Parliamentary Series No 343

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

SECOND INTERIM REPORT (for the period from 07th of May 2014 to 26th of September 2014)

From The Committee on Public Enterprises

Presented by Hon. DEW.Gunasekara Chairman of the Committee

On 14th of November, 2014

Ordered by to be printed on th 14 of November, 2014

Parliamentary Series No 343

ii Report from the Committee on Public Enterprises of the 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. P.Harrison (from 24.09.2014) 19. Hon. 20. Hon. 21. Hon. 22. Hon. M.T. 23. Hon. A.Vinayagamoorthy 24. Hon. (up to 05.08.2014) 25. Hon. (Ven.) 26. Hon. Seeniththamby Yoheswaran 27. Hon. Namal Rajapaksa 28. Hon. 29. Hon. (Prof.) 30. Hon. E.Saravanapavan 31. Hon. 32. Hon. (Mrs.)

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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. P.Harrison (from 24.09.2014) 10. Hon. Harin Fernando (up to 05.08.2014) 11. 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 ii Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Composition of the Follow-Up Committee of the Committee on Public Enterprises.

1. Hon. Mahinda Amaraweera (Chairman) 2. Hon. Eran Wickramaratne 3. Hon. (Prof.) Rajiva Wijesinha

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

Contents  Chairman’s Note………………………………………... …………………. vii  Preface…………………………………………………… …………………. ix  History at a Glance……………………………………... …………………. xi  Introduction…………………………………………….. …………………. 1  Major Transactions with Inadequate Accountability …………………. 3  General Observations………………………………….. …………………. 7  Recommendations……………………………………… …………………. 13  Financial Status of the Examined Institutions……….. …………………. 15  Status of Presenting Annual Reports to Parliament…. …………………. 19  Auditor’s Opinion on Annual Accounts………………. …………………. 21  Institutions Examined by the Main Committee………. …………………. 25  Central Bank of Sri Lanka…………………………... …………………. 27  Ceylon Petroleum Corporation ……………………... …………………. 27  Sri Lanka Institute of Advanced Technological Education …………...... 29  Agriculture & Agrarian Insurance Board…………… …………………. 30  Sri Lanka State Plantation Corporation……………... …………………. 31  ……………………………. …………………. 32  Sri Lanka Ports Authority…………………………… …………………. 34  University of Sabaragamuwa………………………... …………………. 36  Sri Lanka Bureau of Foreign Employment …………. …………………. 36  Lanka Sathosa Ltd. ……………………...... …………………. 37  State Printing Corporation…...... …………………. 38  Ceylon Petroleum Storage & Terminals Limited…… …………………. 39  National Water Supply & Drainage Board ...... …………………. 40  Central Engineering Consultancy Bureau …...... …………………. 41  National Film Corporation…...... …………………. 42  Milk Industries of Lanka Ltd. (MILCO) …...... …………………. 43  University provident Fund & Pension Fund…...... …………………. 44  Sri Lankan Airlines Ltd. …...... …………………. 45  National Paper Company Ltd. …...... …………………. 46  Road Development Authority …...... …………………. 48

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 Sri Lanka Cement Corporation…...... …………………. 50  Central Environmental Authority…...... …………………. 52  Sri Lanka Cricket…...... …………………. 52  Sri Lanka Institute of Tourism & Hotel Management …………………. 53  University of Jaffna…...... …...... …………………. 54  Institutions Examined by the Sub Committee - I…...... …………………. 57  Sri Lanka Ayrvedic Drugs Corporation……………... …………………. 59  Institute of Indigenous Medicine……………………. …………………. 59  National Institute of Library & Information Sciences. …………………. 60  Institute of Technology-University of Moratuwa…… …………………. 61  National Human Resources Development Council…. …………………. 62  Vocational Training Authority…...... …………………. 63  Institutions Examined by the Sub Committee – II…… …………………. 65  Selacine Television Institute …...... …………………. 67  Sri Lanka Press Council…...... …...... …………………. 69  Institute of Post-Harvest Technology…...... …………………. 70  Sri Lanka Freedom from Hunger Campaign Board… …………………. 71  Condominium Management Authority…...... …………………. 72  Urban Settlement Development Authority…...... …………………. 72  Coconut Research Board…...... …...... …………………. 73  Institutions Examined by the Sub Committee - III…... …………………. 75  National Institute of Social Development…...... …………………. 77  National Secretariat for Persons with Disabilities…... …………………. 78  Commercial Fertilizer Company Ltd. ….... …………………. 79  Public Utilities Commission…...... …...... …………………. 80  Sri Lanka Inventors Commission…...... …………………. 81  Sri Lanka Accreditation Board for Conformity Assessment…...... …...... …………………. 82  Marine Environment Protection Authority…...... …………………. 82  Gem & Jewellery Research & Training Institute…..... …………………. 83 * Index……………………………………………….... …………………. 87

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

Chairman’s Note

In keeping with my pledge, I hereby present to the House the Second Interim Report of the Committee on Public Enterprises which covers its activities for the period from May-September, 2014.

Hitherto, the Committee on Public Enterprises has presented to the Parliament four Reports (2 Final Reports and 2 Interim Reports). The Sixth Report or the Third Final Report will be presented towards the end of 2014.

During the course of the First session of the Seventh Parliament (commencing from 2010), the COPE has been able to examine the audited accounts relating to all institutions coming under the COPE thrice within a period of 04 years. This is an unprecedented record in the history of our legislature.

The need for a separate oversight Committee as the Committee on Public Enterprises arose in consequence of the expansion of the Public Sector of the Sri Lankan economy. All institutions other than the Ministries and Government Departments come under the purview of the COPE (244 Institutions). On a directive by the Committee, the State-owned companies registered under the Company Law have also been brought under scrutiny by the COPE. Even the companies which have a fair percentage of state capital come under the COPE’s overview.

Despite a heavy load of work assigned to it and with ever increasing volume of work, the COPE has been able to accomplish its constitutional task smoothly, earning the admiration of the people.

The prestige of the COPE has been enhanced appreciably nationally as well as internationally. Several Parliaments of our sister nations have sought our co- operation with regard to their oversight Committees.

I take this opportunity to reiterate our persistent demand for amendments to the Standing Orders in order to strengthen the COPE’s authority and capacity.

I believe that the COPE has been able to contribute appreciably towards the enhancement of good governance in so far as Public control of Finance is concerned.

The COPE owes its deep appreciation of the high quality performance of its staff. The co-operation extended by the Auditor General’s Department, the Department of Public Enterprises and the Department of National Budget of the General Treasury deserves our commendation.

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I take this opportunity to express the Committee’s deep appreciation for the cooperation extended by the former Auditor General, Mr.H.A.S.Samaraweera, towards making the Committee’s work more efficient and effective. It needs special mention that it was during his tenure of office that Committee’s work was expeditiously and extensively carried out. The Committee wishes him a happy and pleasant retired life.

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

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

Preface

The Article 148 of the Constitution has empowered the Parliament of Sri Lanka with full control over Public Finance and no local authority can impose any tax or levy without the authority of a law passed by Parliament.

The Executive has been made accountable to Parliament through various Constitutional provisions. The Parliament has the every right to be well informed whether the Government spends the money of the people, allocated by Parliament through the Appropriation Act, for the intended purposes, meeting the due value for the money spent.

The Committee on Public Enterprises plays a key role in this oversight process as it has been given the mandate by the Standing Order 126 to examine the Accounts of Public Corporations or any other business undertaking formed by a law laid down before the Parliament.

The Committee on Public Enterprises (COPE) set up in 1979, has so far become a house hold name among the citizens due to its significant contribution made in the recent past in order to improve the good governance of state institutions through constant vigilance.

Your Committee, appointed for the first session of the Seventh Parliament, has so far tabled two Final reports and two Interim reports within a period of four years. Its sixth report, which is the final report for 2014 will be presented before the end of 2014.

The newly appointed Follow-Up Committee is the most recent innovation of the Committee. This Committee was set up to ensure effective and speedy implementation of the directives and recommendations given by the Committee.

The swift response received from the Ministry of Finance & Planning soon after the presentation of the First Interim Report for 2014 merits special mention. Whilst appreciating the action taken by the Treasury as per the directives and recommendations, the Committee reiterates that it is the responsibility of the ix Parliamentary Series No 343

Secretaries to the Ministries, being the Chief Accounting Officers, to make sure that the public money approved by the Parliament has been utilized appropriately and prudently and in compliance with intended objectives. Any irregularity caused due to the influence of the political authority or any decision as required taken by institutions without the concurrence of the Ministry do not prove due diligence, liability and accountability of the Secretaries as they are vested with the financial control.

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History at a Glance

The Committee on Public Enterprises was set up in 1979 coincidence with the emergence of more Public Enterprises after the rationalization of economic policies in 1977.

Over the past 35 year period, it has been headed by the following distinguished Members of Parliament, providing a yeoman service to improve the good governance in the Public Sector.

Parliament Chairman Period Served No of Total No. of Reports Examinations First Hon.George Parliament Abeygoonasekara(passed 21.06.1979-04.01.1981 away on 04.01.1981)

Hon. M.S.Amarasiri 21.01.1981-27.03.1984 04 109 Hon.J.A.E.Amaratunga 09.04.1984-22.01.1988 06 124 Hon.(Dr.)Wimal Wickramasinghe 25.02.1988-20.12.1988 01 16

Second Hon.J.A.E.Amaratunga 20.03.1989-25.10.1993 03 106 Parliament Hon.Rohan Abeygoonasekara 25.10.1993-24.06.1994 02 21

Third Hon.D.P.Wickremasinghe 25.08.1994-01.07.1997 Parliament Hon.Reggie Ranatunga 03.07.1997-18.08.2000 01 23

Fourth Hon.J.A.E.Amaratunga 09.11.2000-10.07.2001 01 07 Parliament Fifth Hon. Parliament 07.03.2002-07.02.2004 02 84

Sixth Hon. 07.10.2004-21.11.2005 03 64 Parliament Hon.(Dr.) Wijeyadasa 04.07.2006- 23.07.2008 02 96 Rajapakshe

Hon. W.D.J.Seneviratne 23.07.2008-09.02.2010 01 20

Seventh Hon. DEW Gunasekara 22.04.2010- to date 05 598 Parliament

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

Introduction

The Committee on Public Enterprises for the First Session of the Seventh Parliament hereby presents its 2nd Interim Report for the year 2014.

The report includes the findings and the recommendations of the Committee on 46 Public Enterprises examined during the period from 7th of May, 2014 to 26th of September 2014. The observations and the findings of the Committee, which had been based on the Auditor General’s reports for 2011 & 2012 and the performance of the institutions, reflect only the situation prevailed as at the date of the examination.

This report is a collective work of the Main Committee, chaired by the Hon. DEW Gunasekara, three Sub Committees and the Follow-Up Committee, chaired by the Hon. A.D. Susil Premajayantha, Hon. Karu Jayasooriya, Hon. Lasantha Alagiyawanna and Hon. Mahinda Amaraweera respectively.

The report unveils the situations of non compliance with rules and regulations, inefficiencies, non transparent transactions observed with regard to the 46 institutions along with the directives and recommendations given by the Committee.

The Financial status in relation to the years of 2011, 2012 and 2013 gives a better understanding to the reader about the performance of the institutions. The audit opinion expressed on 2012 accounts has also been included in the report to enable the reader to understand the stand of the Auditor General in relation to the situation depicted by the Accounts of those institutions.

Since all public enterprises are obliged to present their Annual Accounts to Parliament in time, the failure of any institution to adhere to this regulation is a serious lapse as far as the accountability is concerned. Therefore, the report has separately shown the institutions which have not yet tabled the 2011,2012 and 2013 Annual reports in Parliament.

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The 46 institutions examined by each Committee of the COPE are as follows.

Committee No of Institutions

Main Committee 25 Sub Committee – І 06 Sub Committee – ІІ 07 Sub Committee - ІІІ 08 Total 46

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Major Transactions with Inadequate Accountability (These observations exemplify only the situation prevailed as at the date of the examination.) 01. The entire procurement process in relation to the grant of Local Television Broadcast rights by the Sri Lanka Cricket in 2010 is not transparent and the following observations were made.

(i) The tender notice had not been given an adequate publicity as only a small advertisement had been displayed under the Employment Opportunities Column of the News Paper. Due to the manner in which the advertisement had been designed, it is doubtful whether the attention of the interest parties was drawn to the advertisement.

(ii) Sufficient time had not been given to respond to the tender notice.

(iii) Only one bid had been received in response to the tender notice.

(iv) No clauses had been entered in the agreement in relation to a bid bond and delayed payments.

(v) The Secretary of the Sri Lanka Cricket, being the Chief Executive Officer of the company which received the tender, is a clear conflict of interest.

02. In spite of the initial estimate of Rs.2.5 million, the tender related to the refurbishment of 13 hotel rooms in the Samudra Hotel, had been awarded by the Sri Lanka Institute of Tourism & Hotel Management, for Rs.3.9 million per room. However, the selected contractor had failed to perform the refurbishment up to the standards and the final payment had been made ignoring the audit observations.

03. Even though a Stock Distributor in Anuradhapura had been responsible for the misplacement of 5000 MT of fertilizer valued at Rs.388 million (without subsidy), given by the Colombo Fertilizer Company Ltd. to be distributed among the farmers under the fertilizer subsidy scheme, the investigations into the fraud, taken place in 2008, had not been completed even by 2014.

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It was further observed that no agreement had been entered into when handing over the fertilizer stock to the particular centre which had been registered only as an NGO.

04. The monopoly of selling soft drinks at Galle Face Green had been acquired by a Trade Union of the Sri Lanka Ports Authority by getting registered as a private company and later, it had been sold to an external company for Rs.5.5 million without obtaining the approval of the Authority. (Reference- 2012 performance)

05. The National Paper Company Ltd. had received only Rs.16 million for a stock of scrap iron worth of around Rs. 40 million, sold in the year 2012 and, a significant number of dishonored cheques had also been obtained in respect of this transaction.

06. Although the construction work of the Oluvil Port had been completed by spending Rs.6,780 million received from the DANIDA Agency of the Denmark and Rs.444 million of the Sri Lanka Ports Authority, its operations had not commenced even as at the date of the examination held on 04.06.2014. Further, it has been revealed that the Port can accommodate only smaller vessels due to its low depth of around 9 meters. (Reference- 2014 performance)

07. Rs. 391 million, spent on the improvement of the efficiency of the Colombo Port, had become futile as the project, funded by the Asian Development Bank, had been abandoned since the Government policies had changed later.

08. Rs. 54,889,800 had been paid as fines by the State Printing Corporation in the years 2010 and 2011 for not handing over the printed books at the specified dates, and not printing the text books in accordance with the relevant specifications.

09. Rs.1,494,543 had been made as the initial payment for the construction of an Administration building for the University of Sabaragamuwa. Due to a legal issue, no construction had commenced as at the date of the examination held on 05.06.2014, even though the cabinet approval had been received in 2007.

10. The contract for the construction of the Arch Bridge of Pussallawa-Ulapane road had been awarded by the Road Development Authority in 1999 at the 4 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

estimated cost of Rs. 42 million. Since the construction work had stopped by 2003 after spending Rs. 34 million, the contract had been re-awarded to the State Development & Construction Corporation to complete the rest of the work at Rs. 75 million on condition that it should be completed before 18.06.2009. However, the construction work had not been completed even by 31.12.2013.

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

General Observations Several observations made in general by the Committee in relation to the 46 institutions have been stated below. Most of the irregularities had been caused due to the financial and administrative inefficiencies of the relevant institutions and certain issues are repeatedly observed in spite of several directives already given by the Committee in earlier meetings.

01. Lack of control in managing Subsidiary companies 02. Non-receipt of the Royalty in relation to state resources. 03. Unavailability of a proper Corporate plan 04. Weaknesses in the preparation and implementation of the Action Plan. 05. Lapses in the Procurement of Work, Goods and Services 06. Accounting deficiencies. 07. Inadequacy of the utilization of Information Technology and Management Information Systems 08. Implementation of Projects without proper feasibility studies. 09. Unauthorized writing off of Account balances. 10. Issues related to land administration. 11. Weaknesses in assets management. 12. Non recovery of dividends on investments. 13. Issues related to contracts and agreements. 14. Capital Erosion 15. Releasing institutional resources to other state institutions. 16. Long standing debtor balances.

01. Lack of Control in Managing Subsidiary Companies

Although the Subsidiary companies were usually formed to get BOI and other Tax benefits, presently, it seems that they are desperately formed as a tactic of deviating from the super vision of the Government audit. The degree of control of the parent organizations over their subsidiary Companies has become annulled in many instances. Further, those subsidiary Companies had gone on to form their own subsidiaries. Some subsidiary Companies had not even declared dividends despite their profitability and further annual accounts had also not been submitted.

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02. Non-receipt of the Royalty in Relation to State Resources

The Committee observed number of instances where the royalty in relation to certain resources such as quarries and specially Granites, soil etc., which are removed during road constructions, have not been paid to the Government.

03. Unavailability of a Proper Corporate Plan

The Public Enterprises Circular No.12 provides clear guidelines for institutions required to prepare the Corporate Plan. However, the Committee observed that most of the Corporate Plans submitted to the Committee by institutions are not timely updated nor comply with the standards laid down by the Treasury. Further, there were institutions which had not obtained the approval of the Director Board for the prepared Corporate Plan.

04. Weaknesses in the Preparation and the Implementation of the Action Plan

Certain institutions had not prepared the Action Plan in compliance with Corporate Plan and further in number of instances, the officers responsible for the implementation of activities in the Action Plan, had not been stipulated. In addition, the Committee noticed number of activities which had been remaining incomplete even at the end of the prescribed period.

05. Lapses in the Procurement of Work, Goods and Services

Among the frequently encountered irregularities with regard to the Procurement process is the non-adherence to a transparent tender procedure, offering contracts without calling for tenders, and undue delays. Sometimes, adequate time had not been given to respond to the tender notice. It was also observed instances where the tenders have been offered on the influence of the Donor Agencies.

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06. Accounting Deficiencies

The Committee noticed that number of accounting deficiencies had been resulted for not following the Accounting Standards. It had sometimes been difficult for the Auditor General to express a clear opinion on the Accounts. Erroneous balances resulted by the inaccurate ledger accounts, long standing un-reconciled balances, poor maintenance of documents and records, inserting ledger entries by incompetent people and non-revaluation of Assets had led to most of the accounting errors.

07. Inadequacy of the utilization of Information Technology and Management Information Systems

The public sector is still far behind the optimal utilization of the Information Technology and Management Information Systems which support the effective decision making and taking follow up actions efficiently. There were number of Institutions which did not have an informative Data Base and sometimes, there was no possibility to trace required information straight away through the system.

08. Implementation of Projects without Proper Feasibility Studies.

The Committee observed that satisfactory feasibility studies had not been carried out before the implementation of certain projects. There were instances where no feasibility analysis was in existence at all in relation to some projects. As a result, there were projects which had caused serious environmental issues and some projects had ended up with a failure for not being able to identify the market opportunities in advance.

09. Unauthorized Writing Off of Account Balances.

Certain institutions were found to have written off some account balances without obtaining the approval of the Treasury. The Committee further observed that certain debtor balances have been written off without taking adequate effort to recover them. Unavailability of proof documents, lapses in agreements, accounting errors, inability to recover outstanding amounts for not being to trace the debtors had been the prominent reasons for such instances of write off.

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10. Issues related to Land Administration.

There were significant numbers of issues related to land administration of several institutions. Unavailability of records to prove the ownership of leased out lands, not taking action to get the ownership transferred and situations where the lessees have sold the lands to external parties are some of them. The Committee further noticed several instances where constructions have been carried out without getting the ownership of lands transferred. There was an instance where an institution had to sell the building constructed on such a land at its scrap value due to the inability to get the ownership of the land.

11. Weaknesses in assets Management.

The Auditor General have reported to the Committee that the Management of assets of certain institutions are not at a satisfactory level. The fixed assets registers have not been properly maintained and a physical verification has also not been made at times to assure the availability of the assets in the institution. There were numbers of instances where the assets had been given to external parties on rent. However, no physical verification had been done on the existence of those assets which had been given several years ago. Further, the rent income in relation to certain such assets given on rent is also outstanding for years. A revaluation of assets had also been neglected sometimes. The rent income of certain assets had not been revised for a long period of time.

12. Non recovery of dividends on Investments.

The Committee observed instances where certain institutions had not received dividends on their investments in various businesses in spite of the profitability of the Companies in which those investments had been made. The Committee noticed that adequate follow up has also not been made by some institutions to recover the dividends.

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13. Issues related to Contracts & Agreements.

The Committee observed number of issues relating to contracts and agreements entered into with external parties. Conflict of Interest, abandonment or incompletion of work within the prescribed period and substandard construction work by the contractors were identified. A proper tender procedure had not been followed at times to select the contractor and the Auditors had informed the Committee that certain contractors had been chosen on the influence of the lending agencies. Instances where security bonds have not been obtained were also observed. Due to the unavailability of a clause in relation to termination of certain disadvantageous agreements, the State had to sustain significant losses.

14. Capital Erosion

Due to the heavier losses incurred continuously, the net assets position of certain larger institutions had significantly eroded and their continuity as a going concern without the financial assistance of the government is questionable. Further, the continuation of these institutions with heavy losses has a direct impact on the savings of the country.

15. Releasing Institutional Resources to Other State Institutions.

The Committee observed several instances where the resources of certain institutions, mainly employees and vehicles, have been released to the line Ministry and other state institutions without the approval of the Cabinet. This is a violation of the PED Circular No.116 of 2007. However, fuel, maintenance expenses and the salaries had also been born by the institution.

16. Long standing debtor balances.

As reported in earlier reports, the Committee is not satisfied with the efforts taken by most of the institutions to recover debtor balances which are sometimes outstanding for more than 5 years.

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Recommendations

The Committee expects the special consideration of policy makers on the following matters which need to be addressed as matters of priority.

01. The Treasury should report to the Committee in writing of the instances where institutions have taken decisions regardless of the advice or objections of the Treasury Representative.

02. Salary scales must be revised in order to attract more professionals into the Public Sector.

03. The Committee observes that officials who are sent abroad for studies sometimes do not return to the country. A mechanism should be formulated in coordination with embassies to obtain regular reports on them.

04. The local terrestrial television broadcaster rights may be offered to the state owned TV stations in order to have their financial position strengthened.

05. Sri Lankan Airlines Ltd. and the Mihin Lanka Ltd. may be amalgamated.

06. It is reported that the Cabinet has given approval for the revised Financial Regulations. The Ministry of Finance is requested to take measures to initiate awareness programmes on the revision for the officers concerned.

07. The contribution made by the two national carriers (Sri Lankan & Mihin) for the development of other sectors such as tourism should be given the due recognition. An introduction of a CESS is recommended.

08. Certain State Corporations have Subsidiary companies under them. However, it is observed that the parent organizations have no control over them. This situation has given rise to negative trends of developments. The relevant Ministries and the Treasury should look into these issues and to make suitable recommendations to the Cabinet.

09. It needs to be reiterated that the contractors who had failed to complete the work as per Agreements should be blacklisted. 13 Parliamentary Series No 343

10. Attention of all Heads of Public Enterprises and also Members of Boards is drawn to the Guide and Circulars issued by the Secretary to the Treasury on Financial Discipline and Good Governance of Public Enterprises.

11. Attention is drawn to the requirement that all Public Enterprises carrying business operations should undertake a SWOT analysis, when Corporate Plans are prepared. (Circular No.01/2014 issued by the Department of Public Finance). This should be strictly enforced.

12. It is observed that guidelines laid down regarding the handing over procedure to a new management are not followed by most of the Institutions. It is the responsibility of the Chief Accounting Officer to see that these guidelines are strictly enforced.

13. The application of Information Technology and Management Information Systems should be promoted in Public Enterprises.

14. A tender should be evaluated based on the price, delivery, completion time, environmental impact, and cost of operation, cost of efficiency, quality, service and technical support. The criteria should be made available to the bidder.

15. The Fixed Assets Register should be maintained properly under the supervision of a responsible officer and a physical verification of the assets should be done annually. A common computerized module may be introduced by the General Treasury in this regard.

16. A separate unit should be established within the institution to work on the outstanding debtor balances.

17. The adoption of Sri Lanka Accounting Standards and Sri Lanka Public Sector Accounting Standards need to be specified and accordingly, amend the Sri Lanka Auditing and Accounting Standard Act No.15 of 1995.

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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 01 Central Engineering 569,787,344 499,944,941 315,850,245 Consultancy Bureau

02 Ceylon Electricity Board 18,593,781,000 (61,447,317,000) (20,185,381,000)

03 Ceylon Petroleum (7,732,818,000) (89,569,175,000) (94,356,643,000) Corporation

04 Ceylon Petroleum Services 1,596,039,296 2,193,477,383 2,341,504,652 Terminal Limited

05 Colombo Commercial 439,384,320 181,928,588 314,143,499 Fertilizer Company Limited

06 MILCO 199,057,444 (259,162,961) (244,788,257)

07 National Film Corporation 11,622,173 17,820,214 2,417,938

08 National Paper Company (109,684,000) (73,713,000) (212,193,000) Limited

09 National Water Supply and 1,050,326,475 407,019,536 737,409,181 Drainage Board

10 Selacine Television 11,902,292 21,437,942 7,539,235 Institute

11 Sri Lanka Cement - (70,382,929) 2,600,000 Corporation

12 Sri Lanka Ports Authority 2,427,798,259 5,211,436,974 256,869,976

13 Sri Lanka State Plantation Financial Financial (52,413,476) Corporation Statements Not Statements Not Received Received 14 Sri Lankan Airlines (32,357,980,000) (26,088,570,000) (377,750,000) Limited

15 State Printing Corporation 132,064,773 140,567,143 133,688,336

16 Sri Lanka Ayrvedic Drugs Financial Corporation Statements Not 67,090,055 63,878,705 Received

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Non Profit Oriented Establishments & Other Institutions

Surplus / (Deficit) Before Tax (Rs.) No. Institution 2013 2012 2011 01 Central Bank of Sri Lanka (22,248,312,000) 68,734,238,000 47,431,799,000

02 Sri Lanka Institute of Advanced (160,087,243) (108,514,206) (101,085,841) Technical Education

03 Agriculture and Agrarian (81,920,566) (15,420,596) 87,675,318 Insurance Board

04 University of Sabaragamuwa (214,560,330) (96,632,028) (131,450,782)

05 Sri Lanka Bureau of Foreign 308,950,542 253,210,125 599,148,170 Employment

06 Lanka Sathosa Limited 881,440,784 652,206,019 251,490,199

07 LLGC (Pension and Provident 25,118,987 25,963,371 54,478,480 Fund)

08 Sri Lanka Press Council (1,795,205) (79,648) (877,363)

09 Institute of Post harvest (16,567,327) (4,893,838) (5,090,236) Technology

10 Sri Lanka National Freedom (5,077,457) (8,142,953) (6,471,589) from Hunger Campaign Board

11 Road Development Authority 547,175,198 (547,429,580) (385,204,114)

12 Central Environmental Authority (28,610,438) (30,635,316) 6,305,261

13 Sri Lanka Cricket (1,111,022,034) 368,533,718 594,673,283

14 National Institute of Social (7,806,700) (5,228,093) (9,445,973) Development

15 National Secretariat for persons 1,508,798 373,256,937 389,761 with Disabilities

16 Public Utilities Commission 14,707,789 29,967,560 55,978,423

17 Sri Lanka Institute of Tourism 78,253,762 50,896,177 55,649,410 and Hotel Management

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

18 University of Jaffna (119,128,668) (100,783,982) (60,290,341)

Sri Lanka Inventors Commission 19 (16,341,471) (29,099,096) (7,675,762)

Marine Environment Protection 20 Authority (2,804,789) (1,814,711) 142,233

Gem & Jewellery Research & 21 Training Institute (1,117,200) (207,400) 383,100

Vocational Training Authority 22 (49,225,894) 16,030,860 (18,333,666)

National Human Resources 23 Development Council 544,867 (3,756,366) (758,795)

National Institute of Library & 24 Information Science (863,647) (1,796,279) (1,331,723)

Institute of Technology- 25 University of Moratuwa 2,804,799 (3,510,686) 4,834,423

Sri Lanka Ayrvedic Drugs 26 Corporation FSNS 67,090,055 63,878,705

Institute of Indigenous Medicine 27 (98,204) (12,270,709) (25,847,594)

Condominium Management 28 Authority (8,961,997) 16,005,452 (18,952,422)

Urban Settlement Development 29 Authority 6,032,874 11,619,000 (57,276,733)

Coconut Research Board 30 36,054,442 (59,537,758) (7,998,680)

Source : Auditor General’s Department

17 Parliamentary Series No 343

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

Status of Presenting Annual Reports to Parliament

The status of presenting the 2011, 2012 and 2013 Annual Reports by the institutions coming under the purview of this report is given below separately.

Institutions which had not tabled 2011 Annual Report (as at 30.10.2014)

 Lanka Sathosa Ltd.  National Secretariat for Persons with Disabilities.  National Paper Company Ltd.  Selacine Television Institute  Sri Lanka Cement Corporation  Sri Lanka Cricket  Sri Lanka State Plantation Corporation  Water Supply & Drainage Board.

Institutions which had not tabled 2012 Annual Report (as at 30.10.2014)

 Ceylon Electricity Board  Central Engineering Consultancy Bureau  Ceylon Petroleum Corporation  Condominium Management Authority  Gem & Jewellery & Research Training Institute  Institute of Technology-University of Moratuwa  Institute of Post harvest Technology  Lanka Sathosa Ltd.  Pension & Provident Fund (University Grants Commission)  National Secretariat for Persons with Disabilities.  National Film Corporation  Selacine Television Institute  Sri Lanka Ayurvedic Drugs Corporation

19 Parliamentary Series No 343

 Sri Lanka Bureau of Foreign Employment  Sri Lanka Cement Corporation.  Sri Lanka Institute of Advanced Technical Education  Sri Lanka National Freedom From Hunger Campaign Board  Sri Lanka Press Council  Sri Lanka State Plantation Corporation  Sri Lanka Ports Authority  State Printing Corporation  University of Jaffna  University of Sabaragamuwa  Urban Settlement Development Authority  Vocational Training Authority  Water Supply & Drainage Board

Institutions which had not tabled 2013 Annual Report (as at 30.10.2014)

 No institution except the Central Bank of Sri Lanka, had tabled the Annual Report for 2013.

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

Auditor’s Opinion on Annual Accounts

The opinion expressed by the Auditor General on the final accounts of an institution is an indication about the trustworthiness of the financial management of the institution. A detailed explanation of the four varieties of Audit opinions has been given in the First Interim Report for 2014 and each opinion has been explained in short below for the easy reference of the readers.

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.

Qualified Opinion A qualified audit opinion indicates that the auditor General found issues in the financial information of a Public Enterprise due to deviations from Reporting Accounting Standards or due to limitation of scope for unavailability of documentary evidences.

Disclaimer of Opinion A disclaimer of Opinion indicates that an opinion can not be made due to the inability to obtain sufficient appropriate audit evidences and the Auditor General concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive the uncertainties and their possible cumulative effect on the financial statements.

Adverse Opinion An adverse opinion indicates the auditor found significant material misstatements relating to financial statements due to inaccurate or unreliable information.

21 Parliamentary Series No 343

The Auditor General’s opinion in respect of the 2012 financial statements of each of the 46 institutions considered in this report are given below. As a whole, the Committee observed;  02 institutions offered with adverse audit opinion.  03 institutions offered with disclaimer of opinion.  36 institutions offered with qualified opinion.  Only 04 institutions offered with unqualified opinion.

The Committee is of the view that provisions should be made available to avoid the re-appointment of Chairmen and the members of the Board of Directors in the Institutions which have been offered with a disclaimer or adverse audit opinion for three consecutive years.

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

No. Institution Opinion

01 Central Bank of Sri Lanka Unqualified

02 Ceylon Petroleum Corporation Qualified

03 Sri Lanka Institute of Advanced Technical Education Qualified

04 Agriculture and Agrarian Insurance Board Qualified

05 Sri Lanka State Plantation Corporation - 06 Ceylon Electricity Board Qualified

07 Sri Lanka Ports Authority Qualified

08 University of Sabaragamuwa Qualified

09 Sri Lanka Bureau of Foreign Employment Qualified

10 Lanka Sathosa Limited Qualified

11 State Printing Corporation Adverse

12 Ceylon Petroleum Services Terminal Limited Qualified

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

13 National Water Supply and Drainage Board Qualified

14 Central Engineering Consultancy Bureau Qualified

15 National Film Corporation Qualified

16 MILCO Qualified

17 UGC (Pension and Provident Fund) Disclaimer

18 Sri Lankan Airlines Limited Unqualified

19 Selacine Television Institute Qualified

20 Sri Lanka Press Council Qualified

21 Institute of Post harvest Technology Qualified

22 Sri Lanka National Freedom from Hunger Campaign Board Qualified

23 National Paper Company Limited Adverse

24 Road Development Authority Qualified

25 Sri Lanka Cement Corporation Disclaimer

26 Central Environmental Authority Qualified

27 Sri Lanka Cricket Qualified 28 National Institute of Social Development Qualified

29 National Secretariat for persons with Disabilities Qualified

30 Colombo Commercial Fertilizer Company Limited Unqualified

31 Public Utilities Commission Qualified

32 Sri Lanka Institute of Tourism and Hotel Management Qualified

33 University of Jaffna Disclaimer Sri Lanka Accreditation Board for Conformity 34 Qualified Assessment

35 Sri Lanka Inventors Commission Qualified

23 Parliamentary Series No 343

36 Marine Environment Protection Authority Qualified

37 Gem & Jewellery Research & Training Institute Qualified

38 Vocational Training Authority Qualified

39 National Human Resources Development Council Qualified

40 National Institute of Library & Information Science Qualified

41 Institute of Technology-University of Moratuwa Qualified

42 Sri Lanka Ayrvedic Drugs Corporation Qualified

43 Institute of Indigenous Medicine Affiliated to Qualified University of Colombo 44 Condominium Management Authority Qualified

45 Urban Settlement Development Authority Qualified

46 Coconut Research Board Unqualified

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

Institutions Examined by the Main Committee

25 Parliamentary Series No 343

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

Major Issues & Problems Identified Comments & Directives of the COPE

Central Bank of Sri Lanka 07th of May 2014 Ministry of Finance & Planning

1. A net loss of Rs.22, 248 million had The Governor’s justification been incurred in 2013 before taxes. regarding the loss was that although a loss has been reported as per the IFR standars, the Bank had actually made profits in terms of the Monetory Law Act.

2. The Committee questioned about the The AO was directed to submit a incident of violation of exchange detailed report on this issue to the control regulations. Committee.

3. The Committee discussed about the An arbitration process is in losses incurred by the CBSL owing progress regarding the matter. to the investments in the Greek Government bonds in 2012.

4. The steps taken regarding the The matter had been handed over Pyramid Schemes were discussed. to the Attorney General’s Department and the litigation process was in progress.

Ceylon Petroleum Corporation 09th of May 2014 Ministry of Petroleum Idustries

1. As per the previous directive given The internal control had not yet by the COPE on 02.12.2013, on an been strengthened to overcome over payment of US $ 2,060,842 by such situations. including the premium twice in the agreement made to procure fuel from a Foreign company, an internal investigation had not been conducted to find out the responsible officers.

27 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE 2. The Committee enquired about the The CAO/AO was directed to action taken against the officers submit the Cabinet decision, along responsible for the loss of US $ 75.3 with a report with regard to the loss million caused due to the hedging of the hedging transaction to the transaction of which the breakdown Committee within a week’s time. as at 03.06.2013 is as follows. Amount Standard Chartered US $ 60 million Bank

Arbitration fees, US $ 16.6 million Legal & others Less; Profit(City Bank) US $.1.3 million

Net Loss US $ 75.3 million

The CAO/AO, having stressed that the transaction had taken place according to a policy decision taken by the Cabinet, stated that the Deputy General Manager (Finance) who was in office at that particular period had been given compulsory leave for 5 years, and an inquiry had been initiated.

3. Due to the continuous losses The CPC expects that the situation incurred, the CPC carries a negative will turn around once the CEB net asset position of Rs.228.545 starts generating electricity with million and , Rs. 236.529 million as coal power which would then at the end of the year 2012 and 2013 reduce the dependency on fuel. respectively. The going concern of the CPC had been in an uncertain position without the financial assistance of the Govt.

4. The Committee enquired about the The Committee was of the opinion two instances related to the that the CPC should co-ordinate importation of substandard fuel with the Motor Traffic Dept., and from the two companies, ENOC find out the vehicles that would be (25,000 MT) and VITOL (30,000 imported to the country with new MT) respectively in 2011 and 2012. technology, and update the According to the CAO/AO, the oil specifications accordingly. stock of the ENOC had been The Committee decided that in accepted by the CPC officials at the future if any sub-standard fuel was 28 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE port even though that company had imported to the country, the CPC informed the CPC that the stock did would be summoned before the not meet the specifications. He COPE in the following week. further stated that the stock supplied by the VITOL had no issues regarding the quality. The non- inclusion of a water separator parameter in the specifications of the CPC had given rise to the issue.

5. The contribution of the CPC on The CAO/AO, having accepted the placing orders for petroleum structural issue, stated that the CPC products had been very poor as they was planning to get the had not properly maintained records administration control under the relating to the stock levels nor they CPC. had access to the system Application and Products (SAP) system introduced and implemented by the CPSTL.

Sri Lanka Institute of Advanced 21st of May 2014 Technological Education Ministry of Higer Education

1. Out of the total of 98 vacancies, 41 Since it had been difficult to recruit were in the academic staff and this and retain the academic staff due to could adversely affect to the the low salary scales, a decision performance of the Institution. had been taken to upgrade the salary scales to the level of academic staff of the universities. At the moment, the services of the visiting lecturers were being obtained on covering basis.

2. The performance of the institution According to the CAO/AO, the was not satisfactory as only 1754 less out put in 2013 had been Diploma Holders had been produced resulted by the low student intake in the year 2013 despite the in 2009/2010 due to the limitation availability of 17 branches and the of resources such as lack of a passing rate of the 1st Semester permanent building at that time. examinations in the year 2013 had The branch at Ratnapura, which been only 39%. Further, one of the had been unable to conduct any branches had not conducted any course due to the construction of course. the building, completed only 29 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE recently, had then enrolled 157 students for 03 programmes.

The CAO/AO further stated that the drop-out rate was comparatively high as some of the students had entered into the Universities, found jobs etc. later.

Agricultural & Agrarian Insurance 22nd of May 2014 Board Ministry of Finance & Planning

1. There was no any plan to pay the According to the CAO/AO, no arrears amounts of the pension arrears would be paid as such and payable to the pensioners for the two the old members are required to get years during which the Farmer’s enrolled in the new scheme to be Pension Fund and Social Security benefited under that. However, the Benefit Scheme was not in operation Committee was of the view that it from 2012. would be better to pay those arrears amounts by raising funds at least through a supplementary provision.

2. The accounts should be adjusted According to the CAO/AO, the along with the implementation of the government is not bound to hold new scheme in 01st of January,2014 any responsibility of this contributory pension scheme and as the institution is carrying with a that there is no liability carrying negative worth of assets of Rs.53 forward unless the beneficiaries of billion relating to the Farmers' the old scheme enter into the new Pension Fund and Rs.1.7 billion scheme. relating to the Fishermen's Pension Fund.

3. There is a serious issue with regard The Committee directed the to the viability of the fund as it is no CAO/AO to furnish a feasibility longer a going concern due to under study report on the newly initiated capitalization. The responsibility of pension scheme. the existing liabilities should be under taken either by the institution or the Government.

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

Major Issues & Problems Identified Comments & Directives of the COPE Sri Lanka State Plantation 23rd of May 2014 Corporation Ministry of State Resources & Enterprise Development

1. No Annual Report had been tabled The CAO/AO was directed to table in Parliament after that for 2010. the outstanding Annual Reports in Parliament within three months time.

2. An extent of 11,905.08 hectares of The Committee directed the land of SLSPC was found to have CAO/AO to write to each of the been beyond the custody of the current owners and obtain institution and the present position information on the extent of the of the matter was enquired. The land under their custody. CAO/AO stated that the estates that belonged to Regional Plantation Companies had been legally transferred. However, some of the lands had been given to private partners on the approval of the Director Board.

3. The lands and buildings which had These lands were presently under been transferred to Sapugasthenna the custody of the Land Reforms Plantations Ltd. on lease had been Commission. sold by the company in 2007 to the Finance Company for a sum of Rs. 100 million without the knowledge of the Corporation.

4. It was revealed that 23 petitions, The 02 officers, who were handed over to the Auditor General suspected to have involved in this by the Committee, had subsequently incident, had been interdicted and been stolen by breaking into the charge sheets had also been issued. Government Audit Office in 23rd of May 2013, located in the SLSPC premises.

5. A large number of vacancies in The Committee directed the CAO higher grades remain vacant for not to discuss this issue with the Hon. receiving applications for the Minister and the Treasury officials advertisement published in this in order to solve the staff problems respect. A request had been made to in the SLSPC. 31 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE the treasury to recruit a legal officer and an accountant, as there were a number of court cases. However, the request had been rejected.

Ceylon Electricity Board 03rd of June 2014 Ministry of Power & Energy

1. The Committee discussed about the The Committee wanted to know ownership of the LTL ESOT about the term of office of those Company, and came to know that six who served in the Trust and further enquired whether there was a fair employees had signed as original situation for all employees. The subscribers at the incorporation. Due CAO agreed to furnish a report on to the difficulty in including the the matter after studying the trust particulars of all share holders, who agreement. The Committee are the employees of the company, a directed the Auditor General to separate trust governed by a panel of submit a report to the Committee experts had been appointed to including audit observations on the trust agreement mentioned above represent them. and a report on all other subsidiaries together with their

funding arrangement.

2. The Committee observed that there The CAO/AO stated that the CEB were subsidiary Companies formed did not have any say in those under the present subsidiaries and subsidiaries of subsidiary discussed about the control of the Companies which had been CEB over the subsidiaries of the formed to get BOI benefits and tax subsidiary Companies. benefits. The Committee directed the CAO/AO to provide all the details on these subsidiaries of subsidiary companies. The Committee directed the Auditor General also to send their report on those subsidiary Companies coming under the existing subsidiaries.

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

Major Issues & Problems Identified Comments & Directives of the COPE

3. The irregularly adopted allowances The Committee directed the in CEB had created significant CAO/AO to submit a detailed discrepancies of salary scales among report on all the allowances paid by the similar categories in the the CEB to the employees and government sector and as a result, wanted to include the details the other institutions had found it pertaining to the basis of making difficult to retain professionals such those allowances, percentage, as accountants, engineers etc. authorizing body etc. in the report.

4. The Committee discussed about the The CAO/AO stated that Rs.44 outstanding amounts payable to billion is payable to People's Bank other institutions and Rs.14 billion for various Independent Power Producers. In addition, Rs.14 billion is payable to Ceylon Petroleum Corporation.

5. The Committee pointed out the The Committee directed the importance of a concerted planning CAO/AO to furnish a report to the to improve the use of non Committee on the action taken to promote the use of non conventional energy sources, given conventional energy sources along the environmental impact of the with an analysis of the possible fossil fuels. problems and the ways of overcoming the issues.

33 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Sri Lanka Ports Authority 04th of June 2014 Ministry of Ports & Highways

The monopoly of selling soft drinks The CAO/AO stated that legal 1. at Galle Face Green had been action would be taken against the acquired by a Trade Union by trade union as advised by the getting registered as a private Attorney General and further the company and later, it had been sold Company Registrar had been to an external company for Rs.5.5 requested to carry out a special million without obtaining the investigation on this issue. approval of the Authority. (Reference- 2012 performance)

The Ports at Trincomalee and Galle The CAO/AO stated that steps had 2. had shown losses amounted to Rs. been taken to reduce the losses by 240 million and Rs. 47 million 2015 by developing both ports respectively as at 31.12.2012. under various projects.

The number of ships arrived in the The Authority had taken action to 3. harbors in 2012 to obtain services provide 12 hour service for vessels had been unsatisfactory. at concessionary rates in the aim of increasing the number of vessels up to 2000.

The Authority had paid PAYE Tax The PAYE tax of the employees 4. amounting to Rs. 1998 million from had been paid by the Authority the funds of the Authority during since 2000, on the approval of the five preceding years up to 31st Ministry of Finance and this December 2012 instead of deducting procedure had not been changed from the salaries of employees. to avoid a possible unrest among the staff. The AO agreed to see the possibility of deducting the amount paid as PAYE Tax from the salaries of the employees at the next meeting of the Salary Revision Committee.

The Committee questioned whether The CAO/AO was directed to 5. the South Asia Gateway Terminal submit a detailed report on this Ltd. (SAGT) had a conflict of issue to the Committee, including interest by carrying out its the legal opinion within two operations in another port in this weeks. vicinity violating the agreements and the AO stated that there was no 34 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE information to confirm that the ‘’SAGT’’ had a conflict of interest by operating in another port.

6. The Committee enquired about the The AO stated that the construction of the Suriyawewa construction work had been carried Cricket Stadium in 2011, investing out on a Cabinet approval and Rs. 4.8 billion which was related to further mentioned that the SLPA the objectives of the Authority. could not pay to the contractor, as the Cricket Board had not settled the transaction. The Committee directed the CAO/AO to submit a report on this issue to the Committee.

7. An additional expenditure The AO stated that getting those amounting to Rs. 31,151,474 had services done by the said company been incurred as commission for the was more economical when execution of minor services by Sri compared with cost which would Lanka Ports Management & have been incurred by the authority Consultancy Company without on doing them with its own staff. following the Procurement Procedure in 2011.

8. Rs. 391 million, spent on the The AO stated that they had to improvement of the efficiency of abandon this project due to the Colombo Port, had become futile changes of the Government since the project, funded by the Policies. Asian Development Bank, had been abandoned later. (Reference- 2011 performance)

9. Although the construction work of The AO stated that the SLPA had the Oluvil Port had been completed already pointed out those by spending Rs.6,780 million difficulties at the preliminary level received from the DANIDA Agency discussions and Studies were being of the Denmark and Rs.444 million carried out by the DANIDA of the Sri Lanka Ports Authority, its Agency of the Government of operations have not commenced yet. Denmark which granted a loan of Further, it has been revealed that the Rs. 6,780 million to mitigate this Port can accommodate only smaller situation. vessels due its low depth of around 9 meters. (Reference- 2014 performance) 35 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE University of Sabaragamuwa 05th of June 2014 Ministry of Higher Education

Rs.1,494,543 had been made as the The delay has been caused due to a 1. initial payment for the construction legal case and the Committee, of an Administration building. having expressed its dissatisfaction However, no construction had for spending such a large amount commenced yet even though the of money when there is a legal cabinet approval had been received issue, wanted the CAO/AO to send in 2007. the names of those responsible officers.

Referring to the non-recovery of The Committee wanted the 2. staff loans, the Committee was of the University management to obtain view that the management should legal advice and find out whether take disciplinary action of the the University has the authority to officials responsible for not deduct the loan balances from the recovering the loan balances at the UPF of the respective staff time of the resignations/retirement member. of the relevant staff.

The Committee discussed on the The Committee wanted the 3. incidents related to suspension of CAO/AO to adopt a mechanism in student unions in the Sabaragamuwa relation to establishment of student University. societies in the right path.

The Committee discussed about the The Committee wanted the 4. criteria that should be adopted when CAO/AO to adopt a criteria in this selecting members to the Governing regard and send to the Committee. Council.

Sri Lanka Bureau of Foreign 06th of June 2014 Employment Ministry of Foreign Employment Promotion & Welfare

The Committee examined the The Bureau had met the Inspector 1. progress of the investigations of the General of Police to discuss about fraud relating to two cheques valued the delay in investigations, and at Rs.800,000 encashed in thereafter on the order of the IGP September,2009 by placing forged the Mirihana Police had initiated signatures. the investigations.

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

Major Issues & Problems Identified Comments & Directives of the COPE Further, the Bank of Ceylon and the Seylan Bank had agreed to come to a settlement once the court case was over.

The charge sheets had been issued to the two responsible officers, and several sessions of inquiries had been conducted by then.

Lanka Sathosa Ltd. 17th of June 2014 Ministry of Cooperatives & Internal Trade

No Annual Report had been tabled The Committee ruled that the 1. in Parliament from the year of Company, being an entity incorporation in 2005 on the ground established with 100% public that it was not required to table them funds should table the Annual since the company had been Reports in Parliament and directed established under the Companies to table all Annual Reports upto Act. 2011 in Parliament. It was also directed to table the 2012 and 2013 Annual Reports within six months. The Committee further directed the CAO/AO to furnish the copies of audited accounts from the year 2005 – 2011 to the COPE Secretariat within a week’s time.

Although the approval of the The Committee directed the 2. Treasury had been obtained to CAO/AO to regularize the matter appoint external auditors for a period by obtaining the concurrence of the of 05 years at the inception, no such Treasury. approval except that of the Director Board had been obtained thereafter in appointing private auditors.

A qualified Audit opinion has been The situation had not been rectified 3. given on the 2011 Financial even as at the date of examination Statements as no formal registers or and agreed to complete it within records had been maintained in six months’ time, once the 2013 respect of the trading stock valued at accounts were finalized.

37 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Rs. 2,025,186,297/- and the fixed assets valued at Rs. 362,484,580/-.

A fraud of goods worth of Rs. 11 The security of the outlets had been 4. million had taken place in the tightened as the Inspector General Killinochchi outlet in the year 2014 of Police had issued a Gazette and the manager of the outlet had notification under his signature been arrested as he had been found making O.I.C. of the Police of the guilty. The further investigations area responsible for the security of were in progress. the Sathosa outlets.

State Printing Corporation 19th of June 2014 Ministry of Mass Media & Information

Even though a stock of books The Committee was of the view 1. valued at Rs. 3,381,000 had been that the SPC should have a proper issued to the trade stall for marketing plan before such sales during the month of November promotional activities are 2010, it had not been received by conducted wanted the CAO to look them. Although the AO stated that into this matter and submit a these exercise books had been sent report. for promotional activities for children of the low income families, the Auditor General informed the Committee that he was not satisfied on the manner the SPC had acted in this case.

A sum of Rs. 54,889,800 had been The Committee was of the opinion 2. paid as fines for the years 2010 and that the SPC should have a proper 2011 for not being able to hand over management system, to avoid the the printed books on the specified mark-up-level increase further. dates, and also not printing the text books in accordance with the relevant specifications.

Eleven employees of the SPC had The CAO agreed to look into the 3. been released to the Ministry and above and submit a report to the paid salaries and O.T. amounting to Committee. Rs. 2,156,638 in the year 2011, and further, a sum of Rs. 356,894 related to mobile telephone bills of the line

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

Major Issues & Problems Identified Comments & Directives of the COPE Ministry had also been settled by the SPC.

A sum of Rs. 614,787 had been paid The CAO agreed to take in this 4. as accommodation charges in the regard. year 2011 to the Chairman in contrary to the circular instructions.

It was revealed by the Committee The CAO was directed to submit a 5. that prior approval had not been detailed report on the aforesaid obtained in respect of foreign travels foreign travels, including the spending Rs. 2,799,538, in 2012 and countries, the period of stay in each enquired the countries so visited. country and the amount spent, etc. to the Committee.

6. A Deputy Chairman had been The CAO was directed to look into appointed in contrary to the legal the matter take necessary action. provisions in 2010, and a monthly salary of Rs. 45,000/- and vehicle allowance of Rs. 40,000/- had been paid per month.

Ceylon Petroleum Storage & 20th of June 2014 Terminals Ltd. Ministry of Petroleum Industries

The administration expenses in 2013 The CAO/AO stated that 1. had been 195% of the operating expenditure for salaries and profit. overtime per month had been Rs. 150 million and Rs. 100 million respectively and further added that the institution was an establishment which operated throughout the day.

The Committee enquired as to what The CAO/AO stated that these 2. action had been taken to refund the amount which had been over excess terminal charges amounting recovered for a period of 3 to 4 to Rs. 1,065,391,574/- and Rs. years, had been set off later on a 120,258,623/- which had been Director Board ruling, with an outstanding since 2008 without amount under recovered. being refunded to CPC and LIOC respectively.

39 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE The CPSTL had incurred a loss of The CAO/AO pointed out the 3. Rs. 531.80 million from the requirement of revising the transportation of petroleum products existing rates in relation to the and the interest loss had been Rs. transportation of fuel from the 117.75 million in the year 2013. depots to the filling stations. A proposal has been made to the line Ministry to introduce a new pricing system.

The Committee discussed about the The Committee directed the 4. project of laying pipelines from CAO/AO to submit a report stating Colombo Port to Kolonnawa the action taken to resolve the Terminal, which had an issue with problem, and the time frame that regard to the selection of the would be needed to complete the technology and the price involved aforesaid project. The CAO/AO with each of the two technologies was also directed to send a report available.The Cabinet had instructed including how many officials were to appoint a committee with experts being paid additional payment for in the field to select the best. the above project other than their salaries, other facilities, and how long will they be provided with such facilities.

The Committee noted that the trade The CAO/AO was directed to 5. union of the CPSTL should be given ensure that the trade unions be more opportunities to discuss their given opportunity to meet the grievances with the management. management once in every three months time, if such need arises.

National Water Supply & Drainage 09th of July 2014 Board Ministry of Water Supply & Drainage

No Annual Report had been The CAO/AO agreed to table the 1. presented after that for 2010 and that reports early. the submission of Audit Reports for 2012 & 2013 accounts had delayed due to the lapses in the accounts presented by the institution.

The CAO/AO stated that the The SOR should be prepared by 2. preparation of the SOR had become the Management of the institution difficult due to the inability to come in consultation with the Management Services Department 40 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE to a compromise with the trade and the views of the trade unions unions. should be taken at the end of the process.

A significant amount of frauds, un- More qualified accountants should 3. reconciled balances etc. could be be recruited to the institution observed. immediately.

A suitably qualified person had not The involvement of unqualified 4. been appointed to head the Finance persons in inserting Journal entries division and the Commercial had given rise to severe Division had been removed from the discrepancies among the functional scope of the DGM information furnished by the two (Finance). divisions.

The CAO/AO was directed to bring the financial operations of the Commercial Division under the purview of the DGM (Finance). It was also directed that the Commercial Division should submit all necessary information and documents to the Finance Division to avoid this disparity.

A debtor balance of Rs.28, 519,949 The CAO/AO, commenting on the 5. remains outstanding from the amount of outstanding from CMC, Colombo Municipal Council for a mentioned that they were having long period of time. The Auditor discussions with the Local General stated that the total trade and Authority to recover the money. sewerage debtor balance as at 31.12.2011 had been Rs.810 Millions.

Central Engineering Consultancy 10th of July 2014 Bureau Ministry of Irrigation & Water Resources Management

In addition to the loss of Rs. 295 The Cabinet Decision dated 1. million incurred on construction 18.04.2012 taken in order to solve work in 2011, a further loss of Rs. this problem had not been 223 million had been incurred out of implemented timely. 41 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE 103 contracts handled by 08 base offices in the year 2013 mainly due to the manner in which the calculations are done by the Rate Committee.

National Film Corporation 11th of July 2014 Ministry of Mass Media & Information

The vacant posts of General The Committee directed the 1. Manager, Deputy General Manager CAO/AO to have a discussion with (Operations) and Deputy General the Board of Directors as to how Manager (Finance) remains vacant the SOR should be revised for despite they were advertised several those positions and to refer the times. board decision to the Treasury through the CAO. It was also directed to forward the reply of the Treasury to the Committee.

As directed at the previous COPE The CAO/AO was directed to 2. meeting, a report had not been ensure that the report be furnished furnished to the Committee with within a month’s time to the regard to the un-recovered loans Committee. given to177 cinema halls.

It was revealed that out of the debtor Due to the shortcomings in the 3. balance amounting to Rs. 109 agreements entered into with the million in relation to the loans producers, the Corporation had granted to produce films, a sum of then faced with difficulties in Rs. 50 million had been in existence recovering the loans. for over 5 years, and a balance of Rs. 13 million remains outstanding for 3-5 years . Further, there were instances where the films had not been produced, or not screened and the relevant loans had also not been settled.

Out of the loans amounting to Rs. The committee directed the 4. 15,611,384 given for the production CAO/AO to submit a schedule of 07 films which had already been categorizing the types of loans screened, a sum of Rs. 5,207,998 granted by the Corporation (33%) (as at 31.12.2012) had still including the unrecoverable loans, 42 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE been outstanding for several years the instances where legal action and the shortcomings in the relevant had already been initiated, agreements had made them difficult instances where legal action to be to be recovered. taken, no of loans written off, no of loans recoverable without interest and other debtors.

Adequate follow up action had not The committee directed CAO/AO 5. been taken to recover the loans to furnish a report on the recovery granted for the renovation of film of the renovation loans. halls.

6. A person with no adequate The CAO/AO agreed to take action qualifications and knowledge had to fill that post by September 2014. been appointed as the Actg. Deputy General Manager (Operations).

7. The 2.5% surcharge receivable from The Corporation should adopt a delayed payments of film rent had mechanism to recover the not been received by the Corporation surcharges. in 2012.

Milk Industries of Lanka Ltd. 22nd of July 2014 Ministry of Livestock & Rural Community Development

A loss of Rs. 298 million had been According to the CAO/AO, even 1. incurred in the year 2012/2013. though the company had reached breakeven by November 2013, it had turned into a loss owing to the strike of the workers in December 2013, the interruptions caused on the production process by the refurbishment of the factories and also due to the increase in electricity prices. However, as the sales of dairy products had increased rapidly, the MILCO had been able to show a profit by the time of the examination.

43 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Regardless of the losses incurred The Committee was not satisfied 2. continuously, an incentive of Rs. with the answer of the CAO/AO 15,000/- had been paid from the year and stated that the responsibility of 2012 to each employee without the the Company should have been to approval of the Treasury and the re-structure the salary scales of the CAO/AO stated that the allowance staff. has been paid since the basic salary of some workers were very low.

In comparison to the figures in The increase in distribution 3. 2011/2012, the financial cost had expenses by 109% as against the increased by about Rs.100 million 21% increase in sales was not and the distribution expenses had justifiable and the CAO/AO was increased by about Rs. 80 million in directed to submit a report on the the year 2012/2013. distribution expenses.

As at 31st March 2013, the value of The AO stated that the particular 4. the loan facilities provided to the amount was the amount due for the customers without Bank milk diverted sometimes to other companies due to the limited Guarantees was Rs. 144 million. storage capacity of the MILCO Ltd.

Due to the delays in the The AO, having admitted that the 5. procurement process, additional money could not be obtained from funds provided in the year 2012 and the Ministry for not being able to 2013 to purchase 05 machines to complete the tender procedures upgrade the capacity of the MILCO before the end of the year, stated had been underutilized and only 02 that the required machines had machines had been purchased. been purchased from their own funds.

University Provident Fund & Pension 23rd of July 2014 Fund Ministry of Higher Education

The unidentified balance related to According to the CAO/AO, the 1. contributions had increased to Rs. accounting errors had resulted the 6,903,569 by 31.12.2013. issue. It had not been able to take this amount as an income since there is no impact of the Prescription Ordinance on the Provident Fund Act. 44 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE Even though, 10% of the salary of The CAO/AO further added that 2. the employee should have been the Secretary of the Ministry of credited to the Pension Fund as per Higher Education and the the Cabinet decision taken on Secretary to the Treasury had been 24.03.1999, only 8% had been in the process of preparing a credited. Cabinet Paper in this effect, and agreed to rectify the matter within two to three months time.

Sri Lankan Airline Ltd. 24th of July 2014 Ministry of Civil Aviation

The contribution made by the The CAO was directed to look into 1. national carrier for the development the possibility of submitting a and the survival of other sectors such proposal on introducing a CESS in as tourism should be given the due this regard. recognition.

The net loss for 2013/14 after tax The national savings would go 2. was Rs. 26 billion and the loss for down when such massive amounts were lost continuously.

According to the justification of the The argument given by the 3. Company, it had not been able to Company is invalid as the amount turn around the financial crisis of fuel purchased from CPC is only mainly due to the high fuel price 50% out of the total fuel which is 6-8% higher than that in the consumption. Even after the region and also due to devaluation of removal of the effect of the 6-8% the rupee. of fuel, the loss would still stand at Rs.21 billion. The rupee had also been fairly stable over the period concerned. The proposal made in the last budget The Committee directed the 4. to wave off the levy charged on jet CAO/AO to submit a copy of the fuel had not yet been materialized in letter sent to the Treasury in this spite of the reminders sent to the regard Treasury.

5. There is no cohesive plan or co- The CAO was directed to ordination with other relevant formulate and present a concept sectors to use potential of the paper on the possibility of Mattala Airport to promote the combining the tourism with the Tourism sector. aviation sector

45 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE National Paper Company Ltd. 06th of August 2014 Ministry of State Resources & Enterprise Development

The Committee ,having enquired The CAO informed that the 1. about the action taken against the Competent Authority of the General Manager of the Company company had been informed in who had been convicted for altering writing to terminate his services. a cheque worth of Rs. 5 million at the time he had been employed on The Chairman of the COPE 01.10.2013 in the Colombo informed the CAO that the Commercial Company Ltd., further Committee directives in this regard questioned as to how such person would be sent to him in due course. had been re-employed assigning a responsible position in the company.

No Annual Report had been tabled The CAO/AO agreed to table the 2. in Parliament from 2007. Annual Reports that were in arrears within 3 months in Parliament.

The financial control of the company The AO having accepted the facts 3. had been very weak and the going stated that lack of initial capital concern of the company without the was the major obstacle faced by financial assistance of the Treasury them and further mentioned that a was questionable. sufficient amount of funds were not available even to purchase raw materials.

According to the AO, Rs. 300 When considering the 4. million is required for the revival of accumulative loss of over Rs. 01 the company. billion and the current liabilities over Rs. 500 million, it was not realistic to revive the company with the strategy of the company. The Treasury has to give a capital infusion for the restoration of the Walachchenei Paper Factory.

The Committee directed the CAO/AO to prepare a new Business Plan and send it to the Treasury, with a copy to the COPE

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

Major Issues & Problems Identified Comments & Directives of the COPE within two weeks. The Committee also directed the CEO of the State Resources Management Corporation to give necessary guidelines on the preparation of the new Business Plan. The Auditor General was directed to conduct a full investigation and submit a report to the COPE with regard to the financial performances of the company and other matters discussed.

A stock of scrap iron worth of The CAO/AO was directed to 5. around Rs. 40 million had been sold submit a detailed report about the in the year 2012 by calling tenders, entire transaction process within a but the company had received only week including the value & the Rs. 16 million. Further, a large weight of the stock and the amount number of dishonored cheques had received after selling the stock, etc. also been obtained in this transaction.

6. The Committee enquired the The CAO stated that the investor current position with regard to the who had taken the factory on 30 Embilipitiya Paper Factory. years lease was still in Sri Lanka and no response had been received from him in relation to the correspondences of the CEO of the SRMC. The Attorney General had advised them that there was no possibility of taking over the land and property, since the case filed by the lessee against the Seylan Bank was still in progress. The Auditor General was informed to carry out an investigation and submit a report to the Committee.

7. It was questioned by the The guardianship of the factory Committee, whether action had had been under the Seylan Bank been taken against the responsible as the factory had been mortgaged parties who were involved in the to the Bank and the State robbery of several articles in the Resources Management Embilipitiya Paper Factory. 47 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Corporation Ltd. had made a complaint to the Police.

8. The Committee expressed its dissatisfaction over the management, since they had neither responded nor implemented the recommendations made by the Committee at the previous COPE meeting held on 20.02.2013.

Road Development Authority 07th of August 2014 Ministry of Ports & Highways

No action had been taken to charge a According to the CAO/AO, a rent 1. rent from the Maganeguma had not been charged as it was a Companies for the utilization of the subsidiary company established land worth of Rs.25.98 million under the RDA. situated in Peliyagoda . (Reference- Audit Para 2.2.1 (e) iii-2011)

The hiring charges in relation to the The CAO agreed to have further 2. plant and machinery released to the discussions with the Maga Maga Neguma Construction and Neguma Company to verify the Equipment Company had been information & clear the calculated only on the information transactions within another 1 ½ provided by the company the months’ time. accuracy of the information had not been confirmed by the RDA. Accordingly, the information given by the accounts of the RDA was significantly different from the information confirmed by the company.

Even although the three Maga The CAO stated that the plant, 3. Neguma Companies had shown machinery & vehicles provided to profits in the years 2011, 2012 and the 02 of the Maga Neguma 2013, no dividend had been paid to Companies on rent basis, they had the RDA. fully depreciated by then. The Committee directed the CAO/AO to revalue the assets and make an assessment with a view to 48 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE obtaining an income from these companies.

Although Rs. 131,564 million had The CAO agreed to submit a report 4. been obtained from state and private to the Committee clarifying the banks for the reconstruction of 53 way the maoney had been spent. roads, only a sum of Rs. 33,728 million had been spent for these projects in the year 2013 and the Committee wanted the RDA to justify whether these funds had been used in a fruitful manner.

The contract for the construction of According to the CAO/AO, the 5. the Arch Bridge of Pussallawa- construction had to be stopped by Ulapane road had been awarded in 2003 with the closure of RDSCC in 1999 at the estimated cost of Rs. 42 2003 and the progress of the work million. Since the construction work of the second contractor, the had stopped by 2003 after spending SDCC, had also been Rs. 34 million, the contract had been unsatisfactory. He assumed that re-awarded to the State the construction work would come Development & Construction to completion by next month. Corporation to complete the rest of the work at Rs. 75 million on condition that it should be completed before 18.06.2009. However, the construction work had not been completed even by 31.12.2013.

6. In contrary to the circular “Public The CAO stated that the land had Expenditure Management” issued been leased on a Cabinet decision by the Secretary to the President, a and agreed to submit a copy of the land with an extent of 3.0056 same to the Committee and audit. hectares had been leased out, in 2011, to an affiliated company of Sri Lanka Insurance for a period of 99 years for the construction of a Resting Place in the Southern Expressway.

49 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE 7. During the period 2009-2012, 38 According to the CAO/AO, it had contracts amounting to Rs. sometimes happened in the 198,762.75 million had been directly situations where the length of the awarded to the contractors specified roads had been increased with the by the lending agencies without funds saved in the particular adopting a competitive bidding constructions. procedure.

Sri Lanka Cement Corporation 08th of August 2014 Ministry of State Resources & Enterprise Development

The present activities of the Sri The CAO/AO was directed to 1. Lanka Cement Corporation does not discuss this issue with the Hon. comply with its vision, mission and Minister and take action to revise the objectives stipulated in the Act. the vision, mission and the The privatization of several factories objectives. It was also directed to in 1992 and the security matters in prepare the Corporate Plan the region had led the production of accordingly. cement to be abandoned.

Only one officer has been appointed The CAO/AO was directed to 2. to carry out the duties in the Internal attach one more officer to the Audit Section. Internal Audit section.

Even though the Corporation has The CAO/AO agreed to submit the 3. invested Rs.1,084 million and owns consolidated accounts early since 62.45% of shares in the Ceylon they had received the accounts of Cement Company Ltd., the the company only previous week. preparation of consolidated accounts had been started only recently and that for 2013 accounts has not been prepared yet.

Given the small market share and the There is no rationality of the 4. amount of losses incurred by the argument of the CAO/AO, as the institution, the necessity of the price control can even be handled Corporation should be reviewed. by the Consumer Affairs Authority The stand of the CAO/AO was that or any other entity of such nature. the existence of the institution is vital to maintain a control in the cement prices in the market.

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

Major Issues & Problems Identified Comments & Directives of the COPE The Cabinet decision taken in 2011 The CAO was directed to write to 5. to amalgamate the Lanka Cement the Secretary to the Ministry of Company Ltd. and the Sri Lanka Defence and Urban Development, Cement Corporation and also to re- inquiring as to why the land of launch the operations of the Kankessanthurei factory was Kankessanthurei Cement factory acquired when a Cabinet decision had neither been materialized nor had been taken to re-open the changed yet. factory.

In the meantime, the land had been The CAO/AO was further directed acquired by the Army. According to to submit a report to the Cabinet the CAO/AO, there had been with their suggestions after objections from the Nothern discussing the matter with the Hon. Provincial Council against the Minister based on the reply of the excavation on limestone, given the Defence Secretary. risk of getting the area contaminated by sea water.

6. The decision to amalgamate the The Corporation can prepare a Lanka Cement Company had been proposal and make a request to the taken as winding up the company treasury requesting funds to pay will require the Corporation to pay compensation to the private share compensation to the private share holders. holders who constitute around 12% of the total shares.

7. There is an exorbitant increase in the The loss incurred due to the expenditure from 2010 to 2012 as confiscation of the consignment of that for 2010 which had been 18,000 expired cement bags worth Rs.32,418,704 had increased upto of Rs.12 million, the cost incurred Rs.81,710,913. on the settlement of a very old credit balance of US $ 300,000 pertaining to the period before the privatization in 1992, Rs.40 million loan obtained from the Bank of Ceylon had collectively contributed to the escalation in the expenditure.

8. Rs. 1,656,000 had to be recovered Even though a judgment had been from a Sales Agent in respect of a given by the Courts in favour of the dishonored cheque issued for institution, it has not been able to Supplying of 5100 bags of cement recover the money at least by on credit basis in the year 2003. auctioning the properties of the 51 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE sales agent since there are no assets owned by him.

Central Environmental Authority 19th of August 2014 Ministry of Environment & Renewable Energy

The feasibility report on the The Committee directed to send a 1. “Pilisaru project” 2008-2012 had not report on the difficulty faced by the been furnished yet and the CAO/AO authority in finding a suitable land assured that the project had been in Colombo for sanitary land fill implemented despite many together with the solutions taken. difficulties.

The Committee discussed about the The Committee directed the 2. reported malpractices claimed to Auditor General to study the have taken place at the solid waste Report handed over by the water management project in Authority in this regard and report Dompe. The CAO/AO stated that a back to Committee if required. loss had been incurred for not removing the soil which had not met the requirement of the contractor as expected. (Reference - 2013 performance)

Sri Lanka Cricket 20th of August 2014 Ministry of Sports

The entire procurement process in Offering the tender to a company 1. relation to the grant of Local in which the Secretary of the Sri Television Broadcast rights by the Lanka Cricket was the Chief Sri Lanka Cricket in 2011 is not Executive Officer, gives rise to a transparent and only one bid had clear conflict. been received in response to the tender notice which had not been given enough publicity due to the smaller size of the advertisement and the less time given to respond to the notice.

The loss for the year 2013 is Rs.1.1 The CAO/AO stated that the loss 2. billion. includes a depreciation factor of Rs.674 million and that the actual loss is Rs.436 million. Further, he 52 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE stated that the profitability heavily depends on the availability of tours.

During the years 2011 and 2012, the Adequate action had not been 3. Sri Lanka Cricket had written off taken to recover the dues from receivables amounting to Rs.74, respective parties and the recovery 901,760 and Rs.242, 465,738 of debts was observed to be respectively as bad debts. unsatisfactory.

According to the CAO/AO, the Sri The Committee discussed about 4. Lanka Cricket had constructed new the impact caused by this decision play grounds during the period from on the financial position of the Sri January,2010 to February, 2011 for Lanka Cricket and wanted the the then World Cup as per a CAO/AO to provide written requirement of the ICC. evidence to prove direction of the ICC given to construct new grounds for the World Cup.

Sri Lanka Institute of Tourism & Hotel 21st of August 2014 Management Ministry of Economic Development

Even though, a draft Act had been The co-ordination and the 1. submitted to the Attorney General in accountability in these institutions, 2010 to amalgamate the four namely, the SLITHM, Sri Lanka institutions under the Ministry, it has Tourism Promotion Bureau and Sri come to a stand still as a decision has Lanka Convention Bureau was been taken to maintain the four unsatisfactory and the CAO was institutions further, given the directed to see whether the present different nature of activities handled Act could be amended holding by them. them responsible for presenting Annual Reports and reporting actions taken during the year to the Sri Lanka Tourism Development Authority which is the apex body. Further, it was directed to furnish a report to the Committee on how to develop the effectiveness of those three Institutions while keeping them as separate entities.

53 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE In spite of the initial estimate of The Committee, having directed to 2. Rs.2.5 million, the tender related to appoint an independent Committee the refurbishment of 13 hotel rooms to look into the matter, wanted the in the Samudra Hotel, had been CAO/AO to repair the hotel rooms awarded for Rs.3.9 million per room and submit a detailed report. The in the year 2011. However, the Committee opined that these selected contractor had failed to irregularities could have been perform the refurbishment to the avoided by amalgamating the four standards and the final payment had institutions since at the moment; it been made ignoring the audit has not been able to hold any observations. officer responsible for the matter.

A significant amount of unsettled The CAO was directed to institute 3. balances related to various debtors a new administrative system and creditors was found to be in applying to all the institutions existence for a long period of time. under his Ministry, to streamline the administrative and financial affairs. The AO was directed to furnish a report prior to the end of October,2014 on the restructuring process and the action taken to settle the above mentioned outstanding amounts.

The contract agreements, The non-maintenance of such 4. verification reports, assets registers, registers had led to the misuse of stock adjustments and supporting the properties of the Institute and documents in respect of 11 objects there was an instance where an amounting to Rs. 571,985,108 had officer of the Institute had been not been submitted to the audit. found guilty for such misuse of properties. The CAO/AO stated that action was being taken to interdict the officer.

University of Jaffna 22nd of August 2014 Ministry of Higher Education

1. The Committee observed a large According to the explanation of the number of idling assets in the CAO/AO, most of the assets which University. had been idling by the time of audit, had then being used. The Committee directed the CAO/AO to submit a report on these idle assets. 54 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE 2. The recovery of compensation from Legal action had been taken in the lecturers those have breached the relation to the bonds amounting to bonds by not returning to the Rs. 30.17 million, and the countries after their overseas studies university was looking for the was observed to be unsatisfactory other persons who had violated the and only Rs.19.15 million had been bonds amounting to Rs. 47.26 recovered as at 20.08.2014 out of a million. total of Rs.96.2 million.

3. Although the revaluation of assets The Committee directed the amounting to Rs.1,933,590,051 had chairperson of the UGC to been outsourced to a private party, circulate a copy of the relevant only 80% of the task has been clause of the FR among all completed yet.. As per the Financial universities giving instructions to Regulations, the service of an adhere to the rules and regulations outside party can be obtained only in in the FR related to valuation. the situations where the Government Chief Valuer can not provide his services. (Reference- Audit Para 2.2.1 (i)-2011)

4. Even without the approval of the The said approval is seemed to Treasury, the grants from various have been misinterpreted by the donours amounting to Rs. University as the Treasury official 29,493,089 had been invested for informed that the universities had other purposes in contrary to the been authorized as such only for intended objectives of the donations short term purposes, and not for The CAO/AO stated that the these investments. The CAO agreed to funds which could not be invested as make a clarification on the said intended due to various reasons, had approval. been utilized for other purposes on the approval of the donours. He also stated that there was no requirement to get the approval of the treasury as the universities has been given the approval of the treasury to invest their self owned funds only on the discretion of the Secretary to the Ministry.

5. Due to the non-availability of the The AO agreed to complete the relevant documents, the audit is not Fixed Assets Register before the in a position to vouch a sum of Rs. end of December this year. 1,323,032,618 related to the assets, 55 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE inventory items and expenses met for various other repairs, charges, rent, etc. (Reference- Audit Para 1.2.4 (a)-2011 & 1.2.3 (a,b)-2012)

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

Institutions Examined by the Sub Committee I

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

Major Issues & Problems Identified Comments & Directives of the COPE

Sri Lanka Ayurvedic Drugs 12th of September 2014 Corporation Ministry of Indigenous Medicine

The Committee inquired about According to the CAO/AO, there is 1. 24,780 bottles valued at Rs. a minimum quantity specified in 1,011,767 and 30,000 corks valued the purchase order when buying at Rs. 667,500 purchased for the wine bottles from the Ceylon Glass Manufacture of wine. When Company. Even though the considering the production capacity, institution had planned to increase the quantity would be sufficient for the production, it had not come off. 17 years.

(Reference- Audit Para 4.2. (7)-2011)

Institute of Indigenous Medicine 12th of September 2014 Ministry of Higher Education

The budget had not been made use The CAO/AO stated that they had 1. of as an effective instrument of to spend that money for an management control and a 48% International Exhibition. He also deviation was observed between the stated that action would be taken actual income and the budgeted to rectify those errors and spend income. The expenditure incurred the money with prior approval. under three recurrent objects had exceeded the provisions by Rs. 7,016,415 and an under utilization of provisions were observed in relation to two Recurrent Objects.

(Reference- Audit Para 5.4 -2012)

Although the average monthly The committee directed that there 2. expenditure in the Postgraduate are various options to invest Bank Current Account in 2012 had money in the Banks and use a been only Rs.235,100, an average suitable method to invest the monthly balance of Rs. 1,326,700 current account balances. had been retained without investing properly. The balance as at 31st of December, 2013 had amounted to Rs. 2,727,387.

59 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE The committee observed that action The CAO,/AO stated that incident 3. causing serious financial misuse in in detail and the Committee the procurement procedure had directed apply the financial taken place in 2012 in the purchase regulations in each and every of red soil and drug production transactions submit a report machinery valued at Rs. 3,005,192. regarding the drug production machine within two weeks.

National Institute of Library & 12th of September 2014 Information Sciences Ministry of Higher Education

1. The courses conducted by the The AO stated that although Institute had not still been included several discussions had been held as a qualification in the Teachers’ with the Hon. Minister of Service Minute. Education in order to include the courses of the Institute in the Teachers’ Service Minute as a qualification for the promotions, it had not been done.

The Committee suggested that a policy decision had to be taken by the Ministers of Education and Higher Education with the concurrence of the Cabinet and directed the CAO/AO to make the Hon. Ministers aware of the situation.

2. It was pointed out that as the It was stated that approval of the approval of the UGC had not been UGC had already been sought and obtained for the courses as per the the officials of the UGC also Ordinance of the Institute, agreed to take immediate action to acceptance of the certificates issued rectify the matter. by them was questionable.

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

Major Issues & Problems Identified Comments & Directives of the COPE Institute of Technology – University of 12th of September 2014 Moratuwa Ministry of Higher Education

The financial statements had not The AO stated that the Annual 1. been included in the Annual Reports Reports had been prepared as per a presented in Parliament for the years letter sent by the Ministry of 2010 and 2011. Higher Education in this regard.

It was stressed by the Committee that since the Annual Reports are presented in Parliament for the reference of general public it was essential to include audited financial statements in the Annual Reports.

The CAO/AO was directed to send the copies of audited financial accounts for the years 2010 and 2011 to the Committee Secretariat and to table both the Annual Reports in Parliament after including them with the approval of the Cabinet.

2. It was observed that employees’ The AO stated that since one loans of Rs. 205,290/- from 03 officer had taken legal action officers who had vacated posts while against the Institute and other two Rs. 106,350/- from a lecturer who officials had gone abroad, it was was still being employed on contract delayed to recover the due basis had not been recovered. amounts. However, Rs. 102,000/- had been recovered in the previous month who had been employed on contract basis.

61 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE National Human Resources 12th of September 2014 Development Council Ministry of Youth Affairs & Skills Developement

The Committee observed that out of The CAO/AO admitted themselves 1. the total recurrent expenditure of Rs. and stated that this matter had been 30,247,869/- only a sum of rectified in the following year . Rs.19,182,148/- had been spent on the human resources development which is the primary objective of the council while a sum of Rs.9,939,546/- or 52 percent had been spent on the electronic and the print media publicity (Reference- Audit Para 3.1 (b)-2011)

It was observed by the Committee The CAO/AO stated that this 2. that an amount of Rs.12,979,803 had programme had been carried out been spent on the unsuccessful during the period of the former programme of strengthening of the chairman and by now that had been students failing in all the Subjects at stopped. the GCE (O/L) Examination. (Reference- Audit Para 3.1 (c)-2011)

The Committee noted that The CAO/AO stated that by now 3. Rs.2,218,153/- had been spent on the this programme which had been project of “From Unemployment to unsuccessful had not been in Employment” . operation. (Reference- Audit Para 3.1 (c)-2012 & 3.1 (d)-2011)

The Committee observed that the The committee was not satisfied 4. Council had planned to hold an with the manner in which the Amateur Television Singing CAO/AO answered and directed to Competition called “Nipunatha recover that money from the Handa” for which a sum of responsible persons. Rs.3,082,453/-had been spent in 2011 for a paper advertisement and the Committee further observed that except the paper advertisement there

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

Major Issues & Problems Identified Comments & Directives of the COPE had been no other progress so far reported.

The Committee observed that the As CAO/AO stated that this had 5. Council had entered into a been done without obtaining the Memorandum of Understanding approval of the Board of Directors, with a Private Company for the during the period of the former preparation and maintenance of a chairman, the Committee directed database of the unemployed in Sri the CAO/AO to get this done Lanka and questioned as to why that through the graduates attached to task was given to a private company. the Divisional Secretariats and further directed to file a court case against the persons responsible and also to send a report to the Committee on the action taken in this connection.

6. The Committee enquired as to why The CAO/AO stated that in this instead of handing over the regard although the Bribery & advertisements directly to the Corruption Commission had held an inquiry to which our officers electronic and print media a sum of were also called for, to give Rs.4,937,720/- had been paid to a evidence any result had not yet private company in 2012 without been intimated to us and also stated following the procurement that for them to hold an inquiry guidelines and was observed that former chairman could not be this private company had been contacted. situated in the private address of the former chairman.

Vocational Training Authority 12th of September 2014 Ministry of Youth Affairs & Skills Developement

The Committee discuss in details The Committee directed CAO/AO 1. about the sum of Rs. 8,164,704 that to forward all details and findings had to be recovered from 03 officers relevant to this transaction who had been granted study leave correctly to the Attorney General with salaries and not reported back requesting legal advice and to take for the work. action accordingly.

63 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE The Committee inquired about the The CAO/AO stated that the 2. obtaining of Rs. 1.119 million officer concerned had been fraudulently by an officer as the dismissed and a case was filed rental for hiring a vehicle belongs to against him in the District Court of him on a monthly rental of Rs. Colombo. In addition a discussion 40,000 for the period from had been held with the Fraud September 2008 to December 2010. Investigation Bureau in order to make a complaint.

The Committee also questioned The CAO/AO stated that they had 3. about the actions taken regarding the done oral and written inquiries on payment of this matter but could not settle yet. Rs. 2,643,114/- to a contractor for The Committee directed to take the preparation of Fixed Asset legal action against them based on register without deducting VAT and the agreement. withholding Tax in 2009.

The Committee questioned about 55 The CAO/AO stated that they had 4. instances of employees being requested to the Treasury to obtain recruited and promoted in contrary a covering approval for same but to the Management Services approval had not been granted. The Circular and remedial action which Committee expressed their had been taken to resolve the matter dissatisfaction over this transition as directed by the previous COPE and advised never to do such meeting. payments in the future without (Reference- Performance-2011) prior approval.

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

Institutions Examined by Sub Committee II

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Major Issues & Problems Identified Comments & Directives of the COPE

Selacine Television Institute 24th of July 2014 Ministry of Mass Media & Information

1. Annual Reports till the year 2008 The CAO/AO stated that they were had not been tabled in Parliament. in the process of correcting the accounting errors in the accounts of the previous years and it was a difficult task as they had to trace the old debtors.

The CAO/AO was directed to take necessary steps to table the Annual Reports from 2003 – 2008 as early as possible.

2. No single audit committee meeting The Committee stressed the need had been held for the year 2014, for conducting audit committee while only one for the year 2013 had meetings at least once in three been held. months for the efficiency of the Institution.

3. The current position with regard to The CAO/AO informed that the incorporation of the Institution as restructuring process had been a legal entity was enquired. commenced in the year 2008 while 02 cabinet papers had been submitted in two instances regarding the issue and recently concurrence of the Treasury had been sought for the final observations.

The CAO/AO was directed to finalize the matter within 03 months’ time.

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Major Issues & Problems Identified Comments & Directives of the COPE

4. There were unidentified debtor The CAO/AO stated that some balances amounting to Rs. 6.5 financial issues before 10 years million. had led to the situation and it was difficult to trace the personnel who ordered to make such expenses. He further added that the actions had already been taken to write off the unrecoverable amounts with the necessary approval.

5. Development of a Media Policy. The Committee suggested that it would be beneficial for the country if a media policy is developed for the whole sector and informed the CAO to consider the possibility of developing such a policy with the guidance of the Hon. Minister.

6. Value Added Tax amounting to Rs. The CAO stated that as there was a 18,613,695/- had been deposited in a huge amount of money in arrears savings account without remitting to which had not been paid for the the Commissioner General of Inland Department of Inland Revenue in a Revenue. certain period of time, the Ministry had informed the Institution to keep the money without utilizing for any other purpose in order to settle that after the previous matter being sold.

The CAO was directed to solve the matter very early after discussing with the Commissioner General of Inland Revenue.

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

Major Issues & Problems Identified Comments & Directives of the COPE

Sri Lanka Press Council 24th of July 2014 Ministry of Mass Media & Information

The Committee enquired whether The CAO/AO stated that two 1. any action had been taken to fill the Assistant Commissioners had vacancies in the key positions of the already been appointed and although the vacancy in the post of Council. the Commissioner had been advertised only one applicant not possessing required qualifications had applied.

The Committee questioned about the The CAO/AO stated that although 2. current position of shifting the office a number of discussions had premises to a government building. already been held with UDA , a suitable place in a government owned building could not be obtained and that the office was not shifted to the ministerial premises as the independence of the Council was liable to be affected.

The Committee brought to the notice As the CAO/AO stated that when 3. of the CAO/AO that one of the main it was attempted to bring the media objectives of the Council in under an ethical agreement the general public objected stating that accordance with the Section 8 of the it would severely affect the Act was to maintain high standards freedom of media and if a country of ethics of journalism and that the maintains an ethical control rather Code of Ethics for Journalists than a legal control over the media prepared for that purpose had not that country is developed and that been amended since 1981. they had already published that matter in the web the Committee directed to finalize the matter soon.

69 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Institute of Post Harvest Technology 24th of July 2014 Ministry of Agriculture

An adequate attention had not been The CAO/AO stated that 1. paid to the matters raised by the operational committee had been Internal Audit Reports. appointed to work on the issues raised by the internal audit reports and many queries had been rectified by then.

The CAO/AO was directed to expedite the prosess of rectifying rest of the queries and make aware the Auditor General on the matters alredy solved through a representative of the Institute.

Seven items of assets worth Rs. It was stated that those assets had 2. 30,004,226/- which was fully been transferred to the Institution depreciated by the year 2010 and by the Paddy Marketing Board continued to be used, had not been without being valued and as such re-valued and included in the the details of the assets had already accounts. been submitted to the Dept. of Valuation in order to revalue.

The AO was directed to do the follow-up and expedite the matter through the Ministry.

Action had not been taken to recover The AO stated that those balances 3. the long term balance amount of Rs. were continued from the Paddy 1,778,837/- while Rs.2,494,275/- Marketing Board when had not been settled to due parties. transferring the assets and by then approval of the Treasury had been obtained to remove those balances in the accounts to be prepared for the year 2014.

Plastic containers valued at Rs.1.7 The Committee directed the 4. million which was scheduled to be CAO/AO to find a proper distributed by 2011 and 04 mobile mechanism to make use of those trade stalls valued at Rs.280,000/- items and the CAO/AO stated that had been idled. those stalls could be distributed

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

Major Issues & Problems Identified Comments & Directives of the COPE parallel to the activities of National Farmers’ Week.

Operating income of the Institute The CAO/AO stated that low 5. had been reduced drastically from interest income, less income from year 2012 to 2013. noodles production and reduction in Treasury granted from the Treasury had caused that situation.

The Committee emphasized that it was a basic requirement for any Institution to prepare at least quarterly accounts and directed to send the financial results for the above period to the Committee secretariat within a weeks’ time.

Sri Lanka National Freedom from 24th of July 2014 Hunger Campaign Board Ministry of Agriculture

Acton had not been taken either to The CAO/AO stated that the 1. identify or write off balances related balances would be written off once to 23 ledger accounts. the approval of the Treasury was received.

Action had not been taken to take The CAO/AO was directed to take 2. over the Paddy Harvesting Machine over the machine within a month. worth of Rs. 1.5 million, which had been given to the Dept. of Civil Security along with the transfer of the Waddakachchi farm.

A contractor had sent a letter of Given the amount of compensation 3. demand to the institution as the latter payable at the end of the law suit, had not settled the expenditure of Rs. the Committee wanted the 3.2 million incurred by him for the CAO/AO to come to a settlement construction of a fence and a case with the contractor. has been filed in the District Court.

71 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Directives of the COPE Condominium Management Authority 26th of September 2014 Ministry of Construction, Engineering Services & Housing Development

The Committee enquired about not The CAO/AO explained the 1. responding to an Audit Quarry actions taken to reply and agreed to forward to the Authority regarding a the Committee to forward the payment of Rs 2.5 million for a work replies to the Audit within 02 not done revealed at a physical audit weeks. inspection made at the Housing Complexes at Dias Place and Dissanayakewatta and also an another Audit Quarry dated 2014/04/08.

The Committee questioned about The CAO/AO explained the 2. not issuing the Condominium actions taken in this regards. In Property Certificates and not replaying to a question raised establishing Management regarding not issuing the Corporations in connection with 74 Condominium Property Housing Schemes in 2012. Certificates to the Edmonton Flats, the CAO /AO stated that the Authority could not issue the Condominium Property Certificate, as the Certificate of Conformity for the Flats had not obtained by the Municipal Council from UDA. The Committee directed to send a detailed report on same to the Committee within a month.

Urban Settlement Development 26th of September 2014 Authority Ministry of Construction, Engineering Services & Housing Development

The Committee observed that an The CAO/AO revealed that they 1. amount of Rs. 207,231,737 needed had taken many steps to recover to be credited to the fund of the the said amount. The committee Authority by the UDA collected directed to CAO to discuss with the from the property developers as relevant Minister to come to a service charges in order to provide 72 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Directives of the COPE funds to the low cost housing settlement and report back to the programmes in terms of the Committee. subsection16 ( e ) of UDA Act.

(Reference- Audit Para No.-36 -2008)

The Committee observed that 29 The CAO/AO informed that this 2. community based societies acting as programme was conducted before the mediator for the construction of this Authority was established but homes had obtained and retained a actions were taken to recover Rs. sum of Rs. 6,094,976/- from the 2,673,805 from the said societies. Authority approved under the The Committee pointed out this as Arunodaya Urban Poor Home a fraud and directed to the Programme without granting to the CAO/AO to get legal actions to beneficiaries. recover the balance. (Reference- Performance-2009)

The Committee also observed a The Committee was not satisfied 3. retaining of Rs. 1000/- from a with that transaction and directed housing unit of Arunodaya Urban to take suitable action for the Poor House programme and balance 213 wall clocks and report purchased 1000 wall Clocks at a cost to the Auditor General. of Rs. 630,000/- in 09.03.2011 and distributed to every housing unit and among the officers and Directors of the Authority. (Reference- performance-2009)

Coconut Research Board 26th of September 2014 Ministry of Coconut Development & Janatha Estate Development

1. The Committee enquired about the The CAO/AO stated that the action taken as per the directive Ministry of Forestry & Wild Life given at the previous COPE meeting was to release one of its lands in to see the possibility of using the the area to put up a nursery. land in the Northern Province.

2. There is no updated data on the There must be a mechanism to number of bearing coconut trees in coordinate the grass root level the country. officers such as Grama Niladhari, Economic Development officers, Agricultural Extension Officers, etc. with regard to information gathering. 73 Parliamentary Series No 343

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Institutions Examined by Sub Committee III

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Major Issues & Problems Identified Comments & Derectives of the COPE

National Institute of Social 20th of August 2014 Development Ministry of Social Services

1. Following activities mentioned in The CAO/AO stated that due to the Action Plan for the year 2012 lack of space in the rented out had not been executed within the building where the Institution had year. earlier been established the task could not be completed and (i) Computerization of library books thereby a spacious building at & transformation of the library Narahenpita had been rented out in to an automated library. the year 2013.

(ii) Connection with the National & other Libraries in collaboration with the union index.

(iii) Internationalization of the library through the internet.

2. Athough 07 applicants had been The AO stated that when he had selected by calling applications and been appointed to the post in conducting Viva Voce Tests to fill January 2013 the above matter the vacancies spending sum of Rs. had been dragged on for over 06 362, 826/-, they had not been months due to various reasons such recruited. Instead 07 other persons as elections and was very had been recruited by conducting problamatic. Therefore with the another interview. Guidance of the Hon. Minister and the Board of Directors the vacancies had been published in the Govt. Gazette and had been filled accordingly.

3. A professor who had been recruited The CAO/AO having accepted the as the Academic Head of the fact stated that recently a new Institute for a period of one year cabinet paper had been presented since 03rd April 2006 with the to obtain the necessary approval. approval of the Cabinet had been employed up to March 2012 exceeding the period and a sum of 77 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Derectives of the COPE Rs. 1,430,215/- had been paid as allowances without the approval of the Dept.of Management Services and the Cabinet of Ministers.

National Secretariat for Persons with 20th of August 2014 Disabilities Ministry of Social Services

It had been ordered to discuss with The CAO/AO stated that as the 1. the Hon.Minister and to take Council members had decided to appropriate action in accordance update draft approved by the with the United Nations Ordinance Attorney General , the committee regarding the draft of the Disabled appointed for that purpose had Rights Act submitted by the updated the draft in accordance Secretariat to the Attorney General. with the International Ordinance and had already been submitted for the Hon.Minister’s approval

The Committee observed that As the CAO/AO accepted that 2. altogether a sum of Rs.22 millions there was a shortcoming on their had been spent on Housing Aids, part and follow up action also had Self Employment Aids, Medical and not been taken and stated that by Educational Aids and no progress now action had been taken to reports had been submitted to the rectify them, the Committee Audit to prove such expenses. directed that as the grants had been released through the Divisional secretariats to issue a circular to all Divisional Secretaries informing them to report on the progress of that.

It was observed that a sum of The Committee was not satisfied 3. Rs.651,900/- had been paid without with the answer given by the making any entry in the cash book to CAO/AO and directed to send a a person who was not the legitimate comprehensive report on the agent of the person whose name was matter to the COPE and the Audit. appearing in the voucher.

(Reference- Audit Para 1.2.3 -2011) 78 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE The Committee enquired as to why The CAO/AO stated that these 4. spectacles valued at Rs.2,56,648/- spectacles had been purchased had been purchased without the after publication of a news paper approval of the Procurement advertisement calling for Committee. quotations for 10,000 Nos. of spectacles and after that a lot of (Reference- Audit Para 3.2 (a)-2012) other requests were also forwarded

occasionally for spectacles and further added that from 2012 onwards this had been corrected by following Procurement procedure within the limits of the budget allocation.

5. The Committee observed that The CAO/AO stated that these although in the years 2010, 2011 and spectacles were handed over in a 2012 a bigger part of the financial Mobile Secretariat and the officers on duty on that occasion had allocation had been spent for the maintained a list of recipients and supply of spectacles, eg. in 2012 after 2012 a separate officer had Rs.13 millions had been spent for been appointed to participate in the 95,392 spectacles, no progress Mobile Secretariat for the reports had been submitted particular purpose. The Committee regarding the matter whether those directed to send a progressive spectacles had duly been handed report on the whole process to the COPE and the Audit. over to the recipients.

Colombo Commercial Fertilizer 20th of August 2014 Company Ministry of Agrarian Services & Wildlife

Even though a Stocks Distributor in The Committee directed the 1. Anuradhapura had been responsible CAO/AO to send a detailed report for the misplacement of 5000 MT of to the Committee about this fraud. subsidized fertilizer, worth of Rs.388 million, supposed to be distributed among the farmers in the area, nobody has been prosecuted yet even after lapse of 6 years.

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Major Issues & Problems Identified Comments & Derectives of the COPE A large amount of debts were According to the CAO, such a 2. observed and some of them had been large debtor balance had been older more than 30 years. accumulated since the Agrarian Services Centers had not taken Even though the subsidized fertilizer action to settle the amounts should not be sold on credit, a debtor received from the farmers. balance of Rs.7,426,920 was observed as at 31.03.2014. An The Committee wanted the amount of Rs.7,426,920 of this total CAO/AO to inquire into this had been outstanding for over 5 matter and report to the Committee years. having taken appropriate action.

Public Utilities Commission 20th of August 2014 Ministry of Finance & Planning

The Committee pointed out that The Committee was not satisfied 1. even though the agreements had with the manner in which the been entered into and relevant CAO/AO answered and directed to activities had not been carried out, take action in order that such things expenditure amounting to wound not happen in future. Rs.2,470,000/-,Rs.6,908,568/- and Rs.6,013,767/- had been brought to the account as expenditure payable in the years 2011,2012 and 2013 respectively.

The Committee observed that even The CAO/AO agreed to deduct the 2. though the Pay As You Earn Tax of PAYE Tax calculated on the full the officers of the Commission salary , from the officers.

should be paid by the officers themselves, a sum of Rs.456,676/- had been paid in 2011 out of the funds of the Commission and also observed that PAYE Tax amounting to Rs.665,579/-, Rs.843,153/- and Rs.751,606/- calculated only on the basic salaries of the officers for the years 2012,2013 and 2014

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

Major Issues & Problems Identified Comments & Derectives of the COPE respectively had been paid by the Commission.

Sri Lanka Inventors Commission 22nd of August 2014 Ministry of Technology & Research

The Committee having observed When the CAO/AO stated that out 1. that out of 500 inventors identified at of those 08, one was at the school the national level only 08 inventors level and the others had developed had been granted financial their inventions with the financial allocations amounting to assistance provided by the Rs.2,041,629/- enquired the present commission and that one officer position of those 08. had been appointed to monitor each inventor, the Committee directed to send a progress report on those 08 inventors to the Audit.

The Committee observed that The CAO/AO stated that any 2. although the income amounting to special approval had not been Rs.1,036,000/-received from the taken and at that time as the disposal of motor vehicles should be Commission did not have enough credited to Consolidated Fund in financial allocation for paying terms of Public Finance Circular salaries that amount of money had No.353 dated 31st of August 2004, to be utilized in 2011 and had the amount had been credited to fund reported that situation to the of the Commission. ministry also.

The Committee questioned as to It was stated that in 2013 they had 3. why the under mentioned two funds received Rs.3.5 millions and out of have not been utilized from the year that Rs.2.5 millions had been given to new inventors selected in a very 2007. transparent manner and by now i. Inventors’ Fund these two funds have been amalgamated, a transparent ii.Polonnaruwa District Fund methodology had been made for granting financial aids and the progress had been followed up and the approval of the Board of Directors had also been obtained for that purpose.The Committee

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Major Issues & Problems Identified Comments & Derectives of the COPE directed to send the details of that decision to the Audit.

Sri Lanka Accreditation Board for 22nd of August 2014 Conformity Assessment Ministry of Technology & Research

There is no compulsory requirement The institution should at least 1. for other relevant organizations such publish a list of accredited as Laboratories, hospitals etc., to institutions annually for the obtain accreditations from this awareness of the public. institution to carry on their activities.

The institution should work in coordination with institution such as the Ministry of Health, in order to expand its scope.

An adequate internal audit is not in The CAO/AO agreed to fill the 2. existence. vacancy and strengthen the internal audit division.

Action had not been take to get a The CAO accepted the lapse and 3. valuation report for the office informed that they wished to move premises located in a rented to a new place of their own and the building, paying Rs. 300,000 per IT had agreed to provide a block of month in 02.05.2012. land in Malabe for the purpose.

Marine Environmental Protection 22nd of August 2014 Authority Ministry of Environment & Renewable Energy

1. The Committee enquired as to The CAO/AO stated that there had whether there had any index to no such exact index as to measure measure the Marine Environmental the overall Marine Pollution of the Pollution and the status of Sri Lanka country but there had some indexes compared to other Asian Countries. to measure water pollution in different levels such as Shannon Wiener Diversity Index, COD, and BOD etc.

The committee directed the CAO/AO to submit a detailed 82 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE report on same within a period of one month.

2. The Committee enquired as to why The CAO/AO stated that they had preventive measures had not been complained to the Moratuwa taken to avoid Police Station regarding that but environmental pollution caused due there had been a delay in receiving to sinking the ship named the investigation notes to the “Thermophile” Attorney General’s Department. (Reference- Performance-2012) He further stated that the Police had handed over the investigation notes on 23rd of June 2014 and drafting of the Indictment would be ready soon.

The Committee directed the CAO to talk to the Attorney General and take the necessary action regarding the court case.

3. The Committee was of the opinion The CAO/AO stated that the that the Authority had problems in estimate for the year 2013 was Rs. implementing the activities in the million 45 but had expended only Action plan as the funds received Rs. Rs.32 million. Rs. 14 million had not been properly utilized. could not be utilized due to a problem arose in tender process. The CAO/AO further stated that 34 projects had been sent for the approval but none of them had been approved and as a result of that activities according to the action plan could not be implemented.

Gem & Jewellery Research Training 22nd of August 2014 Institute Ministry of Environment & Renewable Energy 1. The Committee discussed about the The AO stated that although a the objectives of the Institution and project had been set up for enquired as to what extent the exploration of gem mines in 08 exploration of gem minerals and provinces of the country except other objectives were achieved. Northern Province since 2007, 83 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Derectives of the COPE objectives of that project could not be accomplished as the approval of the Treasury for the recruitment of Research Officers and Geologists had not been granted till 2012. However explorations in 03 potential districts had been completed with only 02 Research Officers.

2. The Committee had had a discussion It was revealed that the data were on income earned by exporting not available in the Institution. gems. The Committee was of the view that the Institute should have that information in order to prepare budget proposals to obtain funds from the Treasury. The CAO/AO was directed to co-ordinate with the Geological Survey & Mines Bureau to get information and work together for the fulfillment of the objectives of the country in the field of Gem and Jewellery.

3. Even though a person, actively The CAO was directed to make the engaged in the field of gem industry Hon. Minister aware of the fact in in a University or Research Institute order to rectify the matter. should be appointed to the Board as per the provisions of the Act, such a member had not been appointed.

4. Action had not been taken to recover An investigation had been carried the balance amount of Rs. out by the Presidential 1,495,745/- in relation to the misuse Investigation Unit and the of stock of gold & silver and a responsible officer had paid vehicle loan amounting to Rs. Rs.900 000/- after admitting his 56,250/- in 2013, by an officer who , guilt. Since the balance amount had been interdicted. had not been settled, the matter had

been referred to the Attorney General’s Dept. and the gratuity payment had been held as per the directive of the Attorney General 84 Report from the Committee on Public Enterprises of the Parliament of the Democratic Socialist Republic of Sri Lanka

Major Issues & Problems Identified Comments & Derectives of the COPE and the court case filed to recover the balance was still pending.

5. Even though Rs. 36 million had been The CAO was directed to closely granted by the Treasury to carry out monitor the progress of such an exploration of gem deposits projects in the future. during the period from 2008 to 2011, it had not been completed due to lack of Research Officers.

6. The preparation of an The AO stated that delays had been Establishments Procedure for the occurred as the new Chairman had Institute had not been completed only been appointed in April 2013 even by 2014 despite the fact that and chief officers of the Accounts 50% of the agreed amount had been and the Administration sections paid to the Sri Lanka Institute of had also resigned from the Development Administration Institute. (SLIDA) in 2012.

7. Achievement of objectives of the The Chairman of the Committee Institute. directed the CAO/AO to ensure that the Institution endeavor to accomplish the objectives laid down in the relevant Act and to review the progress accordingly.

8. The current position of the high According to the AO the oven had technological Oven worth of Rs. 10 been bought in December, 2013 million was enquired. only for research purposes and initially it had been installed in Colombo. Later it had been brought to Ratnapura at the sole discretion of a former Chairman.

As it was difficult to recruit research officers when the oven was at Ratnapura and for better co- ordination with related institutions, the lab had then been shifted to Colombo. But they had not been able to bring the oven to Colombo due to various interventions.

85 Parliamentary Series No 343

Major Issues & Problems Identified Comments & Derectives of the COPE The CAO/AO was directed to take immediate action to bring the machine to Colombo after discussing with the Hon. Minister as it was a waste of public money to keep the machine idling at Ratnapura while researchers were in Colombo.

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

INDEX

87 Parliamentary Series No 343

Index

A Agriculture & Agrarian Insurance Board…………… …………………. 30 C Central Bank of Sri Lanka…………………………... …………………. 27 Central Engineering Consultancy Bureau …...... …………………. 42 Central Environmental Authority…...... …………………. 52 Ceylon Electricity Board……………………………. …………………. 32 Ceylon Petroleum Corporation ……………………... …………………. 27 Ceylon Petroleum Storage & Terminals Limited…… …………………. 39 Coconut Research Board…...... …...... …………………. 73 Colombo Commercial Fertilizer Company Ltd. ….... …………………. 79 Condominium Management Authority…...... …………………. 72 G Gem & Jewellery Research & Training Institute…..... …………………. 83 I Institute of Indigenous Medicine……………………. …………………. 59 Institute of Post-Harvest Technology…...... …………………. 70 Institute of Technology-University of Moratuwa…… …………………. 61 L Lanka Sathosa Ltd. ……………………...... …………………. 37 M Marine Environment Protection Authority…...... …………………. 82 Milk Industries of Lanka Ltd. (MILCO) …...... …………………. 43 N National Film Corporation…...... …………………. 42 National Human Resources Development Council…. …………………. 62 National Institute of Library & Information Science.. …………………. 60 National Institute of Social Development…...... …………………. 77 National Paper Company Ltd. …...... …………………. 46 National Secretariat for Persons with Disabilities…... …………………. 78 National Water Supply& Drainage Board…...... …………………. 40

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

P Public Utilities Commission…...... …...... …………………. 80 R Road Development Authority …...... …………………. 48

S Selacine Television Institute …...... …………………. 67 SL Institute of Advanced Technological Education.... …………………. 29 SL. State Plantation Corporation……………………. …………………. 31 Sri Lanka Accreditation Board for Conformity Assessment…...... …...... …………………. 82 Sri Lanka Ayrvedic Drugs Corporation……………... …………………. 59 Sri Lanka Bureau of Foreign Employment …………. …………………. 36 Sri Lanka Cement Corporation…...... …………………. 50 Sri Lanka Cricket…...... …………………. 52 Sri Lanka Freedom from Hunger Campaign Board… …………………. 71 Sri Lanka Institute of Tourism & Hotel Mgt. …...... …………………. 53 Sri Lanka Inventors Commission…...... …………………. 81 Sri Lanka Ports Authority…………………………… …………………. 34 Sri Lanka Press Council…...... …...... …………………. 69 Sri Lankan Airlines Ltd. …...... …………………. 45 State Printing Corporation…...... …………………. 38 U University of Jaffna…...... …...... …………………. 55 University of Sabaragamuwa………………………... …………………. 36 University provident Fund & Pension Fund…...... …………………. 45 Urban Settlement Development Authority…...... …………………. 72 V Vocational Training Authority…...... …………………. 63

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