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1 Uva Provincial Council Uva Provincial Council -2017 The audit of financial statements of the Uva Provincial Council for the year ended 31 December 2017 comprising statement of financial Position as at 31 December 2017 and statement of financial performance and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information was carried out under my direction in pursuance of provisions in Article 154(1) of the Constitution of the Democratic Socialist Republic of Sri Lanka read in conjunction with Section 23(1) of the Provincial Councils Act, No. 42 of 1987. This report is issued in terms of Section 23(2) of the Provincial Councils Act. 1.2 Management’s Responsibility for the Financial Statements ----------------------------------------------------------------------------- Management is responsible for the preparation and fair presentation of these financial statements in accordance with Generally Accepted Accounting Principles and for such internal control as the management determines is necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error. 1.3 Auditor’s Responsibility --------------------------------- My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Sri Lanka Auditing Standards consistent with International Auditing Standards of Supreme Audit Institutions (ISSAI 1000-1810). Those Standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Provincial Council’s preparation and fair 1 presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Provincial Council’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion. 1.4 Basis for Qualified Opinion ------------------------------------ My opinion is qualified based on the matters described in paragraph 2.2 of this report. 2. Financial Statements ------------------------- 2.1 Qualified Opinion ----------------------- In my opinion, except for the effects of the matters described in paragraph 2:2 of this report, the financial statements give a true and fair view of the financial position of the Uva Provincial Council as at 31 December 2017 and its financial performance and cash flows for the year then ended in accordance with Generally Accepted Accounting Principles. 2.2 Comments on Financial Statements ------------------------------------------ 2.2.1 Provincial Council Fund ------------------------------ The Provincial Council Fund Account for the year under review had been presented to audit on 31 March 2018. 2 2.2.2 Other Accounts -------------------- The progress of presentation of other accounts of the Provincial Council for the year under review as at 31 March 2017, is given below. Relating to the year 2017 --------------------------------- Total Number of Number of Number of Number of Accounts Accounts Accounts not Accounts Presented not Presented Presented Relating to the preceding years -------------- ------------- --------------- -------------------- (i) Appropriation Accounts 29 29 - - (ii) Advances to Provincial Public 29 29 - - Officers Accounts (iii) Revenue Accounts 01 - 01 - (iv) Commercial Advance Accounts 08 07 01 - (v) Other Fund Accounts 10 10 - - (vi) Statute Accounts 02 01 01 01 (vii) Provincial Council Members 01 01 - - Advance Account ----- ----- ----- ----- 80 77 03 01 === === === === 2.2.3 Accounting Deficiencies --------------------------------- The following accounting deficiencies were observed. a) Identifying the value of lands of the 18 institutions of the uva provincial council not bring to accounts while the lands value of Rs.24,200,290 shown in the financial statements had not been assessed by the professional qualified assessors. 3 b) Value of the construction work in progress shown in the Appropriation Account of institutions amounting to Rs.22,619,409 had not been disclosed as work in progress in the financial statements. c) A sum of Rs.219,410,000 had been shown work in progress in financial statements relating to 09 institutions had not been shown as non-current assets in the Appropriation Accounts. d) Provision for depreciation had been made for the items valued at Rs.122,944,163 in non-nature of fixed assets according to the Appropriation Accounts, therefore, depreciation for the year under review amounting to Rs.2,474,350 had been over accounted. e) The value of library books belongs to the various institutions of the uva provincial council being identified and not stated in the financial statements. f) The Nature of intangible assets and stock belongs to the institutes of the uva provincial council at the end of the year under review being identified and not disclosed in the financial statements. g) Receivable income under the land ordinance at the end of the year under review not calculated correctly and it shown in financial statements as Rs.45,806,655 while according to the revenue Accounts of the Land Commissioner’s Department it was Rs.12,974,607 thus a difference of Rs.32,832,048 was observed. h) A sum of Rs.51,583,766 and Rs.44,424,103 respectively receivable stamp fees and turn over tax at the end of the year under review and value of stamp fees and court fines payable to the local government institutes being identified and not shown in the financial statements. 4 i) A sum of Rs.160,378 receivable to the Uva Management Development Institution for holding of training programmes at end of the year under review not shown in the financial statements. j) Payable expenses amounting to Rs.1,124,549 as at end of the year under review not shown in the financial statements owing to that expenditure for the year and current liabilities had been shown in understated by that amount. k) Depreciation Reserve Accounts relating to the commercial advance accounts had not been disclosed in financial statements. l) Non identify the interest on lease rental of the year under review a sum of Rs.76,546,578 had been accounted as a expenditure on lease rental and value of interest installments of the lease rental expenditure for the year therefore had been overstated by Rs.71,818,216. m) The value of net lease rental installments to be paid for the year 2018 should be shown as creditors as lease rental in the financial statements for the year under review but gross lease rental value had not been disclosed in the financial statements. 2.2.4 Unreconciled Control Accounts ------------------------------------------ (a) Value of 04 items shown in the consolidated financial statements not compared with the value shown in the Appropriation Accounts of that institutions. (b) Commercial advance accounts pepared by 03 institutions payable balance as at 31 December 2017 not recorded but according to the consolidated financial statements a sum of Rs. 7,769,811 was to be settled as balance of advances. (c) A sum of Rs.159,444 and Rs.532,837 shortages and excesses respectively was observed in 04 items each, between the information system on drugs of the office of the Badulla Regional Health services Director office and the actual balance. 5 (d) Receivable rates and other income according to the financial statements of the local government institutions for the year under review and for the previous years amounted to Rs.266,263,635 but according to the schedules of arrears income presented by the Department of Local Government it was Rs.238,233,224 thus there was a difference of Rs.28,030,411. 2.2.5 Imprest Accounts ------------------------- The unsettled imprest balances in respect of 16 institutions including 04 Divisional Secretariat in the Uva Provincial Council consolidated financial statements as at 31 December 2017 amounted to Rs. 50,844,567. As at 31 March 2018 it was Rs. 47,446,168. 2.2.6 General Deposit Accounts ---------------------------------- According to the age analysis of the general deposit balances as at 31 December 2017 the unsettled deposit balance as per financial regulations 571 belonging to 23 institutions was Rs.52,465,386. That balance as at 15 July 2018 was Rs.45,512,383. 2.2.7 Advances to Provincial Public Officers Account ------------------------------------------------------------- The following matters were observed. (a) The loan balances totalling Rs.84,472,501 recoverable from the officers transferred out, deceased, retired, interdicted and vacanted posts in Ministries, Departments and offices of the Uva Provincial Council and loan balances totalling to Rs.34,740,786 not settled the officers transferred from Ministries, Departments and 15 offices. That balance was
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