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1 Northern Provincial Council P.S.No. 2013/256 Fifth Instalment –Part V Northern Provincial Council - Report of the Auditor General 2011 Northern Provincial Council - 2011 ----------------------------------------------- 1. Financial Statements ---------------------------- 1.1 Qualified Opinion ------------------------- In my opinion, except for the effects of the matters described in paragraphs from 3 to 6 of this report, the financial statements give a true and fair view of the financial position of the Northern Provincial Council as at 31 December 2011 and its financial performance and cash flows for the year then ended in accordance with Generally Accepted Accounting Principles. 1.2 De-merger of the North East Provincial Council --------------------------------------------------------------- The then North East Provincial Council was de-merged on 22 December 2006 based on the ruling given by the Supreme Court of the Democratic Socialist Republic of Sri Lanka. The Northern Provincial Council is in operation with effect from 01 January 2007. However, a Gazette Notification regarding the de-merger and the establishment of the Northern Provincial Council had not been published up to 31 July 2012. The elected Northern Provincial Council was not established up to 31 July 2012. 1.3 Presentation of Financial Statements --------------------------------------------- (a) Fund Accounts of the Provincial Council Fund accounts of the Provincial Council for the year under review had been rendered to audit on 28 March 2012. (b) Governor’s Trust Fund A Governor’s Trust Fund for Northern Provincial Council had been created with effect from 01 January 2007. Statute for the creation of Fund had not been passed in the Provincial Council. However, the Hon. Governor had on his own initiative created the Governor’s Trust Fund in terms of Paragraph 03 of the Governor’s Memorandum No. 01/2007 of 01 January 2007. The Governor’s Trust Fund should be consisted of donations or contribution received from the Members of the Public, Organizations, Societies and Income generated from projects undertaking. However, no any such contribution had been received from the above sources during the year under review and financial statements of the Governor’s Trust Fund for the year ended 31 December 2011 had been rendered to audit, on 02 Feb 2012. (c) Other Financial Statements The progress of presentation of other financial statements for the year under review as at 30 April 2012 are given below. 1 P.S.No. 2013/256 Fifth Instalment –Part V Northern Provincial Council - Report of the Auditor General 2011 Category of Financial Statements Total No. of Total No. of Total No. of Financial Financial Financial Statements Statements not Statements to presented up to 30 presented as at 30 be presented April 2012 April 2012 ---------------- ------------------- --------------------- ---------------------------- (a) Appropriation Accounts 32 32 - (b) Revenue Accounts 06 - 06 (c) Advance to Provincial Public Officers Accounts 32 32 - (d) Commercial Advance 04 04 - Accounts Activities 74 68 06 1.4 Rendition of Annual Performance Report by the Provincial Council and Local Authorities ---------------------------------------------------------------------------------------------------- (1) Annual performance report of the Provincial Council in terms of paragraph 04 of the General Treasury Circular No. 01/2004 dated 24 February 2004 had not been prepared and rendered to audit. (2) Annual performance reports of the 34 Local Authorities functioning under Northern Provincial Council had not been prepared and submitted to the Provincial Council in terms of paragraph 4.3 of the General Treasury Circular No. 01/2004 dated 24 February 2004. 1.5 Tabling of Annual Reports of the Provincial Council together with the Auditor General’s Reports --------------------------------------------------------------------------------------------------------- The Auditor General’s reports on the financial statements of the Northern Provincial Council for the years 2007 - 2010 had not been tabled in the Assembly of the Council up to 6 October 2012 in terms of Section 23 (2) of the Provincial Councils Act No. 42 of 1987 due to non function of the elected Provincial Council. As a result no any mechanism adopted by the Provincial Council to rectify the matters with regard to irregularities pointed out in the Auditor General’s reports since 2007. 2. Comments on Financial Statements ---------------------------------------------- 2.1 Accounting Policies ------------------------- Accounting policies adopted in preparation and presentation of Financial Statements had not been disclosed in the financial statements in terms of Sri Lanka Accounting Standard No.3. 2.2 Accounting Deficiencies --------------------------------- 2 P.S.No. 2013/256 Fifth Instalment –Part V Northern Provincial Council - Report of the Auditor General 2011 The following observations are made. (a) Unexplained differences Unexplained differences observed during the course of audit are given in the following table. Items of Financial Statements Amount as per Amount as per Differences Financial Appropriation Statement Accounts Rs. Rs. Rs. (i) Deposit Account 570,579,237 570,600,237 21,000 (ii) Payment of Loans and Advances 254,199,626 224,539,547 29,660,079 to Provincial Public Officers (iii) Recovery of Loan and Advances 216,686,327 262,052,847 45,366,520 from Public Officer (b) Understatement and Overstatement in the Accounts (i) A sum Rs. 8,904,667 being credit balances in the advance account activities of the Livestock Farm and Agriculture Farm and mechanical workshop had been transferred to Provincial Fund Accounts through journal entries. As a result the Provincial Fund Accounts had been overstated by Rs. 8,904,667. (ii) Arrears of revenue from various sources of the Provincial Council had not been ascertained and brought to Provincial fund account. 2.3 Common Lapses in the Appropriation Accounts --------------------------------------------------------------- Repeated common lapses such as non-utilization of provisions fully or partly, incurring expenditure without provision in the Annual Estimates, omission of outstanding liabilities in the accounts, recurrent expenditure being charged to capital expenditure and vice- versa, non-rendition of details of capital expenditure, lack of adequate explanations for the savings and non-reconciliation of departmental books with Provincial Treasury books were observed in the Appropriation Accounts rendered in respect of certain Provincial Ministries and Departments for the year under review too. In this regard the Chief Secretary had not taken meaningful action on the common lapses on appropriation accounts pointed out in the previous year’s audit report as irregularities were increased continuously due to failure to take appropriate actions on timely basis. In addition to these lapses, the following deficiencies were also observed during the course of audit on the appropriation accounts of the Provincial Ministries and Departments for the year under review. 3 P.S.No. 2013/256 Fifth Instalment –Part V Northern Provincial Council - Report of the Auditor General 2011 (a) Independent confirmations had not been obtained for liabilities amounting to Rs 16,597,536 relating to supplies, Fuel, Electricity etc. (b) Expenditure aggregating Rs. 198,781,457 had been incurred exceeding the estimated provisions by 22 Ministries and Departments and approvals in terms of Provincial Financial Rule (PFR) 46 had been obtained after incurring excess expenditure. (c) Unsettled losses of Rs. 59,689,555 in respect of previous years had not been carried forward to the subsequent year. (d) Expenditure amounting to Rs. 673,784,106 had been incurred relating to 113 objects under 28 Heads of expenditure without creating new object codes. (e) Action had not been taken to the losses aggregating Rs. 19,340,000 in terms of Provincial Financial Rules 61 to 74 and it had not been disclosed in the Appropriation account for the year 2011 by the Zonal Education office, Jaffna. 2.4 Non utilization of Provisions -------------------------------------- (a) The entire provision of Rs. 1,243,674,200 relating to 190 objects under 28 Heads of expenditure made in the Annual Financial Statements for the year under review had not been utilized for the intended purposes. (b) Supplementary provision amounting to Rs.24,176,817 obtained under 18 objects during the year under review had not been utilized for the intended purpose. 2.5 Expenditure incurred without Provision. ----------------------------------------------------- Capital expenditure aggregating Rs. 146,332,726 had been incurred by 16 Departments without provision and this expenditure were regularized at the end of the year from surcharge account. 2.6 Erroneous Classifications --------------------------------- Capital expenditure amounting to Rs.12,550,825 incurred by the Provincial Department of Buildings with regard to capital improvement of Circuit Bungalow, Ratmalana had been erroneously classified under recurrent expenditure. This expenditure was relating to the Provincial Public Administration, but not to the Department of Buildings. 2.7 Deficiencies in the Advances to Public Officers Accounts ---------------------------------------------------------------------- The following observations are made. (a) Proper action had not been taken to recover the loan balances aggregating Rs.7,033,801 due from the officers who were transferred out of the Provincial Ministries and Departments to other Provincial Ministries
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