TREASURY and Finance Minister Peter O'Neill has admitted to parliament that the K125 million deal for Kokopo district is illegal and contributors risk losing 4% of their savings if the government did not repay the money, The National reports.
After intense pressure from within the National Alliance-led members, including East New Britain Governor Leo Dion who asked a series of questions in parliament last Friday, O'Neill admitted the transaction was illegal and that an investigation was under way.
O'Neill said the national executive council had directed the Central Bank, which is the supervisory body of the superannuation fund, to investigate how the Nasfund board approved the deal.
In his series of questions, Dion asked whether the Treasury Department had the powers to issue treasury bills and whether it had the power to appoint an agent to manage the deal.
"Why was National Capital Ltd appointed at no cost to the state?" Dion asked.
"Do the National Planning and Communication ministers have powers to approve the treasury bill transaction?"
Dion said it was a controversial transaction and called for an immediate investigation and to hold those responsible accountable.
Section 209 (1) of the constitution stated that the raising and expenditure of finance by the national government is subject to the authorisation and control of parliament.
This means this kind of financing must form part of a national budget or a supplementary budget in line with the appropriation act.
Dion said the deal was activated by the then treasury minister, national planning minister and Kokopo MP without appropriate legal advice from government lawyers.
O'Neill said under the Public Finance (Management) Act, only parliament could approve such a deal.
He said under the Treasury Bill Act of 2002, when there was not enough revenue, "the government can go out and raise revenue to fund its expenditure".
But he said only the Central Bank was authorised to do that.
"Treasury has conducted its own investigations and we have got advice that the transaction is illegal," O'Neill said.