances, the
creation of new accounts an the subsequent movement of funds.
 
Other Accounts that have not be investigated
 
While the focus of this assignment is of the movement of the balances of the customer
deposits, it is evident that a number of other accounts have also moved. The relative
increase in gross assets in less that 5% however there are significant movements within
the accounts.
 
The possibility that funds were also provided to top management
 
We identified a difference of Frw 313 between the amounts of the discrepancies in
depositors balances and the total funds credited on Valens Kajeguhakwa and related
parties accounts. There is a likelihood that the difference may have credited to accounts
of management and there may be needed to investigate this possibility.
 
 

The findings of the Share Capital Investigation
 
The REA account has been used to make a number of payments for non-bank
expenditures amounting to over Frw 158 million from the sample vouched.
 
Payments amounting to Frw 107 million were made to Colette .R. Benie Consulting
Services for which services rendered could not be determined.
 
Valens Kajeguhakwa and Christian Kajeguhakwa received a total of Frw 205 million as
members of the Permanent Committee of the Board of Directors. There have not been
subjected to tax as required by the law.

(Posted on news group Rwanda-l@yahoogroups.com, on Dec 28, 2001 )