Nine universities and the Municipality of Guayaquil received the Treasury Certificates that are issued by the Ministry of Finance to cover outstanding obligations of the State. More than $ 11,588 million in placements of Treasury Certificates was examined by the Comptroller General of the State, from which inconsistencies of normative order and items without justification arise.
The nominal amount corresponds to a total of 56 operations carried out between January 2016 and December 2017 for new Cetes placement, swaps and renewals. The special examination DNA3-0016-2018 to the issuance, placement and payment of Cetes in the Ministry of Finance determined criminal evidence in five aspects that arose from modifications to the deed of issuance of certificates, normative basis for its placement.
It has to do with six transactions with a term of 360 days for an effective amount of $ 21.1 million plus a financial cost of $ 635 thousand that, according to the Comptroller’s Office, lack justification.
The audit determined that this contrasts with Article 123 of the Planning and Public Finance Code (Coplafip) and 130 of its regulations that exclude from the public indebtedness component securities issued with terms shorter than 360 days, “for which the Cetes should have issued in installments of up to 359 days.”
One of these transactions was generated with the Municipality of Guayaquil for $ 17.1 million, with the delivery of Cetes as payment dation, in order to cover outstanding obligations of the State. In the midst of that appeared Executive Decree 1218, dated October 20, 2016, signed by former President Rafael Correa, who reformed Article 130 of the regulations providing that titles placed up to 360 days are not considered as public debt.
“It is not related to the provisions of article 123 of the Coplafip, an aspect that was not observed by the servers that intervened in the modifications, approval of the deeds, issuance and placement of Cetes,” the report reads.
For this reason the Comptroller recommends the Ministry of Economy and Finance repeal Decree 1218. The same suggested in the special examination to the use and management of internal and external public debt between 2012 and 2017.
Cetes in payment
Twelve Treasury Certificates were used as payment dation to cover obligations of the Ministry of Finance with public and private entities for an effective amount of $ 84 million plus $ 2.2 million in financial costs.
The values were distributed among 9 universities, the Municipality of Guayaquil and the Development Bank of Ecuador. The debts are related to State subsidies, grants for scholarships, and the right of universities to receive resources from the fiscal budget and, in the case of the Municipality, VAT refunds.
Although the agreements were signed for $ 84 million, the delivery of Cetes increased the obligations to $ 86 million. The Undersecretary of Public Financing explained that, according to article 131 of the Coplafip, for all types of obligations, securities of the State can also be delivered as payment dation.
But the audit team replied that the regulation empowers the use of instruments constituted as public debt and the Cetes do not comply with those characteristics because their issuance serves to obtain resources to cover temporary cash deficits or to optimize the liquidity of the economy.
“These operations did not allow the Ministry of Finance to obtain resources to finance the referred box,” the team concluded. Capital and bonus coupons Modifications to the Cetes issuance deed allowed these to be delivered as exchange instruments for securities issued by the Central Bank of Ecuador and for more Cetes at maturity.
Seven certificates came from the exchange of eleven coupons of capital and a bond of the State, issued by Finance and not by the Central Bank for a total of $ 1,778 million with $ 2.8 million in financial costs.
Again Comptroller warns that these operations did not generate revenues of fresh resources to the fiscal coffers. The Monetary and Financial Board ordered the central bank to carry out the swaps and that the renewals of these securities be automatic as of August 1, 2016.
Exchanges and renewals
24 exchanges of Cetes maturities were identified increasing the obligations of $ 3,349 million to $ 3,367 million. The exchanges took place “without considering that said operations would not allow the payment of cash of the obligations to be overcome”, in addition to that they are not related to the nature of the Cetes.
Exchange of Certificates exceeded 360 days Of the 24 operations mentioned above, 4 were exchanged repeatedly at maturity with terms that exceeded 360 days and amounted to a nominal amount of $ 513 million.
The Comptroller’s Office reported that if renovations are considered to be new operations, no documents were provided that show that they generated income for the fiscal fund. The renewals were accepted without observing that they exceeded the allowed period of placement causing those transactions not to be processed as public debt operations.
If they were considered as such, they should have been known and approved by the Debt Committee, and their values recorded in the public debt bulletins.
Repeal of decree
Comptroller recommends the Ministry of Economy and Finance to draft a repeal of Executive Decree 1218, regarding securities for periods of “up to 360 days”, excluded from public indebtedness.
10 suggestions addressed to the Minister of Economy and Finance contain the report of the Comptroller.
The report suggests that the documentation related to the issuance, placement and payment processes of Cetes does not contain the condition of reserved, except that duly reasoned. (I)