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Home , Arjuna Ranatunga, Athuraliye Rathana Thero, Chandrasiri Gajadeera, Eran Wickramaratne, Jagath Pushpakumara, Karu Jayasuriya

PARLIAMENTARY SERIES No.318

of The Seventh Parliament of The Democratic Socialist Republic of (First Session)

INTERIM REPORT From The Committee on Public Enterprises

(for the period from 08th October 2013 to 08th April 2014)

Presented by Hon. DEW.Gunasekara Chairman of the Committee

th on 05 of August 2014

Ordered by to be printed on 05 August 2014

Printed at the Department of Government Printing, Sri Lanka To be purchased at the Government Publication Bureau, .

Price Rs. Postage Rs.

Report from the Committee on Public Enterprises of the i Parliament of the Democratic Socialist Republic of Sri Lanka

Members of the Committee on Public Enterprises First Session of the Seventh Parliament

1. Hon.DEW Gunasekara (Chairman) 2. Hon.(Mrs.) Pavithra Devi Wanniarachchi 3. Hon.A.D. 4. Hon.(Dr.) 5. Hon. 6. Hon. A.P. 7. Hon. T.B.Ekanayake 8. Hon. 9. Hon.S.M.Chandrasena 10. Hon. (Dr.) 11. Hon. 12. Hon. 13. Hon. 14. Hon. 15. Hon. 16. Hon. 17. Hon. (Al Haj) A.H.M.Azwer 18. Hon. 19. Hon. 20. Hon. 21. Hon. M.T. 22. Hon. A.Vinayagamoorthy 23. Hon. 24. Hon. (Ven.) 25. Hon. Seeniththamby Yoheswaran 26. Hon. Namal Rajapaksa 27. Hon. 28. Hon. (Prof.) 29. Hon. E.Saravanapavan 30. Hon. 31. Hon. (Mrs.)

ii Parliamentary Series No. 318

Composition of the Sub Committee I of the Committee on Public Enterprises.

1. Hon. A.D.Susil Premajayantha (Chairman) 2. Hon. (Mrs) Pavithra Devi Wanniarachchi 3. Hon. (Dr.) Rajitha Senarathna 4. Hon. Chandrasiri Gajadeera 5. Hon. T.B.Ekanayake 6. Hon. Mahinda Amaraweera 7. Hon. Lakshman Kiriella 8. Hon. Ravi Karunanayake 9. Hon. Harin Fernando 10. Hon. Sujeewa Senasinghe

Composition of the Sub Committee II of the Committee on Public Enterprises.

1. Hon. Karu Jayasuriya (Chairman) 2. Hon. A.P.Jagath Pushpakumara 3. Hon. S.M.Chandrasena 4. Hon. (Dr.) Mervyn Silva 5. Hon. Sarana Gunawardene 6. Hon. Weerakumara Dissanayake 7. Hon. (Al-Haj) A.H.M.Azwer 8. Hon. Sajith Premadasa 9. Hon. Sunil Handunnetti 10. Hon. Namal Rajapaksa

Composition of the Sub Committee III of the Committee on Public Enterprises.

1. Hon. Lasantha Alagiyawanna (Chairman) 2. Hon. Arjuna Ranatunga 3. Hon. M.T. Hasen Ali 4. Hon. A. Vinayagamoorthy 5. Hon. (Ven.) Athuraliye Rathana Thero 6. Hon. Seeniththamby Yoheswaran 7. Hon. Eran Wickramaratne 8. Hon. (Prof.) Rajiva Wijesinha 9. Hon. E. Saravanapavan 10. Hon. (Mrs.) Rosy Senanayake

Report from the Committee on Public Enterprises of the iii Parliament of the Democratic Socialist Republic of Sri Lanka

Contents

1. Chairman’s Note ...... v 2. Highlights of an Eventful Past...... vi 3. Preface ...... vii 4. Major Transactions with Inadequate Transparency ...... ix 5. Uneconomical Transactions ...... xi 6. General Observations ...... xii 7. Financial Status of the Examined Institutions ...... xvi 8. Presentation of Annual Reports to Parliament ...... xix 9. Institutions which had not tabled 2011 Annual Report ...... xix 10. Institutions which had not tabled 2012 Annual Report ...... xix 11. Audit Opinion expressed by the Auditor General ...... xxi 12. Unqualified Opinion ...... xxi 13. Qualified Opinion ...... xxi 14. Disclaimer of Opinion ...... xxii 15. Adverse Opinion ...... xxii

16. Institutions Examined by Main Committee ...... xxvii

17. Employees’ Trust Fund Board ...... 1 18. Industrial Technology Institute ...... 2 19. Disaster Management Centre ...... 4 20. State Development and Construction Corporation ...... 5 21. National Livestock Development Board ...... 6 22. Ceylon Fisheries Corporation ...... 9 23. Ceylon Petroleum Corporation ...... 12 24. National Youth Services Council ...... 15 25. Urban Development Authority ...... 17 26. Sri Lanka Standards Institution ...... 21 27. Associated Newspapers of Ceylon Ltd...... 23 28. Central Environmental Authority ...... 24 29. University of Colombo ...... 27 30. Geological Survey & Mines Bureau ...... 31 31. State Mortgage & Investment Bank ...... 31 32. Housing Development Finance Corporation Bank ...... 34 33. National Institute of Education...... 36 34. Rajarata ...... 38 35. Mihin Lanka (Pvt) Company Ltd...... 40 36. Sri Lanka Foreign Employment Bureau ...... 42 iv Parliamentary Series No. 318

37. National Savings Bank ...... 43 38. Consumer Affairs Authority ...... 45 39. Sri Lanka Insurance Corporation ...... 48 40. Sri Lanka Institute of Local Governance ...... 50 41. National Transport Commission ...... 52 42. Co-operative Wholesale Establishment ...... 53 43. Ceylon Electricity Board ...... 55 44. Mihin Lanka (Pvt.) Company Ltd...... 56 45. State Plantation Corporation ...... 58 46. Sri Lanka Telecom PLC ...... 61

47. Institutions Examined by Sub Committee I ...... 63

48. National Centre for Advanced Studies in Humanities & Social Sciences ...... 65 49. Buddhist and Pali University of Sri Lanka ...... 65 50. Postgraduate Institute of Pali & Buddhist Studies...... 67 51. Vocational Training Authority of Sri Lanka ...... 68 52. Ministry of Youth Affairs & Skills Development ...... 68 53. University of Vocational Technology ...... 71 54. Tertiary & Vocational Education Commission ...... 72

55. Institutions Examined by Sub Committee II ...... 73

56. Coconut Development Authority ...... 75 57. Coconut Cultivation Board ...... 76 58. Ceylon Fishery Harbours Corporation ...... 77 59. Sugathadasa National Sports Complex Authority ...... 83 60. Rubber Research Board ...... 86 61. National Institute of Plantation Management ...... 87

62. Institutions Examined by Sub Committee III ...... 89

63. Sri Lanka Institute of Textile & Apparel ...... 91 64. Sri Lanka Tourism Promotion Bureau ...... 92 65. Sri Lanka Convention Bureau ...... 93 66. National Building Research Organization ...... 94 67. Insurance Board of Sri Lanka ...... 95 68. Sri Lanka Social Security Board ...... 96

69. Index...... 99

Report from the Committee on Public Enterprises of the v Parliament of the Democratic Socialist Republic of Sri Lanka

Chairman’s Note

The Interim Report hereby presented to the House contains the findings of the examinations conducted by the COPE during the period from 08.10.2013 to 08.04.2014. Though it was originally intended to table Quarterly Reports, it was not practically possible to do so due to variety of technical factors.

However, the Committee intends to table another Interim Report, before the Final Report which will be presented towards the end of the year 2014.

The presentation of Interim Reports provides an opportunity for the Hon. Members to study the findings of the COPE in respect of those already examined, without waiting for the Final Report which is scheduled to be tabled at the end of the year. It also enables the Chief Accounting Officers and the Heads of Institutions to acquaint themselves with the COPE's observations and recommendations sooner than later for necessary follow-up action.

In our view, the performance of the most of the Institutions that come under the COPE has improved appreciably. Excepting a few Institutions, the Institutions have now become accustomed to submit their Financial Statements to the Auditor General well on time. The submission of Annual Reports to the Parliament is encouraging.

It needs to be appreciated that the COPE has never failed to meet due to absence of quorum.

The Co-operation extended by the staff of the COPE, willingly and ungrudgingly has earned my deep appreciation. I take this opportunity to thank with deep appreciation the service of Mr. M.N. Peiris, Secretary of COPE who retired from the Public Service recently. His contribution to the Parliament in various capacities and in particular as the Secretary of COPE for over 12 years deserves special mention.

I wish to recommend to the Hon. Speaker and the Secretary General of Parliament that the staff of COPE be provided with adequate facilities and training.

DEW Gunasekera (M.P) Chairman Committee on Public Enterprises

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Highlights of an Eventful Past

 First meeting of the Committee on Public Enterprises for the First Session of the Seventh Parliament was held on 08th of June 2010.

 As per a decision taken at the first meeting, three sub Committees were formed to expedite the scrutiny process.

 First examination was held on 04th of August 2010.

 The First Report of the Committee on 229 state institutions was tabled on 01st of December, 2011.

 As a follow up move on the first report, all secretaries to the Ministries were summoned to Parliament on 17th of January 2012 to brief on the report.

 The First Report was debated in the House on 08th of May 2012.

 An interim Report on 32 Institutions was tabled on 25th of October 2012.

 On the directive of the Committee, the Auditor General’s Department, for the first time in its history, carried out a special performance audit on the procurement of petroleum products by the Ceylon Petroleum Corporation during the period from 01.06.2011 to 30.06.2012.

 The Second Report was tabled on 23rd of July 2013 including the findings related to 244 Institutions.

 The House debated the 2nd Report on 10th & 11th of October 2013.

Report from the Committee on Public Enterprises of the vii Parliament of the Democratic Socialist Republic of Sri Lanka

Preface

The Committee on Public Enterprises for the First Session of the Seventh Parliament, hereby, presents its Interim Report on 47 state institutions examined during the period from 08.10.2013 to 08.04.2014.

The Committee on Public Enterprises is one of the entities which execute the Parliamentary control over Public Finance and as mandated by the Standing Order 126, it looks into the governance and financial issues of public corporations or any other undertaking vested in the Government under any written law laid before Parliament.

In addition to the Main Committee chaired by the Hon.DEW Gunasekara, there are three other Sub Committees chaired by the Hon. A.D.Susil Premajayantha, Hon. Karu Jayasuriya and the Hon.Lasantha Alagiyawanna respectively. The Main Committee is comprised of 31 Members of Parliament who will also represent one of the three Sub Committees each consisting of 10 members.

This report incorporates the findings and the recommendations made by the Main Committee and the three Sub Committees after reviewing the Auditor General’s reports for the years 2011 & 2012 and the performance related to each institution.

The number of examinations held by each Committee is shown in the table below.

Committee No. of Examinations Main Committee 30 Sub Committee – I 6 Sub Committee – II 6 Sub Committee – III 6 Total 48

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The findings and the recommendations in relation to each institution examined by the Main Committee and the three Sub Committees are also included following to the general observations and recommendations.

Having tabled its Second Report on 23rd of July, 2013, the Committee stated that it wished to present mid-year reports in future due to the ineffectiveness of reporting the irregularities long after their occurrence. The latest report emerged in view of that, is therefore not only an accomplishment of that commitment given to this House, but also an unprecedented move in the history of the Committee.

Report from the Committee on Public Enterprises of the ix Parliament of the Democratic Socialist Republic of Sri Lanka

Major Transactions with Inadequate Transparency

The following transactions involved with a significant monitory value were found to raise more concern on the transparency of the process taken place. (The observations were made based on the position of the institution as at the date of the examination by the COPE.)

1. The Ceylon Petroleum Corporation had incurred an estimated loss of Rs.8.3 billion on the procurement of petroleum products during the period from 01.06.2011 to 30.06.2012 due to inefficiencies such as delays in laboratory tests, lack of coherent communication and preparedness to meet the challenges of a volatile market, overpayments, delays in planning orders for procurement of petroleum products, uneconomical blending of high and low octane petrol, etc.

2. The Ceylon Petroleum Corporation had overpaid US $ 2,060,842 to a foreign Company (UAE Company) due to the inclusion of the premium of US $ 54 twice in the agreement entered into with the said Company to procure fuel.

3. Even though the Sri Lanka Telecom had purchased 75% of shares of the Sky network Ltd. for Rs.108 million to obtain the frequency required for the continuation of service related to WiMax technology, the Company had been closed down after a couple of years with no adequate business activities done on the ground that the technology had become obsolete . The transaction looks suspicious as the said company which had been formed in 2006, had carried out no business activities other than retaining a frequency until it was purchased by SLT in 2008.

It was also revealed that Rs.10,468,000 had been paid as director fees during the period in which the company did not function and the person who had been paid as such had happened to be a Director in the Sky network Ltd.

4. The land of State Plantation Corporation situated at Gregory Rd., Colombo which was once mortgaged to the Bank of Ceylon for Rs.50 million, had later been sold to a private company by the Corporation for Rs.243 million subject to certain conditions related to the redemption of the mortgage. However, the SPC has received only Rs.11.9 million in respect of this transaction.

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5. Rs.19,483,222 had been overpaid to the Contractor by the Central Environmental Authority in its Solid Waste Management Project implemented in Dompe as the tender had been offered to the 6th highest bidder neglecting the justifications of the lower bidders.

Further, a loss of Rs.30,140,320 had been caused to the authority as a of paying Rs.295 per cubic meter without charging Rs.45 from the contractor for the removal of 88,648 cubic meters of earth.

6. A proper investigation had not been carried out by the Central Environmental Authority when issuing the environmental certificate to the Gloves Manufacturing Factory in Rathupaswala and the certificate had been issued by testing only the water samples provided by the factory owner.

7. Due to the premature vacation of the building used as the premises for the Head Quarters of the Social Security Board, it had to pay Rs.5,090,906 as the rent for the remaining 07 months. Later, as a permanent place with adequate space had not been given to locate the Head quarter, the institution had purchased a building at Rajagiriya for Rs.195 million although the Government Valuer had valued it for Rs.165 million.

Report from the Committee on Public Enterprises of the xi Parliament of the Democratic Socialist Republic of Sri Lanka

Uneconomical Transactions Besides the fact that some of the following transactions do not raise much concern over the transparency, they have still caused a substantial loss to the Government as far as the value for money is considered. (The observations were made based on the position of the institution as at the date of the examination by the COPE.)

1. As at the date of the examination, the total loss incurred by the Ceylon Petroleum Corporation on the Hedging Transaction had been US $ 75.28 million.

2. The Electronic Timing Machine purchased for Rs. 44 million by the Sugathadasa National Sports Complex Authority to be used in the SAARC games held in 2005, had not been operating since 2010. Further, it can be used only for two more years even after repairing since the particular software is to become obsolete after two years.

3. The Volley Ball court constructed in the Jayathilake Stadium at Nawalapitiya by the National Youth Services Council spending Rs.1,287,440 in 2011 had been removed after 07 months on a decision taken to upgrade the playground.

4. Ceylon Fishery Harbours Corporation had made an advance payment of Rs.2,791,215 in 2011 to a contractor without entering into an agreement for the construction of 06 fuel tanks. However, no construction had been carried out and the institution has so far been able to recover only Rs. 1 million out of the advance payment.

5. As the Rubber Research Board had not carried out a proper valuation and obtained an insurance cover for the actual value of the properties, it had received only Rs.930,000 as compensation against the assets worth of nearly Rs.7.5 million, destroyed due to a fire erupted in a factory as a result of deploying a non-skilled labourer for the operation of the furnace.

6. Deviating from the normal interest rate of 18%, the Housing Development Finance Corporation Bank (HDFC Bank) had paid a higher interest of 22.5% for the Fixed deposit of Rs.450 million of the Ceylon Electricity Board as the Bank had been in need of long term funds. Nevertheless, the Bank had incurred a loss of Rs.69 million out of this transaction.

7. The Co-operative Wholesale Establishment had written off the loss of Rs.5,095,455 caused due to the missing of 11 conveyer motors. xii Parliamentary Series No. 318

General Observations

1. Non Compliance with Rules & Regulations The majority of the audit findings are related to the situations where the rules and regulations have been violated due to negligence or unawareness on the relevant circulars. Sometimes, the Committee observed instances where they have been deliberately violated in order to avoid a conflict with the employees.

Among the instances where such violations have taken place are;

 Irregular payment of allowances, loans, incentives etc.  Payment of fuel expenses.  Payment of PAYE tax.  Irregularities in the procurement process.

For instance, the Employees’ Trust Fund Board has paid incentives amounting to Rs.74.8 million, bonus amounting to Rs.44.5 million and loans amounting to Rs.338.9 million at the rate of 4.2% contrary to the treasury circulars. However, the management stated that it was not in a position to regularize the matter as the employees have been enjoying these privileges for a long period of time.

It should also be noted that there were number of instances where the institutions had taken certain decisions contrary to the treasury circulars merely due to the ambiguity of the contents in the circulars.

2. Revising Schemes of Recruitments and salary scales As stated in the earlier COPE reports, the Committee reiterates the importance of revisiting the salary scales and schemes of recruitments since a significant number of high ranking positions remain vacant due to the incompatibility of the salary scales with the requisite qualifications. It is also recommended to lessen, where possible, the higher qualifications requested for certain positions so that the medium or small scale Public institutions could afford to recruit personnel with satisfactory qualifications.

3. Borrowings due to lack of Capital Certain institutions such as Mihin Lanka had been deprived of making proper investments into their businesses due to the lack of capital and not receiving treasury funds within the required time frame. This had made those institutions to borrow loans at higher rates aggravating the existing issues further.

Report from the Committee on Public Enterprises of the xiii Parliament of the Democratic Socialist Republic of Sri Lanka

4. Over Staffing The operating expenditure of certain institutions had been significantly high due to the excess number of employees. For instance, the Sri Lanka Telecom has a staff of nearly 8000 whereas the actual requirement as stated by the Chairman of the institution is around 6000. This has led to a decrease in the profitability of the institution.

5. Lethargy in taking action on the irregularities taken place under earlier management. The Committee observed a number of instances where no action had been taken in relation to certain irregularities taken place under earlier management. It is stressed that the responsibility of the present management of an institution is not only to make sure that such irregularities is not repeated but also to take corrective actions on those malpractices by means of taking disciplinary actions, covering approvals or recovering the losses, if any. The Treasury should institutionalize a mechanism in this regard.

6. Inadequate role of the treasury representatives in the Board of Directors Many of the irregularities had taken place since the intervention of the treasury representative in the boards is not adequate. It is the duty of the Treasury Representative present in respective Boards to make sure that the treasury regulations are properly adhered to. Further, guiding the treasury to rationalize the outdated regulations should also be a responsibility of a Treasury Representative. The Committee recommends that the Treasury Representatives on Boards should submit quarterly or biannual reports to the Treasury regarding the issues in the institution in which they are involved.

7. Need of restoring the confidence in the Public on the Government Pension and Insurance Schemes The Committee is of the view that the confidence of the Public on various pension and insurance schemes has deteriorated to a larger extent due to the issues faced by certain schemes such as Farmers Pension Social Security Benefit etc. Although there are nearly 400000 members in the pension schemes implemented under the Social Security Board, it was observed that 75% of the total are inactive members. The enrollment of members for certain schemes implemented recently has also dropped characteristically.

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The existence of a financial entity is largely dependent on the confidence and there should be a methodology to restore the confidence in public. A proper actuarial study should be carried out before the implementation of new such schemes.

8. Outstanding amounts from other Institutions The Committee observed a large sum of money due from other institutions and some of these amounts have been outstanding for a long period due to inadequate follow up of the institution. The table below shows several outstanding sums of certain institutions.

Institution Outstanding Due from Present status amount State Development 348 million Mostly from Present position to be and Construction (approx..) Govt. Institutions reported. Corp. Coconut Development Rs. 20 million BCC Lanka Ltd. Company is in Authority liquidation. National Livestock Rs. 67 million Various Brokers Most of the brokers are Development Board not available. Urban Development Rs.137 million Various Rest Action has been taken to Authority Houses under recover Rs.66 million UDA and the balance is to be written off. Rs. 84 million Ministry of To be written off. Sports Cooperative Rs. 41 million Lanka Sathosa Lanka Sathosa has Wholesale agreed to issue shares Establishment equivalent to the amount. Rs. 22 million SL Army Written off. Ceylon Petroleum About Rs.4.4 Mihin Lanka Present position to be Corporation billion reported. SL Convention Bureau Rs. 17.5 SL Tourism It has been agreed to pay million Development the amount. Authority

This situation had severely affected the productivity and performance of some major institutions of the country. The Committee is of the view that it would be prudent to take a policy decision in relation to the settlement of such outstanding dues directly through the treasury when such action is deemed necessary.

Accordingly, the Committee has informed the Secretary to the Treasury to explore the possibility of transferring money from the funds of the owing institution to the account of the creditor institution directly through the treasury.

Report from the Committee on Public Enterprises of the xv Parliament of the Democratic Socialist Republic of Sri Lanka

9. Appointment of Heads of Institutions The Committee observed instances where heads of certain institutions could directly be held responsible for certain embezzlements. The Committee recommends the Committee on High posts in Parliament may not grant approval for the appointment or re-appointment of personnel who had once been found guilty for such offences. 10. Weaknesses in Practicing Accounting Standards As reported by the Auditor General, number of final accounts had to be rejected for not following the accounting Standards. It was also reported that the knowledge of certain Accountants in relation to the new Accounting Standards is not in a satisfactory level. This situation has caused in delaying the process of tabling the Annual reports in Parliament by certain Institutions. The Committee recommends that more qualified Accountants should be recruited to the Government Sector and further, an allowance for Accountants is also recommended. 11. Strengthening Internal Audit A Strong Internal Audit plays a significant role in good governance of an institution. However, the internal audit division of certain institutions had found problems in discharging of its duties due to the lack of resources. The relevant institutions should take immediate action to staff this division adequately and also to offer a adequate training to improve their knowledge on accounting and auditing. 12. Control of the Treasury on the allowances paid by institutions. The Committee observed that some institutions create schemes of allowances as they desired and the intervention of the treasury in such instances was found to be extremely unsatisfactory because the approval of the Board of Directors on those schemes had been obtained when there is a Treasury Representative in the Board. These irregular allowances had created serious salary anomalies. 13. Weaknesses in the Implementation of Projects. The Committee observed that the reason behind the failure of most of the projects had been due to weak planning and managerial inefficiencies which includes lack of supervision. As a result, a significant monitory loss was observed. A proper feasibility study would have prevented such losses. For instance, several projects launched by the Central Environmental Authority remained incomplete as the date of examination due to the factors such as lack of funds, unavailability of suitable lands, unavailability of the required technology etc.

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Financial Status of the Examined Institutions

Strategic Business Enterprises & Limited Liability Companies

Profit / (Loss) before Tax (Rs.) No. Institution 2013 2012 2011 Employees Trust Fund 01 15,621,131,000 12,313,596,974 11,549,008,187 Board State Development & 02 111,199,959 47,662,968 42,316,969 Construction Corporation National Livestock 03 49,790,222 29,421,086 235,610,403 Development Board Ceylon Fisheries 04 (75,841,048) (41,763,563) (68,969,869) Corporation Ceylon Petroleum (95,345,712,000) (92,015,138,000) 05 (6,351,269,000)* Corporation * * Financial Financial Urban Development 06 Statements not Statements not 302,111,149* Authority submitted submitted Sri Lanka Standards 07 89,298,019 62,784,097 101,032,276 Institute The Associated Newspapers 08 73,074,000 57,429,000 17,457,000 of Ceylon Limited State Mortgage & 09 346,400,852 430,264,728 688,577,768 Investment Bank Housing Development 10 231,374,299 125,852,185 320,655,684 Finance Corporation Bank 11 National Savings Bank 2,669,243,000* 6,392,291,000* 9,411,069,000* Financial Ceylon Fishery Harbours 12 Statements not (258,826,672) (190,648,226) Corporation submitted Sri Lanka Insurance 13 13,797,179,000* 10,241,202,000* 9,640,366,000* Corporation Financial Financial Corporative Wholesale 14 Statements not Statements not (313,605,785) Establish submitted submitted (54,562,452,000) (14,971,115,000) 15 Ceylon Electricity Board 21,488,398,000* * * 16 Mihin Lanka Ltd. (3,284,417,728) (1,968,508,818) (940,489,121) Financial Financial Sri Lanka State Plantations 17 Statements not Statements not (52,413,476) Corporation submitted submitted 18 Sri Lanka Telecom 7,365,000,000* 5,851,000,000* 6,162,000,000*

* Consolidated Profit /(Loss) before Tax Source : Auditor General’s Department

Report from the Committee on Public Enterprises of the xvii Parliament of the Democratic Socialist Republic of Sri Lanka

Non Profit Oriented Establishments & Other Institutions

Surplus / (Deficit) Before Tax (Rs.) No. Institution 2013 2012 2011 Industrial Technology 01 69,829,343 22,628,443 59,318,986 Institute 02 Disaster Management Centre (9,860,860) (8,142,118) (12,999,882) National Youth Services 03 (253,277,000) (73,709,597) (48,751,575) Council Central Environmental 04 (28,610,437) (30,635,316) 6,305,261 Authority 05 University of Colombo 154,316,852 33,033,435 69,382,819 Geological Survey & Mines 06 623,986,493 691,122,409 618,549,416 Bureau National Institute of 07 Education 36,496,150 14,654,153 41,078,115

Rajarata University of Sri 08 (18,154,195) (24,064,637) (150,923,949) Lanka Sri Lanka Bureau of Foreign 09 312,505,966* 258,895,523* 598,382,192* Employment Coconut Development 10 30,381,322 (9,681,156) (13,850,530) Authority 11 Coconut Cultivation Board 37,409,932 (2,207,368) 186,511,249 12 Consumer Affairs Authority 33,104,000 6,766,000 13,821,000 Financial Sri Lanka Institute of Local Statements not 13 (3,467,357) 2,882,054 Government submitted

National Centre for Advanced 14 Studies in Humanities and 166,709 223,210 (508,628) Social Sciences 15 University of Buddhist & Pali 11,615,789 (10,184,520) (62,152,897) Post Graduate Institute of 16 (3,467,632) (2,709,969) 680,658 Pali & Buddhist Studies National Transport 17 (190,119,332) (8,189,317) 192,801,311 Commission Vocational Training 18 (49,225,894) 16,030,859 (18,333,666) Authority of Sri Lanka University of Vocational 19 3,123,062 (7,977,301) (6,844,278) Technology Tertiary & Vocational 20 Education Commission (4,846,384) 55,217 399,044

Financial Sugathadasa National Sports 21 Statements not (81,984,071) (73,498,464) Complex Authority submitted xviii Parliamentary Series No. 318

Rubber Research Board of Sri 22 (84,950,480) (68,557,639) 18,547,965 Lanka National Institute of 23 4,482,528 (4,597,886) (1,247,870) Plantation Management Sri Lanka Institute of Textile 24 41,840,234 6,209,102 13,935,340 & Apparel Sri Lanka Tourism Promotion 25 6,238,009 476,209,102 551,545,914 Bureau 26 Sri Lanka Convention Bureau 67,751,969 21,704,200 8,049,504 Insurance Board of Sri Lanka 27 148,207 238,211 10,930

Sri Lanka Social Security 28 9,471,426 (18,535,954) (15,297,054) Board National Building Research 29 11,227,959 21,461,664 15,406,704 Organization

* Consolidated Profit /(Loss) before Tax

Source : Auditor General’s Department

Report from the Committee on Public Enterprises of the xix Parliament of the Democratic Socialist Republic of Sri Lanka

Presentation of Annual Reports to Parliament

All state institutions are required to table their Annual reports in Parliament no later than 150 days after the lapse of the considered financial year. According to the records as at 30.06.2014, the institutions which have not tabled the Annual reports for the years 2011 and 2012 are respectively shown below. The list was prepared base on the institutions examined in the period from 08th October 2013 to 08th April 2014 only.

Institutions which had not tabled 2011 Annual Report (as at 30.06.2014)

 Ceylon Fishery Harbours Corporation  Ceylon Petroleum Corporation  Corporative Wholesale Establish  Sri Lanka State Plantations Corporation  State Development & Construction Corporation  Sugathadasa National Sports Complex Authority

Institutions which had not tabled 2012 Annual Report (as at 30.06.2014)

 Central Environmental Authority  Ceylon Electricity Board  Ceylon Fisheries Corporation  Ceylon Fishery Harbours Corporation  Ceylon Petroleum Corporation  Consumer Affairs Authority  Co-operative Wholesale Establish  Disaster Management Centre  Employees Trust Fund Board  Geological Survey & Mines Bureau  Industrial Technology Institute  National Centre for Advanced Studies in Humanities and Social Sciences  National Institute of Education  National Livestock Development Board

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 National Transport Commission  National Youth Services Council  Post Graduate Institute of Pali & Buddhist Studies  Rajarata University of Sri Lanka  Rubber Research Board of Sri Lanka  Sri Lanka Bureau of Foreign Employment  Sri Lanka Institute of Local Government  Sri Lanka Convention Bureau  Sri Lanka Institute of Textile & Apparel  Sri Lanka Standards Institute  Sri Lanka State Plantations Corporation  Sri Lanka Tourism Promotion Bureau  State Development & Construction Corporation  Sugathadasa National Sports Complex Authority  Tertiary & Vocational Education Commission  The Associated Newspapers of Ceylon Limited  University of Colombo  University of Vocational Technology  Urban Development Authority  Vocational Training Authority of Sri Lanka

Report from the Committee on Public Enterprises of the xxi Parliament of the Democratic Socialist Republic of Sri Lanka

Audit Opinion expressed by the Auditor General

The financial audit carried out by the Auditor General is in accordance with the Sri Lanka Auditing Standards consistent with International Standards of Supreme Audit Institutions (ISSAI). Those Standards require that the Auditor General should comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. In compliance with the Sri Lanka Auditing Standards a risk based audit approach is applied when determining the audit scope of Public Enterprises. Risk is considered as a main factor.

Public Enterprises prepare financial statements annually comprising statement of financial position as at the end of the year, statement of income, cash flow statement, statement of changes in equity for the year then ended, a summary of significant accounting policies and other explanatory information. The Auditor General provides independent assurance to Parliament as to whether the financial statements give a true and fair view of the state of affairs of the institutions. This assurance is provided in the form of expressing an opinion on the financial statements. The opinion simply states the auditor General's conclusion that the financial statements do or do not fairly represent the financial position and financial performance of the Public Enterprise, and that they do or do not conform to the financial reporting standards either Sri Lanka Accounting Standards or Sri Lanka Public Sector Accounting Standards which are now in line with the respective International Accounting Standards.

Four types of audit opinion are expressed. Those are, the unqualified, qualified, adverse and the disclaimer of opinion which is expressed in instances of material uncertainty, management disagreement or limitation of work. The pervasiveness of the scope limitation would lead to express disclaimer of opinion whereas the pervasiveness of the disagreement would lead to express an adverse audit opinion.

Unqualified Opinion An unqualified audit opinion indicates that auditor General could find no significant violations or misstatements in the financial statements of a Public Enterprise. An alternate name for this opinion is a clean opinion. Auditor General typically express this opinion referencing the Public Enterprise’s ability to record financial information according to financial reporting standards either Sri Lanka Accounting Standards or Sri Lanka Public Sector Accounting Standards. This is the best audit opinion an enterprise can receive.

Qualified Opinion A qualified audit opinion indicates that the auditor General found issues in the financial information of a Public Enterprise. These issues prevent the auditor xxii Parliamentary Series No. 318

General from issuing a clean opinion on the affairs of a Public Enterprise. Qualified audit opinion often have one or more specific qualifications. The qualification may represents deviations from Reporting Accounting Standards. This indicates the enterprise has improperly applied standards, and the financial statements do not conform to standard accounting principles. Another qualification is limitation of scope. Limitation of scope indicates that Auditor General cannot review one or more areas related to the financial statements. This qualification relates only to the financial information not reviewed by the Auditor General due to unavailability of documentary evidences.

The Auditor General express a qualified opinion when: (a) The Auditor General, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the financial statements; or (b) The Auditor General is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.

Disclaimer of Opinion The Auditor General disclaim an opinion when he is unable to obtain sufficient appropriate audit evidences on which to base the opinion, and he concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. The Auditor General disclaim an opinion when, in rare circumstances involving multiple uncertainties and concludes that, notwithstanding having obtained sufficient appropriate audit evidences regarding each of the individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential interaction of the uncertainties and their possible cumulative effect on the financial statements.

Adverse Opinion An adverse opinion is one of two significantly negative audit reports and the worst audit report a Public Enterprise can receive. An adverse opinion indicates the auditor found significant material misstatements relating to financial statements. These misstatements typically mean financial statements do not conform to the financial reporting standards and the information is inaccurate or unreliable. Banks and lenders typically avoid public enterprises that have adverse audit opinions. Auditor General express an adverse opinion when he obtained sufficient appropriate audit evidences, concludes that misstatements, individually or in the

Report from the Committee on Public Enterprises of the xxiii Parliament of the Democratic Socialist Republic of Sri Lanka aggregate, are both material and pervasive to the financial statements. Expressing an adverse opinion on financial statements by the Auditor General is very rear as he gives opportunity to the public enterprise to rectify the misstatements and submit fresh set of financial statements. In this opinion the Auditor General states that, because of the significance of the matters described in his audit report, the financial statements do not give a true and fair view of the financial position, financial performance and cash flows for the year in accordance with reporting financial Standards.

The following chart shows a percentage comparison of the different opinions received on 2012 financial reports by the 46 institutions considered in this report.

The table below shows the opinion given on the 2012 Financial Statements of each institution.

No. Institution Type of Opinion

01 Employees Trust Fund Board Qualified

02 Industrial Technology Institute Qualified

03 Disaster Management Centre Qualified

04 State Development & Construction Corporation Qualified

05 National Livestock Development Board Qualified

06 Ceylon Fisheries Corporation Disclaimer

xxiv Parliamentary Series No. 318

07 Ceylon Petroleum Corporation Qualified

08 National Youth Services Council Qualified

09 Urban Development Authority -

10 Sri Lanka Standards Institute Qualified

11 The Associated Newspapers of Ceylon Limited Qualified

12 Central Environmental Authority Qualified

13 University of Colombo Qualified

14 Geological Survey & Mines Bureau Qualified

15 State Mortgage & Investment Bank Qualified

16 Housing Development Finance Corporation Unqualified Bank

17 National Institute of Education Qualified

18 Rajarata University of Sri Lanka Qualified

19 Sri Lanka Bureau of Foreign Employment Qualified

20 National Savings Bank Unqualified

21 Coconut Development Authority Qualified

22 Coconut Cultivation Board Qualified

23 Ceylon Fishery Harbours Corporation Disclaimer

24 Consumer Affairs Authority Qualified

25 Sri Lanka Insurance Corporation Qualified

26 Sri Lanka Institute of Local Government Qualified

27 National Centre for Advanced Studies in Unqualified Humanities and Social Sciences

28 University of Buddhist & Pali Qualified

29 Post Graduate Institute of Pali & Buddhist Qualified Studies

Report from the Committee on Public Enterprises of the xxv Parliament of the Democratic Socialist Republic of Sri Lanka

30 National Transport Commission Unqualified

31 Vocational Training Authority of Sri Lanka Qualified

32 University of Vocational Technology Qualified

33 Tertiary & Vocational Education Commission Qualified

34 Corporative Wholesale Establish -

35 Sugathadasa National Sports Complex Qualified Authority

36 Rubber Research Board of Sri Lanka Qualified

37 National Institute of Plantation Management Qualified

38 Ceylon Electricity Board Qualified

39 Mihin Lanka Ltd. Unqualified

40 Sri Lanka State Plantations Corporation -

41 Sri Lanka Telecom Unqualified

42 Sri Lanka Institute of Textile & Apparel Qualified

43 Sri Lanka Tourism Promotion Bureau Qualified

44 Sri Lanka Convention Bureau Qualified

45 Insurance Board of Sri Lanka Unqualified

46 Sri Lanka Social Security Board Qualified

47 National Building Research Organization Qualified

xxvi Parliamentary Series No. 318

Report from the Committee on Public Enterprises of the xxvii Parliament of the Democratic Socialist Republic of Sri Lanka

Institutions Examined by the Main Committee

xxviii Parliamentary Series No. 318

Report from the Committee on Public Enterprises of the 1 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

Employees’ Trust Fund Board 08th October 2013 Ministry of Finance & Planning

1. The irregular payment of incentive The Committee directed to write to allowances, bonus and the staff loans the Secretary to the Ministry granted at the interest rate of 4.2% had explaining the difficulties of not been regularized as directed at the regularizing the matter since the previous COPE meeting. CAO/AO stated that any discontinuation of those privileges enjoyed by the employees for a long period of time would lead to unrest among employees.

2. The Committee enquired the current The CAO/AO stated that the position of the recovery of interest on Elkaduwa Plantations Ltd. had the investments made in Elkaduwa requested a relief period to settle the Plantations Ltd., and Vanik outstanding interest due to their Incorporation Company amounting to financial difficulties and the Vanik Rs. 10,291,556 and Rs. 15,574,073 Incorporation was in the process of respectively. liquidation which had been stopped due to litigation.

3. Action had not been taken to settle the The CAO/AO stated that every long standing and steadily increasing possible action had been taken to balances related to Unclaimed Death settle those balances which had been Benefits, Returned Benefits and accumulated due to erroneous Refunded Benefits which had personal information and wrong respectively amounted to Rs. account numbers furnished by the 7,573,890, Rs. 13,905,162 and Rs. beneficiaries. 5,149,573 as at 31.12.2012 .

4. An expenditure of Rs.2,317,396 had The Auditor General stated that the been incurred contrary to the Public relevant officers would have been Administration Circular 22/99 as fuel entitled to official transport as expenses on private transport of referred to in the PED Circular No. officers who were not entitled to have 50 of 2008 provided that the relevant official transport and the stand of the conditions in the Public CAO/AO was that no irregularity had Administration Circular No. 22/99 taken place as the payments had been were satisfied. The Committee, made adhering to the PED Circular No. having directed to get the covering

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Major Issues & Problems Identified Comments & Derectives of the COPE 50 of 2008. approval on those payments, emphasized the need of reviewing all the circulars in order to clear the ambiguities.

5. The institution had borne an amount of The General Treasury should take a Rs.15,286,378 as PAYEE Tax on firm decision regarding the behalf of the employees. settlement of PAYEE Tax which does not vary from institution to institution.

6. A physical verification of Fixed Assets The CAO/AO agreed to submit an valued at Rs. 348,673,030 had not been approved copy to the Audit. conducted.

7. Over time had been paid to the officers The CAO/AO was directed to irregularly allowing for 42 days leave regularize the matter after having a instead of the due number of 21 days. discussion with the Auditor General on the ambiguous matters.

8. The Board had not been able to recover The CAO/AO stated that there were either the invested money or the two pending court cases against these income in relation to two investments two companies. worth of Rs.25,227,568 and Rs.4,066,314 respectively made in two The Committee directed the CAO/AO companies which were currently under to submit a report to the Committee liquidation. including the following matters. The Investment Policy with a historical analysis, The Competence level and the Technology level, An analysis of the active members of the ETF and the contributors.

Industrial Technology Institute 22nd October 2013 Ministry of Technology & Research

1. Annual Reports for the years 2011 and The CAO/AO was directed to look 2012 had not been tabled in Parliament. into the matter and the Auditor General agreed to hand over the accounts early, if there had been any lapse from the Auditor General’s Dept.

Report from the Committee on Public Enterprises of the 3 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

2. There had been 56 vacancies to be The CAO/AO stated that those filled. vacancies could not be filled due to lack of qualified personnel and the existing salary scales. The Committee pointed out the possibility of the line Ministry to submit a Cabinet Paper to that effect.

3. Action had not been taken to recover The Committee was informed that Rs. 4,069,011/- due from 18 officers most of those bonds were over 20 who had breached the agreements, as at years and the balance amount to be 31 December 2012. Moreover a female recovered was around Rs. 4 million. officer who had signed a bond for Rs. With regard to the recovery of Rs. 3.7 3,789,640/- in the year 2012 had gone million, it was stated that the amount abroad violating the agreement. to be recovered as at the date of examination was around Rs. 2.2 million approximately and on a decision taken by the Director Board, that female officer had been informed to settle the dues in installments of Rs. 50,000/- per month. In case of failure to do so, legal action would be instituted against the sureties.

4. The current position with regard to the It was stated that those were very old dishonored cheques amounting to Rs. returned cheqeus and there had been 338,016/- was enquired. book entry errors as well and action would be taken to write off the balances that cannot be traced after reconciliation of accounts. The need to provide a clear explanation to the Treasury for obtaining approval to write off the balances was emphasized.

5. The Institution had to pay a surcharge Since the money had not been due to the delay in payments of received from the Treasury to settle contributions to EPF and ETF that surcharge, the ITI had decided to amounting to Rs. 4,217,373/- and Rs. settle the outstanding amount from 506,084/- respectively. the self-generated funds and the full amount would be settled by November 2013.

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Major Issues & Problems Identified Comments & Derectives of the COPE

6. Due to improper maintenance of the The AO stated that it had been source documents and inconsistencies occurred in the year 2000 and they occurred when transferring the data had had a problem of retrieving data from the previous computerized from the back-ups. It was directed to accounting system “Sage” to the new expedited the reconciliation process one “DMS”, debts over 5 years and submit a report to the Committee amounting to Rs. 5,093,824/- could not within six months’ time. be identified.

7. It was enquired whether the deficit of It was stated that there had been some Rs. 1,092,428/- identified at the 2011 excess items which could not be Board of Survey had been rectified at identified when transferring from one the 2012 Board of Survey. section to another and the reconciliation carried out parallel to the 2012 Board of Survey could be completed in two months’ time.

Disaster Management Centre 23rd October 2013 Ministry of Disaster Management

1. Out of the provision of Rs. 5,350,000 It was stated that as the Road allocated for the Peakwell Landslide Development Authority had Mitigation Project, only a sum of Rs. undertaken the Peakwella Landslide 1,500,000 had been made available in Mitigation Project , the Center, 2011 and the project had not been initiated the Rain Water Management initiated. Instead of that project, a Rain Project which had already been Water Management Project had been completed utilizing the financial implemented. provisions available.

2. It was observed that even though the The CAO/AO assured to take action Centre had indicated that all the 13 to complete those projects before projects valued at Rs. 27.77 million, May of the following year. had been completed at the end of 2011, those projects had not actually been completed even upto the year under review.

3. Out of the assets valued at Rs. 3,729 It was agreed that the real value million granted to a project by the would be shown in the accounts of Netherlands Govt., only the assets the year 2013, after verification of valued at Rs. 1,641 million had been the difference. brought to the accounts

Report from the Committee on Public Enterprises of the 5 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

4. Rs. 76 million had been granted to The projects could not be completed District Secretariats for Disaster due to the unfavourable weather Mitigation projects in 2010 and 15 condition in the year 2010, and had projects valued at Rs. 23.98 million had been completed in the year 2011 and not been completed even by the year 2012. under review.

State Development and Construction 24th October 2013 Corporation Ministry of Construction, Engineering Services, Housing & Common Amenities

1. The Committee observed that as at The CAO/AO stated that since the October 2013 there had been a number Corporation was a self funded of vacancies in the cadre and also the organization, and that the salaries of staff had been recruited on casual and the staff were paid from their contract basis, and in addition there had generated funds, the Corporation had been some excess staff. limited appointing permanent staff as there had been difficulties in paying salaries at times where their income was low. He further stated that they had recruited the necessary staff on casual and contract basis, when they had more projects, and that the Corporation could terminate their appointments when the projects were over.

2. When the financial transactions of the The CAO/AO stated that in addition Corporation were examined, the to the Cabinet approved projects, the Committee observed that the Gross Corporation had to go for competitive Profit Margin had been eventually bidding in order to have competitive decreased. prices with other institutions, and as such the Gross Profit Margin had been reduced.

3. The Committee observed that although The CAO/AO stated that the delay the Corporation had well experienced had occurred due to some lapse in the engineers and technicians, a generator computer system and there had not valued at Rs. 4,000,000 had been been any fraud, and the Corporation handed over to a private party for had already taken action to rectify the

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Major Issues & Problems Identified Comments & Derectives of the COPE repairs in the year 2010 and the computer system. The CAO/AO quotation in this regard had been further stated that legal action had obtained in September 2012. The been taken against the relevant Corporation had not thereafter taken external party. any follow up action in this regard.

4. The Committee noted that the The CAO/AO having accepted the Corporation had obtained the services mistake stated that the Corporation of a contractor for supply of labour had already rectified the error. since 2010, and in contrary to the agreement entered with the contractor, the Corporation had reimbursed the contractor a sum of Rs. 22,196,834 for EPF and ETF in the year 2012 without obtaining the relevant documents from him.

5. The Committee enquired the current The CAO/AO stated that currently position with regard to the outstanding the Corporation remits the money payment of EPF and ETF of the staff. monthly, and there were no arrears of ETF payments. He further added that all those arrears were due to insufficient cash flow, and if the Corporation had a good working capital , they could have run the Corporation smoothly. The Committee directed the CAO/AO to submit the proposals as to how they could overcome such problems, so that the COPE could also provide recommendations to the Govt., in this regard.

National Livestock Development 25th October 2013 Board Ministry of Livestock & Rural Community Development

1. The institution had made appointments The Committee was of the opinion to the Board of Directors exceeding the that the payments made to the provisions in the Act for the want of directors violating the Act could not getting the service of professionals in be justified and directed the CAO to the field to implement certain important see the possibility of regularizing the projects. matter by appointing the excess members at advisory capacity

Report from the Committee on Public Enterprises of the 7 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE provided that the Act could not be amended to meet the requirement.

2. Sixteen farms had continuously been The CAO/AO stated that they had running at a loss and that for the year been able to increase the milk 2012 alone had been Rs.141,229,674 . production in those farms upto 15 to 16 liters per day as against an average of 2 liters in the past by replacing herds giving a lower yield.

3. The present position of the issue related The CAO/AO stated that it had been to the lands of the Ridiyagama farm, suggested to get the occupants to claimed to have been encroached by plant animal food such as maize, external parties was discussed. grass etc. in those lands which could be bought by the NLDB or to give them some alternate lands.

4. The present position on the recovery of The CAO/AO stated that the Rs.11,947,220 due from a private accused, who had been arrested for company in connection with an defaulting the money, had later been unreturned stock of maize given for released on bail and further stated that drying, was discussed. the legal process was under way.

5. The present position of the litigation As the CAO/AO stated that the over the quarry in the Haragama farm NLDB had then stopped accepting which had been leased out irregularly even the monthly rental on the ground by the previous management was that it would make the institution discussed. liable to the lessee, the Committee wanted the CAO/AO to get the permission of the courts to deposit the rental either in courts or in a special account as a precaution to avoid any loss for the period they used the land.

6. The Committee further observed an The Committee wanted the CAO/AO outstanding balance of Rs.67 million to discuss with the treasury on this due from various brokers most of matter in order to see whether the whom had not been available by then. unrecoverable balances could be written off.

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Major Issues & Problems Identified Comments & Derectives of the COPE

7. The outstanding loan balance related to The CAO/AO stated that a sum of the loan obtained from the Farmers’ Rs.4.2 million had already been Trust Fund in 2002 and the settled with the payment of the last accumulated interest thereon, had installment on 23.10.2013 and agreed amounted to Rs.100,112,700 and to furnish the necessary information Rs.88,475,763 respectively, as at related to this matter to Audit. 31.12.2012 and no installment had been paid after October, 2012.

8. A registered vehicle had been The CAO/AO stated that the purchased in 2012 paying Rs. 700,000 particular type of vehicle required by more than the initial assessment despite the institution had not been available the fact that the approval of the in the market except at one place in Department of Public Enterprises had Kelaniya. Even though, the initial been given to purchase 03 double cab assessment of Rs.3,150,000 in 2011, motor vehicles on lease purchase basis. had been increased by the seller to Rs.3,850,000 by 2012, the CAO/AO, having admitted the lapse, stated that they were compelled to purchase it as a vehicle had been essentially required by that time .

9. At the construction of a new restaurant, The Committee directed the CAO/AO kitchen and the latrine system in the to hold an inquiry into the allegations Melsiripura farm several irregularities and submit a report to the Committee such as instances of not obtaining the within four weeks, with copy to the approval of the procurement Auditor General. committee, making double payments to the contractor for certain installations, making final payments without getting the work completed etc. had been reported,

10. The poultry worth of Rs.5,752,594 had The CAO/AO pointed out that the been given on credit basis to the company, coming under the purview Mahaweli Livestock Company which is of the same Ministry, would drive apparently not in a position to settle the further into crisis in case of any amount due to its severe financial discontinuation of the supply of the crisis. poultry. The Committee directed the CAO/AO to attend to the matter immediately reducing the burden on the NLDB.

11. The gradual increase in the number of The Committee, having understood male calves, which had to be the requirement of rationalizing the maintained at the expense of the female existing policies, wanted the

Report from the Committee on Public Enterprises of the 9 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE calves, had become a serious burden on CAO/AO to furnish a cabinet paper in the industry as, according to the this regard. CAO/AO, the cultural and religious factors had made it more difficult to find a solution to the problem.

Ceylon Fisheries Corporation 05th November 2013 Ministry of Fisheries & Aquatic Resources

1. The Committee enquired as to why the The CAO/AO stated that 2011 Annual Reports of 2011 and 2012 had Annual Report had been submitted to not been tabled in Parliament. the Cabinet for approval, and the audit opinion for 2012 accounts had not yet been received. He assured to take action to table both reports in Parliament early.

2. The Committee observed that the The CAO/AO stated that the CFC had penalty interest accumulated due to the to pay only Rs. 21 million as the dues non payment of the arrears of taxes of the Value Added Tax. The dues payable to the Inland Revenue Dept. by settled by them had not been updated October 2013 had been increased up to in the books of the Inland Revenue Rs. 1,843,905. Dept. The CAO/AO further stated that the PAYEE Tax arrears of Rs. The arears income tax payable Rs. 72,550 had been the penalty charges as at 31st Oct 2014 brought forward from the year 2004, Econ. Services Charges 35,695,513 which they had requested the Inland Value Added Tax 47,609,350 Revenue Dept. to waive off. The CFC PAYE Tax 72,550 had to settle only the Economic Defence Levy 7,450 Service Charges. After discussion, the Committee directed the CAO/AO to Total Rs. 83,384,863 submit a detailed report with an age analysis including all necessary source documents to the Committee as well as the Auditor General on this matter.

3. The Committee enquired whether the Even though CFC had handed over CFC had taken action to acquire the the land to the private company, that ownership of the land which had been land actually belonged to the given to a private company. Fisheries Harbour Corporation. Therefore the CFC had been legally advised to ask the Fisheries Harbour Corporation to file a case against the

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Major Issues & Problems Identified Comments & Derectives of the COPE private company and seek an order from the courts to nullify the previous transfer made by the CFC. Accordingly they were in the process of carrying out the legal advice.

4. The Committee enquired the progress The CAO/AO stated that they had of recovering the outstanding balances been able to reduce the amount of of the debts. outstanding debts up to Rs. 167 million of which Rs. 57 million were dues from various Govt. Institutions and the balance amount had been long outstanding brought forward from a period of 7-15 years.The CAO/AO further pointed out that although there had been a high amount of outstanding balance due from the Ministry of Health they had been continuously supplying Rs. 20 million worth of fish to hospitals. After a lengthy discussion of the issues regarding the recovery of dues, the chairman stated that he would write to the Secretary to the treasury in order to explore the possibility of taking a policy decision as to settle the dues from one govt. institution to another govt. institution directly through Treasury.

5. The Committee observed that the CFC The CAO/AO stated that since CFC had not obtain the approval of the had established fish retail sales Ministry for issuing fuel worth of Rs. outlets island wide, the media crew 339,405 for 05 vehicles of the Ministry had to attend to the ceremonies and and a sum of Rs. 628,202 had also other activities of those outlets and been paid for the supply of fuel for 03 CFC had to undertake those payments motor vehicles belonged to the because they had not received Ministry in the year 2012. provisions for those activities from the Ministry. The Committee directed the CAO/AO to obtain the approval of Director Board and then send it to the Treasury for approval.

6. The Committee enquired as to why the The AO stated that the provision of provision of Rs. 36.62 million made Rs. 36.62 million was kept in the available for the purchase of 06 Ministry in order to keep it in

Report from the Committee on Public Enterprises of the 11 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE deep freezer trucks had been utilized safe hands. Rs. 6.6 million out of the for settling a loan obtained from above provision had been paid as an the Ministry of Fisheries and Aquatic advance for the freezer trucks. The Resources and to meet the recurrent balance Rs. 30 million had been taken expenditure of the Corporation. by the Ministry without the knowledge of the CFC to set off a loan obtained for some special purposes. The Auditor General pointed out that a question arises as to how the Ministry had granted a loan to the CFC and how that transaction had been accounted.

7. The Committee having observed that The Committee also emphasized that the Corporation had paid allowances it is the duty of the Treasury amounting to Rs.180,000 to an officer Representative in the Director Board in the Engineering Services without to look into any need for exception, obtaining approval from the and report them to the Treasury, The Dept. of Management Services Treasury should attempt to take and the Salaries and Cadre decisions on those matters in such a Commission, directed the CAO/AO to way that they could be applied to all write to the treasury showing the relevant institutions. necessity and obtain their approval prior to such appointments .

8. The CAO/AO explaining the Government policy of imposing duty on imports stated that even though the imports of the CFC had been exempted from duty as per an earlier Cabinet decision, it had not been implemented. He stressed the importance of waiving off the duty imposed on “Thalapath” at least, since the Corporation supplied “Thalapath” fish worth of Rs. 20 million a month to the Govt. Hospitals alone.

9. The Committee having observed that The CAO/AO stated that since the CFC had not provided any subject comes under the purview of facilities for the repairs and Fisheries Harbour Corporation, they maintenance of fishing boats in the should be directed to look into that Northern area, suggested the CFC to set matter. up Vocational Training Centers in

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Major Issues & Problems Identified Comments & Derectives of the COPE collaboration with private sector in order to develop the skills of the people in that area.

10. The Committee suggested the CFC to take action to introduce producing value added products from fish.

Ceylon Petroleum Corporation 02nd December 2013 Ministry of Petroleum Industries

1. The Committee observed that the The CAO/AO pointed out that as they corporation had not tabled the Annual had not received the accounts of Reports in Parliament from the year CPSTL, a subsidiary of CPC, which 2010. had been given to an institute of Charted Accounts for IFRS adjustments, the preparation of the consolidated accounts had been delayed and assured to furnish all the financial statements for the year 2012 within a month’s time. The Committee directed the CAO to follow up the above and submit the accounts for the year 2013 to the Auditor General early.

2. The Committee enquired the current The CAO/AO stated that the total loss position with regard to the Hedging incurred by the CPC in the Hedging transaction and the losses incurred. transaction had been US $ 75.28 The Committee further revealed that million as at 30.09.2013. With regard the CPC had to pay US $ 60 million to to the Citi-bank transaction the Court the Standard Chartered Bank under the delivered the decision in favour of the Deed of Settlement entered with them. CPC, and the decision with regard to The legal and other costs the CPC had Deutsche Bank transaction was to incur had been US $ 15.3 million pending. whereas only US $1.3 million had been The Committee observed that as per earned from the Hedging transaction. its directive a special audit had been carried out by the Auditor General on the procurement of Petroleum products during the period of 01.06.2011 to 30.06.2012. They had found that the loss had been Rs. 8.3 billion. The CAO/AO stated that

Report from the Committee on Public Enterprises of the 13 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE most of the shortcomings pointed out by the Audit had been rectified by then, but there were some shortcomings that could not be corrected due to lack of infrastructure facilities. The Auditor General pointed out that some of the replies received from the CPC with regard to the special audit report could not be accepted, and the Audit had already informed the CPC of such findings. The Committee directed the Auditor General to submit a report indicating such shortcomings to the Committee.

3. The Committee enquired whether the The CAO/AO stated that the CPC, CPC had taken action to black list those had temporarily stopped their suppliers who had supplied substandard supplies, but after an arbitration if it fuel to the country. was found that there had been no fault from their part the Corporation would allow them to bid for tenders. The CAO/AO further added that the CPC continuously check the specifications of the fuel, and as per the agreements the suppliers had to replace the contaminated fuel that had been supplied.

4. The Committee observed that there had The CAO/AO stated that due to been a negative net asset position, and losses incurred by the Hedging the CPC should take action to rectify transaction and the supply of fuel by the shortcomings that had been pointed the CPC at subsidized rates, the CPC out by the Audit. had been making losses for the past several years. On further inquiry, the CAO/AO stated that still the CPC had to supply fuel on credit to Sri Lankan Airlines and Mihin Lanka Ltd.

5. Answering to a query raised by the The Committee directed the CAO/AO Committee with regard to the criteria to submit the criteria prepared by the adopted for the establishment of new University to the service stations, the CAO/AO stated Committee. that the guidelines prepared by the Moratuwa University and approved by

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Major Issues & Problems Identified Comments & Derectives of the COPE the Board of Directors were used when the approval was given for new locations. In addition to that the Board of Directors has the authority to give approval on special grounds deviating from the recommended guidelines.

6. The Committee observed that the CPC The Committee directed the CAO/AO had entered into an agreement to to submit the following reports to the procure fuel with a foreign company Committee; (UAE Company) for a second time on The first and the second agreements the similar terms and conditions as in on the above procurement. the previous agreement and as a result To conduct an internal investigation of including the premium of US $ 54 and find out the responsible officers twice in the second agreement the CPC for the lapse, had overpaid US $ 2,060,842. The The decision of the arbitration. committee enquired whether any action had been taken against the officers The Committee having discussed responsible with the overpayment. The about the procurement of fuel from CAO/AO stated that the over payment Govt. to Govt. basis, directed the had already been recovered from some CAO/AO to submit such agreements dues to be paid to the supplier and an to the Committee. arbitration had been taken in Singapore, of which the decision was pending.

7. The Committee noted that sum of US $ The CAO/AO stated that sometimes 795,393.71 and US $ 726,867.31 had it was beyond their control, and been claimed by suppliers as further stated that the every effort had demurrage in the years 2011 and 2012 been made to minimize the delays. respectively. The CAO/AO further added that according to their calculations the payment of demurrages had been reduced up to US $ 844,796 in 2012.

8. The Committee enquired the current The CAO/AO stated that the CPC had performance of the Ceylon Petroleum been able to reduce their losses in the Corporation. year 2012, and as at September 2013, they had been able to show a profit of US $ 2 billion, but due to the adjustments of Hedging transaction it had been converted to a loss. He further assured that the CPC would take every effort to gain profits in the year 2014.

Report from the Committee on Public Enterprises of the 15 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

9. The Committee enquired about an The CAO/AO stated that after they incident which was reported in the got to know of this incident they electronic media regarding some immediately interdicted the two officials of the CPC who had obtained officers who were responsible for the money by stealth and issued permits to case. Bowser owners.

National Youth Services Council 03rd December 2013 Ministry of Youth Affairs & Skills Development

1. Treasury approval had not been The Council had already written to obtained to write off 144 loan balances the Treasury seeking covering amounting to Rs. 6,873,642/=. approval for the said written off amounts .

2. A sum of Rs. 261.3 million had been It was directed to appoint a spent on the constructions and repairs Committee to discuss with the LRC of buildings on the lands not belonging officials , and obtain the title deeds to the NYSC by 31.12.2012. for the said lands.

3. Purchases valued at Rs. 684,295/= had As the CAO/AO stated that the been made in 05 instances in the year money had been spent for urgent 2012 without calling for quotations. requirements of the Youth Sports Festival and other events conducted during that period, the Committee was of the opinion that in such a situation the NYSC should have at least obtained the approval of the CAO and the Board of Directors.

4. Although a sum of Rs. 3,398,200/= had The CAO/AO stated that although been spent for a land at Beruwala they had planned to construct a youth which had been obtained from the hostel and the estimate had been sent UDA at the cost of Rs. 3,330,000 in to the Treasury for approval , the July 2000 for the construction of a Treasury had informed them not to Youth Centre, the development work get involved in new constructions. had not been taken place upto the date As such the NYSC had decided to of examination. invest the money on a suitable project when they receive funds in future.

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5. The NYSC had spent Rs. 588,000/= to The Council had to utilize funds for publish a newspaper advertisement and such purposes at that time, A survey Rs. 71,460/= for a consultant for an had been carried out by the National unsuccessful project implemented for Human Resources Development the students who had failed the A/L Council of Sri Lanka to see whether examination. this project was actually fruitful.

6. Although a sum of Rs. 332,500/= had The Committee directed the CAO/AO been spent for the supply of 3500 food to submit all the information about parcels for a Youth Leaders Awareness the Awareness Programme to the Programme held on 01.05.2011, the Auditor General. agenda of the programme and a letter informing the youth leaders to be present for the programme were not available. It was also reported that even a Resource Person had not participated.

7. It was noted that though a sum of Rs. The volleyball court was constructed 1,287,440/= had been spent on the for the Youth Sports Festival on the construction of a volleyball court in the request of the Youth Social Jayathilleke Stadium at Nawalapitiya in Federation and after a short period it January 2011, it had been removed was decided to upgrade the after 07 months. The reusable materials Jayathilleke Playground to the valued at Rs. 361,000/= had been international level. As such the underutilized while there had been a volleyball court had to be removed fruitless expenditure of Rs. 926,440/=. and the NYSC had discussed with the officials of the District Secretariat with regard to the removed items. Those items could be used to set up a new volleyball court in a new location or distributed among Youth Social Federations.

8. Rs. 1,143,155/= received from the Since it was not so easy to collect such UNESCO Commission in Korea in an amount, the Committee directed to 2009 for implementation of a project discuss with the Hon. Minister and see based on a project report on home whether the Council could get directly garden cultivation, submitted by a involved in this and release funds for the member of the Sri Lanka Youth Social distribution of tool kits, and send a report Federation had not been utilized for the to the UNESCO informing that they had intended project. implemented the project. Otherwise, in future the UNESCO would not release funds for such type of projects.

Report from the Committee on Public Enterprises of the 17 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

9. Although a Land Rover Jeep valued at After an investigation the Council Rs. 1,200,000 belonged to the line had taken action to recover the value Ministry had been brought to the from the salary of officer responsible NYSC in September 2006 for in this regard, and after sometime he auctioning, it had been retained and had returned the engine. used by the Council without the approval of the Ministry. Meanwhile the gear box of the vehicle valued at Rs. 200,000 had been misplaced and the engine had also been sent to the Motor Mechanism unit.

Urban Development Authority 04th December 2013 Ministry of Defence & Urban Development

1. The financial statements for the year The CAO/AO stated that they had 2012 had not been submitted to the prepared the financial statements in Auditor General. accordance with the SLAS & the IFRS and undertook to furnish them to Audit within three weeks.

2. The Committee observed that there had The CAO/AO stated that the revised been some shortcomings in the Corporate Plan had been submitted to Corporate Plan prepared for the period the Board of Directors for approval. 2013 – 2017. The financial results of three preceding years, the organizational chart and the financial values of the targets had not been included in it. The approval of the Board of Directors had not been obtained.

3. The Committee noted that there had The CAO/AO stated that the UDA been 197 vacancies and 92 excess staff had not recruited any staff after the in non-technical grade as at 30th year 2010 and the excess employees August, 2013. were being trained in various fields. After the completion of training, action would be taken to appoint them for the vacancies.

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4. The Committee enquired as to why The CAO/AO stated that about 1250 only the UDA Website had been used local and international investors had when calling for the quotations for the visited and responded for the UDA Transwork Square Development website. He further stated that the Project. investor who had been selected had already paid Rs. 4,365 million out of the total estimate of Rs. 4,995 million. Since there had been a delay in settling the balance Rs. 638 million, the UDA had informed the investor to settle it with an interest of 12% as per the agreement. The CAO/AO further stated that in order to avoid such delays action had been taken to include a new condition indicating a deadline before which they should invest the total amount of the investment, in future agreements.

5. The Committee enquired the current The CAO/AO stated that that was a position of the Hanwella Town Treasury funded project, and the total Development Project. estimate of the entire project had been Rs. 185 million. The Phase I & II of that project had been completed by spending Rs. 43 million and the road way had to be completed. The AO further stated that the CAO had informed them to obtain the balance amount of the fund from the Ministry of Economic Development to complete the project.

6. The Committee observed that the The CAO/AO stated that there were progress of the preparation of about 248 Municipal Councils, Urban development plans and obtaining the Councils and Pradeshiya Sabhas approvals for the identified areas to be identified as the areas to be developed developed had not been satisfactory. and the preparation of all the development plans could be completed by the end of 2014. The Committee directed the CAO/AO to include all those data in the official website.

7. There had been an outstanding Balance The CAO/AO stated that they had of Rs. 139 million from the Rest taken action to recover some of the

Report from the Committee on Public Enterprises of the 19 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE Houses as at 30/09/2012. dues amounted to Rs. 66 million and the balance to be written off. The CAO/AO further informed that penalty charges had also been included in the total outstanding amount of Rs. 139 million.

The Committee was of the opinion that a policy decision needed to be taken so as to hand over the administration of Rest Houses from the UDA, to some other institution, which could do the management properly.

8. There had been an outstanding amount The CAO/AO stated that the Ministry of Rs. 84 million from the Ministry of of Sports had been granted Rs. 84 Sports Million for modernization of Sugathadasa Stadium. As that amount could not be recovered, UDA had written to the Treasury seeking approval to write off that amount.

9. The Committee observed that although The CAO/AO explained that the the UDA had issued debentures worth process of leasing the acquired lands of Rs.10 billion to gain funds for would take some time and hence they acquiring the lands and houses in extent invested the available funds on some of 150 acres and re-locate those other investment which had returned residents in some other location with 3.7 billion earning that was need for more facilities under the first stage and settlement of an interest of 4.2 billion. subsequently 75 acres of land should have been leased out on long terms for raising funds for redemption of debentures, action had not been taken to lease those lands even though 23 months had been elapsed since the issue of debentures.

10. The Committee enquired the total The CAO/AO revealed that the value amount spent for construction of a of a house would be approximately house in Dematagoda Housing Project Rs. 7 million including the land. A which the residents of the acquired house holder had to initially deposit lands were to be re-settled in and the Rs. 50,000/- in the maintenance amount each beneficiary of house had fund, and another Rs. 50,000/- as to pay. registration fee. Thereafter a monthly

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Major Issues & Problems Identified Comments & Derectives of the COPE rental of Rs. 3,000/= for a period of 30 years. Accordingly CAO/AO added that after investing Rs. 7 million, the Government would receive only Rs. 01 million.

11. The Committee discussed about the The CAO stated that he had maintenance of the housing projects. instructed his officials to train the excess staff of the UDA to carry out the maintenance work, until it was handed over to the Condominium Management Authority.

12. The Committee enquired as to why The CAO/AO stated that an Assets adequate information with regard to the Register had not been maintained lands and buildings valued at Rs. 3.7 earlier and at the time it had been billion and the Work-in-Progress prepared and updated, where the re- valued at Rs. 1.9 billion shown in the valuation had also been completed, financial statements had not been and the reconciliation was being furnished to the Audit. carried out in order to incorporate them in 2012 final accounts. With regard to the Work-in-Progress to the value of Rs. 1.9 billion, the CAO/AO stated that some of the projects had been stopped due to lack of funds, and every steps had been taken to incorporate those in 2012 financial statements.

13. The Committee observed that the The CAO stated that since some of arrears of income of the Dematagoda the requirements were not fulfilled in Housing Complex the Housing Complex, there was a by the year 2012 had been increased delay in issuing deeds. The deeds up to Rs. 107 million. could be issued, only when they obtain the clearance certificate from the Condominium Management Authority and the arrears could be recovered thereafter. The CAO/AO further added that by the end of March 2014 the matter could be rectified.

14. The Committee observed that the The CAO/AO stated that at the balances of advances granted by the beginning of June 2012 Rs. 1.1

Report from the Committee on Public Enterprises of the 21 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE UDA had been remained unsettled for million had been written off and the period of 2 to 5 years and over 5 agreed to settle the balance early. years amounting to Rs. 10,255,041/- and Rs. 4,462,088/- respectively.

15. The Committee enquired the current The CAO/AO stated that letters of position of the recovery of the demand had been sent to the tenants outstanding usage charges amounting who had not paid the outstanding to Rs. 92 million, in connection with amounts and also legal action had the Dambulla New Town Plan. been taken against some tenants who had forcefully entered the premises.

16. The Committee questioned whether The CAO/AO stated that the matter action had been taken to pay the arrears had been rectified and all payments of EPF and ETF of the employees. with the arrears had already been made.

17. The Committee enquired the current The CAO/AO stated that having position of the court case with regard to negotiated, it had been agreed to pay the Compensation payable to Waters Rs. 148 million, as the decision given Edge Hotel and to the Urban Settlement by the Attorney General and that the Development Authority. Treasury approval had also been given. The CAO/AO further added that action would be taken to finalize the matter early.

Sri Lanka Standards Institution 5th December 2013 Ministry of Technology & Research

1. Permits had been issued for suppliers to It was mentioned that although the import cement of inferior quality of licence had been cancelled by the which the sample tests for compression SLSI, there had been some instances power had been failed. For instance of releasing stocks while the tests for “Lucky Cement” which was reported to checking the quality were being be of inferior quality had been released carried out. If the manufacturers were to the market. able to increase the quality of the Also permits had been re-issued to product up to the required standard, certain suppliers whose permits had the SLSI could re-issue the permit. been previously cancelled.

2. Some stocks of imported cement, even The approved imported stocks had been though the quality tests had been failed, labeled as “can be released” but if the

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Major Issues & Problems Identified Comments & Derectives of the COPE had been approved and labeled as “can be random checks confirmed that those released”. stocks were not up to the required standard, SLSI had the authority to stop releasing those stocks to the open market. The Committee directed the CAO/AO to collect samples from the open market and test the quality.

3. The total debtor balance as at 31.12.2012 It was stated that Rs. 12.64 million had was Rs.40,858,140/- out of which been recovered by 31 December 2012 Rs.14,838,281/- and Rs.5,041,750/- had and the balance amount would be been outstanding for 2-5 years and recovered in due course. exceeding 5 years respectively.

4. It was observed that although the existing The Committee was informed that procedure was to issue SLS certificate for presently a proper methodology had a period of 03 years on full payment of been adopted where the manufacturer Rs. 300,000/=, there had been instances had to pay upfront and renew the SLS where certificates had been issued for the certificate annually. initial payment of Rs. 100,000/= and those certificate holders had neglected from paying the balance amount.

5. Allowances and incentives amounted to The CAO/AO agreed to obtain the Rs. 20,842,206/- had been paid for covering approval for the same and the unavailed leave in contrary to the Public Committee suggested getting the whole Finance Circular No. PF/PE of 11 incentive scheme approved by the January 2000. Treasury.

6. The Surveillance tests had not been It was stated that due to lack of staff carried out once in 12 months in terms of there had been certain lapses and as at the Certificate of Quality Management the date of examination the tests were System Procedure and ISO-9001 System being carried out on time. Certification Agreement for the institutions which obtained the System Certificates.

7. An outstanding amount of Rs. As the relevant records had been traced 2,724,253/- could not be recovered from with the assistance of the Internal Audit 31 Institutions which obtained ISO-9001 Division, action had already been taken and ISO-14000 certificates as the relevant to recover the dues. files were destroyed.

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Major Issues & Problems Identified Comments & Derectives of the COPE

8. Although a sum of Rs. 1,400,000/- had By then 23 certificates had been issued been received from the Coconut as at the date of examination, while Development Authority to issue GMP work related to 11 industries had been certificates for 44 industries associated completed by spending Rs. 1.2 million. with coconut, only 11 certificates had been issued by May 2013.

9. A balance sum of Rs. 4,079,759/- out of The Committee directed the CAO/AO the funds of the project implemented in to take action to invest that money in a collaboration with the Export fixed deposit account. Development Board to issue quality certificates for small and medium scale entrepreneurs had been idling in a current account for over 03 years.

10. Salaries and allowances amounted to The CAO/AO was directed to obtain Rs.1,084,086/- had been paid by the approval of the Secretary to the Institution for 07 officers who were Treasury before releasing the staff to released to other institutions in contrary other institutions. to the PED/12 Circular.

Associated Newspapers of Ceylon Ltd. 09th December 2013 Ministry of Mass Media & Information

1. The post of Director-Finance in the Board The Committee directed the CAO/AO of Directors which should be appointed to inform the Public Trustee to take by the Public Trustee, had not yet been action to fill the vacancy without filled. further delay.

2. The necessity of a proper editorial policy was broadly discussed since the ANCL’s news papers had often been accused of biased reporting and also pointed out the gravity and seriousness of the repercussion that may cause due to such criticisms against the countries like India.

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3. Rs.4,330,510/- out of Rs.20,472,934/- The CAO/AO stated that the amount of receivable from a private printing press in Rs. 4,330,510/- had been identified as relation to the supply of printing papers an accounting error and that the on credit basis, had been referred to the approval of the Board of Directors had Board of Directors to write off. been sought to adjust it.

4. No return had been received to date for The CAO/AO stated that the ANCL the investment of Rs.1.2 million made in would receive the due value for its the Lanka Puwath Company. shares as it had been planned to rebuild the company in a new profile.

5. No satisfactory action had been taken to The CAO/AO stated that Rs.4.5 million recover the due amount in relation to 109 had already been recovered from the dishonoured cheques worth of Rivira Media Institution for their Rs.16,903,756/-. dishonoured cheque and further mentioned that the legal process was underway to recover the value of other dishonoured cheques.

Central Environmental Authority 10th December 2013 Ministry of Environment & Renewable Energy

1. 10 landfills to be executed under the The CAO/AO stated that the total “Pilisaru Project” had not been allocated amount for the project had not implemented by 11th September 2012, been received by the CEA and it was even though Rs. 1151 million had already difficult to find suitable lands in some been allocated by the initial estimate. areas for sanitary landfills. Further, the required technology for executing landfills was also not available in Sri Lanka. However, as stated by him some projects had been completed by then and another 04 landfills would be implemented with Korean funds.The Committee was of the opinion that the CEA should have done a feasibility study before including such a project in the Corporate Plan and directed the CAO/AO to submit a comprehensive report to the Committee including the expenditure (Capital & Recurrent) of the “Pilisaru Project” from 2008 – 2012.

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Major Issues & Problems Identified Comments & Derectives of the COPE

2. The following malpractices had been The CAO/AO was directed to submit a identified with regard to the solid waste detailed report to the Committee on the management project in Dompe funded by entire project after carrying out an the Korean Govt. for a total value of Rs. investigation. 37,597,609/-.

An amount of Rs. 19,483,222/- had been over paid, as the tender had been offered to the 6th highest bidder, by neglecting the justifications of the lower bidders.

A loss of Rs. 30,140,320/- had been caused to the Authority since Rs.295/- per cubic meter had been paid to the contractor instead of charging Rs. 45/- from him for the removal of 88,648 cubic meters of earth.

3. Under-qualified personnel had been The CAO/AO stated that due to the appointed to the posts of Senior Engineer prevailing low salary scales they could and the Deputy Manager (Public not recruit an engineer as per the SOR Relations) in the “Pilisaru Project”. even after several efforts and as such the Deputy Manager (Procurement) who possessed experience in the relevant field had been appointed to the post of Senior Engineer with the approval of the Board of Directors on the recommendation of the Project Director. His service had been terminated as at the date of examination.The Committee was of the view that the Authority was bound to follow the SOR and the CAO/AO was directed to submit a report on the matter.

4. The Committee observed the following The CAO/AO stated that action had weaknesses with regard to the compost then been taken to overcome the above yard project in Kalutara. shortcomings and waste water was collected for re-using in composting. Although Rs. 2,961,500/- had been paid The waste water had been emanated to a contractor for the removal of garbage due to practical problems of the from the project site and filling the site labourers. He further added that huge with soil and sand, the work had not been amount of clinical waste were also

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Major Issues & Problems Identified Comments & Derectives of the COPE done. being dumped at the adjoining site which was out of the boundaries of the Although the yard had initially been project site of the Authority. constructed for recycling garbage from 04 Local Authorities, the garbage from The Committee pointed out that the only 02 Local Authorities was being objective of establishing the CEA was recycled. to solve such environmental issues and therefore it was the responsibility of the As an environmental impact assessment CEA to attend those issues. had not been done prior to the construction of waste water storage tanks, waste water emanated from garbage flowed out of the project site.

5. A sum of Rs. 44,984,504/- had been The Committee directed the CAO/AO granted for 17 Local Authorities to to submit a report on this matter. construct small scale compost yards and they had not been constructed even upto August 2013.

6. Although the CEA had provided Rs. The CAO/AO stated that the follow up 103,518,945/- to 45 Local Authorities for action had been taken and the relevant solid waste management, those compost reports obtained by those Local yards had not been commenced and the Authorities had already been submitted CEA had not carried out follow up action to the Auditor General. to ensure the achievement of the intended The Committee suggested that such objectives of the projects. issues should be forwarded to the Divisional Co-ordination Committee through the District Co-ordination Committee so that proper monitoring could be done. The CAO/AO was directed to submit a comprehensive report with regard to the above 45 projects.

7. In spite of complaints made by various The CAO/AO stated that as per the BOI parties against the gloves manufacturing Act, environmental certificates had to factory in Rathupaswala, environmental be issued by the BOI with the certificates had been issued upto the year concurrence of CEA for the industries 2013 without proper investigations. registered under the BOI as such any Further the environmental certificates had complaint regarding those industries been issued by testing the water samples should be forwarded to the attention of provided by the factory owner instead of BOI. collecting the water samples by the officers of the Authority themselves to The Committee stressed that it was the

Report from the Committee on Public Enterprises of the 27 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE verify whether the pH value was in the duty of the CEA to test the pH value of appropriate range for human the water samples collected by the CEA Consumption. officials themselves and directed the CAO/AO to submit a comprehensive Even though the pH value of the tested report on that issue to the Committee. water samples had been 3.5 – 6.5, CEA had given its consent to issue the environmental certificate where as the pH value of industrial waste water should be within the range of 6.00 – 8.5 according to the Gazette notification of 1st February 2008.

8. The Committee questioned about the The CAO/AO was directed to submit pH value of the pipe borne and well in writing to the Committee on the water as well separately. appropriate pH ranges of pipe borne water and well water suitable for drinking.

University of Colombo 11th December 2013 Ministry of Higher Education

1. The Committee questioned about the The CAO stated that the 2011 Annual presentation of the 2011 and 2012 Report had already been tabled in Annual Reports in Parliament. Parliament. The Committee directed the CAO/AO to take action to table the 2012 Annual Report in Parliament early.

2. The Committee observed that there had The CAO/AO stated that they had been 216 vacancies in the University recruited 41 in the year 2013 out of out of which 136 vacancies had been in which 32 were for the academic the academic grades. grades. He also stated that during that period 33 staff members had left the University on account of retirement or resignation. On further questioning, the CAO/AO stated that the university had faced a problem of recruiting administrative staff due to the prevailing low salary scales, and they had planned to revise the qualifications of the administrative staff to suit the existing salary scales.

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3. The Committee enquired the current The CAO/AO stated that necessary position of the recovery of outstanding amendments had been done amounts due from the lecturers who empowering the University Grants had breached the agreements, and Commission to recover the dues from whether the university had made the provident funds of the defaulters necessary amendments to the without their consent. With regard to agreement enabling the dues be the court cases, the CAO/AO stated recovered from the Provident Fund of that one judgment had been received those who had violated the bond in favour of the University, and they agreements. were in the process of implementing the court orders. The CAO/AO was directed to take action to send letters of demand to the rest of the defaulters quoting the judgment.

4. The Committee enquired as to how The CAO/AO stated that since there research allowances amounting to Rs. were a number of faculties in the 58,366,090 had been paid to 502 University, the Research Reports lecturers without obtaining the approval were forwarded to that particular from a Research Committee accepted Faculty Board for approval, and by the senate, as per the Management thereafter the reports were submitted Circular No. 45 of April, 2011. to the senate. The CAO/AO was directed to send that particular decision to the Auditor General, where the Faculty Boards had been authorized to give such approvals.

5. Committee observed that out of a The CAO/AO stated that by then the sample test of 100 lecturers, 44 had not matter had been rectified. submitted the relevant research information to the Audit, even though Rs. 4,847,440/- had been paid to them.

6. Committee enquired as to how seven The CAO/AO stated that the lecturers who had not involved in academic administrators were also research activities had been paid a paid the research allowance and he research allowance of Rs. 524,571/-. was directed to explain the Auditor General as to who entitled to research allowance.

7. The Committee observed that in The CAO/AO stated that as those contrary to the provisions of University positions were very important and Establishments Code, 04 academic and very difficult to find experienced

Report from the Committee on Public Enterprises of the 29 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE non-academic retired officers had been persons for those positions, their reinstated. services had been extended. He further stated that 03 new staff members had already been recruited and they had advertised to recruit two other officers, and once the new appointments were given, the services of the above officers would be terminated.The Committee was of the view that if the University needs to extend the services of any official, they could obtain Cabinet approval indicating the reasons for extending their services.

8. Committee noted that some of the The CAO/AO stated that they had faculties and departments of the prepared separate ledger accounts for University had established separate their convenience, and the income funds violating the Universities Act and and expenditure statements of the the Treasury Circulars and an amount funds had been submitted for audit. of Rs. 119,069,767/- had been The Auditor General pointed out that accumulated in those Funds. income and expenditure of those funds had not been shown in the final accounts and the University had to proceed as per the Paragraph 99(1) of the Universities Act. The Chairperson of the UGC wanted to know whether they could obtain approval from the Treasury to establish separate funds when necessary in Universities Island wide, since they need to have money for the wellbeing of the University. The Committee was of the view that the Universities management could submit a Cabinet paper indicating their necessity of establishing separate funds and those funds need to be audited by the Auditor General.

9. Committee observed that although the The CAO/AO stated that at the time the procurement guidelines clearly specified Engineer who was attached to the a specialized person in the respective University had resigned from the post field should be appointed to the Technical and due to urgency prevailed the Evaluation Committee, an amount of Rs. consultancy service had been given to 20,842,673 had been incurred on the CECB. The Committee did not accept

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Major Issues & Problems Identified Comments & Derectives of the COPE contract for repairs and development of the explanation given by the university the new Art Gallery without such an officials, since there were engineers expert in the Technical Evaluation attached to other universities, where Committee appointed for the purpose. they could have appointed one of them to the Technical Evaluation Committee.

10. The Committee noted that 02 officers had The CAO/AO stated that one officer obtained advances amounting to a total of had already settled the advance Rs. 408,511/- and action had not been amounting to Rs. 350,000/- and the taken to recover the money even by 01st other officer had agreed to settle by the November 2013. end of the year, since he had not completed his research. The CAO/AO further stated that at the last Audit & Management Committee, they had decided to recover the due amount from his salary, if he failed to settle the advance before the given date.

11. The Committee observed that a contract The CAO/AO stated that this contract in respect of the construction of a had been awarded to the lowest building for Clinical Medicine tenderer by a Cabinet Procurement Department had been awarded to a Committee. He further added that the private company for a value of Rs. construction work had been completed 47,644,945/- in December 2004. as at the date of examination and the Although, in term of the agreement, the building was being used to conduct construction work should be completed lectures and to hold examinations from within 18 months, construction had not the year 2011. been completed after a period of 8 years and an amount of Rs. 92,353,867/- had been incurred by the University for the construction exceeding 93.8 percent of the initial value of the contract by March 2013.

12. The Committee noted that the chairs The CAO/AO stated that action had purchased at a cost of Rs. 7,227,023/- been taken to repair those chairs. had been broken.

13. The Committee enquired as to why the The CAO/AO stated that due to some hostel situated at Thelawala renovated problems this hostel was closed for at a cost of Rs. 22 million which can about 02 years, and it was being provide facilities to 500 students had renovated presently, with a view of been closed from the year 2010. giving accommodation for about 600 students by January 2015.

Report from the Committee on Public Enterprises of the 31 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

Geological Survey & Mines Bureau 12th December 2013 Ministry of Environment & Renewable Energy

1. There had been debtor balances The CAO/AO was directed to take amounting to Rs. 15,167,885/- and early action to recover the dues. Rs.6,071,830/- due from the private sector and Government sector respectively as at 31.12.2011.

2. Contrary to the Finance Act, the The Committee directed the CAO/AO Bureau had invested Rs. 516,421,790/- to take action to deposit in in fixed deposits. Government Banks.

State Mortgage & Investment Bank 13th December 2013 Ministry of Finance & Planning

1. The Committee observed that although The CAO/AO stated that; As the the Corporate Plan for the period 2013 Non-Performing Loan (NPL) ratio – 2017 had been prepared the following had been increased, the Bank was targets in the 2012 Action Plan had not very much concerned when granting been achieved. Annual Growth rate of loans. He further stated that however the loans and advances, Introduction of the actions had been taken to increase ATM, Credit Card Systems and on line the annual growth rate of loans up to banking facilities. 13%. The introduction of ATM system had been delayed until the common gate system was introduced by the Central Bank. He further stated that the introduction of the credit card system would also be carried out in parallel to the introduction of the ATM system. The Committee directed the CAO/AO to take action to prepare the Corporate Plan accordingly.

2. The Committee noted that the The CAO/AO stated that as pointed Procurement Plan for 2012 had by the Auditor General, the Bank been prepared. had not done very much of purchases in the year 2012, and that action would be taken to prepare the Procurement Plan in the future.

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3. The Committee observed that there The CAO/AO stated that the Bank were 99 vacancies in the approved had decided to establish more cadre. branches island wide, and in accordance with those operations the action had been taken to recruit 50 Banking Assistants and 15 Management Trainees. The CAO/AO further stated that by next year the Bank would be able to fill all the vacancies.

4. The Committee enquired the current The CAO/AO stated that a Technical position of Etablishment of the Fully Evaluation Committee had been Automated Core Banking System. appointed at the Ministry level, and all bidding documents had been reviewed by them, and also they had requested the Ministry to appoint a Procurement Committee for further action.

5. The Committee observed that when The CAO/AO stated that the Bank compared with other banks, the Non- had been able to reduce the NPL Performing Loan (NPL) ratio of the Ratio up to some extent by SMI Bank had been high. establishing a Special Loan Recovery Unit and a Law Enforcement Unit. The CAO/AO further added that the Bank had decided to give priority in recovery of loans in the year 2014.

6. The Committee noted that the NPL The CAO/AO stated that at the ratio on EPF loans had been increased beginning of 2011, the NPL Ratio on up to 60% as at September 2013. EPF was 66%, where the Bank had taken various methods to recover those loans. The CAO/AO further stated that the Bank had discussed this issue with the Central Bank and reduced granting the number of EPF loans.

7. The Committee enquired as to how The CAO/AO stated that it had been PAYE tax amounting to Rs. done as per the agreement between 8,649,997/- had been paid by the Bank, the Bank and the employees. The on behalf of employees without Committee pointed out that the

Report from the Committee on Public Enterprises of the 33 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE obtaining approval from the General payment of PAYE Tax by the Bank Treasury. was in contrary to the Bank Act.

8. The Committee observed that the Bank The CAO/AO stated that the property had given a loan amounting to Rs. 9 belonging to the defaulter had already million in the year 2008 and the total been acquired by the Bank, and they outstanding amount as at 10.09.2013 had a problem in obtaining the total had been Rs. 19.6 million. outstanding amount by selling that property due to the low market value, whereas the Bank had decided to sell this land to the current market value with the approval of the Board of Directors, to reduce the loss incurred by the Bank to some extent.

9. The Committee observed that although The CAO/AO stated that the Bank the new loan schemes had been had introduced new saving schemes introduced by the Bank in the year for the self-employees and the 2012 the Act had not been amended so children of Sunday schools and also as the Bank could introduce new they had discussions with the products. Treasury to introduce a Gold Pawning Scheme, since that scheme would be helpful for the people in the suburb areas for their urgent requirements. He further stated that the Bank had to amend the Act before introducing such loan schemes.

The Dy. Secretary to the Treasury informed the Committee that it was the duty of the Bank to go for alternative loan schemes instead of pawning schemes to encourage people to carryout projects, and it would be a good contribution for the development of the country.

10. The Committee observed that the The CAO/AO stated that the inappropriate loan balance of Rs. inappropriate balance as at the date of 236,278,296/- had now been reduced examination had been Rs. 22 million, up to Rs. 53 million, and enquired the and further action would be taken to action taken by the Bank for further reconcile and reduce this balance. reduction.

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Major Issues & Problems Identified Comments & Derectives of the COPE

Housing Development Finance 17th December 2013 Corporation Bank Ministry of Finance & Planning

1. Regarding the Manikkawatte Housing The Auditor General pointed out that Project, the AO having explained the the Rs. 179 million value of the situation stated that this housing project property had been indicated as in the had been commenced by the NHDA by balance sheet. The Committee obtaining a loan from the HDFC Bank, directed the CAO/AO to obtain a and since they could not settle the loan valuation from the Chief Valuer or complete the project, the property before preparing accounts for the year including the housing project was 2013. handed over to the Bank by a deed of transfer. The AO further stated that by then the Bank had sold 16 houses and also advances for 06 houses had been obtained. The AO also emphasized that the Bank grant personal loans to the customers who wish to buy those houses.

2. The Committee noted that deviating The AO explaining the matter stated from the normal interest rate of 18%, that since the Bank was in need of the Bank had agreed to pay an interest long term funds and the deposit was of 22.2% for a fixed deposit of Rs. 450 also matured at the time the million made by the Ceylon Electricity management decided to increase the Board and as a result a loss of Rs. 69 interest rate up to 22.2%, with the million had to be incurred by the Bank. approval of the Director Board in order to keep the deposit with the Bank. The Committee, directed the Deputy Secretary to the Treasury to conduct an inquiry at the Ministry level and submit a report to the Committee within a month’s time.

3. The Committee also noted that the total The AO stated that the EPF was re- deposits of Employees Provident Fund deposited in January 2013, at the of the CEB in the Bank had been Rs. interest rate of 17% to 18%, although 1,900 million as at 30.09.2013 and the the interest rate had come down to 11 interest rate was 18 percent, whereas to 12% by now. She further stated the present deposit yield had been that by January 2014 those deposits 15.74%, and also revealed that this would be matured, and if the CEB deposits represents 11% of the total wanted to re-deposit, they had to

Report from the Committee on Public Enterprises of the 35 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE deposit portfolio of the Bank. invest the money at the prevailing interest rates, and even though the CEB decided to withdraw the deposits, it would not harm to the Bank.

4. It was observed by the Committee, that The AO explaining the issue stated the profit of the Bank had been that the HDFC Bank introduced this increased from Rs. 2,452,167/- to Rs. Annual Review Fee System after 158,948,000/- during the period 31st having discussed with the Central December 2012 to 30th September, Bank. She further stated that although 2013 by introducing a new income the HDFC Bank had not shown high source of an annual review fee. profits they had an income in the Although a total income amounting to going concern process of the Bank. Rs. 146,690,412/- had been accounted On further inquiry, the AO stated that as the new income collected by the Annual Review Fee be deducted introducing this new fee as at only once during the tenure of the 30.09.2013, that amount had not been loan in installments within 2 years. reduced by the Bank.

5. The Committee understood that the The AO stated that the situation had Bank depends on a limited number of been changed as at the date of depositors. Out of the total customer examination as 42% was owned by deposits, more than 47.29% had been 20 depositors, and the balance 58% owned by 20 depositors as at was owned by retail depositors. 31.12.2012, and this situation would adversely affect the going concern of the Bank.

6. The Committee observed that a loan The AO stated that a newly appointed amounting to Rs. 1.8 million granted by staff member had closed the account the Bank on fraudulent documents without knowing the procedure, and which were categorized under Non after recognizing the error, action had Performing Loan had been written off been taken to deposit Rs. 1.00 and the to one Rupee and by keeping Rs. 1.00, account had been continued as a NPL and a staff member of the HDFC Bank account. On further inquiry, the AO had closed the loan account by stated that a complaint had been depositing one rupee of her own lodged at the Fraud Investigation money. Bureau and it was still under investigation.

7. It was observed by the Committee that The AO stated that the Bank had NPL ratio of the Bank had been taken action to recover the EPF loans

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Major Issues & Problems Identified Comments & Derectives of the COPE 20.20% as at 31.12.2012, and the as well as all the other outstanding average of the NPL ratio in the banking loans. sector for the year 2012 was 6.09%.

8. The Committee revealed that although The AO explaining the situation the actual share issue had not been stated that due to the high price of done under the Employee Share Option shares they were not purchased by the Plan (ESOP), Rs. 49,842,936/- of employees and by changing the Trust excesses Share Capital and other assets Deed the bank had decided to grant a had been accounted in the name of a loan to every member of the staff to private firm under the other assets. purchase shares, and the matter would be solved by January 2014.

9. The Committee enquired as to why the The AO stated that by then all Bank had invested Rs. 01 billion in deposits had been invested under new commercial papers and Rs. 2 billion in rates, and only the commercial papers fixed deposits without making a better were available to the value of Rs. 400 evaluation. million and those would also be matured in February 2014. She further emphasized that there would be better opportunities when investments were being made in commercial papers.

10. The Committee enquired as to how a The AO stated that only one or two special gratuity had been paid to staff members would be retired a employees who had completed a year, and after obtaining a valuation service period of 15 years or more done by an Actuary regarding the since the year 2007, while Bank had special gratuity payments, action not provided any provision in the would be taken to make provision accounts with regard to the special from the year 2014. gratuity payments.

National Institute of Education 23rd January 2014 Ministry of Education

1. Out of the approved cadre of 652, there It was stated that the Organizational had been 181 vacancies of which the Chart and the new Scheme of majority was in the academic grades. Recruitment had been approved in the year 2011, and the Treasury had agreed only to release funds for salaries for the 50% of the approved cadre in the first year. Therefore rest

Report from the Committee on Public Enterprises of the 37 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE of the staff would be recruited after October 2014.

2. The Committee discussed the method The CAO/AO stated that the majority of recruiting the senior lecturers and was from the personnel in the was of the opinion that it would be Teacher Education Service who had better to recruit staff for the Senior been promoted or the retired Lecturer posts from those who were principals and also direct recruitments already in the Teacher Education were being done from University Service or in related services. Degree holders with a class.

It was informed that since the salary scales in the related field including the teachers and principal service grades had been at a higher level than that of lecturers in the NIE, they had a problem of recruiting staff from those grades. The Committee suggested that the salaries of the NIE academic staff should be at least on par with the Teacher Education Service or university lecturers and wanted the CAO/AO to make a proposal to this effect to the Govt.

3. An outstanding debtor balance of Rs. The CAO/AO stated that the NIE had 3,237,799/- to be received from the written to the Treasury seeking Ministry of Education for printing approval for the same, but no question papers which remained response had yet been received. outstanding since 2008, had been written off without obtaining the Treasury approval.

4. The Committee discussed about the The Committee directed the CAO/AO training of teachers for the vocational to submit a report on the training of and technical skills education and the teachers for the vocational and quality of the education. technical skills education and their future plans to fulfill the above requirement Island wide within a month.

5. The Committee questioned on the It was stated that HRD plan had preparation of the Human Resources already been prepared and approved Development Plan, its’ activities and by the Cabinet.

38 Parliamentary Series No. 318

Major Issues & Problems Identified Comments & Derectives of the COPE the implementation therein. The Committee wanted the CAO/AO to prepare the Corporate Plan including the goals that were derived from the newly implemented Human Resource Development Plan and submit to the Committee, so that the Committee could assess the performance.

6. The Committee had a discussion on The Committee made the following education of the country. proposals;

(i.) Since around 60% of teachers who teach in primary classes had not been trained in that relevant field, to see that those teachers be trained on primary education,

(ii.) To introduce pedagogy to subjects like Mathematics, Science, Commerce, Economics, etc. at the University level,

(iii.) To make life skills a compulsory subject,

(iv.) To see whether the monitoring and the evaluation could be authorized to the NIE, although preparation of syllabuses, Teacher’s Guides, Text Books were being done by the NIE, while the monitoring/supervision of the education were being carried out by the Ministry of Education at present.

To include stories when preparing English Text Books.

Rajarata University of Sri Lanka 24th January 2014 Ministry of Higher Education

01. The Committee enquired as to why the The Committee was of the opinion University had dropped its ranking in that entering data to the websites of

Report from the Committee on Public Enterprises of the 39 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE the year 2013, when compared with the universities should be monitored that of the year 2011. by an officer appointed for that purpose; so that shortcomings of this 2011 2013 nature would not be reoccur. The Web metric 6226 12,924 committee directed the CAO and the System Sri Lankan 09 13 Chairman, UGC to see whether they University could appoint an officer to monitor all System University websites, and report back the status of each website to the The AO stated that the materials up Secretary to the Ministry and the loaded to the website by the University Chairman, UGC periodically. were taken into account for the determination ranking at the Web metric system, and due to the following reasons there had been a decline of the ranking in the year 2013.

Sufficient number of research papers had not been uploaded to the website during this period. Due to the construction of the roads, the network cables had been damaged, and the University could not even upload the research data available with them.

02. The Committee questioned as to why The AO stated the students who had the failure rates of students had been been selected for special degree risen to such a higher level as 22%. courses had not been included for calculating the failure rates; therefore the actual failure rate should be 17% not 22%.On further inquiry, the CAO stated that they had introduced a system from this year in which every University was required to prepare a strategic plan for a period of 5 years, and submit the budget each year. The implementation and the progress of the plan would be monitored at Ministeril level.

03. The Committee observed that there had The CAO/AO stated that most of the been a large number of vacancies in the vacancies were in the medical faculty, academic and non academic staff and a and pointed out that as the University sum of Rs. 6,668,689 had been paid for is situated in a remote location they the visiting lecturers during the period had to provide accommodation and

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Major Issues & Problems Identified Comments & Derectives of the COPE under review. other facilities to the staff. The CAO/AO further added that due to the low salary scales the University had been unable to fill the vacancies in the senior positions in spite of the number of advertisements published in the newspapers.

04. The Committee observed that, although The CAO/AO pointed out that the University staff was required to University academic staff all over the sign the arrival and departure register world had been exempted from the according to the University requirement of signing the attendance Establishment Code, the academic staff register as their duties are not had been paid salaries and allowances confined to few specific hours of the without confirming the time of arrival day as in case of office staff.The and departure. Committee advised the CAO/AO, to take action to amend the University Establishments Code accordingly, to regularize the matter.

05. The Committee enquired as to why Rs. The CAO/AO stated that they had 33,676,127 earned through the external introduced Centers for Distance & courses had not been credited to the Continuing Education (CDCE) in the University fund as per the previous Universities, and the income received directive of the Committee. from the external courses had been shown separately in the Annual accounts of 2013.

06. The Committee observed that a sum of The CAO/AO stated that as funds had Rs. 18 million had been granted by the not been received from the Treasury Treasury in 2006 to acquire the Police in time to settle some bills of a quarters located in University contractor in December 2011, they premises, and Rs. 9,243,577 received had to withdraw the said amount, but as interest for the above sum had been when they received funds in the used to settle the bills of a contractor following January, that amount was without obtaining the Treasury deposited and the matter had been approval. settled as at the date of examination.

Mihin Lanka (Pvt) Company Ltd. 05th February 2014 Ministry of Civil Aviation

1. The possibility of amalgamating the The Committee directed the CAO/AO two airlines was discussed. to send a report to the Committee

Report from the Committee on Public Enterprises of the 41 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE within two months on the stand of the institution in relation to this matter and also recommended that it could be taken up at the Consultative Committee of the Ministry.

2. The financial position of the institution The CAO/AO stated that the poor had further deteriorated since its last capital structure had paved the way to appearance before the COPE and the this crisis which was further worsen incurred losses from the inceptions in the year 2012/13 due to the were as follows. additional cost incurred on the engine overhaul of the returned leased air Financial Treasury Operating craft. Year Grant Loss Rs. millions Rs. Millions 2012/13 1,950 3,284.42 2011/12 507 1,968.51 2010/11 1,757 940.49 2009/10 785 1,221.38 2008/09 2,454 1,300.47 2007/08 550 3,160.81

3. A significant variation was observed The Committee pointed out that those between the actual income and the factors should have been addressed at projected income and the reason for the the time of preparing the Business shortfall as explained by the CAO/AO Plan. was that the projections on the income had been made subject to the addition of new air crafts to the fleet which had not happened as expected due to its own financial reasons.

4. The present position of the cabin factor The CAO/AO was directed to send a which needed to be increased further report to the Committee in this regard was discussed. along with an assessment on each route.

5. The Committee directed the CAO/AO to submit a breakdown of the total expenditure of the company including the passenger cost, staff cost, financial cost, cost of capital etc. together with the final accounts and

42 Parliamentary Series No. 318

Major Issues & Problems Identified Comments & Derectives of the COPE the Corporate plan.

To be resommoned on 19.03.2014

Sri Lanka Foreign Employment 07th February 2014 Bureau Ministry of Foreign Employment Promotion & Welfare

1. The current position of the encashment As the Committee was not satisfied of 03 cheques amounting to Rs. with the manner the Bureau had 800,000 placing forged signatures was carried out the internal investigations, enquired. and the way the police was carrying out the investigations, directed the CAO to submit a detailed report on this incident and also directed the CAO/AO to meet the Inspector General of Police and enquire the reason for the delay, and to discuss with the Chairmen, Bank of Ceylon and Seylan Bank with regard to the refunding of money to the Bureau, and to report back to the Committee.

2. The current position of the recovery of It was stated that a sum of Rs. 9 the loan of Rs. 20 million given to the million had been recovered in 03 Foreign Employment Agency was installments, and assured that the inquired. balance amount could be recovered before the end of the year 2014.

3. It was enquired whether action had The Committee was of the opinion been taken against the officials that if the Bureau had come to know responsible for the loss of Rs. that a fraud had taken place, they 2,264,660 caused due to the failure of should have taken immediate action handing over the 62 tickets to the travel before submitting it to the agents, purchased for migrants who Presidential Investigations Unit, and did not proceed overseas. directed the CAO/AO to submit a detailed report on this issue.

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Major Issues & Problems Identified Comments & Derectives of the COPE

National Savings Bank 18th February 2014 Ministry of Finance & Planning

1. The Committee queried about non - AO stated that the income received interest income by providing cards ( ATM, credit cards, proprietary cards, etc.) to the customers and the commission received for carrying out various types of international transactions had been shown as non-interest income, but earlier this type of commission was not collected from the customers as done by the other banks. She further added that non-interest income would be reflected in the 2014 financial statements.

2. The Committee observed that Rs. 15 The Committee directed the CAO/AO billion had been granted for to submit a breakdown on the same to infrastructure projects by the bank the Committee.

3. The Committee enquired as to why the The GM/CEO stated that during the interest expenses had been increased. latter part of 2012 and in the year 2013 due to the rising of the interest rates in the market, the Bank also had to offer high interest rates to the fixed deposit customers to retain them with the bank.

4. The decline of the profit in the year The GM/CEO stated that based on the 2013 competition of the market, the bank had to offer high interest rates to the depositors and as such the bank’s interest expenses were increased by 33%, whereas the income had been increased only by 17%. He further stated that at present they had been able to address that situation, as almost all the banks pay the same interest rate.

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5. The Committee enquired the current The AO stated that on the position with regard to the internal recommendations of the preliminary inquiry to be held as directed by the investigations committee conducted Committee regarding the investment of by an external party, charge sheets Rs. 390 million in “The Finance had been issued to two senior officers Company” in the year 2012. at the end of January 2014, and a court case is being heard against the former chairman.

6. The Committee enquired as to how the The AO stated that the Director matter had been handed over to an Board had not mentioned a particular external party, when the COPE had reason as to why they had decided to directed to carry out an internal inquiry. hand over the case to a private party. She further stated that the normal practice had been that this type of investigations are carried out by the internal audit, and since the DGM (Audit) being a suspect in this case, the Board might have decided to hand over the matter to an external party.

7. The Committee observed that Rs. The AO stated that as per the Act of 73,584,480 and Rs. 1,136,500,000 had the Regional Development Bank, the been invested in Regional Development NSB was supposed to invest in the Bank and Sri Lanka Air Lines and the Regional Development Bank. With dividends from 2011 and 2010 regard to the investment in the Sri respectively, had not been received. Lankan Air Lines, it was a Budget proposal, and that with the infusion of capital by the Government, the bank would get this money back.

8. The Committee observed that the SL The AO having confirmed the Navy had paid a sum of Rs. 130 million payment made by the SL Navy, stated to purchase a land in extent of 02 acres that in addition, the Govt. had 03 roods and 31.7 perches which had acquired some blocks of lands and been valued at Rs. 184 million by the transferred to the SL Navy, where the Chief Valuer. bank had to receive compensation from the Govt.

9. The Committee enquired the current The AO stated that out of Rs. 6.2 position on the frauds that had taken million fraud of Bandarawela Brach, place in Bandarawela through an ATM Rs. 2.5 million had been received and the loss of pawned jewelers in from the Insurance Company and a

Report from the Committee on Public Enterprises of the 45 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE Galle Branches. court case was pending to recover the balance amount. With regard to the fraud in the Galle Branch, a court case was going on.

10. 57 branches had been running at a loss The GM/CEO stated that out of the in the year 2011. loss making branches as at 2011, 40 branches had come to a profitable status. He further stated that out of the 19 new branches that were opened in the years 2012 and 2013, one branch had shown profits, whereas other 18 branches were at a loss making level.

11. Strategic Plan (Corporate Plan) The Committee directed the CAO/AO covering the period 2014 – 2016 to submit a breakdown of the cost of capital and a study report on the depositors including the lending, receiving, interest rates, etc. to the Committee.

Consumer Affairs Authority 20th February 2014 Ministry of Co-operatives & Internal Trade

1. The Committee enquired as to why the The CAO stated that he had already appointment of the Chairman, informed the Hon. Minister, and Consumer Affairs Authority had not action would be taken to issue the been legally confirmed. letter of confirmation early.

2. The Committee questioned as to why The CAO/AO stated that at the time 28 members had been appointed to the of formulating the Act, only the Board of Directors. minimum number of members to be appointed to the Board of Directors had been included; a maximum number had not been indicated there in. He further stated that the maximum number of members had been limited to 21 in the amended Act to be presented to Parliament in due course.

The Committee was of the opinion

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Major Issues & Problems Identified Comments & Derectives of the COPE that 15 members would be sufficient for the Board of Directors, and directed the CAO/AO to explore the possibility of reducing the number.

3. The Committee observed that although The CAO/AO stated that although the the CAA had identified 15 goods as CAA had issued an interim order specified goods for price control, the asking the company not to increase Authority had failed to intervene in the price, until an evaluation was controlling the prices of 10 specified done, the company had filed a case in goods. order to prevent the raids. He further stated that the decision of the court Non-fat Milk Powder was pending. With regard to the The Authority had not stipulated a Attorney General’s ruling, the controlled price for non-fat milk CAO/AO stated that it was not powder. The producers and the possible for the CAA to distributors had determined the price at revise/increase the prices their own discretion. expeditiously, within 30 days, since they had to analyze every aspect Full Cream Milk Powder before coming to a conclusion. Four companies had filed court cases against the CAA for not taking action The Committee pointed out that the to revise/increase the price of full Authority had no ethical right to say cream milk powder. The Attorney that it had not been possible to do an General had informed the CAA that analysis for price revision/increase due to the failure of the Authority to within 30 days. make a decision within 30 days from the receipt of the application, the companies concerned had the right to increase their prices.

Infant Milk Foods The CAA had intervened in the price control of infant milk foods through a Gazette Notification. One company had filed a case against the CAA stating that the price increase was not reasonable. The Attorney General had instructed the CAA to withdraw the said Gazette Notification and issue a fresh Gazette Notification, since the CAA had not carried out investigations on the matters properly.

4. The Committee questioned about the The CAO/AO stated that guidelines to following offensive activities in the trade maintain the quality of the bottled

Report from the Committee on Public Enterprises of the 47 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE of bottled drinking water. drinking water had been provided by * Re-filling of unpurified water in the Ministry of Health and the disposed empty bottles. monitoring process should be handled *Action had not been taken to have a by the SLSI. control on this industry and to standardize the quality of the products by using the The Committee pointed out that under powers vested by the Act. Para 12(1) of the CAA Act, the responsibility of protection of consumers had been vested on the CAA, and directed the CAO/AO to take action to issue a Gazette Notification specifying the standards and the quality of the bottled water and report back to the Committee within a month’s time.

Also the Committee wanted the CAO/AO to study and develop a system for the grading of the bottled water in order to eliminate the refilling unpurified water in disposed empty bottles.

5. The Committee enquired about the milk The CAO/AO giving a detailed powder that had been found to be explanation on the tests that were contaminated with DCD. carried out locally and internationally stated that the milk powder that was suspected to have been contaminated with DCD was removed from the market. At the time the ITI had developed all necessary machinery and equipment to do the DCD testing locally. The CAO/AO further stated that all kind of milk powder imported to the port were tested for DCD by the ITI before they were released to the market, and the Ministry of Health had made compulsory that milk food companies should paste a label in every pack of milk powder indicating that the milk powder is free of DCD. On further inquiry the CAO/AO stated that the Food Control Unit functioning under the Ministry of Health had decided that the DCD level of all kind of milk powder that would be imported to Sri Lanka should be zero.

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The Committee directed the CAO/AO to be vigilant on the other food items that were imported to the country.

6. On going through the performance report The CAO/AO stated that those 37 of the CAA, the Committee observed that special raids had been carried out only 37 special market raids had been during the Christmas and New year carried out by the CAA officials. seasons only but not in the entire year, and stated that most of the traders who were engaged in re- packing, changing the expiry dates, etc. were based in Colombo and distribute those items island wide from there.

7. The Committee enquired as to why the The CAO/AO stated that such companies that had been found guilty had provisions had been included in the not been black listed and make the amended Act and companies if found general public aware of the names of guilty would have to be closed down those companies. after the implementation of the new Act.

Sri Lanka Insurance Corporation 04th March 2014 Ministry of Finance & Planning

1. At the outset, the Committee observed The CAO stated that there had been that there had been a judgment an issue with regard to Rs. 2.4 billion, rendered by the Supreme Court on where the earlier management could 04.06.2009, declaring that the legal not submit the relevant details to ownership of the majority of the shares confirm this amount. The Auditor of the Corporation should be vested in General informed the Committee that the name of the Secretary to the after having further discussions with Treasury to be held on behalf of the the Treasury, they would take a Government. The Deputy. Secretary to decision to furnish the re-calculated the Treasury had been directed to profit of the parent company, as per calculate profits during the period the the available data to the Supreme Distilleries Company had been the Court.The Committee wanted the parent company of the Corporation, and CAO/AO to send a report to the the profit corresponding to that period Committee after finalizing the matter be paid to the Distilleries Company.The with the Supreme Court. Auditor General pointed out that in the absence of the confirmation of balances; the auditors were not satisfied with the completeness, existence and

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Major Issues & Problems Identified Comments & Derectives of the COPE accuracy of the amount due from the Distilleries Company, disclosed in the financial statements.

2. The Committee noted that there had The CAO/AO stated that action had been a number of system and control already been taken to implement two weaknesses in the SLIC. systems; the systems of front line *System Limitation, accounting and investments systems. *Differences between the reports The Committee directed the CAO/AO generated by the IT system and the to furnish a report on the said systems general ledger, and its implementation to the *Lack of control implemented on Committee within 06 months. lapsed policies, *Re-Insurance.

3. The Committee enquired the current The CAO/AO stated that at present position on entering into formal rent all rent agreements had been finalized agreements and renewals of the except one agreement, which would agreements. be finalized early. The Committee wanted the CAO/AO to take action to finalize all the agreements within two months time.

4. The Committee enquired whether the The Committee was of the opinion Corporation had taken any action that such persons may have appeared against the fictitious broker, who had in different names, and hence wanted entered into a re-insurance agreement the CAO/AO to make a formal with the SLIC. The CAO/AO stated complaint to the CID about the that after having complained about this fictitious broker, and send a copy of broker to the Insurance Board of Sri same to the Committee, and also to Lanka, his services had been terminated take disciplinary action against the from 2011. The Insurance Board of Sri responsible officers. Lanka had circulated the name of that fictitious broker and the license had also been cancelled.

5. The Committee observed that there had The committee directed the CAO/AO been intances where the SLIC had been to submit a list of such Govt. paying commissions to the Institutions to the Committee. brokers/agent who appeared on behalf of the Govt. Institutions as facilitators when obtaining business from the Insurance Corporation.

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6. The Committee questioned about the The CAO/AO stated that within a period of time taken by the SLIC to week’s time they could pay claims on settle the claims. general insurance, but if there had been any lapses or errors in the source documents provided by the claimant, it would be delayed.

Sri Lanka Institute of Local 05th March 2014 Governance Ministry of Local Government & Provincial Councils

1. The following observations were made The CAO/AO was directed to; in relation to the functions of the institution. (i) Take action to follow the Government Circulars in future (i) Most of the issues highlighted by the Auditor General had been in relation to (ii)Ensure that the audit queries be non-compliance with rules and replied within the prescribed time regulations. period and (iii) Table all the audit queries before (ii)There had been delays in replying to the Governing Council, and make the audit queries sure that those queries would not be repeated in future (iv) Rectify all the matters pointed out in the Auditor General’s Brief Note which were carried out in contrary to the rules and regulations of the Govt. and submit a detailed report on the same to the Committee within two weeks

2. In contrary to the PED-12 Circular, It was stated that incentive of allowances had been paid to the Rs.15,000/- had been paid to every officers from the project funds. officer in the year 2011 on the approval of the Governing Council and the excess had been recovered on the instructions of the Governing Council by the end of year 2013.

The Institution had to obtain covering approval of the Treasury for the payments made and prior approval for the future incentive payments from the project funds if necessary. It

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Major Issues & Problems Identified Comments & Derectives of the COPE was stressed that internal financial control of the Institution need to be further strengthened.

3. According to the Treasury Circular The CAO/AO was directed to apply issued in the year 2010, Local those standards from the financial Authorities should also apply the year 2013 onwards and to take Public Sector Accounting Standards, necessary steps to train the staff of but it had not been implemented as at the Local Authorities on these the date of examination. standards.

He was also directed to submit a report on the progress of the same to the committee within two months .

4. A Media Consultant had been recruited As the CAO/AO stated that initially outside the approved cadre with the he had been recruited for a period of approval of the Governing Council and one year on contract basis and he had paid salaries and allowances for the continued to work on renewal basis. years 2010/2011. The Committee stressed that even for the contract basis appointments the approval of the Dept. of Management Services should be obtained. The CAO/AO assured to regularize the matter as per the Scheme of Recruitment very early.

5. Another Legal Advisor had been The CAO was directed to send a appointed on the approval of the reprimand to the Director of the Governing Council and salaries Institute stating that it was an amounting to Rs. 320,000/- had been improper practice, to send his replies paid, while a Legal Advisor had as to why that had been done, to give already been in service in the reasons as to why the amount paid to Institution. the Legal Advisor should not be recovered from the Governing Council and send a copy of the same to the COPE Secretariat within two weeks’ time.

6. A loss of nearly 4 million had been It was stated that as they were unable caused as a land acquired from the to receive funds on time from the UDA for a sum of Rs. 15,111,237/- to Treasury to construct the building, the construct the administration building said land had been acquired back by

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Major Issues & Problems Identified Comments & Derectives of the COPE for the Institution in the year 2000, had the UDA as per the agreement been taken back by the UDA, by refunding a sum of Rs. 11,070,000/- after deducting agreement cancellation charges, Lawyers’ fees…etc. since the land had been idling for nearly 08 years.

7. The Committee pointed out that the It was stated that they were facing a planning capacity of the Local big challenge in getting the Authorities were at a poor condition. participation and retention of members of the Local Authorities for training programmes. The Committee was of the view that the Local Authorities Act should be amended to make those training programmes compulsory for the members.

8. The Committee discussed about The CAO/AO was directed to conducting Training programmes for conduct joint training programmes for officials of the Local Authorities. members of Divisional Secretariat and Administrative officers and suggested that they could issue a joint circular making mandatory of conducting weekly consultation meetings between the Divisional Secretaries and the Chairmen of the Divisional Secretariat so that the effective results of the training programmes could be obtained.

National Transport Commission 06th March 2014 Ministry of Private Transport

1. The Committee observed many cases of The CAO/AO stated that due to some busses operating without route permits. lapses in the prevailing Act, the NTC has no powers to raid the buses running without permits. They could only make a complaint to the Police. The CAO/AO assured to amend the act after finding out the areas that need to be included in the Act, and submit to the Cabinet within two months time. The Committee directed the CAO/AO

Report from the Committee on Public Enterprises of the 53 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE to send those suggestions to the Committee within a month time.

2. The NTC had paid advances exceeding As the CAO/AO stated that during the the limit of Rs. 20,000 to 05 officers in 08 year 2011, they had paid advances instances amounting to Rs. 2,007,500. exceeding the limit due to various reasons. He further pointed out at present they have to face difficulties when granting advances within this limit of Rs. 20,000/-. The Committee was of the opinion that those Treasury circulars should be amended accordingly.

3. Even though the NTC had spent Rs. Since the Committee was not satisfied 2,977,179 for the construction of the with the explanation given by the NTC, N’Eliya District Office and the Holiday directed the CAO/AO to submit a Resort, the line ministry had repaired the detailed report on this matter to the building and settled the electricity bills Committee stating that the district office and the holiday resort had been allocated for the Hon. Minister’s official use.

4. In the year 2011, 05 route permits had When the CAO/AO stated that all those been issued for the Kottawa-Galle route permits were granted by calling expressway after calling for tenders, and for tenders, and explained the criteria the number of busses had been increased adopted in issuing route permits the to 13 by the end of the year and the 08 Committee directed the CAO/AO to additional route permits had been granted furnish a detailed report on this issue to without calling for tenders. the Committee.

Co-operative Wholesale Establishment 07th March 2014 Ministry of Co-operative & Internal Trade

1. CWE had taken action to write off the The CAO/AO was directed to submit loss of Rs. 5,095,455 caused due to the a detailed report to the Committee missing of 11 Conveyor Motors, including the officers in charge of without recovering this amount from those motors at that time, the period the officers responsible. which those machines got lost, and the reason for not making a complaint to the Police. It was also directed to send letters to all previous chairmen of CWE, , inquiring the steps taken

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Major Issues & Problems Identified Comments & Derectives of the COPE by them to safeguard the assets of the institution, the issues queried at the day’s meeting, especially with regard to the 11 conveyor motors, and send copies to the Committee.

2. The current progress of the recovery of The CAO/AO stated that out of the rent income from 198 above, Rs. 41 million had to be institutions/persons amounting to Rs. recovered from Lanka Sathosa who 124,551,893 was questioned. had agreed to issue shares equivalent to the amount to be recovered and Rs. 22 million to be recovered from the Army had to be written off, since the Army was not in a position to settle that. The balance amount of Rs.56 million had also been partly recovered, but due to accounting errors it had been unable to confirm the amount so far recovered and after completion of the reconciliation process, action would be taken to confirm the balance amount to be recovered.

3. A stock of 140 rice processing As the AO stated that although they machines worth of Rs. 14,501,998 had had called for tenders, the Director been idling in the stores. Board had decided to distribute the machines to self employed persons at the Deyata Kirula exhibition, but another accessory which would cost around Rs. 30,000 – 40,000 had to be installed in order to make it usable , it was directed to appoint a Technical Committee and submit a report including the problems of the machines and the decisions taken thereafter by the TC to the Committee on Public Enterprises..

4. A fraud amounting to Rs. 1,321,285 The CAO/AO stated that two officers had taken place in the sale of bakery involved in the fraud had been products in the years 2009 and 2010, interdicted and further stated that the

Report from the Committee on Public Enterprises of the 55 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE but no disciplinary action had been loss could be recovered from their taken against the relevant officers upto gratuity and the Provident Funds. date.

5. A supervisor not signing the attendance This supervisor was paid Rs. 50,000 Register and also the allowance including all the allowances for amounting to Rs.1,990,999/- had been looking after the two mills and further obtained upto July 2013 contrary to the stated that at present finger print Public Enterprises circular. machines had been fixed to mark the attendance, the two mills had been computerized and the CCTV cameras had also been installed to avoid such shortcomings.

Ceylon Electricity Board 18th March 2014 Ministry of Power & Energy

1. According to the CAO, the CEB had achieved a significant financial improvement by the time of the examination and the power crisis had also resolved to a larger extent with the completion of the coal power plants in Norochchole and adequate rainfall. It was further stated that they would consider recommending the Government to remove the Fuel Adjustment Charge to bring down the unit cost upto Rs.16 once the coal power plant 1 and 2 were connected to the main grid.

2. The Committee enquired the reasons The CAO/AO stated that the for the frequent break downs in the microscopic fractures in certain tubes Norochchole coal power plant. in the condenser had led to a leakage of sea water and added that the work- man-ship failures had given rise to those fractures and not due to substandard equipment. The Chinese government had pledged to make an annual test on the condenser tubes in plant 2 and 3 and also to re-tube those of plant.

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3. The Committee wanted a detailed The total cost of the entire project had explanation on the heavy cost incurred increased upto US $ 1341 million on the coal power plant project. with the subsequent modifications made in the scope of work for the inclusion of items such as official residencies, site developments, resettlement activities etc . The lack of prior experience on coal power plants had made the CEB changed the scope of work from time to time.

4. The Committee enquired about the An electrostatic precipitator which steps taken to minimize the was capable of trapping 99.5 % of the environmental impact of the project. ash generated, had been installed. Further, a sea water spray is used to trap Sulpher dioxide gas which could cause acid and a wind barrier has been used to prevent the dust blowing inside the country.

5. The Human Resources division of the The Committee is of the view that a institution is still headed by an engineer person in a different discipline could in spite of several COPE directives not be trained completely to the level given at previous COPE meetings to of the person who had specialized in rectify the situation. the discipline of Human Resource Management or any other.

6. The Committee enquired whether an The CAO/AO, having stated that he unlimited fuel facility had been offered had no understanding on this matter, to a retired engineer. agreed to report to the Committee after an inquiry.

Mihin Lanka (Pvt.) Company Ltd. 19th March 2014 Ministry of Civil Aviation

Previous date of Examination 05.02.2014 The lack of capital was given as the 1. The Committee discussed the major facts major reason for this situation and as a which had led the institution to a severe result the Company had been driven to financial crisis. borrow loans at higher rates around 12%. However, as stated by the CAO/AO, the average return on investments in the airline industry

Report from the Committee on Public Enterprises of the 57 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE across the world over past four decades had been less than 2%. Nevertheless, the CAO/AO stated that the Mihin had performed well in this difficult situation as it had managed to decrease the loss margin.

2. The Committee discussed about the The total outstanding to the CPC is outstanding amounts to the Ceylon around Rs.4.4 billion and the CPC Petroleum Corporation. charges 12% interest on the outstanding. The Committee directed the CAO/AO to send a report to the Committee on the total outstanding amount due for the CPC and the interest charged thereon along with invoice copies.

3. Out of the total of 10 routes serviced by The former CEO stated that all the Mihin, only two were found to be profit routes except for Dubai and Sajah could making and flying to a destination like be made profitable. Seychelles at a loss of US $ 214000 raised concerns among certain members of the Committee.

4. The Committee enquired as to why the It was stated that offering a meal had no airline, being a low Cost Carrier, offered impact on the loss of institution as its a meal to the passengers incurring an cost was added to the fare. additional cost.

5. The figures of the cost of lease, fuel, The CAO/AO stated that 49% of the labour etc. on the total cost were taken total cost was for fuel and the cost of for discussion. lease and labour on the total cost had been 8.8% and 5% respectively.

6. The reasons for incurring an exorbitant According to the CAO/AO, an cost of Rs.1.2 billion on the engine engine repair generally cost anywhere overhaul were inquired. between Rs.2.5 million to Rs.4 million and the particular engine overhaul had cost around Rs.1.1 million more for the lack of funds in the required moment to settle the cost of the overhaul. During that period, the Mihin had to run a leased engine incurring an additional expenditure.

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7. The Committee directed the CAO/AO to submit a percentage cost comparison between the Mihin Lanka and Sri Lankan Airlines along with a comparison with other regional airlines.

State Plantation Corporation 20th March 2014 Ministry of State Resources & Enterprise Development

1. At the outset, the Committee pointed The AO stated that since all the out the following shortcomings of the officials of the higher management SPC. level took office recently, there had *The Corporate Plan had not been been a delay in updating the updated annually. Corporate Plan, but at present they *The Action Plan had not been were in the process of preparing the prepared. Corporate Plan for the period *Approval had not been obtained for covering the period 2014 – 2018, the the Cadre. Action Plan and the Budget had A Procurement Plan had not been already been prepared. He further prepared. stated that the cadre had already been approved by the Dept. of Management Services, and that they were currently preparing the Scheme of Recruitment and the Scheme of Procedure, and could be completed within a period of 03 months. The CAO/AO was directed to submit same to the committee within three months.

2. It was observed by the Committee that The Committee also directed the Annual Reports from 2010 onwards CAO/AO to take action to table the had not been tabled in Parliament. The Annual Reports that were in arrears CAO stated that after scrutinizing the within three months time in 2010 and 2011 reports by the Ministry, Parliament. those reports had been sent back to the SPC. The Committee wanted the CAO to make sure that immediate action be taken by the Ministry to examine and return such reports to the relevant institution within a month.

Report from the Committee on Public Enterprises of the 59 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE

3. The Committee enquired the CAO The CAO stated that there had been whether there was a directive from the an investigation against a board Presidential Secretariat to dismiss a member by the Presidential member of the Director Board of the Investigations Unit and a report had SPC after an investigation carried out been submitted to the Hon. Minister, by the Presidential Investigations Unit. but they had not received a directive to remove that Board Member. He further added that the respective Board Member had made an appeal to the Presidential Secretariat, and no intimation had been received thereafter. On further inquiry the CAO stated that he had no authority to remove the members of the Director Board. After deliberation, the CAO was directed to discuss with the Hon. Minister and take appropriate action, and report back to the Committee.

4. The Committee observed the following The Committee directed the CAO/AO shortcomings with regard to the to provide a detailed report on every transaction of the Govt. owned land transaction that took place on the situated at Gregory Mawatha. above issue within a month’s time.

The above land in extent of 03 Roods and 37.12 perches had been transferred to the SPC in October 1993, and the SPC had later mortgaged that land to the Bank of Ceylon and obtained a loan amounting to Rs. 50 million in December 2002.

Thereafter, the SPC had sold that land to British Overseas Realty (Pvt) Company for Rs. 243 million in January 2004 subject to some conditions relating to the redemption of the above mortgage. Only a sum of Rs. 11.9 million had been received by the SPC in respect of this transaction, and no details regarding this transaction had been included in the financial statements.

Further the particulars relating to the

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Major Issues & Problems Identified Comments & Derectives of the COPE re-sale and the redemption of the mortgage had not been registered in the Land Registrar’s office.

5. It was revealed by the Committee that The CAO/AO was directed to have 11,905.08 hectares of land belonging to discussions with the relevant the SPC was beyond the custody of the authorities in regard to the SPC, and there were no evidence to identification of the said lands, and identify the present caretakers of such submit a report to the Committee lands. The AO stated that due to lack within three months time. of source documents they were unable to trace those lands, and the only way that they could identify such lands were by means of a land survey, which would cost a huge amount.

6. The Committee enquired as to how The Committee was not satisfied with lands and buildings which had been the explanations given by them, and transferred to Hapugasthenna directed the CAO/AO to discuss the Plantations Ltd.,on lease had been sold matter with the Auditor General and by them to The Finance Company for a submit a consolidated report to the sum of Rs. 100 million. Committee signed by both the Chairman and Secretary within two months time.

7. The Committee noted that out of a The committee directed the CAO/AO stock of tea produced by the Kelebokka to make a complaint to the IGP, Estate, 16,231 kgs. of tea worth of Rs. informing that the COPE was not 7,814,758 had been returned by the satisfied with the manner the CID had broker company without Producing the acted in this case, and to make further stock at the tea auction due to non- inquiries in regard to this matter and suitability for human consumption, and submit a report to the Committee. enquired whether the SPC had taken disciplinary action against the officers concerned. One of the Board Members informed that they had called explanations from the relevant Estate Superintendent, Who had resigned from the post when he was transferred to another estate. He further stated that CID had informed that they could not proceed further due to lack of evidence. Since it was clear that a fraud had taken place.

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Major Issues & Problems Identified Comments & Derectives of the COPE

8. The Committee observed that the The CAO/AO stated that this amount interest amounting to Rs. 2,000,000 to had been accounted as a payable be paid as at 31.12.2011, in respect of a amount, and altogether Rs. 1.1 billion loan of Rs. 20 million obtained from debts had to be settled. the Chilaw Plantations Ltd., had not been stated in the accounts, and as such the loss had been declined by the same amount.

9. The Committee observed that several The Committee also informed that audit files and 23 petitions received action would be taken to summon the against the management of the SPC former chairman of SPC to inquire referred to the Auditor General by the into the investigations carried out by COPE to be investigated had been him, and wanted the present stolen from the Govt. Audit office CAO/AO to conduct an inquiry into situated in the SPC premises on this issue and submit the report to the 06.06.2013. According to Auditor Committee. General even though the Chairman of the SPC, Secretary to the line Ministry and the Police were informed in this connection by the Auditor General, no investigation had been conducted until that date.

Sri Lanka Telecom PLC 21st March 2014 Ministry of Telecommunication & Information Technology

1. The Committee observed a significant The CAO/AO stated that their actual excess in the staff. requirement was around 6000 and also stated that the implemented VRS had also not come off for the higher remuneration drawn by employees. The CAO/AO was directed to furnish a report on the actual carder requirement after an analysis.

2. The Committee discussed about the The Committee directed to furnish a expenditure incurred on advertising. report on the advertising budget of the SL telecom and Mobitel.

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3. Even though the SLT had purchased The Company had been compelled to 75% of shares of the Sky Network Ltd. purchase the required frequency form for Rs.108 million to obtain the the said Company as it had been frequency required for the continuation available only with them at that of service related to WiMax moment.The Committee directed the technology, the Company had been CAO/AO to send a report on this closed down after a couple of years matter after inquiring whether there with no adequate business activities was any fraud at any level behind the done on the ground that the technology entire process and also the reasons for had become obsolete . The transaction not developing the network during looks suspicious as the said company the period 2008-11 except for having which had been formed in 2006, had 70 customers. carried out no business activities other than retaining a frequency until it was The Committee also stated that it was purchased by SLT in 2008. unexplainable as to why the TRC did It was also revealed that Rs.10,468,000 not give a frequency when requested had been paid as director fees during by the SLT and reminded that the the period in which the company did provision were available to take over not function and the person who had any frequency which are not in use. been paid as such had happened to be a Director in the Sky network Ltd.

4. The huge revenue increase does not The high operating expenditure reflect in the increase of profits. incurred on the human capital and the cost of fuel had led to this situation. According to the CAO/AO, the expenses on maintenance and investments were also high due to huge competition in the market.

5. A fairly high amount of Rs.30 billion The CAO/AO stated that they had to has been allocated in two consecutive invest a significant amount on years of 2014 and 2015 for Capital technological improvements as they investments. always had to go for the best available technology due to the nature of the business.

Report from the Committee on Public Enterprises of the 63 Parliament of the Democratic Socialist Republic of Sri Lanka

Institutions Examined by the Sub Committee I

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Report from the Committee on Public Enterprises of the 65 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

National Centre for Advanced Studies 06th March 2014 in Humanities & Social Sciences Ministry of Higher Education

1. A cash grant of Rs.9,290,674/- had A written request had been made to the been released to 17 lecturers not related UGC with regard to amending the to the field of Humanities & Social Ordinance and the UGC had informed Sciences. that it had been referred to a Standing Committee in the UGC.

2. An amount of Rs.2,521,897 had not Two beneficiaries had started been recovered from 04 beneficiaries repaying the dues in installments and who had been awarded with legal action had already been taken scholarships and cancelled against the other 02 beneficiaries subsequently during the period from 2005 to 2011.

3. Although grants amounting to Rs. Most of the progress reports had 18,455,000/- had been released to 30 already been submitted to the Centre lecturers for their researches, the by the date of examination. progress reports had not been furnished to the Institution within the prescribed period.

94. Buddhist and Pali University of Sri 06th March 2014 Lanka Ministry of Higher Education

01. The Committee questioned whether the The AO stated that the lecturers had to University had adopted a system to mark the students’ attendance register record the arrival and departure of the and certify it, Also every lecturer had lecturers. been provided with a time table with lecture hours. They were required to endorse it stating that they had conducted the lectures. On further inquiry the AO stated that the lecturers sign their attendance in their respective departments. The Committee directed the CAO/AO to submit that to the audit.

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02. The Committee observed, that even The AO assured to obtain approval after the previous directive of the from the Treasury for the payment of COPE to obtain approval of the those allowances in future. Treasury, the University had paid allowances to the permanent staff in the External Examination Section without obtaining approval from the Treasury.

03. The Committee enquired as to why the The AO stated that they had rectified approval of the Secretary to the line the matter. Ministry had not been obtained as per the Procurement Guidelines for vehicle repairs exceeding Rs. 200,000 in 03 occasions totaling to Rs. 1,220,240 in the year 2011.

04. The Committee observed that an The CAO/AO stated that the volleyball advance of Rs. 241,810 had been paid court had been constructed on a to a Govt. institution for the request of the lay students, but since construction of a volley ball court, the number of lay students had been without entering into an agreement in very low level, the management July 2010, Although the project had decided to abandon the construction of been abandoned by the year 2014, the the volleyball court. The CAO/AO advance had not been returned further added that the University had some retention money to be returned to the CECB, and they had agreed to set- off the advance from retention money. The AO emphasized that the advance had been paid to the CECB on a written agreement.

05. The Committee noted that a sum of Rs. The AO stated due to various reasons 101,920,000 had been allocated from they could not complete the land the Budget for the acquisition of lands survey, and get the land transferred in and buildings in the year 2012, but due time. He further stated that at the to non completion the necessary request of the Hon. Minister the CAO functions in time there had been a loss, had to transfer Rs. 50,000,000 for a of Rs. 51,920,000 and Rs. 50,000,000 project, but the said amount had not had been transferred by the line been released by the Treasury. ministry under F.R.66.

Report from the Committee on Public Enterprises of the 67 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

Postgraduate Institute of Pali & 06th March 2014 Buddhist Studies Ministry of Higher Education

01. At the outset, the Committee pointed The CAO/AO assured to take action to out the following shortcomings of the rectify those shortcomings without Postgraduate Institute of Pali & delay. Buddhist Studies

Corporate Plan had not been prepared properly. Action Plan had not been prepared for the year 2011. Action Plan for the year 2012 had not been Prepared according to the required standard. Annual Reports from 2012 onwards had not been tabled in Parliament.

02. The committee observed that although The CAO/AO stated that they were the construction of a permanent searching a suitable land in Colombo building for the institute had been or Suburbs and as soon as a land was included in the corporate plan and the found they would propose to Action plan; a building rent of Rs. government to acquire the land. 4,695,000 per year had been paid in the years 2012 and 2013. And a building at Kohuwala had been procured at an annual rent of Rs.9, 175,000 w.e.f . 01 February 2014.

03. When the committee enquired as to The CAO/AO stated that they had no why the stock of publications had been Storekeeper at that time, and a report computed by taking into account. 477 with a comparison of the balances for books of 12 publications more than and 05 years had been prepared after 162 books of one publication less than appointing a new Storekeeper. They the stock balance as at the end of the were able to submit that report for the year 2011, the value of the stocks had audit purposes soon. been overstated by a sum of Rs. 113,420. Even though the value of the stocks of consumable goods account according to the main ledger amounted to Rs. 456,250 the value of the physical stocks amounted to Rs. 271,196. As such the stocks of consumable goods

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Major Issues & Problems Identified Comments and Directives of the COPE had been overstated by a sum of Rs. 185,054.

04. The committee observed that a sum of The committee was not satisfied with Rs. 8,425,286 had been paid as salaries the way of recording the attendance of and allowances for the academic staff the Lecturers and directed the but relevant books and registers had not CAO/AO to evolve a system to prove been maintained for confirmation of the Lectures attendance. arrival and departure of them.

05. The committee enquired as to why a The CAO/AO stated that a register of register of Fixed Assets had not been Fixed Assets had already been maintained in respect of fixed assets completed and they would submit that worth Rs. 26,332,811 as at 31 to the Auditor General in two weeks. December 2012.

06. The Committee observed that the The CAO/AO stated that it depends on institution conducted two Masters the results of the Pracheena Final degree courses in Buddhist Education Examination. Also the percentage of and the registration of students for the the registration of students increased if course in English had been increased the above examination results were but registration of students for the released before the commencement of course in Sinhala had been decreased the Master Degree courses. when compared with the preceding to the year under review.

07. The committee enquired as to why the The CAO/AO stated that the 90% of pass rate of examinations had been low the students were employed and they in the year 2012. were unable to sit for the examinations due to their leave problems and other unavoidable reasons.

Vocational Training Authority of Sri Lanka 07th March 2014 Ministry of Youth Affairs & Skills Development

1. The Committee questioned about the The Committee was not satisfied with sum of Rs. 8,164,703 that had to be the actions taken by the Authority and recovered from 03 officers who had directed the CAO to be present before been granted study leave with salaries the Committee along with the Director and not reported back for the work. Administration, Director General,

Report from the Committee on Public Enterprises of the 69 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE Accountant and the Legal Officer who were responsible for the negligence, on the day of next COPE Meeting. It was also directed to submit a detail report in this regard to the Committee.

2. The Committee observed that Rs. 1.119 The CAO/AO stated that the officer had been obtained by an officer as the concerned had been dismissed and rental for hiring a vehicle on a monthly awaiting for the legal advice for rental of Rs. 40,000 for the period from further action. The Committee directed September 2008 to December 2010. In the CAO/AO to take immediate action an investigation it had been found that to inform the CID and also to take civil that officer had fraudulently claimed action before next summoning to the rental for his own vehicle. COPE meeting.

3. The Committee enquired the current The CAO/AO stated that they had position of the payment of taken steps to resolve the matter and Rs. 2,643,114/- to a contractor for the assured to settle that soon. preparation of Fixed Asset register without deducting VAT and withholding Tax.

4. The Committee inquired about the The CAO/AO explained the progress of acquiring the lands where difficulties in completing the process 26 buildings had been constructed by and assured to finalize the matter as the Authority. early as possible.

5. The Committee having discussed 55 The CAO/AO stated that all those instances of employees being recruited employees had already been reverted and promoted in contrary to the to the correct salary scales and pointed Management Services Circular and out that the amount over paid could not having placed them on higher salary be recovered as the salary scales of the scales inquired what remedial action Authority had been very low compared had been taken to resolve the matter. with other similar institutions. The Committee advised to discuss all the matters in the Authority and inform the situation to the Treasury for a long- term solution.

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6. The Committee enquired regarding a The CAO/AO replied that the director director who had obtained salary other concerned had received only an than his substantive post from another allowance from the Central Cultural institution. Fund as a Board Member. The Committee directed the CAO to write to the Central Cultural Fund and find out the factual information.

7. The Committee questioned about the The CAO/AO stated that action had debtor balance of Rs. 43,554,442 as at been taken to identify the balance 31.12.2011. separately and to settle those amounts as far as possible. An amount of Rs. 05 million receivable from the previous Ministry and erroneous accounting figures were included to this amount he added.

8. The Committee questioned as to why The CAO/AO was directed to submit bills had not been furnished for Rs. required details with certified bills 1,150,000 spent in connection with Sri without further delay. Sambhuddhatwa Jayanthi celebration.

9. The Committee observed that the The CAO/AO stated that they had Authority had paid Rs. 4,446,919 as reduced that number to 08 and also salaries to 20 employees released to the wrote to those institutions to revert Ministry and other institutions. them. The Committee directed to submit a report with the details of those 08 employees together with copies of those 08 letters requested to revert them.

10. The Committee questioned as to why The CAO/AO stated that the action had not been taken to fill the recruitment procedure had been vacancies of Director General, Director prepared and forwarded to the Finance and Director Administration. Management Services Department and the vacancies would be filled soon after the receipt of their approval.

Report from the Committee on Public Enterprises of the 71 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

11. The Committee also questioned about The CAO/AO stated that this company the establishment of VTA Holdings was established as per the Act of the Company. Authority. The Committee directed to obtain Cabinet approval for that matter as the company used public funds.

University of Vocational Technology 07th March 2014 Ministry of Youth Affairs & Skills Development

1. Covering approval of the Treasury had The AO was directed to regularize the not been obtained for the written off matter early. amount of Rs. 1.4 million from the accounts with regard to the payment of allowances to the staff from the funds received for Korean Training Courses.

2. The Committee enquired whether the The AO stated that as the land action had been taken to get transferred belonged to the Urban Development the land belonged to the Sri Lanka Authority, it had been referred to the National Institute of Technical legal division of the UDA. Education as per the Act of the University of Vocational Technology.

3. A building constructed for the official The AO stated that even though that quarters at a cost of 4.7 million had building had been constructed at the been idling from the year 2011. inception of the University to be used by the Director General of the National Institute of Technical Education, it had not been utilized and it was then being used for various functions, conducting meetings and by the volunteers of external organizations after refurbishing.

4. It was discussed about the courses The CAO/AO was directed to; conducted by the University and the (i) Expedite the skills development Vocational Technology Education in programmes particularly in North and the Country and appreciated the East of the Country University of Vocational Technology (II) To consider the possibility of for having less number of audit queries. establishing Public-Private partnership

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Major Issues & Problems Identified Comments and Directives of the COPE with the Military forces (III) To send a report to the COPE secretariat within a month on expanding the Public-Private Partnership lead by the Ministry specially for Training of Trainers

Tertiary & Vocational Education 07th March 2014 Commission Ministry of Youth Affairs & Skills Development

1. The loan balances from two employees, It was stated that steps had been taken one who had vacated the post and the to recover those amounts and that the other one who had been dismissed from two employees had agreed to pay the the service had not been recovered. loan balances in installments and in case failure action would be taken to recover from the guarantors or the legal action would be taken against them.

2. A separate vehicle had been allocated Since the CAO/AO stated that as for 06 offices and Rs.12,000/- had been directed in the previous COPE paid to each officer as fuel allowances meeting, ministry had submitted a without taking the proper approval in memorandum to the Cabinet of respect of providing group transport Ministers for approval in this regard facilities as per the PA Circular the Committee was of the opinion that No.22/99 of 1999. this matter does not need the cabinet approval , and the Secretary to the Ministry of Public Administration can grant the approval and the AO agreed to get the approval very early.

Report from the Committee on Public Enterprises of the 73 Parliament of the Democratic Socialist Republic of Sri Lanka

Institutions Examined by the Sub Committee II

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Report from the Committee on Public Enterprises of the 75 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

Coconut Development Authority 18th February 2014 Ministry of Coconut Development & Janatha Estate Development

1. The Committee enquired as to why the The CAO/AO stated that as there was required number of Audit & a delay in appointing the Board of Management Committee meetings had Directors, they could not hold Audit & not been conducted in 2013. Management Committee meetings for the last two quarters of 2013 and assured to conduct the Audit & Management Committee Meetings regularly in the future.

2. The Committee observed that an The CAO/AO explained that this Interest of Rs. 20 million recoverable amount was due from the BBC from a Limited Liability company for Company which was to be liquidated the period 2008-2012 in respect of a in the near future. The CAO/AO also loan of Rs. 26,715 million had been stated that this company would settle shown in the accounts without the principal amount excluding the recovering. In addition an interest free interest in the liquidation process and loan amounted to 31.55 million had the Treasury approval for that would been granted to same Company in 2004 be sought. also remained without being recovered.

3. The Committee queried about the The CAO/AO explained that Rs. present situation of an interest free loan 550,000 had been received and legal amounted to Rs. 02 million granted to actions had been taken to recover the a company to be settled within 06 balance. months in 2006.

4. The Committee questioned as to why a The CAO/AO stated that the officer misappropriated amount of Rs. concerned had gone abroad and legal 1,664,769 inclusive of the interest had actions had been taken against him to not been recovered from the officer recover the said amount. Action had concerned since 1998. also been taken to avoid such lapses in the future.

5. The Committee questioned about the The CAO/AO stated that the amount outstanding amount of Rs. 1,650,000 was being recovered on monthly receivable by the Authority as rental for installment basis. the building leased out to the State Plantation Corporation.

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6. The Committee also questioned about a The CAO/AO stated that a portion of recoverable amount of Rs. 2,931,691 that amount had been recovered from from desiccated coconut millers as the the Mills Development Funds and all ground rent relevant to coconut and the necessary actions had been taken to copra auctions. recover the balance.

7. The Committee discussed in detail The CAO/AO stated that they have about the necessity of encouraging the already taken actions to encourage the registration of coconut oil Millers and registration of oil millers and improve pointed out that the Authority should the quality and standard of the coconut take action to improve quality and oil. standard of the coconut oil.

8. The Committee questioned as to why The CAO/AO stated that they had the Desiccated Coconut Mills rectified the previous lapses and the Development Fund had been left money in the fund was being utilized dormant. effectively at present.

9. The Committee observed that a sum of The CAO/AO stated that the capital Rs. 5 million allocated under capital fund had to be used for the payment of expenditure had been utilized for salaries to casual workers at the Coir recurrent expenditure. Research and Development Center at Dunkannawa. The CAO/AO further stated that the Center had been handed over to the Coconut Research Institute on 21/01/2014 and assured there would not be such lapses in future.

10. The Committee questioned about not The CAO/AO revealed that they had to implementing a database for gathering give up the project. information of the manufacturers of coconut related products by networking Processing Development Division and Regional Offices spending Rs. 2.18 million.

Coconut Cultivation Board 18th February 2014 Ministry of Coconut Development & Janatha Estate Development

1. The Committee enquired about the The CAO/AO stated that the no investigation carried out on the loss of person could be responsible for the Rs.1.7 million incurred by the Egg loss since it had been due to the

Report from the Committee on Public Enterprises of the 77 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE Production Unit in the Maha Yaya decrease of sales during that period Model Coconut Garden. consequent to the spread of the bird flue.

2. The present position of the Weligama The CAO/AO stated that 95% of the Leaf wilt disease was discussed. disease had been brought under control and compensation had been made for the evacuated trees.

3. The Committee wanted the CAO/AO to The CAO/AO stated that they had explain about the proposed Coco planned to develop their certain estates tourism project. as tourist resorts as most of the gardens had been located in close proximity to tourist sites. Accordingly, souvenir shops, cultural shows and awareness programmes on various coconut products were expected to be included in the project.

Ceylon Fishery Harbours Corporation 18th February 2014 Ministry of Fisheries and Aquatic Resources

01. The Committee observed that the The CAO/AO stated that due to some Annual Reports from 2010 onwards deficiencies in the 2010 financial had not been tabled in Parliament. statements there had been a delay in presenting the Annual Report and at present action had been taken to submit the 2010 and 2011 Annual Reports to the Cabinet for approval. The CAO/AO further added that the preparation of the 2012 Annual Report would also be completed by end of April 2014. The Committee directed the CAO/AO to ensure that the 2012 and 2013 Annual Reports also be tabled in Parliament early.

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02. The Auditor General informed the The CAO/AO stated that since there Committee that there had been delays had been some shortcomings in the in submitting the accounts to the 2010 accounts, as requested by the Auditor General’s Dept., and as such Auditor General at the last COPE they had difficulties to audit the meeting, the accounts had to be accounts in time. withdrawn, revised and re-submitted. Accordingly there were delays in submitting the 2010 and 2011 accounts. The Auditor General informed that the 2012 financial statements were received only today, and to see that the 2013 accounts be submitted to the audit within two months time. The committee directed the CAO/AO to submit the 2013 accounts to audit by 31st March, 2014.

03. The Committee observed that there had The CAO/AO having accepted the been 09 unanswered audit queries delay stated that they submitted the issued for the year 2013. replies only the day of this examination. The Committee directed the CAO/AO to ensure that replies to audit queries be submitted to audit without delays.

04. The Committee enquired as to why The CAO/AO stated that those there had been 618 staff in excess to the employees were also included in the approved cadre of 1015. Corporation’s cadre, the Corporation had been directed to provide security services for all the institutions coming under the Ministry of Fisheries and Aquatic Resources as per a Cabinet decision in 1996, and that, he further stated that according to their statistics there had been only 61 excess staff. Security Staff salaries were paid by the Corporation, and later on reimbursed by the respective institution. On further inquiry, the CAO/AO stated that a provision of Rs. 9 million is being received by the Treasury to pay salaries, and the balance amount, approximately Rs. 28 million had to be

Report from the Committee on Public Enterprises of the 79 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE borne out of their earned funds. The Committee directed the CAO/AO to submit the correct position of the cadre to the audit.

05. The Committee noted that the loss of The CAO/AO stated that it was too the Corporation had been increased to early to show a profit from the newly Rs. 255 million in the year 2012, and constructed 05 harbours, and that they 12 harbours out of the 20 Fishery had initially established the fishery Harbours, had been making losses. harbours to provide services, but they had adopted their future plans to reduce the losses and show a profit or at least to come upto the break-even level soon. The CAO/AO further added that during the off-season they were unable to earn any income from the fishery harbours. The Committee pointed out that the Corporation could limit their staff during the off season and to prepare the Corporate Plan by taking all such issues into consideration, in order to show a better progress by at least coming up to the break-even level without being a burden on the Govt.

06. The Committee observed that no action The CAO/AO stated that as directed at had been taken to obtain a valuation the last COPE meeting they had report from the Chief Valuer, prior to written to the Chief Valuer in this increase the lease rents of lands and regard and he had advised them to buildings. submit a detailed report of the assets of the Corporation at regional level. The CAO/AO further stated currently the lease rents had been determined the prevailing market prices. The Committee directed the CAO/AO to expedite the matter.

07. The Committee observed that even The CAO/AO accepted that an though the Corporation had paid Rs. advance of Rs. 3 million had been 2,791,215 as advance to a private given to a company without any company in 2007 for the construction agreement, but with the intervention of

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Major Issues & Problems Identified Comments and Directives of the COPE of 06 fuel tanks at a total cost Rs. the legal officer at that time they were 5,065,075, neither the tanks had been able to recover Rs. 1 million. The constructed nor the advance had been CAO/AO further stated that 02 court refunded. cases had been filed against that private company and its insurer, Ceylinco Insurance. Since the name of this private company had been deleted from the name register, further proceedings could not be taken against the company, but the case filed against the Ceylinco Insurance is being heard. On further inquiry, the CAO/AO stated that on the advice of the Manger (Supplies) at that time, the advance had been paid to the private company, as such he had been interdicted and also a complaint had been lodged against him in the CID. The investigation report of the CID had been referred to the Attorney General for further advice.

08. The Committee queried as to how 31 The CAO/AO stated that they had employees attached to the Corporation written to the Dept. of Management had been released to the line Ministry Services seeking approval for same. without obtaining approval from the The CAO/AO further stated that the Treasury. above staff had been recruited under contract basis, and that after the completion of the contract their services be terminated. The Committee directed the CAO/AO to pay attention on this issue since the salaries had been paid by the Corporation to those employees.

09. The Committee enquired as to why the The CAO/AO stated that this vessel Corporation had released the vessel owned by Apollo Marine Institute was anchored in the Fishery Harbour, anchored in the year 2007, and later on Moratuwa recovering only a sum of Rs. in 2010 the vessel had been purchased 4,844,734, when the total anchorage by another person. On the request of charges to be received had been Rs. this person to remove the vessel, 10,520,113. anchorage charges from the date of his purchased had been received amounting to Rs. 4.8 and million,

Report from the Committee on Public Enterprises of the 81 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE thereafter the vessel was released to him. He further added that a case had been filed in the Supreme Court, Colombo to recover the balance amount.

10. The Committee observed that the The CAO/AO was directed to pay Corporation had paid a sum of Rs. attention to this issue. 4,505,835 as surcharges for the delay in the remittance of contributions to the EPF and ETF, and the arrears of contributions payable as at December 2012 had been Rs. 22,639,568.

11. It was revealed by the Committee, that The CAO/AO stated that since they in contrary to the PED Circular No. 60 need specialized services from those of April 2011, the Corporation had employees, they had been given granted extension of service for 18 extensions on contract or assignment employees above 60 years of age basis, and once the employees with without obtaining the Cabinet approval. required qualifications were recruited, their services would be terminated. The Committee directed the CAO to take action to obtain Cabinet approval for the extension of service.

12. The Committee noted that sums of Rs. The CAO/AO stated that the above 13,455,059 and Rs. 14,597,250 had system was outdated, and at present been spent for the establishment of a they had converted to ADSL system direct telephone system with internet which was more profitable, seven connection for communication between harbors had already commenced co- the Head Office and the Fisheries ordination, and the rest of the harbours Harbours and as service charges would be converted to the ADSL respectively, but the expenditure had system by December this year. been fruitless since the telephone system had not been used by the Corporation.

13. The Committee enquired as to why the The CAO/AO explained that due to the newly recruited staff had been placed in prevailing salary scales they different salary scales contrary to the experienced difficulty in recruiting Treasury Circulars and it was also staff for higher positions. As such, observed that they had been granted 06 according to the educational &

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Major Issues & Problems Identified Comments and Directives of the COPE salary increments prior to the professional qualifications and completion of the probationary period. experience, those staff had been placed in different salary points; there had been instances where the Corporation had to give salary increments to retain them in the Corporation. The Committee was of the opinion that the Corporation should propose a new SOR with suitable salary scales and get it approved, or had to obtain special approval from the Cabinet if they need to recruit staff contrary to the prevailing circulars.

14. The Committee observed that a sum of The CAO/AO stated that they had Rs. 7,565,194 had to be recovered by been able to recover 50% of the said the Corporation for providing security amount as at the date of examination, services for the external institutions and the procedure had been that the accommodated in the Head Office Corporation paid salaries to the premises. security staff and those institutions reimburse the paid sum in the following month. The CAO/AO further stated that they had written to those institutions which had delayed the payments informing that further delays would result in discrimination of security services.

15. It was questioned by the Committee as The CAO/AO stated that there had to why the Corporation had paid a sum been instances where they had to have of Rs. 1,608,205 in the year 2012 for the services of experienced lawyers to external lawyers where 03 legal win cases, so that the Corporation officers and a legal consultant were could obtain more benefits than the available in the Corporation. amount spent.

16. The Committee observed that there had The CAO/AO stated that action had been delays in the settlement of been taken to recover the advances advances obtained for various purposes obtained, and they had been able to and enquired the current position. recover Rs. 20 million. The Committee directed the CAO/AO to submit a report to the Committee on the progress of the above within a month’s time.

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Major Issues & Problems Identified Comments and Directives of the COPE

17. The Treasury officials pointed out the The Committee directed them to following shortcomings prepare a business plan taking those shortcomings into consideration, and Most of the fuel stations were running to take remedial action to eliminate at a loss. them. Failure to implement the pricing policy of charging Rs. 1/- per kg. on all harbours, To pay attention to the payment of EPF and ETF.

18. One of the Board Members suggested The Chairman of the COPE directed that since the Corporation had been the Board Members to discuss their continuously making losses, a proposals with the CAO and take responsible officer or a committee be action accordingly. appointed to find out the reasons for loss making, and to take action to rectify the shortcomings situation.

19. The Committee informed the CAO/AO that the Corporation would be re- summoned in August 2014, and should take action to rectify all shortcomings pointed out by the Committee prior to the next examination.

Sugathadasa National Sports Complex 18th March 2014 Authority Ministry of Sports

1. The Committee questioned about the The CAO/AO stated that the Action reasons for not submitting the Action Plan for the year 2014 had already Plan of the authority for the year 2014 been prepared and the approval had even as at the date of examination also been received from the Board of Directors. The Committee directed to submit the same to the Auditor General within a week.

2. The Committee enquired about the The CAO/AO stated that the progress of recovering the outstanding outstanding amount was being

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Major Issues & Problems Identified Comments and Directives of the COPE debtor balance of Rs.25 million from recovered in monthly installment the Sri Lanka . amounting Rs. 200,000 each. The Committee was not satisfied with that rate as it takes 10 years to recover the outstanding amount in full. Hence the Committee directed the CAO/AO to renegotiate in order to get the installment increased.

3. The Committee questioned about the The CAO/AO stated that they had recoverability of Debtors balance. recovered 60% of the debtors’ balance which had previously been Rs. 65 million approximately. He further said that every possible action had been taken to recover the remaining balances. The Committee directed the CAO/AO to forward a detailed report including the names of the debtors, time period, amounts and the responsible officer etc. as early as possible.

4. The Committee observed that the The CAO/AO stated that they had authority had spent Rs. 4,912,403 to conducted an independent inquiry purchase an Electronic Barrier Machine relevant to this transaction and which did not function properly. forwarded the report of same to the Attorney General for obtaining legal advice enabling them to take further action. The Committee directed to send that report of the independent inquiry to the Committee and at the same time take disciplinary action against those parties who had evaluated the machine and also made payments without performance bond etc.

5. The Committee queried about an The CAO/AO stated that they had to estimated loss of Rs. 2,158,239 caused maintain the Hotel by the Authority as to the Authority due to the cancellation the leasing opportunity was not of the lease agreement of Sports Hotel succeed and assured to take necessary which had the possibility of getting a action to lease out Sports Hotel at monthly rental of Rs. 760,000 for 03 higher rate in the future. The years. Committee proposed to provide

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Major Issues & Problems Identified Comments and Directives of the COPE facilities to the students who come to Colombo for sports events at concessionary rates.

6. The Committee questioned as to why The CAO/AO stated that the machine the electronic timing machine had been repaired recently spending purchased by spending Rs. 44 million Rs. 150,000 and it can be used for 02 for SAARC Games in 2005, had not more years as the software of the been operated since 2010. computers of the machine would be obsoleted after two years. The Committee was not satisfied with the transparency of that transaction of purchasing the machine and directed to send a detailed report as to how the procurement was conducted.

The CAO/AO further stated that the Machine had been included in the Assets Register of the Ministry.

7. The Committee questioned as to why The CAO/AO stated that those the Authority had paid Rs. 4,004,430 employees were absorbed to the carder for the 17 employees who should be of the authority as there had been recruited by the as vacancies for them. per the lease agreement with the stadium.

8. The Committee enquired as to why the The CAO/AO stated that action had full insurance cover which should be been taken to obtain relevant insurance obtained by the Sri Lanka Cricket had coverage in 2014. not been obtained as per the lease agreement of the R. Premadasa Stadium.

9. The Committee also enquired about the The CAO/AO stated that there was a reasons for the defects in the syntactic bid bond in respect of the contract. track of the R. Premadasa Stadium. Also the technical evaluation committee had received certification for the track from IFFA. The CAO further stated that they would take legal action soon after they receive the technical report regarding those defects. The Committee was not satisfied with the procurement as the

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Major Issues & Problems Identified Comments and Directives of the COPE construction had not been given to an experienced company and also the technical evaluation committee had not consisted with members with sufficient knowledge regarding similar tracks. The Committee directed to continue legal action and also to forward a detailed report on that matter to the committee within 03 months.

Rubber Research Board 18th March 2014 Ministry of Plantation Industries

1. The institution had not regularized Having pointed out that the failure to most of the issues pointed out at the adhere to the directives given by a Previous COPE meeting. Parliamentary Committee could be a matter of contempt of Parliament, a further period of three months was given to rectify all the issues.

2. The Auditor General had reported that the recruitment and promotion process had not shown adequate transparency and the coordination among the different levels in the Management had not been satisfactory which was an indication of the serious deterioration in the administration of the institution.

3. As the institution had not carried out a The reason for the fire, as reported by proper valuation and obtained an the Auditor General, had been due to insurance cover for the actual value, it the unavailability of a skilled labourer had received only Rs.930,000 as to operate the furnace at the time of the compensation against the assets worth incident and also for the use of of nearly 75 lakhs, destroyed due to a substandard wood. The Committee fire erupted at one of its factories. directed the CAO/AO to send a report on this matter, once the report of the Govt. Analyst was issued.

4. The Committee observed that the latex The CAO/AO was directed to of the institution had continued to be regularize the matter early. sold to the same supplier even after the security deposit kept in the bank in this respect had lapsed on 10 May 2013.

Report from the Committee on Public Enterprises of the 87 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

National Institute of Plantation 18th March 2014 Management Ministry of Plantation Industries

1. The post of Director General had been The AO replied that even though they vacant from 19th October 2013 while had advertised the vacancies twice, 01 post in Middle Management and 03 suitable persons with required posts in Junior Management had also qualifications had not applied and as been remained vacant. such they had increased the age limit upto 55 years with the approval of the Department of Management Services. It was further stated that the location of the Institute (Athurugiriya) and the existing low salary scales had affected the process of filling of the vacancies.

The CAO was directed to discuss the matter with the Hon. Minister and solve the issue as early as possible.

2. Although 9th batch had also been The CAO/AO informed the Committee enrolled by then for the Bachelor of that they already had had discussions Science Degree programme launched with the University and an MOU by the Wayamba University in would be signed very early. affiliation with the NIPM, the Institution had not entered into an agreement with the University regarding the same.

3. The financial position of the Institution The Auditor General informed that was discussed. they could have shown a lesser deficit if accurate accounting standards had been maintained for accounting grants and the Committee appreciated the Institution for having a better management without financial defects.

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Report from the Committee on Public Enterprises of the 89 Parliament of the Democratic Socialist Republic of Sri Lanka

Institutions Examined by the Sub Committee III

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Report from the Committee on Public Enterprises of the 91 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE

Sri Lanka Institute of Textile & 08th April 2014 Apparel Ministry of Industry & Commerce

1. Even though the Committee had It was stated that an officer from the discussed regarding the strengthening Ministry had been temporary of internal audit at the previous COPE appointed to carry out the audit meeting, an Internal Audit unit for the functions untill the SOR is approved Institution had not been established as by the Salaries and Cadre Commission at the date of examination. However, the Committee expressed its dissatisfaction for not establishing an Internal Audit Unit and directed the CAO/AO to expedite the matter.

2. The Committee had had a discussion on The Committee informed the CAO/AO the following matters. to take every possible step to further enhance the performances of the (i) The current position of the scientific Institution. researches in relation to the apparel industry. (II) Action taken to achieve the objectives laid in the Act and the activities of the different sections (III)Textile production in the Country

3. The Annual Reports of the year 2012 The Committee directed the CAO/AO had not been tabled in Parliament. to present them early.

4. The Committee made the following The CAO/AO agreed to look into suggestions. them. (i)To pay attention on introducing e- learning facilities for easy access of services (II) To see the possibility of incorporating Textile Technology as a subject in the Advanced Level Technology Subjects Stream in schools in collaboration with the Ministry of Education

5. 43 vacancies had not been filled as at The Committee was informed that it the date of examination. had been delayed till the new section for Leather Apparel had been

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Major Issues & Problems Identified Comments and Directives of the COPE established and they were in the process of getting approval for the SOR to recruit appropriate personnel.

6. Although machines had been purchased The activities had been commenced incurring Rs. 8 million in the year 2011 parallel to the “Deyata Kirula” for the Yarn Dyeing Centre in programme by the Provincial Council. Polgahawela, yarn dyeing activities had not been commenced as a boiler operator had not been recruited even as at the beginning of the year 2014.

7. A penalty of Rs. 895,698 had to be paid It was stated that before the by the Institute as the contributions to amalgamation of the two institutions, EPF and ETF had not been made in one institution had not paid those time. contributions in time as they were running at a loss and as such a penalty had to be paid.

8. The expenditure of Rs. 6, 133,865/- The CAO/AO stated that since they incurred on modernizing the electricity had again made a request to the CEB, system for converting the electricity their engineers had recently visited the rates paid to the CEB from commercial institution and also he had personally tariff to industrial tariff had been discussed the matter with the CEB fruitless as the CEB had informed that Chairman. the institute could not be considered under the industrial category.

9. According to the provisions of the The CAO Stated that he had already present Act The Secretary to the decided to resign from the post of Ministry should essentially be the Chairman after the day’s Committee Chairman of the Institute. The and to appoint a suitable person as Committee was of the view that the there were provisions in the Act. Secretary to the Ministry should be in rather higher position to monitor the activities of the Institute.

Sri Lanka Tourism Promotion Bureau 08th April 2014 Ministry of Economic Development

1. Action had not been taken to recover As it was stated that the relevant the sponsorship income related to the institution had been informed in UK office amounting to Rs. 2,428,920/- writing to pay back the amount and

Report from the Committee on Public Enterprises of the 93 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE from the responsible officers. that legal action would be taken in case of failure and also stated that the institution had initiated a preliminary inquiry regarding that, the Committee directed to send a report to the COPE.

2. The transactions relating to seven items The Committee directed to send a copy amounting to Rs.167,416,107/- had of that report to the Audit for auditing been included in the accounts without of the year 2013 evidence to prove the expenditure incurred regarding the programme implemented in connection with the coming of media persons.

3. The surplus money amounting to The CAO/AO stated that tourism Rs.500 million had not been credited to promotion activities planned by the the consolidated fund violating the Bureau in two years could not be directives Circular No. PED/56 of completed and the money was used in 2011. 2012 and 2013 to complete those activities and that the surplus money had already been invested in the Bank of Ceylon pending approval of the Treasury.

4. The Bureau had failed to invest surplus The CAO/AO stated that as soon as the money amounting to Rs. 1020 million matter was reported action had been resulting a loss of Rs.134 million to the taken to bank the money and the Bureau. interest had also been received.

Sri Lanka Convention Bureau 08th April 2014 Ministry of Economic Development

1. The Committee queried about the The Authority had expressed its amount of Rs.7,150,286/- and agreement to pay back those amounts. Rs.17,500,000/- which had not been recovered from the Sri Lanka Tourism Development Authority.

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2. Although the Bureau had spent the The project commenced in 2008 and sums of Rs.170,960/- and Rs.921,602/- by 2010 it had completely ceased to on the Sustainable Tourism Project in function and at that time the the years 2009 and 2010 only a sum of implementation agency was the Rs.180,289/- had been received. Tourism Development Authority. As it was handed over to the Convention Bureau in 2010, to re-start the project, they were in need of seed money which was approved by the Board of Directors and a considerable portion of that money had been incurred for the staff of the project. It was stated that the Bureau had prepared a feasibility report and that money could not be obtained from the World bank.

3. Sums of Rs.360,000/- and Rs.194,800/- All the officers had been entitled for had been paid as motor vehicle hire and this facility while the Tourism Board fuel allowance respectively to the was existing, and through the Senior Manager without obtaining the Ministry, the Bureau had written to the approval of the General Treasury. Treasury on several occasions and a number of replies had been received. Although those replies were submitted to the Audit for a solution, it had been unable to arrive at a decision so far.

On a request made by the Ministry of 4. A sum of Rs.512,450/-had been spent Finance this amount was paid to the on air travel which was not at all Sri Lanka Air Force, at the time of the relevant to the objectives of the Bureau. SAARC Finance Ministers conference was held , to provide transport facilities to Finance Minister of Bangladesh to pay a visit to the Mattala Air Port and the Hambantota conference hall by air.

National Building Research 08th April 2014 Organization Ministry of Disaster Management

1. The Committee questioned about the The CAO stated that the mapping of progress of the mapping of landslide 10 districts at scale the 1:50000 had risk area already started with a view of been completed and another two mitigating of disasters. districts namely Kurunegala and

Report from the Committee on Public Enterprises of the 95 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE had been added to the above subsequently. Mapping of 07 districts at scale 1:10000 had also been completed.

2. The Committee enquired the current The CAO/AO stated that the balance position of the debt recovery in the of Rs. 24 million as at 31/12/2011 organization. could be reduced up to 11 million as at 31/12/2013 and only Rs.1.25 million had been written off. The Committee directed to take further action to reduce the debtor balance of Rs. 9 million as at 31/12/2013.

3. The Committee also inquired about the The CAO/AO assured that this increase of the amount of unsettled position would be minimized in future. advances of Rs. 465,177 as at 31/12/2013 contrary to the FR 371(5).

4. The Committee questioned as to why The CAO stated that this amount was the amount of Rs. 10.5 million was incurred during 2011 in mapping of shown in the financial statement of year areas having a risk for landslides and 2013 as a balance yet to be received requests had been made to the from the Treasury. Treasury to settle the amount. The Committee directed to take necessary action to write off the figure with the approval of the Treasury.

5. The Committee inquired regarding the The CAO assured the possibility of availability of a mechanism to avoid doing so when NBRO would be the use of building materials rejected incorporated under a Parliamentary by the NBRO for other constructions in act. .

Insurance Board of Sri Lanka 08th April 2014 Ministry of Finance & Planning

1. The entity being the regulatory body of The CAO/AO agreed to have a the insurance institutions in the country meeting at the Ministerial Level on needs to proactively look into the issues this matter.

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Major Issues & Problems Identified Comments and Directives of the COPE faced by certain Insurance schemes such as the Farmers' Pension scheme, since many of the beneficiaries have become frustrated and lost confidence in those schemes for not receiving the benefits as promised.

2. The approval of the Treasury had not When the CAO/AO stated that the been obtained in relation to the salary institution was not in a position to increments irregularly offered for 17 recover them which had been paid for officers during the previous the performance of those officer under management in 2010. the approval of the then Board of Directors, the Committee stressed that the responsibility of the present Management in taking action on an irregularity was not nullified by the fact that it had occurred during the previous Management and directed the CAO/AO to write to the Treasury seeking their instruction on the matter.

3. The approval of the treasury had not The CAO/AO was directed to been obtained for the cost of regularize the matter. Rs.513,713 incurred on insuring 33 employees of the institution and their family members.

4. The institution, being an entity running The Committee directed the treasury at a deficit, had violated the to give a recommendation to the Management Services Circular No.19 Committee on these kinds of of 2013 by paying bonus exceeding the procedural errors done by institutions. limit of Rs.1000 per person. As a result, Rs.3,717,751 had been made instead of Rs.94,000 for the three years of 2010, 2011 and 2012.

Sri Lanka Social Security Board 08th April 2014 Ministry of Finance & Planning

1. Due to the premature vacation of the The CAO/AO stated that the institution building used as the premises for the had been located in this building headquarters without a 6 month notice during the period it had been vested in advance, Rs.5,090,906 had to be paid under the Dept. of Social Services

Report from the Committee on Public Enterprises of the 97 Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments and Directives of the COPE as the rent for the remaining 7 months. which had entered into the rent agreement with the lesser. Accordingly, she stated that the institution had informed the Dept. about the requirement of moving to a more spacious place.

2. The Committee observed a significant The Committee pointed out the reduction in the enrollment of new importance of a proper actuarial study members to the scheme and even in the along with a methodology to restore existing membership, 75% are inactive the confidence among the public on members. these schemes before launching new schemes.

3. The institution had purchased a The Committee directed the Treasury building at Rajagiriya for Rs.195 to send a report on this transaction million to locate the Head Office, even including the action taken by the though the Government valuer had Treasury once the Treasury valued if for 165 million besides the Representative had informed the objections of the Treasury Deputy Secretary to the Treasury in Representative on the move. writing about the irregular transaction.

98 Parliamentary Series No. 318

Report from the Committee on Public Enterprises of the 99 Parliament of the Democratic Socialist Republic of Sri Lanka

Index

A

Associated Newspapers of Ceylon Ltd. · 23

B

Buddhist and Pali University of Sri Lanka · 65

C

Central Environmental Authority · 24 Ceylon Electricity Board · 55 Ceylon Fisheries Corporation · 9 Ceylon Fishery Harbours Corporation · 77 Ceylon Petroleum Corporation · 12 Coconut Cultivation Board · 76 Coconut Development Authority · 75 Consumer Affairs Authority · 45 Co-operative Wholesale Establishment · 53

D

Disaster Management Centre · 4

E

Employees’ Trust Fund Board · 1

G

Geological Survey & Mines Bureau · 31

H

Housing Development Finance Corporation Bank · 34

I

Industrial Technology Institute · 2

100 Parliamentary Series No. 318

Insurance Board of Sri Lanka · 95

M

Mihin Lanka (Pvt) Ltd. · 40 Mihin Lanka (Pvt.) Company Ltd. · 56

N

National Building Research Organization · 94 National Centre for Advanced Studies in Humanities & Social Sciences · 65 National Institute of Education · 36 National Institute of Plantation Management · 87 National Livestock Development Board · 6 National Savings Bank · 43 National Transport Commission · 52 National Youth Services Council · 15

P

Postgraduate Institute of Pali & Buddhist Studies · 67

R

Rajarata University of Sri Lanka · 38 Rubber Research Board · 86

S

Sri Lanka Convention Bureau · 93 Sri Lanka Foreign Employment Bureau · 42 Sri Lanka Institute of Local Governance · 50 Sri Lanka Institute of Textile & Apparel · 91 Sri Lanka Insurance Corporation · 48 Sri Lanka Social Security Board · 96 Sri Lanka Standards Institution · 21 Sri Lanka Telecom PLC · 61 Sri Lanka Tourism Promotion Bureau · 92 State Development and Construction Corporation · 5 State Mortgage & Investment Bank · 31 State Plantation Corporation · 58 Sugathadasa National Sports Complex Authority · 83

Report from the Committee on Public Enterprises of the 101 Parliament of the Democratic Socialist Republic of Sri Lanka

T

Tertiary & Vocational Education Commission · 72

U

University of Colombo · 27 University of Vocational Technology · 71 Urban Development Authority · 17

V

Vocational Training Authority of Sri Lanka · 68

102 Parliamentary Series No. 318

Notes