ANNUAL REPORT OF THE AUDITOR GENERAL 2018
NATIONAL AUDIT OFFICE
Official Emblem of the National Audit Office
Symbols used in this Official Emblem reflect the following.
The Lion at the top of the emblem depicts Sri Lanka. The weighing scales at the Centre reflects independence and impartiality. The two olive branches surrounding it reflects peace and prosperity. The “palaa pethi” designs surrounding it reflects the national culture.
Auditor General’s Message The duties and functions devolved on the Auditor General in pursuance of the provisions in Article 154 of the Constitution of the Democratic Socialist Republic of Sri Lanka for the direction of the independent examinations on the effective and efficient maintenance of the Parliamentary control on the Public Finance devolved on Parliament in pursuance of provisions in Article 148 of the Constitution. I am pleased to present my report for the financial year 2018 in connection with these activities. The Annual Report is presented as the seventh installment of my report presented to the Parliament and arrangements have already been taken to table the other reports under the following nine installments. First Installment - Ministries and Departments Second Installment - Public Corporations, Authorities, Boards and Statutory Funds Third Installment - Non – Statutory Funds Fourth Installment - Foreign Funded Projects Fifth Installment - Provincial Councils Sixth Installment - Local Authorities Eighth Installment - Performance Audit Reports Ninth Installment - Public Companies Tenth Installment - Special Audit Reports
According to the Nineteenth Amendment to the Constitution it was accepted by the Government that the Auditor General and his staff should be given more powers and to secure his independence not only in the operational aspect but also in the context of financing and administration. The long awaited Audit Service Commission was established in December 2015 and the appointments, promotions, transfers, disciplinary control and dismissal of staff of the Sri Lanka State Audit Service should have been done by that Commission. The National Audit Act was passed in Parliament on 17 July 2018 as the National Audit Act No. 19 of 2018 and published in the Gazette notification by his Excellency Precedent that the Act will be effective from 01 August 2018. Although the National Audit Act had been effective from 01 August 2018, it has not been possible to establish a Public Audit Service by 15 October 2019. The Cabinet of Ministers had recognized the valuable contribution of the service performed by the members of the Sri Lanka Audit Service and the Audit Examiners’ Service and approved the establishment of a new service called the Sri Lanka State Audit Service. The absorption of the officers of the above two services to the new unified service has been entrusted to the Audit Service Commission. The National Audit Act No. 19 of 2018 was envisaged to provide for the powers, functions and functions of the Audit Service Commission, to establish the National Audit Office and the Sri Lanka State Audit Service of Sri Lanka, and for matters connected therewith or incidental thereto. Establishment of the National Audit Office to meet the challenges emerging in a constantly changing and more demanding environment, including the pressure arising from being a part of the accounting and auditing professions, is vital. Although the Audit Act had been implemented with effect from 01 August 2018, the Service Minute relating to the Audit Staff which is essential to perform the functions of the National Audit Office had not been established yet. As a result, it had been hindered to perform audit duties and staff had been denied opportunities to get promotions. The organization structure of the Office had already been prepared and the audit and supportive services will be organized under 63 Divisions to enable the expansion of the audit scope and to ensure close supervision and review. The National Audit Office is expected to implement a number of initiatives to ensure that the National Audit Office's important role is taken into consideration as well as to ensure that the public sector is well aware of the key issues facing it. The National Audit Office is also committed to continually reviewing and improving its operations which support the effective and efficient delivery of our audit reports. Finally the audit independence provided under the Constitution is recognized explicitly as the key of the Office’s effectiveness. It is a privilege for me to work with such a dedicated staff of the National Audit Office and I thank them for their commitment to the efficient performance of their duties. I also take this opportunity to thank the Chairmen and Members of the COPA and COPE, the firms of Chartered Accountants in public practice which carried out the assisted audits, the Institute of Chartered Accountants of Sri Lanka, the Auditee Institutions, the Secretary to the President and his staff who assisted in the administrative matters of the Office, the Secretary to the Ministry of Finance and staff, the Public Service Commission, the Salaries and Cadre Commission, the Attorney General and the other State Institutions which assisted in the administration, the International Development Association United States Agency for International Development which contributed to the improvement of the physical and human resources of the National Audit Office. I am very keen to ensure that my audits remain relevant to the needs of the Parliament and the General Public.
W.P.C. Wickramarathne Auditor General October 2019
Contents
page page Our organization 01 Ports and Shipping 281 Legal Reforms 04 Highways 289 Our Organization Structure 11 Disaster Management 297 Staff Training 15 Sports 303 Deployment of Qualified Auditors 19 Women and Child Affairs 309 Assistance to Parliament 20 Tourism Affairs 315 Surcharges imposed by the Auditor Urban Development 321 22 General Industry and Commerce 329 Performance Audit of the Auditor 23 Housing and Construction 337 General Transport 341 Investigation Audit and Audit on 49 Social Empowerment and welfare 351 Public Petitions Science, Technology and Research 357 Financial Statements of Year 2018 63 Communication 363 Special Audit Reports Published in 71 Higher Education 369 the Year 2018 Power and Renewable Energy 375 The Summery of Audit Observation 113 Petroleum Resources Development 381 according to Sector Rural Economic Affairs 391 Consolidated Fund 115 City Planning and Water Supply 399 National Security 135 Irrigation and Water Resources 407 Public Enterprises 141 Agriculture 411 Local Government 153 Cultural Affairs 417 Foreign Funded Projects 163 Prison Reforms and Rehabilitation 421 Banking 169 Pension Benefits for Public Service 425 Plantation Industry 197 Conciliated Financial Statements of 431 Land 207 Provincial Council Education 215 Western Provincial Council 441 Labour and Trade Union Relation 225 Central Provincial Council 443 Environment 233 Southern Provincial Council 447 Foreign Affairs 237 Northern Provincial Council 449 Foreign Employment 241 North Western Provincial Council 453 Development of Fisheries and 247 North Central Provincial Council 455 Aquatic Resources Uva Provincial Council 459 Health and Nutrition 255 Sabaragamuwa Provincial Council 463 Mass Media 269 Eastern Provincial Council 469 Law and Order and Southern 275 Development
Our Organization Organization Our Our History Commission, the Constitutional Council, the Commissions referred to in The beginning of the present Auditor the schedule to Article 41B, the General‟s Department of Sri Lanka then Parliamentary Commissioner for known as Ceylon, can be traced to early Administration, the Secretary General British times. From the records available of Parliament, Local Authorities, Public it would appear that there had been an Corporations, business and other Accountant and Auditor General by the undertakings vested in the Government name of Cecil Smith as far back as the under any written law and Companies early 1799 just three years after the registered or deemed to be registered British occupation of the Island in 1796. under the Companies Act, No, 7 of 2007 Since then, the existence of the Auditor in which the Government or a public General‟s Department continues to corporation or local authority holds function as an independent organization fifty per centum or more of the shares under forty Auditors General as the of that company including the accounts Supreme Audit Institution of Sri Lanka. thereof.” Our Authority to Audit The authority conferred on the Auditor General in the Constitution had been The authority for the Auditor General to further amplified or expanded by the audit the accounts of Public Sector following Statutes. Institutions is primarily derived from Article 154 of the Constitution. Part II of the Finance Act, No. 38 of 1971 which provides for audit of Under the Nineteenth Amendment to the Public Corporations. Constitution the authority has been further extended to cover Companies Provincial Councils Act, No. 42 of incorporated under the Companies Act in 1987 – (Section 23) which provides which the Government or a Public for Audit of Provincial Councils. Corporation or Local Authority holds Section 219 of the Municipal fifty per centum or more of the shares of Councils Ordinance – (Cap. 252) that company as quoted below. which provides for Audit of “ The Auditor General shall audit all Municipal Councils. Departments of Government, the Office Section 181 of the Urban Councils of the Secretary to the President, the Ordinance – (Cap. 255) which Office of the Secretary to the Prime provides for Audit of Urban Minister,, the Offices of the Cabinet of Councils. Ministers, the Judicial Service
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Pradeshiya Sabhas Act, No. 15 of Ministries 51
1987 – (Section 172) which provides Departments 96 for Audit of Pradesiya Sabahs. District Secretariats 25 Corporations 204 Agrarian Development Act, No. 46 State Companies 141 of 2000 – (Section 58) which (Brought under the scope of the provides for Audit of Agrarian Auditor General under the Development Councils. Nineteenth Amendment to the Sports Act, No. 47 of 1993 - Constitution) (Section 9) which provides for Audit State Banks 10 Statutory and other Funds 60 of Sports Associations. Foreign Funded Projects 164 The Constitution also empowers the Other Independent Institutions 23 Auditor General to carry out any other Provincial Councils 09
Our Organization Our duties as specified in any law passed by Local Authorities 341 the Parliament as required. In the Agrarian Service Canter‟s 561 performance and discharge of his duties Sport Associations 64 Provincial Councils Ministry, and functions, the Auditor General has Department and Special been given powers under the Expenditure Units 253
Constitution to engage the services of Institue of Under the Provincial qualified auditors to assist him in his Councils Ordinance 44 work. He has also the power to obtain Total 2046 the Examination of any technical, professional or scientific problems Our Scope relevant to the audit. In Article 154(5) of the Constitution empowers the Auditor The Auditor General, at his discretion, General to have access to all books and decides on the scope of audit, and in this records, to stores and other property of regard, he is guided by the prevailing Public Institutions or Entities as stated Standards as introduced in terms of the above, conduct audits and furnish with provisions in the Sri Lanka Accounting information and explanations as may be and Auditing Standards Act, No. 15 of necessary, for the performance and 1995 and conventions and best practices discharge of his duties and functions. relating to audit as adopted by the Institute of Chartered Accountants of Sri Our Clients Lanka(ICASL), the International Organization of Supreme Audit The scope of the Auditor General is Institutions(INTOSAI), the Asian defined in the Constitution itself which is Organization of Supreme Audit further expanded by the Nineteenth Institutions (ASOSAI), and the guidance Amendment to the Constitution by provided by the Committee on Public inclusion of Companies. The following Accounts and the Committee on Public is our Client base at present. Enterprises of Parliament.
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Further to that as regards Public Whether there has been economy Corporations, the Finance Act, No. 38 of and efficiency in the commitment of Organization Our 1971 defines the scope of audit to be funds and utilization of such funds; considered by the Auditor General in relation to Public Corporations in more specific terms and it requires the Auditor Whether systems of keeping moneys General to render three distinct statutory and the safeguarding of property are reports, viz. a detailed report to satisfactory; management of the Corporation, a report for publication together with the Annual Whether the accounts audited have Reports of the Corporations and another been so designed as to present a true separate report to Parliament. The scope and fair view of the affairs of the of the audit as defined in the Finance Act corporation in respect of the period requires the Auditor General to examine under consideration with due regard as far as possible, and as far as necessary being given to principles of the following accountancy, financing and valuations; and Whether the organization, systems, Any such other matters as the procedures, books, records and other Auditor General may deem documents have been properly and necessary. adequately designed from the point of view of the presentation of Our Independence information to enable a continuous evaluation of the activities of the The independence of the Auditor corporation, and whether such General is preserved to a great extent by systems, procedures, books, records the Constitution itself. This has further and other documents are in effective been expanded to match with the operation; INTOSAI fundamental principles on independence of a Supreme Audit Whether the conduct of the Institution (SAI) by the Nineteenth corporation has been in accordance Amendment to the Constitution. The with the laws, rules and regulations Article 153 states that; relevant to the corporation and whether there has been fairness in the “There shall be an Auditor General administration of the corporation; who shall be a qualified auditor and subject to the approval of the Constitutional Council, be appointed by the President and shall hold office during good behavior”
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He can be removed from office by the General‟s independence, including
President only on the grounds of ill functional and financial. The Auditor health or infirmity or upon an address of General depended on the General Parliament. Treasury for his budget up to the year under review, and the resource allocation Article 153 of the Constitution further for his department was not linked to states that the salary of the Auditor fiduciary risks. Unlike in other advanced General shall be determined by the Commonwealth Countries, the budget of Parliament, and shall be charged on the the Auditor General in Sri Lanka is Consolidated Fund and shall not be neither approved by a legislative diminished during his term of office. committee after being subjected to The Auditor General does not come scrutiny nor safeguarded against Our Organization Our under the supervision of any Minister or Executive control as allocated by officer of the Government. provisions of the National Audit Act, No.19 of 2018 thereby confirming the Legal Reforms independence of the Auditor General in discharging his duties and functions. The Requirement for Legal Reforms The administrative independence of the Though the functional independence of Auditor General and his staff also needs the Auditor General has been hitherto to be secured. Control over safeguarded by the Constitution, administrative matters relating to the financial and administrative promotion, transfer, disciplinary action, independence of the Auditor General had salaries and other administrative matters been constrained by the Executive due to of staff of the Auditor General‟s Constitutional and legislative provisions Department shall be vested in the on the subject. However, those National Audit Service Commission. constrictions have been obstructed by the provisions of the National Audit Act, Further, as the Constitution does not No.19 of 2018, from 01 August 2018. It include the Auditor General in the is also of the view that the dependence of “Public Officers‟ Exception List”, all the Auditor General on the Executive for administrative regulations of the his resources in terms of both manpower Government, as described in the and finance would harm the truly Establishments Code, are applicable to independent nature of the audit the Auditor General himself and to his performed on behalf of the Parliament as staff. This further constrains the he must be completely free from all administrative independence of the obligations to any individual or Auditor General. There have been many institution and must be free from instances where this lack of arbitrary retaliation. Elaborate safeguards administrative control over his officers have to be provided by the Parliament had significantly hampered the audit through legislation to ensure the Auditor work.
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In the year 1977, the “Lima Declaration” The applicable legislation specifies the of the International Organization of conditions for appointments, re- Organization Our Supreme Audit Institutions (INTOSAI) appointment, employment, removal and retirement of the head of SAI and also determined the principle of members of collegial institutions, who independence of the Government are Auditing in methodological and professional terms. In the “mexico Appointed, re-appointed, or removed Declaration” after 30 years, the XXX . by a process that ensures their independence from the Executive Congress of INTOSAI (2007 in Mexico) (see ISSAI 11 Guidelines and Good defined these requirements in more Practices Related to SAI concrete terms and identified following Independence); eight major requirements for the Given appointments with sufficiently independence of the Supreme Audit long and fixed terms, to allow them Institution which has already been to carry out their mandates without recognized by the United Nations on 22 fear of retaliation; and December 2011 at their 66th General Immune to any prosecution for any Assembly by adopting a resolution act, past or present, that results from A/RES/66/209, “promoting the thenormal discharge of their duties as efficiency, accountability, effectiveness the case may be. and transparency of public administration by strengthening Supreme Principle 3 Audit Institutions (SAIs)”. A sufficiently broad mandate and full Principle 1 discretion, in the discharge of SAI functions The Existence of an appropriate and effective constitutional/statutory/legal SAIs should be empowered to audit the framework and of de facto application provisions of this framework. Use of public monies, resources, or assets, by a recipient or beneficiary Legislation that spells out, in detail, the regardless of its legal nature; extent of SAI independence is required. Collection of revenues owed to the government or public entities; Principle 2 Legality and regularity of government or public entities The independence of SAI heads and accounts; members (of collegial institutions), Quality of financial management and including security of tenure of tenure and reporting; and legal immunity in the normal discharge Economy, efficiency, and of their duties. effectiveness of government or public
entities operations.
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Except when specifically the laws SAIs should submit an annual activity
enacted by the Legislation, SAIs do not report to the Legislature and to other audit government or public entities state bodies-as required by the policy but restrict themselves to the audit constitution, statutes, or legislation – of policy implementation. which they should make available to the public. While respecting the laws enacted by the Legislature that apply to them, SAIs are Principal 4 free from direction or interference from the Legislature or the Executive in the Unrestricted access to Information
Section of audit issues; SAIs should have been adequate powers Planning, programming, conduct, to obtain timely, unfettered, direct and reporting, and follow-up of their free access to all the necessary Our Organization Our audits; documents and information, for the Organization and management of proper discharge of their statutory their office; and responsibilities. Enforcement of their decisions where the application of sanctions is part of Principle 5 their mandate. The right and obligation to report on SAIs should not be involved or be seen their work to be involved, in any manner, whatsoever, in the management of the SAIs should not be restricted from organizations that they audit. reporting the results of their audit work. They should be required by law to report SAIs should ensure that their personnel at least once a year on the results of their do not develop too close a relationship audit work. with the entities they audit, so they remain objective and appear objective. Principle 6
SAI should have full discretion in the The freedom to decide the content and discharge of their responsibilities, they timing of audit reports and to publish should cooperate with governments or and disseminate them public entities that strive to improve the use and management of public funds. SAIs are free to make observations and
recommendations in their audit reports, SAI should use appropriate work and audit standards, and a code of ethics taking into consideration, as appropriate, based on official documents of the views of the audited entity. INTOSAI, International Federation of Accountants, or other recognized Legislation specifies minimum audit standard-setting bodies. reporting requirements of SAIs and,where appropriate, specific matters that should be subject to a formal audit opinion or certificate.
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SAIs are free to decide on the timing of action, even when SAIs have their own their reports except where specific statutory power for follow-up and Organization Our reporting requirements are prescribed by sanctions. law. Principle 8 SAIs may accommodate specific Financial and Managerial/ administrative requests for investigations or audits by authority and the availability of appropriate human, material, and the Legislature, as a whole, or one of its monetary resources commissions, or the government. SAIs should have available necessary SAIs are free to publish and disseminate and reasonable human, material, and their reports, once they have been monetary resources – the Executive formally tabled or delivered to the should not control or direct the access to appropriate authority – as required by these resources. SAIs manage their own law. budget and allocate it appropriately.
Principle 7 The Constitution refers only the Auditor The existence of effective follow-up General and not his staff and therefore it mechanisms on SAI recommendations is required that the authority and function of the staff of the Auditor General be SAIs submit their reports to the amplified through a separate Audit Act Legislature, one of its commissions, or like other countries. an auditee‟s governing board, as appropriate, for review and follow-up on The Auditor-General can only examine specific recommendations for corrective the affairs of public entities. However wholly or partly owned Government action. companies incorporated under the SAIs have their own internal follow-up Companies Act are not coming under Auditor General‟s purview. There are system to ensure that the audited entities such companies with a capital infusion properly address their observations and either by the General Treasury or by a recommendations as well as those made Public Enterprise which held more than by the Legislature, one of its 50 per cent of the share capital. There commissions. Or the auditee‟s governing were also considerable number of board, as appropriate. companies formed by public enterprises. Further the Auditor General cannot SAIs submit their follow-up reports to inquire into private organisations, the Legislature, one of its commissions, including organisations that may have or the auditee‟s governing board, as received funding from a public entity. appropriate, for consideration and
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Amendments made to Article To form an Audit Service 153 and 154 of the Commission which will be chaired by the Auditor General. The other Constitution through the members are two retired officers of Nineteenth Amendment to the the Auditor General’s Department Constitution who have held office as a Deputy Auditor General or above and a The following amendments were made retired Judge of the Supreme Court, to the Constitutional provisions by the Court of Appeal or the High Court of Nineteenth Amendment to the Sri Lanka and a retired Class I Constitution in order to remedy the Officer of the Sri Lanka shortcomings in the administrative and Administrative Service. The financial independence faced by the members of the Commission will be
Our Organization Our Auditor General. Further reforms are appointed by the President to a fixed included in the Draft Audit Bill for term of 3 years on the recommendation of the further streamlining State Audit. Constitutional Council. Auditor General shall be a qualified auditor and subject to the approval of The power of appointment, the Constitutional Council, appointed promotion, transfer, disciplinary by the President and shall hold office control and dismissal of the members during good behavior. belonging to the Sri Lanka State Audit Service is vested with the To form an Audit Service Commission with a view to secure the Commission which will be chaired administrative independence of the by the Auditor General. The other Auditor General. members are two retired officers of the Auditor General’s Department Audit of all the public institutions who have held office as a Deputy including public resources provided Auditor General or above and a wholly or partly and whether directly retired Judge of the Supreme Court, or indirectly by the Government is Court of Appeal or the High Court of brought under the Auditor General’s Sri Lanka and a retired Class I purview. Officer of the Sri Lanka Administrative Service. The The Auditor General is excluded members of the Commission will be from the definition of “Public appointed by the President to a fixed Officer” to secure his independence. term of 3 years on the recommendation of the The Auditor General is excluded Constitutional Council. from the definition of “Public Officer” to secure his independence.
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The annual budget estimates of the relating to an audited entity brought to National Audit Office to be prepared by his notice in writing by any member of Organization Our the Commission, reviewed by the the public with adequate evidence to Parliament and submitted to the Minister in charge of the subject of Finance to prove that matter, and report thereon to incorporate in the National Budget to Parliament. make sure that adequate funds are The Sri Lanka Auditing Standards provided to carry out the Auditor determined by the Auditing Standards General’s functions without any interference from the Executive. Committee established under the Sri Lanka Accounting and Auditing National Audit Act, No.19 of 2018
Standards Act, No.15 of 1995 are
The National Audit Act, No.19 of 2018 applicable to all audits undertaken by provides for the powers, duties and the National Audit Office. functions of the Audit Service Where there are no auditing standards Commission, the establishment of the specified in the Sri Lanka Auditing National Audit Office and the Sri Lanka Standards for performance audit, State Audit Service, specify the role of the environmental audit, technical audit Auditor General over public finance and to and any other special audit, the Audit make provision for matters connected Service Commission may, by order therewith or incidental thereto. published in the Gazette, specify the provisions of the International Significant Features cited in the National Standards of Supreme Audit Audit Act are as follows. Institutions which shall apply to such Expansion of the scope of an audit audits, with necessary amendments to carried out by the Auditor General in a suit local requirements. manner to enable examining the The Auditor General shall issue a accounts, finances, financial position Summary Report within five months and financial control of public finance after the closure of each financial year and properties of auditee entities, a to an auditee entity in respect of any performance audit, an environmental financial statements or any account audit, a technical audit and any other submitted by such entity, other than a special audits. public corporation or company. The Auditor General will be given the The Auditor General shall within three discretion to inquire into any matter months of the receipt of the approved
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annual financial statements and other hold 50 per cent or more of the shares relevant documents and information of of that company. a public corporation or a company in The appointment, promotion, transfer, which the Government or a public disciplinary control and dismissal of corporation holds 50 per cent or more the members belonging to the Sri of the shares, present a report for Lanka State Audit Service recruited by publication in its Annual Report. the Audit Service Commission shall be
Organization vested in the Commission. The Auditor General shall present an The salaries and other allowances and Annual Detailed Management Audit any other benefits of persons recruited Our Our Report to the Governing Body of each by the Commission, shall be auditee entity within the five months determined by the Commission, after after the end of each financial year having obtained the views of the with a copy each to the Minister to Salaries and Cadres Commission, and
whom the respective auditee entity is shall be charged on the Consolidated assigned and the Minister assigned a Fund. subject of finance. All auditee entities shall cooperate The Secretary to the Treasury shall with the Auditor General and any submit the financial statements of the officer deployed by him and shall Government to the Auditor General not provide a safe and secure working later than three months after the environment to facilitate the carrying closure of each financial year of the out of an effective audit. Government. The Audit Service Commission shall The Auditor General shall charge a fee prepare the annual budget estimate of for conducting an audit from public the National Audit Office within the corporations Statutory Funds or period as specified by the Minister Boards, businesses and other takings assigned the subject of Finance. The vested in the Government by or under said estimates shall be submitted to the any written law and any company Speaker on such date as may be registered or deemed to be registered decided by the Speaker. under the Companies Act, No.7 of At least sixty days before the 2007 in which the Government or a beginning of each financial year, the public corporation or local authority Auditor General shall prepare and
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submit to the Speaker a draft annual Officer of the Sri Lanka State Audit work programme that describes the Service, to be an offence. Organization Our Auditor General‟s proposed work Any person who contravenes the programme for the forthcoming year. provisions of the Act or any rule made The Speaker shall appoint an thereunder, commits and offence and independent qualified auditor to carry shall on conviction after summary trial out the audit of the financial before a Magistrate be liable to a fine statements, accounts and other not more than one hundred thousand information relating to the financial rupees or to imprisonment for a term
year of the National Audit Office and not exceeding one year or to both such
for this purpose the Audit Office shall fine and imprisonment. be deemed an auditee entity under the A Centre for Public Audit Training and
said Act. Development shall be established The establishment of an Audit Fund to under the National Audit Office with a which shall be paid 15 per cent of the view to enhancing the capacity of audit fees, all payments credited by the human resources in the field of public Government with the concurrence of finance and auditing. the Parliament and any cost recovered Our Organizational Structure in suit or prosecution. The Auditor General is the Head of the The responsibilities of Chief Auditor General‟s Department and he Accounting Officer or the Accounting functions as a Chief Accounting Officer as well in terms of the Financial Regulation Officer shall be cited. 124(2) in respect of financial activities of An Audit and Management Committee the Department. The present shall be appointed by the Chief organizational structure of the Department Accounting Officer or Accounting comprises four levels in its hierarchy with specified numbers of officials in each Officer or the respective Governing level, in conformity with the cadre as Officer. approved by the Department of Failure to assist the Auditor General or Management Services of the General Treasury. any person authorized by him to be an offence. The first layer comprises of three Additional Auditors General who Influencing or attempting to influence supervise the audit functions of the Central a decision of the Commission or any Government and the Provincial Councils. The second level comprises of 60
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Divisions, each headed by 15 Deputy making field visits, etc., in conformity
Auditors General and 44 Assistant with Sri Lanka Auditing Standards, Auditors General. These Divisional statutory and other regulatory Heads are assigned with full responsibility requirements and best practices as to manage and supervise the functioning of programmed. The above mentioned second a specified number of Branches assigned level comprises 60 Divisions and 18 to them with a specified number of auditee Divisional Heads of 18 Divisions out of institutions in a specified sector under the them, are in charge of Regional Sub- charge of a “Branch Head” who is a offices at Provincial level and they are Superintendent of Audit or a senior officer supervised by three Deputy Auditors of the Audit Examiners‟ Service and General. represent third level. They are charged with the responsibility for execution of the The administrative activities of the Our Organization Our audits of Public Institutions assigned to Department are carried out under the them by deploying the supportive field purview of the Director (Administration) officers of the Audit Examiners‟ Service of the Establishments Branch and the assigned to them, efficiently and financial activities are carried out under effectively. Accordingly, the fourth level purview of the Chief Accountant of the
comprises those field officers who assist Accounts Branch. Branch Heads by conducting audit of the affairs of Public Institutions assigned to The Organizational Structure is given them through carrying out examinations, below.
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DAG (HUD) AAG- 5 SAs AEs Our Organization Our
DAG(TND) AAG -10 SAs AEs
DAG(JPC) AAG - 5 SAs AEs
DAG(MDP) AAG - 1 SAs AEs
DAG(FFP) AAG - 5 SAs AEs
DAG(SIN) AAG - 2 SAs AEs
DAG(CGL) AAG - 12 SAs AEs
DAG(COM) AAG - 1 SAs AEs
DAG(SBE) AAG- 4 SAs AEs
DAG(SOF) AAG-4 SAs AEs
Auditor General General Auditor DAG(SPR) AAG - 3 SAs AEs
DAG(ADM)
Chief Accountant Accountant MAs
Director (Admin) AD(Admin) MAs
DAG(WNS) AAG - 3 SAs AEs
DAG(NNE) AAG - 3 SAs AEs
DAG(USC) AAG - 3 SAs AEs
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According to the cadre approved on 14 passed by Parliament. As such, it was not
November 2011 by the Department of possible to obtain approval for the Draft Management Services after an evaluation Service Minute prepared for the of the responsibility and role of the Department staff and the filling of Auditor General‟s Department, the total vacancies is carried out by the Public number of officers in the Sri Lanka Audit Service Commission according to the old Service stands at 350 and the officers in Service Minute. the Audit Examiners‟ Service stand at 1,200. The Sri Lanka Audit Commission The vacancies in the respective posts in the established in terms of the Nineteenth Department that existed as at the Amendment to the Constitution of the beginning of the year 2017, as at the end Democratic Socialist Republic of Sri of year 2017 and as at 31 May 2018 under
Lanka could not come into operation as the such circumstances are given in the Table Our Organization Our Draft National Audit Bill has not been 01 below.
Post As at 01 January 2018 As at 31 December 2018 As at 01 August 2019
Cadre Cadre Cadre
Actual Actual Actual
Approved Approved Approved Approved
Vacancies Vacancies Vacancies
Audit Staff Additional Auditor General 3 1 2 3 1 2 3 - 3 Deputy Auditor General 15 11 04 15 11 04 15 11 4 Assistant Auditor General 44 22 22 44 32 12 44 28 16 Superintendent of Audit 288 223 65 288 213 76 288 210 78 Audit Examiner 1,200 1137 63 1,200 1,102 98 1,200 1,027 173 Non-Audit Staff Director Administration 1 1 - 1 1 - 1 1 - Chief Accountant 1 1 - 1 1 - 1 1 - Other Staff Officers 17 10 7 17 11 6 17 12 5 Public Management Assistants’ Service and allied Grades 127 98 29 127 115 12 127 115 12 Report Processor 48 48 - 42 42 - 42 42 - Junior Employees 213 184 29 213 185 28 213 204 9 Total 1,957 1,736 221 1,951 1,713 238 1,951 1,651 300 Table 01 – Cadre Position as at 31 December 2018 and 01 August 2019
As per the above Table, the existence of a 31 May 2018. As such, the necessary steps large number of vacancies in the cadre have been already taken to make ranging from 439 to 221 from 01 January recruitments for 04 posts of Deputy 2017 to 31 December 2017 of every post Auditor General, 11 posts of Assistant of the Department was an impediment to Auditor General, 59 posts of discharge the statutory function of the Superintendent of Audit, 69 posts of Audit Department. However, the said number of Examiner and the post of Technical vacancies could be reduced up to 211 by Officer existed further as vacancies.
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Approval of the Service combining the Sri Lanka Audit Service Our Organization Our Minute and Audit Examiners‟ Service in accordance with the aforesaid Cabinet The audit staff of the Auditor General‟s Decision had been accepted by the Department consists of officers of the Sri Government as a policy. Accordingly. A Lanka Audit Service and Audit Service Minute for the new Service was Examiner‟s Service. Under the formulated Even though the Audit circumstances at that time, even though Service Commission has been appointed, separate Service Minutes were Accordingly a Service Minute for the formulated in respect of these two new service was formulated and after the Services in terms of Public approval of the National Audit Act on Administration Circular No.6/2006, a 2018 of No. 19 the Adudit Sevice
Commission is in the process of Committee was appointed by the approring it. The approval of the new Secretary to the President to look into the Service Minute will pave the way for the various proposals and requests made by maintenance of a staff of more extensive the staff in this connection. That professional level for the efficient Committee was chaired by the Auditor performance of duties and functions General and it consisted of two former assigned to the Auditor General. Auditors General and an Additional Moreover, the Audit Service Secretary to the President. Considering Commission is the Appointing and the recommendations made by the Disciplinary Authority of the new Committee, approval had been granted service and as such the capability of on 23 December 2014 for the Cabinet discharging those functions without Memorandum submitted to the Cabinet delay will be immensely helpful for the of Ministers with a view to establishing a upliftment of the performance of the new service named “Sri Lanka State Department. Audit Service” by combining the Sri Lanka Audit Service and Audit Staff Training Examiners‟ Service and the Cabinet Memorandum on the establishment of a It is examined that the Auditor General‟s new service under the name “Sri Lanka Department has correctly performed the State Audit Service” has been approved responsibility of accounting for the on 23 December 2014”. performance of the financial and performance functions of the public The establishment of “Sri Lanka State Audit Service” proposed to be set up by institutions to guarantee the providing of resources in an economic, efficient and a quality and reliable public service to effective manner and reported to the Sri Lanka nation by providing the parliament. necessary contribution and the guidance At present, the Auditor Generals‟ to strengthen the utilization of state Department makes use of the
National Audit Office| Annual Report - 2018 15
contribution of the staff of 1,397 Audit Conduct programmes for attitudinal Officers and officers 344 offices in improvements of the officers. Supporting Services to fulfil this statutory role. Local Training Programme
Hence, it is an essential element to In order to achieve the above objectives, empower the Audit Staff with adequate the Training Division of the Department knowledge and skills to meet the had conducted 48 training programmes statutory functions efficiently and under 11 topics in the year 2017 effectively with the aim of achieving this covering all Audit Officers. In addition, goal the Department had emphasized the training facilities had been provided for necessity of the completion of local or officers of the non-audit staff.
foreign training courses for not less than Our Organization Our 80 hour per annum by each Officer in the Foreign Training Department for ensuring his Continuous Professional Development (CPD). With the objective of providing a foreign training on performance audit to all audit The Training Division of the Department officers, it had been participated 560
has organised local and foreign training audit officers during the year under programmes in keeping with the review for the started Malaysia requirements of the Officers, to Performance Audit Training Workshop encourage them by way of providing and being participated 39 audit officers necessary assistance. It is expected to for 27 foreign training programme obtain assistance from competent and covering 10 other topics. qualified Officers of the Department as well as Resource Persons and lectures, Details of local and foreign training discussions, practical training and field programmes attended by officers of the visits will be used as training methods to Department during the year under review achieve the following objectives. are given in the table 02 below.
Development of knowledge and technical skills of the Officers. Enhancement of efficiency and the
performance of the Officers. Improvement of management skills of the Officers. Dissemination of knowledge, tools
and technical knowledge required for the performance of duty.
To impart knowledge on Service Rules and Finance. Development of team spirit.
16 National Audit Office | Annual Report - 2018
Details of the Officers involved in the Programme No. of Training
Programme Hours Our Organization Our
Total
s
Audit Audit
-
No.of Programmes
Superintendent of Audit
Divisional Head Audit Examiners Non Offic Local Training
Programmes 1 Financial Audit 1 9 35 - 43 312 2 Performance Audit 2 - 0 75 - 75 2,175 Training 3 Training of New 1 - 4 28 - 32 232 Officers
4 Procurement and 8 11 78 633 - 722 16,858 Construction Audit 5 Investigation 2 - 5 71 - 76 4,523 Audit Training 6 Approprition 7 12 144 542 - 698 10,121 Accounts Auditing 7 Forensic Audit 3 4 32 43 - 79 1,871
8 Computer 8 1 14 204 - 219 4,815
9 Taxation 3 43 199 737 - 979 14,196
10 Positive Thinking 13 42 212 1131 - 1,385 84,092 Development 11 Auditing for 1 - 6 34 - 40 290 Foreing Funded Project 12 Foreign Am busy 1 10 66 262 - 338 2,450 Audit 13 Motor Mechanism 2 2 17 78 - 97 2,661
14 Land Aqurisam 1 - 7 38 - 45 326 For Development Maters 15 Others 2 2 3 5 - 10 189
16 Training 2 - - - 374 374 2,712 Programme for Non-Auditors Total 55 5,212 145,823
Foreign Training Programm 1 Performance 6 8 80 374 - 462 40,194 Auditing 2 Sustanable 2 1 3 1 - 5 167 Development
National Audit Office| Annual Report - 2018 17
Goles
3 Training For 3 1 1 2 - 4 167 Information Technology 4 ASSOSAI/ SAI 8 5 5 1 - - 348 Training Programme i. ASSOSAI - workshop on Performance Audit ii. ASOSAI - Seminar on Improvement and Innovation of Audit Process- iii. SAIS - Workshop for Engaging with
Our Organization Our Stakeholders
iv. SAI PMF Training Course 5 State Audit 2 1 1 1 3 472 Management 6 Public Accounting 3 1 2 - 3 218
and Financial
Management 7 Constraction 1 1 1 145 Management 8 Financial and 4 4 4 348 Economic Administration for the Developing Countries 9 Post Graduate 1 1 1 10 Environmental 1 1 2 1 65 Audit Total 31 497 42,464
Table 02- Local and Foreign Trainings attended by the Department during the year under review
18 National Audit Office | Annual Report - 2018
Organization
Our Our
Deployment of Qualified Constitution of the Democratic Socialist Auditors Republic of Sri Lanka.
The deployment of qualified auditors Sums amounting to Rs. 38.38 million was required to fill the resource gap and Rs. 61.24 million are due to be paid created in view of the prevailing for the years 2017 and 2016 respectively vacancies and in the meantime it is done to the relevant Audit Firms for the audit due to the need of specialized services, services rendered on the approval of the especially in the case of State Bank Audit Fees Committee of the Department Audits. The Auditor General is vested comprising representatives of the with the authority to deploy qualified Ministry of Finance, Auditee Institution, auditors by Article 154 of the line Ministry and the Audit Firm. In obtaining the service of qualified
National Audit Office| Annual Report - 2018 19
auditors, the factors such as the quality Twenty seven and Eighty seven Audit of the services rendered by them in the Firms engaged in Public Practice assisted past, the number of partners engaged in me in the audit of 72 Institutions and 180 the firm concerned, and the number of Institutions in the years 2017 and 2016 audit trainees working with them had respectively, which consisted of 3 major been considered. In addition, State Commercial Banks and Companies international affiliation of the firm with State Shareholding of 50 per cent or serving as a factor to consider the more brought under the scope of the standard of the Firm and the quality of Auditor General through the Nineteenth professional services rendered by them Amendment to the Constitution. The had been included in the selection amount of assisted audit firms had been criteria. reduced in 2017 than 2016, due to the
Our Organization Our decision of not appointing qualified Generally a particular audit assignment auditors to audit the branches of two is entrusted to a particular Audit Firm to major commercial banks and the continue only for a maximum period of Department directly audited related five consecutive years. companies as the recruitement of new
Audit Examiners.
Assistance to Parliament use of public funds and resources through the examination of public As per Article 148 of the Constitution, accounts. As such, the two Committees the Parliament shall have full control have a critical role in ensuring public over public finance. The Auditor sector accountability and effective General‟s Department makes a key governance. In simplistic terms, the contribution to the system of public COPA and COPE have some similarity accountability, serving as the external to an audit committee in a corporate or auditor of the Government with a duty to pubic enterprise. report directly to Parliament on the financial stewardship and the economy, As per Standing Order 125, it shall be efficiency and effectiveness of the the duty of the COPA to examine the operations of the public entities. Auditor accounts showing the appropriation of General‟s reports tabled in Parliament sums granted by Parliament to meet the are then taken up by two Parliament public expenditure and such other oversite committees setup under accounts laid before Parliament as the Standing Orders 125 and 126 named Committee may think fit, along with the Committee on Public Accounts (COPA) reports of the Auditor General. The and Committee on Public Enterprises COPA shall time to time, report to the (COPE). The role of these two Parliament on the accounts examined, Committees is to assist the legislature in the finances, financial procedures, holding the Executive to account for its performance and management generally
20 National Audit Office | Annual Report - 2018 of any department, local authority and on members and also have the power to any matter arising therefrom. summon before them and question any person and call for and examine any The duty of the COPE established under paper, book, record or other document Standing Order 126 is to examine the and to have access to stores and property. accounts of public corporations and of any business or other undertaking vested Each Committee consists of twenty six under any written law in the Government members at present to make them laid before Parliament, along with the sufficient size to accommodate proper reports of the Auditor General thereon. representation of both ruling party and The COPE shall, from time to time opposition in the parliament. The real report to Parliament on the accounts test of the influence of COPA or COPE
examined, the budgets and annual is not simply whether its Our Organization Our estimates, the finances and management recommendations are accepted by the on such public corporations or of any Executive but whether they are business or other undertaking vested implemented, effectively and in full, and, under any written law in the Government most importantly, whether they make a as the Committee may direct. The positive difference to financial efficiency COPA and COPE have the authority to and quality of service. The Auditor appoint sub committees of its own General often involve in reporting back to the committees on the process of comment in response to questions from implementation. Committee members. The Auditor General may suggest a line of possible The two Committees are assisted in its questioning or offer background work by the Auditor General or his information about any of the issues being deputies along with the Audit Officers discussed. who directly involved in that particular audit. Auditor General performs an One month notice is normally being important role in the work of the given by the Committee to the Committees and help to ensure that the respective public institution appear Committees have before them all before the Committee to examine them necessary information and opinion on the of the performance of the operations matters under review. based on the Auditor General‟s report. Auditee institutions are required to The Auditor General‟s role is to assist provide a progress update to the the Committee in its work by providing Committee with a copy to the Auditor background information and comment General within a specified period of relevant to the subject being considered. time. Auditee institution must prepare a During the course of the examination, written response to enable the Auditor Auditor General is expected to offer General to prepare the brief note for information and comment to the discussion at the Committee. All written Committee and provide information and responses submitted by auditee
National Audit Office| Annual Report - 2018 21
institution are reviewed by the Auditor validating the answers given by each and
General‟s Department to confirm the every institution after ensuring their fairness of information about the accuracy. progress made in implementing the recommendations contained in the Surcharges imposed by the Auditor General‟s report. After Auditor General completion of the review, Auditor General‟s Department prepares a brief There are 335 Local Authorities in Sri discussion note based on all important Lanka comprising 23 Municipal audit issues those were reported to Councils, 41 Urban Councils and 271 Parliament through the audit report after Pradeshiya Sabhas. These Local taking into account of the comments and Authorities are audited by the Auditor
Our Organization Our observations made by the respective General in pursuance of provisions in Chief Accounting Officer, Accounting Article 154(1) of the Constitution of the Officer or the Governing Body. Democratic Socialist Republic of Sri Therefore the members of the Committee Lanka and the respective Statutes and are well informed the current position of Acts.
the audit issues. Furthermore, the The Auditor General is vested with the performance of the implementation of power to surcharge items contrary to the directives given by the previous law, losses due to negligence and meetings are also included separately in misconduct and items which should have the said discussion note. been brought to account but not brought to account by the provisions in the said During the year 2017, the COPA has Statutes and Acts. held 71 secessions to examine 67 institutions and the COPE held 46 In terms of the said power, 122 secessions to examine 44 institutions. Surcharge Certificates valued at Rs.69.36 million had been issued during a period The officers of the Auditor Generals of 11 years from the year 2007 up to have assisted the COPA to develop a IT 2017 on 843 parties related to the Local based questioner with a view to rate the Authorities. Out of that, a sum of Rs.3.93 institutions coming under the Committee million or 5.66 per cent had only been specially Ministries, Departments, recovered by 31 July 2018. Due attention Provincial Councils and Local had not been paid to the recovery proces Authorities. The audit officers have of surcharges by the authorities further assisted to the Committee by concerned.
22 National Audit Office | Annual Report - 2018
Main Audit Observation
Animal of the Zoological Graderns
being subjected to diseases
Post-harvest Loss of Vegitables and Fruits
Non-achievement of Objectives of the Police Reward Fund
Delays in repairs of Rodar Equipment of the Meteorological Department
Performance of Schools with Minimum Nuber of Students.
Low Level of Overall Performance in Achievement of Sustainable
Performance and and Performance Development Goals.
Environmental Audit Environmental Operation of Lakvijaya Power Plant and its Environmental Impact Water Pollution in Kelani River
National Audit Office| Annual Report - 2018 23
24 National Audit Office | Annual Report - 2018
Performance and Environmental Audit conducted PerformanceAudit by the Auditor General Performance auditing and environmental impact implement performance involves evaluating the selected by this audit and determine key economy, efficiency, Performance and performance indicators effectiveness and Environmental Audit Unit for each organization are environmental impact of obtaining proposals from very important, a activities of the other Audit Branches on performance-based government agencies in various areas of budget system and selected sectors of a Government Institutions. performance indicators government agency, In addition to the are not defined and
programme, project and financial audit reports, the implemented currently in expenditure unit through performance and Sri Lanka. As a result, we reporting including environmental audit determine performance recommendations on reports are also tabled in indicators relevant to improvements to be made Parliament. Training of each sector and carry out in accordance with officers of the National performance audits. relevant audit Audit Office are also Important observations observations. being carried out relevant revealed during to this field. performance audits Performance and during the year under Environmental Audits are Although implementing a review are summarized carried out in specific performance based below. areas of economic, social budget system to
Performance Audit
Evaluation of whether the under the provisions of the National Zoological Gardens Development Zoological Gardens Act No. 41 of 1982 . and Welfare Fund utilize for In addition to the Dehiwala Zoo, which is one of the oldest zoos in Asia, the animal welfare Pinnawala Elephant Orphanage, Dehiwala Zoo which was established in Pinnawala Zoo, Hambantota Safari Park the early 1920s and was taken over by and Gonapola Animal Feed Farm are the government on 01 July 1936, is being belonged to the Department of kept as a collection of wild animals had Zoological Gardens. been established in 1946 as an The purpose of this audit was to evaluate independent State Department. whether the Zoological Gardens Subsequently, the administration and Development and Welfare Fund is being management of the Department of used for animal welfare. In many cases, National Zoological Gardens comes
National Audit Office| Annual Report - 2018 25
there is a lack of food at the right time, pieces of branches when supplies of and the food for animals were eaten by foliage for animal feed, instances of the animals coming from outside, due to less weight of foliage were seen. The there were considerable amount of details are shown in the diagram 01
Performance Audit Performance
Diagram 01. - foliage, pieces of branches left for after providing to the animals at Dehiwala Zoo
There was no mechanism to meet the moving animals from one location to shortage of food and even though the another. food given to elephants had to be When the treatments carried out for changed according to the difference of elephants and tuskers, those their weight, the weights were not treatments were not done measured for that. continuously. Insufficient crushes for easy A number of 328 animals of the treatments for animals. National Zoos belonging to the National Zoological Department had died from Although shelters should be designed so various diseases during the years 2016 that animals could be able to and 2017. demonstrate their natural behavior, there were no enough space for some of Several occasions where the National the animals in Dehiwala Zoo and also Zoological Department had not drawn lack of sufficient shade management. In attention regarding the health of the addition to that, some animals were animals of the National Zoos are shown found with no partners. The construction below. of the Dehiwala Zoo and the Pinnawala Insufficient Quarantine Facilities Elephant Orphanage had not been carried Occasional cases in which veterinary out for proper discharge of contaminated advices were not followed when water. The details are shown in the diagram 02 and 03.
26 National Audit Office | Annual Report - 2018
PerformanceAudit
Diagram 02 - waste water collected at the at quarry at Diagram 03 Water flowing down the drainage the Dehiwala Zoo Pinnawala Elephant Orphanage
A large number of animal The attention should be The Department of cages had decayed at the drawn on develop and National Zoological Dehiwala Zoo and maintain a detailed and Gardens had earned an they are being used with specific guidelines income about Rs. 999 everyday repairs. covering all welfare million in the year 2017 activities of Zoos and and out of this revenue , In the observations made employees of the Zoos 27 per cent for food and on employee welfare, the belonging to the medicines for animals, reasons such as less than Department of National 2.56 per cent for three per cent of the total Zoological Gardens, employee welfare and income earned by the taking necessary steps to training, 16 per cent for Zoo is spent on workers, provide partners for constructions as well had as a result of lack of animals who has no been incurred. The crushes for treatment of mates, provide training Department of Zoological animals the employees for employees to be able Garden earns its full could be in danger and to carry out their services income from the display lack of adequate more efficiently and of animals and it is protection to insufficient effectively, holding concluded that further insurance coverage to medical camps at regular attention is needed to be prevent such accidents intervals, enhance their drawn for the animal and not providing formal service productivity by welfare and employee training had affected providing adequate welfare with a focus on Employees' welfare. insurance coverage. identified observations.
National Audit Office| Annual Report - 2018 27
Intervention of Relevant Government Agencies on Minimization of Post-harvest Losses of Vegetables and Fruits of Sri Lanka and to Sell at Reasonable Prices. As the world population is expected to reasonable price for the harvest, the reach 10.5 billion by the year 2050 and the instances where the farmers are helpless food supply for that had to be increased by and unable to cover the cost of cultivation 60 per cent, in addition to improving food were also reported. distribution simultaneously with that, international researches have also The Ministry of Agriculture and the public confirmed that reducing post-harvest institutions involved in this under this losses is a critical factor. Since the harvest Ministry are conducting researches on
wastage of 30 percent to 40 percent of the post-harvest technology. In this case the Performance Audit Performance country's vegetable and fruit farming is essential crops and major sectors had not about 270,000 tons per year until it was in been adequately covered by those the hands of the consumer and as the researches and it was also observed that disadvantage to economy of Sri Lanka is the implementation of the recommendations of the research reports about Rs. One Billion, the time has come to pay special attention to it. by the relevant government institutions was also inadequate. There are many instances where Sri Lankan farmers are unable to sell their The process of post-harvest losses from products at harvest time were reported . harvesting until it is in the hand of the Similarly, because there is no minimum or consumer is shown in the Diagram 04
Harvesting Storing Transportation
Wholesale Cleaning Packing Consumer Dealer
Retail Clasification Preparation transportation Dealer
Diagram 04- The process of post-harvest loss from harvesting until it is in the hand of the consumer
28 National Audit Office | Annual Report - 2018
The time of harvesting varies from crop to notifications in the years 2011 and 2012 PerformanceAudit crop and it is a key step in identifying the when collection of 37 and 21 locally right time for harvesting. For that, lack of produced vegetables and fruits awareness of farmers about the harvesting respectively with the objective of indicators , lack of knowledge about minimizing postharvest losses in harvesting system, inadequate training and packaging when storing and distributing distribution of necessary equipment , non- the packages made of plastic and hard establishment of standards in respect of paper or wood should be used. However, harvest ratings and lack of understanding when issuing the notification in the of it had mainly affected the loss of post- second gazette it was stated that packaging harvest . should be used for 16 vegetables and fruits in the first gazette had been Further, storage and transportation of exempted and removed from that vegetables and fruits without proper requirement. But it had been ascertained packaging has been a major factor to post- that as per the results of surveys harvest losses. Because of this, the conducted by the National Post Harvest directions had been issued to all local Management Institute in the years 2016 vegetable and fruit transporters, and 2017, losses of harvesting in 08 distributors and dealers, the two vegetables out of these in transportation announcements made by the Consumer and marketing ranges from a minimum of Affairs Authority in two special gazette 7.68 per cent to a maximum of 77 per cent.
Diagram 05 - Meegoda Special Economic Diagram 06 - Special Economic Development Center Development Center - 26 June 2018 in Dambulla - 19 March 2019
Out of each of the occasions of post- occurred in transport of various vegetables harvest losses, a number of problems had under traditional methods ( poly-sack to be faced during transport. As per the bags) , can reduce by 20 per cent to 25 data and research reports on the losses on per cent by using plastic crates. the transportation of the harvest, it had Nevertheless, at present the use of these been shown that the harvest losses plastic crates is very low.
National Audit Office| Annual Report - 2018 29
Diagram 07 – Thabuthagama E.D.C- 20 July 2018 Diagram 08 – Megoda EDC -26 June 2018
Performance Audit Performance To minimize the losses to fruits and to be develop the public and private sector vegetables harvest, reaching economic partnerships especially for the sale of disadvantages to the farmer by eliminating vegetables with the opening of the excess crops which cannot be sold has to Dambulla Economic Center in the year be controlled. Although several 1999 later on . government institutions have introduced value added products, since the lack of Fifteen economic centers had been availability of value added products in the established and built shops and leased market, necessary actions should be taken them out during the period from the year to promote entrepreneurs to incorporate 1999 to 2017. The legal ownership of the them into the market. lands belonging to Piliyandala, Ratmalana, Nuwara Eliya, Keppetipola, As a result of working on a cultivation Kurunduwatta, Meegoda and Ampara plan, since the productivity of each crop Economic Centers had not been taken over can be maximized, a necessity of by the Ministry in charge . cultivation plan is important in this case. Although prepare a plan for the crops to be Construction of a roof covering the ground grown and the quantities during each of in front of the shops to protect the the season in each of the area for this and vegetables and fruits brought to the motivation of the farmers to implement economic centers by the farmers from the it should be made, the attention had not sun and the rain until sell had assisted to been drawn on such motivation. minimize losses of post-harvest. Although such a roof had been made at the In the Budget Speech 1988, it had been Dambulla Economic Center, due to the proposed to establish Regional Sales absence of such safe roofs in the economic Centers to facilitate the marketing centers at Thambuththegama, Veyangoda activities of agricultural products. A and Nuwara Eliya the losses of harvest favorable environment had been created had increased. The management trusts of the respective the excess harvesting stocks at Dambulla Ministries or economic centers had not Economic Center to other economic prepared a necessary programme to carry centers and to provide necessary
30 National Audit Office | Annual Report - 2018
information to encourage farmers and to At certain times when there is an PerformanceAudit act as a network of economic centers. excessive supply of vegetables at the Dambulla Economic Center, at the The price display boards or electronic instances of they are unable to sell, those price boards had not been implemented in vegetables are disposed to Digampathana the shops of economic centers functioning area . Those discarded vegetables are eaten under the Ministry of Agriculture, Rural by wild elephants roaming in that area. Economic Affairs, Livestock The way of eating these vegetables by the Development, Irrigation and Fisheries and elephants is shown in the diagram ......
Aquatic Resources Development.
Diagram 09- Eating vegetables disposed at the Economic Center in Digampathana by Elephants - 04 October 2018
However, since it was not disclosed a distribution centers such as bringing from reduction in the prices of vegetables in Jaffna to Dambulla, bringing it to other parts of the island during this period, Colombo from Nuwara Eliya, from the attention of authorities had not drawn Thambuttegama to Kegalle. Accordingly, to implement a network to distribute the price variations had also increased due to vegetables that could not be sold at the inequality of establishing economic Dambulla Economic Center to other areas. centers island wide.
According to a survey carried out by the There were price variances in between the Institute of Post-Harvest Technology in prices of economic centers focused on the year 2014, when distribution of 11 manufacturing areas and the prices of vegetables under 09 networks, it had been economic centers located focusing on declared that the vegetables are damaged urban areas. The cost of transportation and ranging from 7.68 per cent to 66.45 per the intermediaries in the transactions were cent from those vegetables. also affected on those variations. Similarly, the Government institutions Accordingly, it was revealed that losses to which work with this had not intervened to harvest is increased when the vegetables regulate those price variations. reached from a far to vegetable
National Audit Office| Annual Report - 2018 31
Police Reward Fund
Ensuring security in all parts of the active through crime control, drug control, country, providing full time care to ensure traffic management, environmental the safety of lives of people 24 hours a day protection and various issues in civilian is the responsibility of the Department of life such as providing relief to people at Police. Within this aggregation of the times of disasters. The details are responsibilities, the Police Department is shown in the diagram 10 and 11
Performance Audit Performance
Diagram 10 - Traffic Management Diagram 11- Environmental conservation
The Police Reward Fund had been taken in to accounts as a source of established to encourage the officers of the income. Sri Lanka Police who perform all these functions. The Reward Fund had been Using the income generated by these established under the Sections 72 and 73 major sources of income, criteria have of Police Ordinance No 16 of 1865 which been introduced to encourage police was the mandatory for the Establishment officers through various circulars. Prizes of Sri Lanka Police. The Sri Lanka Police are awarded annually under those criteria. Reward Fund had been implemented by a Those payments are classified as General notification published in the Gazette No. Prize Payments, Motor Vehicle Payments, 116 dated 07 August 1974 . The Directives Special Prize Payments, Special Reward of the Reward Fund had been amended by Payments of Inspector General of Police the Extraordinary Gazette Notification No. and Entertainment Payments. 600/20 of 09 March 1990. A certain A sum of Rs. 1,939 million had been amount out of the fines receiving to the credited to the Police Reward Fund as government on duties of police officers is revenue from fines in the year 2018 and credited to this Fund. Accordingly, the even though a sum of Rs. 885 million or revenues are credited in two main ways 70 per cent should be paid according to to the Police Reward Fund. That, they can the directives of the Inspector General of be called as court fines and traffic fines. In Police as rewards, the paid percentage was addition to that, the investment income only 54. A sum of Rs. 9,821 million generated by investing of the annual had been invested in fixed deposits as at surplus of the Police Reward Fund also 31 December 2018. Although as per the
32 National Audit Office | Annual Report - 2018
Directives of the Inspector General of rewards, accounting policies which are PerformanceAudit Police, the percentage of investments that being followed at the instance of Reward should be made in the year 2018 was10 Fund Income taking in to accounts existed per cent , the percentage of investment had with regard to this as well. The Police been 92 per cent. When Payment of Rewards Fund which was established to Rewards to Police Officers the problems encourage the police officers who work in connection with non-revision of reward closely with the public and do their service payment criteria timely to match with unswervingly for the public in all activities present, delays in payment of rewards, should be maintained efficiently and availability of police officers who has no effectively.
Using of Meteorological Techniques
The Department of surveillance and high Site under the expert Meteorology which was atmospheric data advice of the World established in 1948 as a observation. Meteorological separate Department is Organization and a functioning under the A sum of Rs. 400 million feasibility study had not Ministry of Disaster was provided by the been carried out on the Management at present. Government of Sri Lanka relative location. This Department is the in the years 2006 and authorized national 2007 approving The Doppler Radar institution for weather, establishment of a System had been decided meteorological services Doppler Radar System in to be installed in a 20 and weather disasters and Sri Lanka for the meter high tower. early warning for tsunami detection of adverse According to the Decision as well. In addition to the weather conditions, to of Cabinet of Ministers Head Office in Colombo, keep an eye on them dated 13 January 2010, the Department have 22 continuously, warnings, the contract for the external offices, including weather conditions survey construction of the tower offices located at and estimate the amount and transporting parts of Katunayake, Mattala and of rainfall. It had been the imported Radar Ratmalana Airports. In entered into a Trust Fund System from the Port to addition to this, obtaining Agreement by the Gongala had been data for weather Ministry of Disaster awarded to the Central forecasting is done from Management on the Engineering Consultancy 16 collaborative centers advice of the World Bureau without calling located in other areas. Meteorological open bids. Due to lack of Traditional equipment organization on 24 May soil tests, the construction and automated 2007 for fulfilling of that works had to be stopped meteorological equipment requirement. The Gongala on a number of issues are being used for ground Peak in the Deniyaya area such as the emergence of was selected as a Radar soil problems when National Audit Office| Annual Report - 2018 33
laying the foundations for for procurement of Radar equipment were sent back construction. Equipment had been to the manufacturing Implementation of works awarded to the Enterprise plant in America again. related to construction, Electronics Corporation After assembling those supply of goods and by World Meteorological equipment parts as this in services providing had Organization. The October 2013 it had not been adequately installation of the System delayed for more than 3 supervised and assessed had been commenced by ½ years to send back by the Department in 10 October 2012. The again to the supplier for accordance with vehicle which had repairs. As a result, there Guideline 8.12 of the brought the crane needed was a more possibility to Government Procurement to install it, fallen down damage the parts of that
Guideline. Similarly, the from the hill by breaking equipment. Performance Audit Performance construction had been a section of the driveway carried out without proper and injuring its driver. Even though an insurance approval. When the The installation of Radar coverage valued at Rs. completed contract System had been halted 142.68 million had been obtained from Sri Lanka
handing over by the based on that reason. The Central Engineering supplier's Technical Insurance Corporation for Consultancy Bureau there Engineer had arrived and this purpose, and parts of were delays in the parts of installed the equipment this the Radar Equipment work and shortcomings in on 05 October 2013 and it were damaged whilst the quality. had been stated that the storage and transportation electronic connectivity as well the Department The World could not be provided to had failed to get Meteorological the above Radar System insurance compensation Organization had been sending a letter to the for it. A sum of 1.84 entrusted with the World Meteorological million US$ had been purchasing of equipment Center by the supplier on incurred from the Trust including Doppler Radar 17 October 2013. It was Fund of the World Equipment on the decided to send the Radar Meteorological instructions of the Sri Equipment at Gongala Organization even by 25 Lanka Meteorological Site to the factory again April 2018. The relevant Department in terms of for the repairs as a result location had remained subsection 3.3 of the of the discussions made unsafe at present and the agreement entered in to subsequently. existence of the with the Trust Fund of the Accordingly, it was equipment was not World Meteorological concluded that the cost of satisfactory. The details Organization. repairs would be too high are shown in the diagram Accordingly, the contract even if the parts of the 12, 13. and 14
34 National Audit Office | Annual Report - 2018
PerformanceAudit
Diagram 13- Fence covering the Diagram 14- The way rain water Diagram 15- How the bottles of work area was cut for easily leaks liquor have been dropped accessible to any person
The Japan International Cooperation Thirty eight automated meteorological Agency (JAICA) and the Democratic systems received as Japanese grant in the Socialist Republic of Sri Lanka had year 2009 for automatic measurement of entered in to an agreement on 30 June weather conditions (data collection), 2017 for installation of two Doppler storage and communication and those Radar Systems near the office premises of equipment were installed in the year 2012 the Puttalam and Potuvil Meteorological and 2013 . Accordingly, despite these Centers due to uncertainty about the equipment was received as a grant had success of the Gongala Doppler Radar been in idle for more than four years. System and the necessity for a Doppler Radar System for early warning in Sri Most of these centers had not sent any data Lanka. These two workplaces had been for certain months to the Head Office. The identified paying more attention on access function of this system had been roads, monitoring and maintenance interrupted from time to time from the capabilities and paying less attention to year 2009 to 2018 and it had not provided wave barriers, radar misleading resistors accurate weather data. Data and environmental impacts in this Project. communication facilities had collapsed Similarly, the extent of land required for and those equipment had not been properly this has not been identified specifically maintained. Parts of the AWS system and the survey plans had not been made in scheduled to be installed at the relation to them. Likewise, a very slow Trincomalee Meteorological Center had acquisition process of lands is taking place been stored in idle in the Head Office. and a school had located next to the The details are shown in the diagram 16, Puttalam site. 17 and 18.
National Audit Office| Annual Report - 2018 35
Diagram 15.AWS system in Diagram 16 AWS system data Diagram 17 - How the mounting Wagolla logger At the Meteorological pole of the AWS system to be Center, Galle installed at the Trincomalee Performance Audit Performance
A sum of 53 million had been made for the operations and maintenance of available by the Ministry of Disaster services performed by the contractor as per
Management for the installation of 100 the contract agreement, the contractor had automatic rain gauges around 05 selected not performed those activities. rivers aiming to keep attention on real- time rainfall conditions and issue Providing data on air pressure, warnings based on their results. The temperature, humidity, wind speed and Project was implemented by the direction of the wind are being done by Department of Meteorology. It had spent a Radio Sound Equipment and although lot of time to choose the relevant locations doing all member countries daily on oo and although the Department of UTC and 12 UTC universal times or Meteorology had made arrangements to observation of Radiosond high air purchase rain gauges, contract agreements monitoring at least once a day as per the had been entered into before the necessity instructions of the World Meteorological was identified and the transactions had Society, in Sri Lanka, these observations been carried out before those agreements are made three days a week only on taking into effect. Also, the attention was Mondays, Wednesdays and Fridays at not drawn on Calibration Certificates when 11.30 a.m. . Although the supplier had purchasing equipment and except for the mentioned that the life of a balloon was 12 rain gauge fixed on the Head Office months, it was observed that the balloons premises arrangements had not been made with a lifespan of more than 12 months are to ascertain the accuracy of the data of being used for Radiosond surveillance and other rain gauges. Even though the also the safety measures were not taken to Departmental Officers should be trained fill hydrogen gas into the balloons.
36 National Audit Office | Annual Report - 2018
PerformanceAudit
Diagram 18- Send containers without clothing Diagram 19- Filling hydrogen gas to balloon the protective clothing without protective
Traditional Meteorological Equipment
Rainfall data is collected from 500 centers the National Meteorological Center under island wide and each center itself had to the Forecasting and Decision Support submit that data to the Head Office on a Division of the Department to the public, monthly basis. Rainfall reports from the to the various industries, to the community year 2016 to 2018 had not been and to the various organizations. continuously provided by those centers. Every center had not been inspected by According to the reports examined as a the Department of Meteorology for at least sample submitted by the Divisional once in 2 years and even in the Annual Secretaries in respect of disaster situations Board of Survey, these rain gauges had occurred in land areas during November not been surveyed. The instances of those and December 2018 for the evaluation of rain gauges not complied with the relevant the successes of early warnings issued standards were revealed at the physical regarding the natural disasters and those examination carried out by audit. Early incidents occurred in the year 2018, the warnings had been made in respect of community had not been made aware by the natural disasters and adverse weather the early warnings with regard to those conditions occurred in the year 2018 by disasters. Performance of Government Schools with Minimum Number of Students The Pirivena education Muslim and Hindu international schools have method in Sri Lanka after schools were established. also joined the network. the establishment of The schools are In the meantime, one of Missionary Schools by administratively divided the main expectations of the English, in addition to into national schools and parents in Sri Lanka is to English Missionary provincial schools at get a good school for their Schools, Sinhala Buddhist present and in addition to children. schools as well and the that private and There were 10,194 schools had been existed government schools and in Sri Lanka in the year 859 non-government 2017. The government National Audit Office| Annual Report - 2018 37
schools were made up of to parents to enroll their projects over the years 9,841 Provincial Schools children in a popular these schools were not and 353 National school because of the able to control the Schools. The total existence of such schools, increase of the number of number of students the results of the students or reduce the thereon were 4,165,964 examinations of the congestion in popular and the total number of students of those schools schools. However, the teachers had been are not high, principals major shortcomings such 241,591. Accordingly, the and teachers have to work as commencement of teacher to student ratio in hard to stop the closure of new schools in contrary schools in Sri Lanka has those schools very large to the Guidelines laid been calculated as 1:17. area of land, buildings down by the Ministry of
About 3.5 per cent out of and other physical Education had caused for Performance Audit Performance all schools had been resources, and human the closure of other National Schools and 19 resource as well remained schools in the area, per cent out of the total underutilized, the despite the criteria for number of students are government has to afford closing schools without
studying in those schools. of maintaining such taking actions to close Although 40 per cent of schools had occurred down schools ; making the total number of from schools where the arrangements to close schools were students number of student is low. down the schools, despite who study in grades 1 to the high student teacher 5 (type 3) , 16 per cent of In order to minimize ratio in these schools, the the total number of these problems, the failure of examination students are studying in government has provided results, availability of these schools. various physical excess teachers, students resources to the schools go to other schools as Students arrive to study to through various projects there are no opportunities popular schools from and presently, the to choose the secondary other parts outside the "Nearest School is the subject category as per area. As a result of that , Best School" is a special the expectations of the the total number of project implemented for students due to lack of students attending school that purpose. This project teachers, a child cannot had reduced to less than had expected to increase receive a good education 200 in more than half of the number of students in during the school term all schools, or 5,161 these schools including due to one teacher gathers schools. The specific development of resources several classes and issues such as parents such as buildings, water teaches in the primary unwillingness to send and sanitation needs for section were revealed. their children to schools the development of There were also schools to study with fewer schools. Even though the with no any student in students , Teachers' huge expenditure on certain Grades and some unwillingness to teach in education had made by schools had conducted such schools, disturbing implementing various pre-schools as well. 38 National Audit Office | Annual Report - 2018
Although it was expected Similarly, it was revealed remained and in some PerformanceAudit to increase the number of that in some schools schools there were lack children enrolled in the there were underutilized of modern physical school, there had not resources such as resources. improvement in buildings, playgrounds enrollment of students. and laboratories had
Underutilized buildings and playground
National Audit Office| Annual Report - 2018 39
Preparedness of Government Institutions to achieve Sustainable Development Goals
Performance Audit Performance
As decided at the Sustainable number of public and semi government Development Summit 2015 held by the institutions including Local Authorities, Heads of State of the United Nations classified under 11 categories were 964. Member States , Member States had The number of entities that had completed announced 17 Sustainable Development the activities such as Awareness of Goals, 169 Goals and 244 Indicators by Sustainable Development Goals and 2030 .This Agenda is a plan for humanity, Targets, Identification of Goals and the earth and prosperity. The process of Targets, Inclusion of Goals and Targets in achieving these goals and objectives has the Plans, Preparing Indicators, been started from the year 2016 to suit the Maintaining Data, Identifying Milestones individual member countries and as the were 173, 132, 60, 17, 6, 9 and zero first phase of the programme, the relevant respectively. parties were expected to be aware and prepared. These objectives are As the above activities have not been interconnected and had to be achieved completed by the institutions to be that objective with the co-operation of all completed to measure the progress of this public and private sectors. programme, measuring of the progress of the program was impossible. As such, the Accordingly, in examining the overall performance of the programme had preparedness to achieve these Sustainable remained at a low level. The details are Development Goals and Targets by the shown in the Diagram 20 government agencies for the year 2017 the
40 National Audit Office | Annual Report - 2018
200 PerformanceAudit 180
160 140 120 100 80 60 No ofInstitutes No 40 20 0 Awareness Identification Including Setting Up Maintaining Identification Measuring of Goals and of Goas and Goals and Indicators of Data of Progress * Targets Targets Targets into Milestones Organization Plans
Diagram 20 - preparedness to achieve these Sustainable Development Goals
Environment Audit
Operation of Lakvijaya Power the source with the second lowest average Plant and its Environmental unit cost. Impact The audit observations revealed at the environmental audit conducted on this The first and only coal power plant in Sri Plant are summarized below. Lanka is Norochcholai Lakvijaya Coal Power Plant located at Kalpitiya in North When examination on data analysis Western Province belonging to Ceylon during the last 4 years power Electricity Board with a capacity of 900 generation the average contribution of MW . The first phase of 300 MW in the the Lakwijaya Power Plant had been year 2006, Phase II of the 600 MW project 32.58 per cent and the power in 2010 were commenced and 900 MW of generation from hydro, fuel and other power had been added to the national grid sources were 28.08 per cent, 13.80 per in the first and second phases. The cent and 25.54 per cent respectively. contribution of 26 major power plants (excluding private power plants) under the In the function of electricity Sri Lanka Electricity Board for the present generation during the year 2015 to electricity generation in Sri Lanka and the 2017, the electricity generation from total production in the year 2017 was source of hydro had decreased from 14,671.2 GWh. The contribution of the 37.46 per cent (4,904 / 13,089 * 100 ) Lakwijaya power plant to this production to 20.85 per cent (3,059 / 14,671 * had been 34.78 per cent. Out of the main 100) out of total power generation . sources of electricity used are water, fuel , Electricity generation had decreased generating electricity from coal had been by 37.62 per cent whilst only consideration of source of Hydro. To National Audit Office| Annual Report - 2018 41
meet the electricity demand during this license until 29 June 2017 without period the electricity generation had carrying out adequate monitoring on gone up using fuel oil by 140.85 per the accuracy and following-up the cent, purchasing from private sector power Plant the requirements of those (IPP) power by 47.82 per cent. Out of conditions. Accordingly, the attention the sources of electricity generated by had not been drawn by the authorities the Ceylon Electricity Board the on possibility of occurrence of number of units of electricity generated environmental risky circumstances during this period increased by only through the functions of the Plant. 14.85 per cent using coal, which is the lowest second unit cost source. When burning coal for electricity production process, there are mainly
Instead of using low cost sources in two side effects are generated and it is Performance Audit Performance the power generation process, it had known as Fly Ash and Bottom Ash. been focused on high-cost sources. The ash disposal yard covers a land area of about 25 acres. The expected The North -western Provincial life of one unit operating at the plant
Environmental Authority was had been identified as 35 years at the established under the, sub-section 2 (i) planning stage. Assuming that these of Part I of the North-western three units are operating at 65 per cent Provincial Environmental Statute No. efficiency of those 03 units the amount 12 of 1990 on the powers of the of Flying Ash and Bottom Ash could Provincial Council under the have been 6,405,750 metric tons and Thirteenth Amendment. A Provincial 1,281,150 metric tons respectively. Environmental Advisory Council should be established in terms of sub- The following matters were revealed section 07 (i) of the Statute and its during the audit examination of the members are appointed by the Minister disposal of these by-products. in charge or there must have been a certain number of members appointed - Approximately 425,008 metric tons among them. A member representing of Fly Ash were sold during the the Central Environment Authority period from the year 2015 to 10 should also be included in the May 2018. About 443,909 metric Advisory Council in terms of section 7 tons of Fly Ash remained during (1) (m) of the Statute . The North - this period had been stored in the western Environmental Advisory ash yard. Details are shown in Council had not been implemented by Diagram...... 10 May 2018. - Since the lack of special attention On renewal of the license issued with on quality of coal to be existed in 22 conditions by the Provincial coal which was the main raw Environmental Authority to the Plant, material used in the production of actions had been taken to renew the electricity by the Lakvijaya Power Plant, it had been a major cause of 42 National Audit Office | Annual Report - 2018
environmental problems. Even observed in audit. Further, the PerformanceAud though the mechanism of disposal efficiency of the emitting gas of by-products as Fly Ash and sulfur abstraction in respect of Bottom Ash produce in coal emission gases and the static combustion had been identified at emitter in relation to Fly Ash had the project planning stage, due to to be continuously monitored. The inadequate implementation of the maintenance work of the plant is process the cost of that had to be carried out according to plan and incurred could have been widening the existing wind barrier increased when taking necessary around the coal yard to prevent the measures to control the dust particles in the coal yard from environmental problems. However, spreading with the wind, taking
instead of deposit of Fly Ash in necessary measures to prevent the it the yard which is an environmental spread of the ashes that are already problem, attention had not been dumped in the yard should also be drawn to use as a raw material for carried out. other identified products removing from the yard in expedite action. - The necessary actions had to be In compliance with the ambient air planned to minimize the impact on quality standards published by the the activities of the power plant to Provincial Environmental the fisher community, to minimize Authority there was no continuous the amount of coal deposited by monitoring by the Environmental conducting seawater surveys. The Authority regarding the operation attention on minimizing coastal of the plant. erosion and taking measures to protect the coast are being drawn and the possibility of contributing - Gases and heavy metals emitted in as a eco-friendly industry by coal combustion are harmful to the minimizing environmental damage environment. That disposal and as a power generation industry process, the process of disposal of with a value added to the national seawater after treatment which economy should be enhanced while was used for the operation of the by taking all the steps mentioned plant and necessity for continuous above. monitoring of groundwater was
National Audit Office| Annual Report - 2018 43
Water Pollution Issue in Kelani River
The Kelani River , the second longest river Environmental Act were inadequate for and the fourth largest water basin in Sri the penalties for parties who do not follow Lanka is the main source of drinking water the methods laid down by the Central for nearly 80 per cent of the population in Environment Authority when disposal of the Western Province. There are wastewater in to internal water sources. approximately 10,511 factories located along this river basin and due to the Due to the expansion of industries, the functions of these industries, domestics the water pollution in the Kelani River had water pollution in the River is being increased. In this case, the Environmental increased. Similarly, when examine the Protection License issued to the Performance Audit Performance activities on the two main Export Seethawaka Export Processing Zone Processing Zones around the Kelani River which is a major industrial hub located in the contaminated water had been the Kelani Valley had expired since 8 discharged to internal water sources and to years. The capacity of the public
the environment without proper treatment wastewater treatment plants for the
from activities of certain factories in those wastewater treatment plant of 37 industries areas and in a way that does not conform in the region was insufficient. The to standard parameters. Since the lack of environmental damage caused by the proper management of hazardous and non- microbial degradation mechanism of the hazardous waste disposal systems, Since wastewater treatment plant had been re- the disposal system of sediment remained added as an environmental impact. after the wastewater treatment was not Since there was no proper methodology done in an eco-friendly manner, the further, to remove sludge generated from impact was ultimately added to water factories in Seethawaka and Biyagama sources. Even though there had been a Export Processing Zones there was a risk growth in economic advantages that of contamination of sources of water humans derive from the Kelani River the mixed with muddy rainwater. contribution of all stakeholders for the protection of the environmental beauty of Erosion of riverbanks due to unauthorized the river and ecological value of the river construction on both sides of the river, had diminished. Around many of the major hotels built along the bordering of the bridges, the quality of water had exceeded river, and dumping of solid waste, sewage the standard parameters of the Central and wastewater into the water of the river, Environment Authority at the disposal of waste water from vehicle examination of water pollution detection service centers and factories without criteria. The cost which had to be incurred wastewater treatment as per the to water treatment plants to provide the observations the Kelani River water people with clean drinking water had pollution had been the major contributing increased. The provisions of the National factors as per the observation tours along the Kelani River.
44 National Audit Office | Annual Report - 2018
PerformanceAudit
Diagram 22- Unauthorized construction on Kelani River
The Pattivila Canal starts and flows from the audit conducted , the water in the canal the Ceylon Petroleum Corporation and was in discoloured and dirty. This canal there are factories and houses on either was also the one that joins the Kelani side of the Canal. All pollutants discharged River, close to the Intake Water Treatment from these factories were allowed to flow Plant at Pattiwila as well. The details are through this canal .On several occasions shown in Diagram 23.
Diagram 23 - Intake Water Treatment Plant at Pattiwila
The area from Modara to Ambatale garbage had affected to the destruction of around Kelani River had severely the environment. damaged to the environment and due to human activities this destruction had occurred. The reasons such as disposal of garbage without proper management, erosion of riverbanks, constructing unauthorized houses and buildings bordering the river and disposing of
National Audit Office| Annual Report - 2018 45
Performance Audit Performance
Diagram 24 - Environmental damage from Modara to Ambatale
Due to the large number of pollutants 2017 as compared to Rs. 879 million in that had added during the last 5 years, the year 2015. Similarly, the amount of and the increasing of use of chemicals chemicals used in the Pattiwila Water in the two water treatment plants at Treatment Plant had increased by 17 Ambatale and Pattiwila water treatment per cent of Alum , 37 per cent of Lime plants as well, the total and 74 per cent of Chlorine respectively. cost of refining them had increased. Further, since the cost of water Since the increase of water treatment is increased gradually, the cost contamination, chemicals had to be used of production of drinking water will be more. Accordingly, the total cost of increased and move to the consumer. purification at Ambatale Water
Treatment Plant was Rs. 929 million in
46 National Audit Office | Annual Report - 2018
Main
quarries lands Maintenance of quarries in Mahaweli lands
Failure in the Recovery of Delay Charges in Purchase of Multi Day Boats
Financial malpractices and frauds Financial Malpractices and Frauds
Sale of Limonite Stocks at Low Price
Obtaining Allowances in Improper Way
Granting Money to External
Audit activities on investigation, on activities Audit Institutions audit and representation of the public the of representation and audit
National Audit Office| Annual Report - 2018 47
48 National Audit Office | Annual Report - 2018
Audit activities on investigation, audit and InvestigationAudit representation of the public
It is expected by an audit investigation to representations of the Heads of institutions examine to sources of the risks where any and media to widen its investigations. person or a group has the possibility to Concurrently to these measures, action has gain a benefit or advantage in an unfair or been taken by the Department to develop illegal way. At such cases attention of the the methodologies for the enhancement of audit is drawn to strengthen the knowledge and skills of the officers, administration system in order to reveal provide necessary training, physical such frauds and avoid the occurrence of resources, hotlines, and e-mail facilities
these frauds. etc. .
19th amendment to the constitution of the When the attention of the special Democratic Socialist Republic of Sri investigation unit was paid during the year Lanka has strengthened the government under review to the representations, which audit in order to ensure the proper demanded important as well as instant management of public finance. In addition attention, it was revealed at the to the examination of official documents examination on the expenditure of Rs. of the institutions subjected to an audit, it 5,090.70 million relevant to 23 is expected by an audit to make the representations that the estimated loss management of public finance more incurred to the government was Rs. effective by way of obtaining information 4,114.20 million. Therefore important from representations of general public, observations, which are relevant to the requests of commissions, representations investigations conducted in year 2018 are of public accounts committee and COPE, submitted in brief in the following manner. Maintenance of quarries in Mahaweli lands
Hambantota District
Permission has been granted to the private Department of Wildlife Conservation sector to carry out 49 quarries in situated within the boundaries declared as Hambantota district as per the Circular No Walawa River Basin and Walawa Special 03/2012 dated 01 November 2012 issued Mahaeweli Area under Gazette Extra by the Director General of Mahawela Ordinary No 13 dated 16 April 1981. As Authority in order to give effect to the mentioned in the notification published in provisions of the Forest Ordinance. Even the Gazette Extra Ordinary No 1600/8 though the powers vested under Forest dated 06 May 2009 published by the Ordinance have been restricted to the area Minister of Environment and Natural of Mahaweli projects, most of the quarries Resources under the powers mentioned in have been located within the reservations section 20 of the Forest Ordinance, belonging to the Department of Forest 'charges should be recovered based on the Conservation and within the areas of volume of granite removed within each National Audit Office| Annual Report - 2018 49
year'. However criteria have not been calculation of the volume of granite specifically determined in order to removed from the sties by way of determine the volume of granite removed maintaining proper communication from the lands alienated for mining and the with the above government institution. charges to be recovered. Following According to the measurements taken weaknesses were observed in this regard. by the Department of Surveyor General on 09 sites in extent of 41.83 When the royalty has been recovered acres our of those 49 quarries, mining under the permits issued by the Bureau has been carried out over 1.9 times of Geological Survey and Mining to comparing to the volume forecasted by these granite mines within the period Bureau of Geological Survey and from 2010 to 2018, it has been Mining depending on the amount of
calculated that 1,266,991 cubes of gunpowder approved for the blasting. Investigation Audit Investigation granite has been removed from the Since a method has not been sites. However Mahaweli Authority introduced in the issuance of permits has recovered charges for the use of for the recovery of charges for use of lands only for 150,837 cubes of lands by way of mapping the location granite during that period from 49 of granite layer, the forecasted charge quarries. Under such situation, the for the use of lands on the volume of Government has lost charges for the granite removed from these 49 mines use of lands of Rs. 1,117.50 million, has amounted to Rs. 2,407.28. which could have been recovered by Relevant particulars are given in 25 Mahaweli Authority exclusively from and 26 these 49 quarries as a result of non
Diagram 25. - Quarry of an engineering company Diagram 26 - Unauthorized quarry in the middle situated in a land in extent of 20 acres of the proposed southern express way at CH8+250-500 k.m. ( The depth of the quarry was 28 meters as per the measurements ofthe Departement of Surveyor General)
50 National Audit Office | Annual Report - 2018
In terms of the notification published have been implemented in consistent InvestigationAudit by the Minister of Environment Affairs with the regulations of the in the Gazette Extra Ordinary No Environment Authority obtaining the 772/22 dated 24 June 1993 under approval for environment protection on section 2 of National Environment Act submission of a report on the effects No 47 of 1980, the utilization of lands made to the environment by the project situated within a land in extent of more under section 23 b of Environment act, than 01 hectare for non forest related such environment evaluation has not purpose has been declared as projects been made in connection to these prescribed under IV d of Environment granite mining projects. Particulars
Act. Accordingly the projects should are given in photo 27 and 28
Diagram 27- A quarry, which has violated the Diagram 28 -Unauthorized mining at Mahaweli conditions of the permit. lands
A rehabilitation plan has not been without making an evaluation on obtained in the issuance of lands environment in consistent with the belonging to the Mahaweli provisions of the National Development Authority on lease for Environment Act No 27 of 1980. mining of minerals and further lands Therefore granite mining has been have been granted without including carried out in violation of the conditions in the agreements so as to conditions of the permit and neglecting entrust the responsibility for the the prescribed charges. However rehabilitation of lands to the holders of approval has been granted to extend the permits. Permission has been the terms of such permits without granted to mine granite in these lands taking any legal action in this regard.
National Audit Office| Annual Report - 2018 51
Badulla District
Following matters were observed in the method to recover the royalty. inspection conducted at 03 sites at Under such circumstance a loss of Mahaweli Zone 'c' of Girandurukotte in Rs. 21.8 million has incurred. Badulla District, where permission has However after the audit query, Rs. been granted to carry out quarries based on 7.04 million has been recovered the Circular No 03/2012 dated 01 during the period from 20 July November 2012 by the Director General of 2018 up to 31 May 2019. . Mahaweli Authority in order to implement the powers of Forest Ordinance. According to the matters revealed in the physical inspection, the
volume of granite removed from Investigation Audit Investigation When permission is granted for these 3 sites is 215,000 cubes. mining, no criteria have been Since no method has been introduced to determine to volume of introduced in the recovery of granite removed from the mine. charges for use of lands to Further a loss of Rs. 236.8 million has calculate the amount of granite incurred in the following manner due removed the loss incurred to the to non introduction of criteria for the government from the 3 sites as per recovery of charges. the forecast id Rs. 215 million.
Charges to be recovered per 01 Permission has been granted to cube of granite has not been mine granite in these lands without recovered in terms of the Gazette making an evaluation on the Extra Ordinary No 1600/8 dated 06 environment as per the provisions May 2009 published by the of the National Environment Act Minister of Environment and No 27 of 1980. Accordingly Natural Resources under the granite mining has been carried out powers in section 20 of the Forest violating the conditions in the Ordinance and calculations of the permits and neglecting the payment volume have not been made based of charges. Further approval has on the amount of gunpowder been granted to extend the term of issued. Bureau of Geological the permits further without Survey and Mining has applied this initiating legal action in this regard.
52 National Audit Office | Annual Report - 2018
Moragahakanda Project InvestigationAudit
According to the report of the evaluation new settlements located under on the environment of Moragahakand Moragahakand project for their project, it has been recommended that it is crossing. advisable to mine granite required for the project at 02 sites ,which are to be According to the reports of the Bureau submerged in water, without causing any of Geological Survey and Mining, harm to the wildlife. However granite 1,891,950 cubes of granite have been mining has been done in a land in extent removed from this site during the 07 hectare situated on an crossing where period from 2012 up to 2017. elephants in Elehera- Girithale sanctuary Action has not been taken to recover cross towards Minneriya and Kavudulla Rs. 1,891.95 million at the rate of Rs. sanctuaries through Wasgamuwa national 1,000 per cube of granite as charges reservation. The slope of the mining is for use of lands in terms of the more than 90 degrees and the height is 30 notification published in the Gazette meters. Following observations are made Extra Ordinary No 1600/18 dated 06 in this regard. May 2009 by the Minister of Environment and Natural Resources As a result of mining granite at such a under section 20 of Forest Ordinance ( strip of land ( width is 450 meters) Chapter 45) . which is highly sensitive in Cabinet Memorandum has been environmental terms and situated submitted by the Minister of Higher below the bund of Moragahakanda Education and Highways to obtain reservoir elephants' crossing has been granite from this site for the highway severely obstructed. development programme conducted
under district development There is a risk of increasing the programme in the name of Pibidemu conflict between elephants and human Polonnaruwa. since elephants may turn towards the
Diagram 29- Even though the mining should have been done from 10 to 10 meters under level basis, mining has been done at a slope of 90 degrees with the height of 30 meters.
National Audit Office| Annual Report - 2018 53
In terms of the observations submitted 2017 that it is not possible to by the Minister of Finance and recommend the quarry further, Minister of Mahaweli Development approval has been granted by the and Environment approval has been Director of Wildlife (Operations) for a granted subjected to the following blasting at the site on 24 May 2017. matters. 02 companies have signed
memorandum of understanding using If the Department of Wildlife aforesaid approval and then Conservation extends its commenced the functions of quarry concurrence, neglecting the conditions mentioned in If the Ministry of Highways the approval of the Cabinet of extends its concurrence to ensure Ministers. Accordingly they have environment conservation, Investigation Audit Investigation removed granite to the estimated value To make payments deducting the of Rs. 73.5 million. cost included for granite in the contract agreement, after making a No action has been taken against the feasibility study if the finding of unauthorized activities taken place in the study are satisfactory. . the premises belonged to the Department of Wildlife. Even where the Director General of Wildlife has informed on 03 April
Kandy District
03 plot of lands situated within the area of have been removes from this site during residential business management office, the period from year 2013 up to 2016. For Digana of Sri Lanka Mahaweli Authority this purpose charges for the use of lands has been issued on lease by Digana office have been recovered but it has been in year 2013 to mine limestone for the undercharged by Rs. 30.18. Permission has production of Dolomite fertilizer. been given for mining of limestone in the Accordingly it has to recover the charge sites without making any evaluation on the for the use of land as per the rate of Rs. environment as per the provisions of 1000 per one cube of limestone removed National Environment Act No 27 of 1980. as per the notification published in the Mining has been made in violation of the Gazette No 1600/18 dated 06 May 2009. conditions of the permit and neglecting the However only Rs. 300 has been recovered payment of charges but the term of the per cube. According to the information permit has been extended without taking available at the Bureau of Geological any legal action in this regard. Survey and Mining 31,684 cubes of stone
54 National Audit Office | Annual Report - 2018
Establishment of a CCTV system InvestigationAudit
A CCTV camera system has been action to enter in to a formal agreement established covering Administration with the bidder. Further the institute has building, Farm, Front door, Computer lab not taken action to obtain the performance 01 and 02 of Higher Technological security. 14 cameras out of 23 cameras Institute , Ampara spending Rs. 1.24 in were not working by 09 December 2017. January 2017. Bids were called for the No action has been taken by the institution purpose and the Contract has been get them again workable and therefore the awarded selecting the supplier who submit total expenditure born for the project has the lowest bid. However it has not taken become an uneconomical expense.
Manufacturing 10 trawlers and distributing them among beneficiaries
Department of Fisheries submitted on 06 Department of and Aquatic Resources December 2016, a Fisheries and Aquatic has take action to get 10 request has been made Resources has multi day boats from the Ministry of provided Rs. 149 manufactured from Cey- Finance to provide million, which were Nor institute and other funds from the vote required for purchase private boats made under the of 10 multi day boats, manufacturing institutes Ministry for year from the provisions in order to enhance the 2016 for the made for 2016 to production of fish, the manufacturing of 10 Cey- Nor institute. quality of the fish, and the multi day boats, fisheries system. This which have been In terms of the purchase has been made planned to decision of the with a view to distribute manufacture in 2017. Cabinet of Ministers these vessels among According to the dated 24 May 2016, selected 10 beneficiaries recommendations the Department of on the basis of the made by the Minister Fisheries and Aquatic recovery of 50% from the of Finance in this Resources has total cost from the respect, it has been provided an aggregate selected beneficiaries. informed that the of Rs. 48 million at The matters revealed in provisions allocated the rate of Rs. 22 the investigation for year 2016 could million and Rs. 26 conducted in this regard not be provided for million for making of are given in brief below. year 2017. Without a mould for paying any attention manufacturing a multi By the Cabinet on this day boat to the length Memorandum recommendation, of 55 feet and National Audit Office| Annual Report - 2018 55
manufacturing a of the year under the procurement model vessel review. procedure of the respectively to Cey- government. However Nor institute. Cey- The model multi day bids have been called Nor institute has boat, which has been only from two manufactured a model manufactured institutions depending boat to the length of spending Rs. 26.06 on the interest of 55 feet spending Rs. million with the beneficiaries but 26.06 million using length of 55 feet and without following an old mould which rejected by the above decision and has been repaired by beneficiaries, had these two institutions it spending only been kept idle for a have submitted their
Rs.0.36 million. As a period of one year and bids with similar Investigation Audit Investigation result of then it has been sold prices for the purpose. manufacturing that to a foreign country to model boat without the value of Rs. 21.22 In terms of the entertaining the views million. The loss quadripartite of the beneficiaries caused to the agreement signed by they have not agreed government by this the Department of to manufacture their transaction was Fisheries and Aquatic boats as per the model Rs.4.83 million. Resources with Cy- boat. Therefore it has Further the Nor limited, Private to manufacture Department has not Boatyard Owners and another mould taken action even by Beneficiaries , the spending Rs. 13.75 the end of the year multi day boats have million due to this under review to to be manufactured situation. The amount recover this amount and handed over to , which has to be gained from the sale beneficiaries before spent at these two of multi day boat, 31 March 2017. occasions, has been which has been However only 02 out Rs. 14.11 million and manufactured of 05 and 03 out of Rs. 7.81 million utilizing the grants 05, of which the remained unspent out from government. manufacturing has of the amount been entrusted to allocated for the In terms of para 24 (a private boatyards and manufacturing of ) of the Cabinet Cey- Nor institute, mould. Department Decision dated 14 have been completed of Fisheries and December 2016, by 31 August 2018. Aquatic Resources approval has been Therefore the total has not taken any granted to get multi number of multi day action to recover this day boats boats completed was amount from Cey- manufactured from 05. Under such Nor even by the end private boatyards circumstance action subject to following has not been take to 56 National Audit Office | Annual Report - 2018
recover delay charges fire was a has paid only Rs. InvestigationAudit of Rs. 4.49 million as manufacturing fault. 12.35, which was the per the agreement Under such half of the total cost, from two private circumstance there Rs. 24.70, which was boatyards. was a possibility the total value of the either to get the vessel boat, has been paid in One boat produced by repaired by Cey- Nor this way to the Cey Nor and handed or to get a new vessel, beneficiary. The over to a beneficiary the total amount paid amount paid in excess was destroyed due to by the insurance to the beneficiary in a fire within the institution has been this way was Rs. guarantee period and provided to the 12.35 million.
it has been revealed beneficiary. Even
that the casue for the though the beneficiary
Financial malpractices and frauds
When 14 fixed deposits, which have been obtained money by way of submitting invested in state banks by Post Graduate a fraud letter containing the amount Institute of Science affiliated to University and instructions to 'pay in cash' instead of Peradeniya for the period from 2009 to of the letter prepared to submitted to 2016, have been reinvested on maturity, the bank with the signature of the the accumulated value of these fixed Director of the institute, which deposits at the time of maturity has not contained the official order to credit a been reinvested. Only a part of this amount part of the deposit to a current account has been invested and Rs. 55.34 million on maturity and further to commence from the remaining amount has been taken another fixed deposit with the fraudulently by a Senior Assistant Bursar. remaining amount. The observations of the audit in this regard are given in brief in the following manner. With a view to cover this financial fraud in The former Director has stated that the former Senior Assistant Bursar has
accounts, the accumulated balance and the interest at maturity has not been accounted.
National Audit Office| Annual Report - 2018 57
Granting money to external institutions
Lanka Mineral Sands occasions by the the same by the Limited has provided government, has been Senior Assistant short term loans to the accounted as Bursar himself. value of Rs. 545 government grants. million to 04 Rs. 18.60 million, 06 receipts of fixed government which is the deposits to the value institutions for remaining amount, of Rs. 5.68 million management has been utilized to have been kept in the operations contrary to settle the amount of safe under the custody
its objectives during Rs. 19.37, which has of Senior Assistant Investigation Audit Investigation the time from 2010 up been obtained Bursar with the to Rs. 3.08 million, fraudulently at the signature of the which is the maturity of fixed Director and Senior accumulated amount deposits. Assistant Bursar after of 03 fixed deposits endorsing them for a and interest at the Former Senior long time so as to be maturity, has been Assistant Bursar has able to withdraw them obtained fraudulently obtained Rs. 1.93 at any time depending in cash without million out of Rs. on the requirement of entering in cash book 2.93 million, which is the institution and and without the accumulated without any official depositing in bank amount of a fixed order to bank. current account of deposit at the Post Graduate maturity, by way of Money required for Institute of Science. submitting fraudulent day to day operations documents to the of the institution were Fixed deposits have Bank. Later action has kept at the range of been commenced by been taken to get a Rs. 6 million up to Rs. 5.14 million out payment voucher 118 million in current of the Rs. 24.51, prepared by the and savings accounts. which is the officer in charge of Further balances at accumulated balance the subject to imply the range of Rs. 1 of 03 fixed deposits at that the amount has million up to 27 the maturity, and the been paid to National million were kept in remaining balance of Science Foundation RFC accounts in a Rs. 19.37 has been and it has been kept state bank. Even taken fraudulently. under his custody where such liquid Only Rs. 4.40 million without paying to assets were available out of Rs. 23.00 NSF after getting the at the institute, no million, which has approval of a relevant clarification has been been granted at three officer and certifying made to the audit for 58 National Audit Office | Annual Report - 2018
the requirement of interest of fixed for accounting InvestigationAudit withdrawing money deposits. relevant interests, invested in fixed Due to withdrawing planning and deposits, which have money from fixed implementation of been made to earn an deposits fraudulently internal administrative income from the by way of terminating processes for the money in excess in fixed deposits, the control over accounts the institution. institution has lost an of fixed deposits etc. amount of Rs. 24.25 have been performed With the intension to million, which could by Senior Assistant commit a financial have been earned as Bursar. fraud, Rs. 16.89 the income on interest
million, which was for the period from 14 No attention has been
the interest due from March 2008 up to 30 made regarding the fixed deposits for the November 2017, the non-maintenance of period from 2008 up date of audit. fixed deposit register, to 2016, has not been which is the utility shown in annual All activities such as register to be financial statements. determining the maintained for the Action has taken to requirement of carrying out make financial fraud commencing fixed transactions on fixed by way of deposits, preparation deposits, non- understating the of applications for maintenance of actual accumulated fixed deposits, relevant documents value of fixed determining the properly, non- making deposits in accounts requirement of a supervision on without accounting withdrawing money operations connecting the income on interest closing such fixed to fixed deposits and withdrawing such deposits, preparation maintained by Senior interests from the of official orders to Assistant Registrar bank. Further action the banks for the and accounting has been taken purpose, carrying out process at an adequate purposely for a long banking operations level and non- time to avoid the relating to fixed implementation of the revelation of such deposits, calculation internal audit so as to frauds in accounts by of the interest on evaluate the internal way of understating fixed deposits, administration of the the actual value of preparation and institute. fixed deposits and certification of journal non-accounting the entries and vouchers
National Audit Office| Annual Report - 2018 59
InvestigationAudit Operational activities of Lanka Mineral Sands Ltd
Observations made at the special audit of mineral sands after refining them as an investigation conducted on the operations economic resource, are given in brief in of Lanka Mineral Sands Limited, which is the following manner. one of the main institutes for exportation
Non- making the income on exports at the maximum level
Since industries have not been United Kingdom, Europe, United State established in Sri Lanka for the of America, India, Pakistan, China etc. productions related to mineral sands, However the Company has not
there was no demand in the local exported limonite directly to the market for mineral sands, which was genuine buyers identifying such buyers the production of the Company. and therefore the company has lost Therefore the whole production has opportunity to maximize its income as been sent to export market. a result of selling its productions Accordingly the productions of the through local and foreign buyers. Company are exported to Japan,
Sale of 9000mt of limonite
Approval of the Cabinet of Ministers of the world market, whether this has to be obtained before commencing tender offers a higher price than the activities of tenders for the sale of previous prices, lack of storage 9000 mt of limonite. However all facilities relevant to the higher activities relating to the tender such as production of mineral sands and calling of tenders, obtaining wastage and damages caused to stocks quotations, making technical as a result of keeping them in stores for evaluations, granting approval of the a long time and the requirement of tender board for tender etc. have been selling its productions due to the performed before obtaining the above increase in production. approval. However the Cabinet Memorandum has been submitted by Further the price for 01 mt of limonite the Ministry just before awarding the with 54% of titanium dioxide (TIO2) tender to selected bidder. Attention of was at the highest price of 215$ at the the cabinet of Ministers has not been world market during that time. Under drawn by this Cabinet to the facts such such circumstance a higher price of as the condition of the huge limonite 202.89 $ has been offered by the stocks struck in the stores of company, tender for 01 mt of limonite over whether a higher price has been 51.54% of titanium dioxide (TIO2). offered by the tender as per the prices However the Secretary of the Ministry,
60 National Audit Office | Annual Report - 2018
without paying attention to these facts, has ordered to cancel the tender As a result of selling this limonite without granting approval to sell the stocks at lower price without taking limonite stocks of the Company at the proper decisions at the correct time, the price of the tender. However the Company has lost Rs. 476,010 $ (Rs. Cabinet of Ministers has ordered to the 72.35 million), which could have Secretary of the Ministry of Industries earned by the Company. and Trade Affairs to take necessary action to sell limonite stocks by calling 2013, during which the company was international bids considering the price under the Ministry of Public escalation in the international market. Enterprises Development. This money Further it has been requested from the has been utilized for the purposes such Minister of Industries and Trade as payment of compensation on Affairs to submit proposals to the retirement for employees of Ceylon Audit Investigation Cabinet Sub Committee on economic Ceramic Corporation, payment of the management regarding the production arrears of salaries in State Plantation of value added items as per the cabinet Corporation, making urgent payments decision, he has neglected that request. of Janatha Estate Development Board, Even though a higher price of 202.89$ payment of arrears of salaries of has been offered by first tender for 01 National Paper Corporation. mt of limonite, it has been cancelled Instructions of the Ministry of Public again tenders have been called. At that Enterprises Development have been time the price received was at a lower followed when making these loans but level i.e. 163.80 $. However without action has not been taken to obtain considering the market trends at that approval of the Ministry of Finance time, which showed a decline in prices and Department of Public Enterprises. for limonite, that tender has also been No agreement has been made with cancelled without selling the stock relevant parties regarding these loans even at that price. The Secretary of the except the loan of Rs. 500 million Ministry of Industries and Trade granted to the State Resources Affairs has neglected his Management Corporation to pay responsibilities without making a compensation on retirement to the proper evaluation and study on the employees of Ceylon Ceramic market trends in prices and without Corporation. Even though 5 years have taking action diligently. At the final lapsed for these loans by the end of and the third tender calling action has November 2018, the Company has been taken to sell limonite stocks at a failed to recover its loans. lower price of 150 $ per 01mt.
Obtaining allowance in improper way
It has been informed by the letter of the MMI/05/06/2/13-2 dated 01 March 2014 Ministry of Media and Information No to pay holiday pay for the performance of
National Audit Office| Annual Report - 2018 61
duties on holidays subject to public obtained commercial allowances to the
administration circular No 21/2013, and value of Rs. 4.44 million for 2017 and Rs. further not to make any payment for such 1.35 million up to May 2018 without any days and not to take these days in to entitlement applying the number of hours account for the payment of any other of the days for which they have obtained allowance. However 25 employees of holiday pay. Department of Government Printer have
Our Organization Our
62 National Audit Office | Annual Report - 2018
Main
Basis of Preparation of Financial Statements Financial malpractices and frauds Statement of Financial Performance for the year ended 31 December 2018
Imprest Adjustment Account
Statement of Financial Position as at 31 December 2018
Cash Flow Statement for the year ended 31 December 2018
National Audit Office Audit National
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64 National Audit Office | Annual Report - 2018
Format of the Preparation of Financial Statements The financial statements of the National Audit Office have been prepared in term of the provincial in State Account circular No.267/2018 of 21 November 2018, statement of financial position and the cash flow ststement as at 31 December 2018 have been prepared on the following bases stipulated in the said circular. Basis of Reporting Reporting Period The reporting period for these Financial Statements is from 01st January to 31St December 2018.
Basis of Measurement FinancialStatement The Financial Statements have been prepared on historical cost modified by the revaluation of certain assets and accounted on a modified cash basis, unless otherwise The figures of the Financial Statements are presented in Sri Lankan rupees rounded to the nearest rupee. Recognition of Revenue Exchange and non exchange revenues are recognised on the cash receipts during the accounting period irrespective of taxable period.
Recognition and Measurement of Property, Plant and Equipment (PP&E)
An item of Property, Plant and Equipment is recognized when it is probable that future economic benefit associated with the assets will flow to the entity and the cost of the assets can be reliably measured.
PP&E are measured at a cost and revaluation model is applied when cost model is not applicable.
Property, Plant and Equipment Reserve This revaluation reserve account is the corresponding account of PP&E. Cash and Cash Equivalents Cash & cash equivalents include local currency notes and coins on hand as at 31st December 2018.
National Audit Office| Annual Report - 2018 65
Fina
ncia
l Statement of Financial Performance Stat For the Year Ended 31 December 2018 eme Rs nt Revenue Receipts Income Tax 1 - - Taxes on Domestic Goods & Services 2 - - Taxes on International Trade 3 - -
Non Tax Revenue & Others 4
FinancialFinancialFinancialStatement Statement Statement FinancialStatement 140,000,000 165,030,063 Total Revenue Receipts (A) 140,000,000 165,030,063
Non Revenue Receipts - - Treasury Imprests - 1,603,800,000 - Deposits 20,365,300 - Advance Accounts 77,867,428 - Other Receipts 62,339,998 VAT Receipts 26,380,610 - Total Non Revenue Receipts (B) 1,790,753,336 Total Revenue Receipts & Non 1,955,783,399 140,000,000 Revenue Receipts C = (A)+(B) Less: Expenditure - Recurrent Expenditure - Wages, Salaries & Other Employment 5 1,456,300,000 Benefits 1,464,526,249 Other Goods & Services 6 190,200,000 253,286,132 Subsidies, Grants and Transfers 7 15,800,000 13,771,671 - Interest Payments 8 - Other Recurrent Expenditure 9 - - Total Recurrent Expenditure (D) 1,731,584,052 1,662,300,000 Capital Expenditure
66 National Audit Office | Annual Report - 2018
Rehabilitation & Improvement of 10 12,500,000 Capital Assets 12,212,631 23,000,000 Acquisition of Capital Assets 11 14,834,169 Capital Transfers 12 - - Acquisition of Financial Assets 13 - - Capacity Building 14 87,000,000 76,136,977 Other Capital Expenditure 15 - - Total Capital Expenditure (E) 103,183,777 122,500,000
Main Ledger Expenditure (F) 118,826,825 Financial Statement Financial Deposit Payments 24,858,261 Advance Payments 73,254,303 VAT Payments 20,714,261 Total Expenditure G = (D+E+F) 1,953,594,654 1,784,800,000
Imprest Balance as at 31st December 2018 H = (C-G) 2,188,745
Imprest Adjustment Account For the Year ended 31 December 2018 Rs.. Imprest balance according to statement of financial performance as at 31.12.2018 2,188,745
(+) Add Adjustment balance in advance account 1,204,496 Debit of other department votes 2,404,375 3,608,871 5,797,616 (-) Less Adjustment of advance receipts 2,462,180 Expenditure for other department votes 3,335,436 5,797,616
-
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Statement of Financial Position As at 31 December 2018 Note Actual
Rs. Statement Non Financial Assets Property, Plant & Equipment ACA-6 126,731,812 Financial Assets Advance Accounts ACA-5/ACA- 219,416,775 5(a) Cash & Cash Equivalents ACA-3 - Financial Total Assets 346,148,587 Net Assets / Equity Net Worth 205,279,869 Property, Plant & Equipment 126,731,812 Reserve Rent work advance reserves 2,730,000 Current Liabilities VAT Payble 4,542,134 Deposits Accounts ACA-4 6,864,772 Imprest Balance ACA-3 - Total Liabilities 346,148,587
The Financial Statements have been prepared in complying with the Generally Accepted Accounting Principles whereas most appropriate Accounting Policies are used as disclosed in the Notes to the Financial Statements and hereby certify that figures in these Finacial Statements, Notes to accounts and other relevant accounts were reconciled with the Treasury Books of Accounts and found to in agreement.
W.P.C.wickkramarathna S.M.C.Laksmee Chief Accounting Officer Auditor General Chief Accountan Februry 2019 Februry 2019
68 National Audit Office | Annual Report - 2018
Statement of Cash Flows For the Year ended 31 December 2018 Actual Rs. Cash Flows from Operating Activities Fees, Fines, Penalties and Licenses 165,030,063 Non Revenue Receipts 1,666,049,458 Deposit Receipts 20,365,300 VAT Receipts 26,380,610 Total Cash generated from Operations (a) FinancialStatement 1,877,825,431
Less - Cash disbursed for: Personal Emoluments & Operating Payments 1,820,864,723 Tax Payments - VAT 20,714,261 Deposit Payments 24,858,261 Total Cash disbursed for Operations (b) 1,866,437,245
NET CASH FLOW FROM OPERATING ACTIVITIES(C )=(a)- 11,388,186 ( b)
Cash Flows from Investing Activities Interest - Dividends - Divestiture Proceeds & Sale of Physical Assets 90,540 Recoveries from On Lending 75,405,249 Total Cash generated from Investing Activities (d) 75,495,789
Less - Cash disbursed for: Purchase or Construction of Physical Assets & Acquisition of other Invstment 14,834,169 Advance Payamnts 72,049,806 Total Cash disbursed for Investing Activities (e) 86,883,975
NET CASH FLOW FROM INVESTING ACTIVITIES( F)=(d)- (11,388,186) (e)
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NET CASH FLOWS FROM OPERATING & INVESTMENT - ACTIVITIES (g)=( c) + (f) Cash Flows from Fianacing Activities
Local Borrowings - Foreign Borrowings - Grants Received - Total Cash generated from Financing Activities (h) -
Less - Cash disbursed for:
Repayment of Local Borrowings - FinancialStatement Repayment of Foreign Borrowings - Change in Deposit Accounts and Other Liabilities - Total Cash disbursed for Financing Activities (i) -
NET CASH FLOW FROM FINANCING ACTIVITIES (J)=(h)- - (i)
Net Movement in Cash (k) = (g) -(j) -
Opening Cash Balance as at 01st January -
Closing Cash Balance as at 31st December -
70 National Audit Office | Annual Report - 2018
ands Public Debt Management Construction of Monuments for the Museum Medical Supplies Performance on Wildlife Conservation Uma Oya Multipurpose Development Project Digitalization of Public Service Import of Dairy Cattle Paddy Fertilizer Subsidy Programme Sports in Sri Lanka and Its Administration Computerization of Revenue Administration Performance of the Development Officers in the Public Service Export of Gold Mixed Soil Empowering the Samurdhi Beneficiaries Enhancement of Agricultural Economy Performance of the Department of Ayurveda, North Central Province Filling up of Fallow Paddy Lands
Special Audits carried out on Lotteries year 2018 year Performance of the SEMA Institution Performance of the National Water Supply and Drainage Board Safety and Protection for Prisoners Management and Performance of the Employees’ Provident Fund Performance of the State Printing Corporation Yan Oya Sand Mining Project
A Summary A of Audit Observations Central Expressway Project Performance of the Paddy Marketing Board Performance of Projects implemented by the District Secretariat, Nuwara Eliya
Financial malpractices and fraud takenpublished from Special Audit Reports of the
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72 National Audit Office | Annual Report - 2018
Special Audit Reports Issued in the Year 2018
The Auditor General‟s Department issued Accounts Committee, the disclosures made 08 Special Audit Reports up to 01 August by the media, and the public 2018 in terms of Article 154(1) of the representations are taken into account by Constitution of the Democratic Socialist virtue of the discretionary powers vested Republic of Sri Lanka. With the inclusion in me for issuing such reports. Attention of 19 Special Audit Reports issued after o1 was made on the national and timely August 2018 in terms of Section 13 of the importance as well. National Audit Act, No. 19 of 2018 which All the Special Audit Reports issued in the
became effective from 01 August 2018, a Reports SpecialAudit year 2018 have been tabled in Parliament number of 27 Special Audit Reports was as shown below whilst taking action to issued in the year 2018. These reports have upload them trilingually on the official been issued with respect to Ministries, website of the National Audit Office in Department, Corporations, Boards, and order to be used by the general public. Public Companies being audited by the National Audit Office along with the other Information relating to the Special Audit institutions audited by the Auditor Reports issued in the year 2018 is shown General. Requests made by the Committee in Table 03 on Public Enterprises or the Public Title of the Report Date of the Background of the Report Report 01 Public Debt Management in Sri 2018.02.02 To present the Parliament with an Lanka analytical report on the debt management of the Government of Sri Lanka. 02 Special Report of the Auditor 2018.02.06 To present the report by considering the General on the Construction of importance and controversy relating to D.A Rajapaksha Museum and those constructions. Monument at Madamulana by Sri Lanka Land Reclamation and Development Corporation
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03 Special Audit Report of the 2018.03.14 The deficiencies in the medical supplies Auditor General on Process of and supply process of the Medical Supplying Medical Supplies Supplies Division of the Ministry of carried out by the Medical Health, Nutrition and Indigenous Supplies Division of the Medicine Ministry of Health, Nutrition and Indigenous Medicine. 04 Special Report of the Auditor 2018.03.16 The social crisis triggered by the losses General on the Solid Waste of lives and properties due to collapse of Management of the Colombo garbage dump in Pothuwilkumbura,
Special Audit Reports SpecialAudit Municipal Council Meethotamulla. 05 Performance of the Department 2018.03.23 The common dialogue in the society as of Wildlife Conservation to whether the Department of Wildlife Conservation has performed their duties for the protection and conservation of wild life. 06 The Special Report of the 2018.04.23 The extensive water leakage causing Auditor General for the Uma many environmental and social issues. Oya Multipurpose Development Project Under the Ministry of Mahaweli Development and Environment 07 Special Report of the Auditor 2018.05.09 To investigate as to whether the ICTA General on the Role Played by has rendered their duties properly on the the Information and digitalization of Public Service. Communication Technology Agency of Sri Lanka (ICTA) relating to the Digitalization of Public Service 08 Special Report of the Auditor 2018.05.04 To evaluate the productivity of General on the Project for the importing 15,000 dairy cattle for the Import of Dairy Cattle farms belonging to the National Livestock Development Board.
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Special Audit Reports Audit Special 09 Special Audit Report on the 2018.05.18 To examine as to whether the objectives Paddy Fertilizer Subsidy of the fertilizer subsidy programme have Programme in Sri Lanka been achieved. 10 Special Audit Report on Sports 2018.05.24 To conduct an investigative examination in Sri Lanka and Its on the legal background of the sports in Administration Sri Lanka and the institutional functionality thereunder, thus presenting the observations. 11 Special Report of the Auditor 2018.06.14 To look into the effect of discontinuing General on the effect to the the automated system.
Government Revenue made by holding over of issue of automated assessment reports by the Revenue Administration Computer System of the Department of Inland Revenue
12 Auditor General‟s Special 2018.09.05 Report on the Performance of the Development Officers in the Public Service 13 Special Audit Report on Export 2018.09.05 To examine the problematic situation of Gold Mixed Soil arisen in the export of wastage of goldsmith burnt residue. 14 Contribution of the Samurdhi 2018.06.07 To examine the productivity of the Programmes in empowering programme empowering the Samurdhi the Samurdhi beneficiaries. beneficiaries. 15 Special Report on the 2018.09.12 To identify as to whether the Evaluation of Contribution contribution made by the Agriculture Extended by the Agriculture Research and Production Assistants to Research and Production the society is sufficient. Assistants for an Enhanced Agricultural Economy
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16 Special Audit Report on the 2018.09.12 To examine as to whether the duties Performance of the Department expected from the Department of of Ayurveda, North Central Ayurveda, North Central Province have Province been performed properly and the Provincial Council of North Central Province has acted to ensure a productive service for the public through that Department. 17 Special Audit Report on the 2018.09.28 To identify the impact caused by the Impact of Filling up of Fallow gradual increase in the filling of fallow
Special Audit Reports SpecialAudit Paddy Lands in Kagalle paddy lands. District 18 Special Audit carried out on 2018.09.09 To examine as to whether the objectives Thirty Second (32) Colombo of the lotteries issued with the intentions Airport Super Draw Lottery, of promoting the Colombo International New Airport and Dollar Airport as an attractive transit point for Fortune Lotteries conducted by the tourists and increasing the revenue the National Lotteries Board. generated by the Airport, have been achieved. 19 Performance of the SEMA 2018.11.01 To examine as to whether the primary institution objectives of establishing the SEMA institution have been fulfilled, and evaluate the productivity in maintaining the institution further. 20 Special Audit Report for 2018.11.30 Had the proposals on the revision of Evaluation of the Performance water charges proposed for the 3 of the National Water Supply preceding years been implemented, the and Drainage Board. impact thereof could have been borne by the people. The objective of issuing this report is to examine the reasons for taking measures to revise the water charges without considering to minimize the volume of water that do not generate
76 National Audit Office | Annual Report - 2018
Special Audit Reports Special revenue so as to control costs, and increasing the progress of projects. 21 The Special Report of the 2018.11.30 To evaluate the functionality of the Auditor General on the process Department of Prisons relating to the of Caring, Securing, process of properly maintaining the Rehabilitation and safety, protection, and rehabilitation of Socialization of prisoners. the prisoners.
22 Special Audit Report on the 2018.11.30 The Employees‟ Provident Fund was Performance of Fund extensively questioned at the COPE
Management of the meeting held for examining the bonds Employees‟ Provident Fund for in question issued in February 2015 and the Years 2015 and 2016. March 2016, as well as the Presidential Commission appointed to look into the said bond issue. This report is prepared to examine the performance in the fund management of the Fund by considering the matters identified in those instances with emphasis on the period in which decisions had been taken to suspend the bonds issued under direct placement method. 23 Special Audit Report on the 2018.12.06 To examine the reasons that caused the Performance of the State inefficiency of the State Printing Printing Corporation. Corporation, a prominent institution in the public sector, and identify the measures to be taken to revitalize the Corporation. 24 Report on Industrial Sand 2018.12.27 To examine the social, technical, and Mining Project done within the environmental issues arisen due to Yan Oya Reservoir Premises. informality in issuing licenses and mining, thus proposing solutions therefor.
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25 Special Audit Report on 2018.12.27 To evaluate as to whether the feasibility Feasibility Study and study for the Central Expressway Project Procurement Activities of the had been carried out properly and the Central Expressway Project. procurement activities had been done appropriately. 26 Special Report of the Auditor 2018.12.28 To examine the reasons that caused the General on the Performance of Board to become inefficient and identify the Paddy Marketing Board. the measures to be taken to reverse the situation. 27 Special Audit Report on the 2018.12.31 To identify the economic and social
Special Audit Reports SpecialAudit Performance of Development problems due to projects without Projects implemented by the standard, incomplete projects, and District Secretariat, Nuwara misappropriation of public funds in the Eliya. implementation of projects.
Table ...... : Special Audit Reports Issued in the year 2018 A summary of audit observations in the reports issued in the year 2018 is given in this chapter.
Public Debt Management in Sri Lanka
Reporting the Total Public Debt and only an increase of Rs.794 billion. Even Total Assets though the debt of the country was rapidly increasing, it was observed that the assets According to the financial statements generated by the utilization of those debts presented to audit, the public debt had not been correctly identified and accounted for as at the end of the year brought to accounts. 2005 amounted to Rs. 2,142 billion and it The total public debt balance as at 31 had been Rs.8,861 billion as at the end of December 2016 amounted to Rs. 8,861 the year 2016, thus indicating an increase billion (including the advances obtained by of Rs.6,719 billion. Further, the total assets the Government as short -term debt from (only financial assets) amounting to the Central Bank) was about 74.8 per cent Rs.293 billion as at the end of the year of the Gross Domestic Product of the same 2005 had increased to Rs.1,087 billion as year amounting to Rs.11,839 billion. at the end of the year 2016, thus indicating Further, according to the Reports of the 78 National Audit Office | Annual Report - 2018
Special Audit Reports Audit Special Central Bank of Sri Lanka , the public debt long period due to the shortage of adequate balance as at 31 December 2016 was 79.3 production industries as a result of non- per cent as a percentage of the Gross increase in public investments as Domestic Product. compared with borrowings and gradual increase in recurrent expenditure. Further, Even though it was indicated that the it was observed that non-implementation development of the country had occurred of development projects as expected, could through the investment of debt if the have an adverse effect on the financial public investments existed similar or more stability of the country and the ability of than to the total net public debts (after repayment of debt. deduction of debt instalments from total borrowings), it was observed that the value identified as public investment in the year In comparison of the total public debt with 2016 and preceding years was decreased the midyear population, the per person less than the net borrowings during the debt which amounted to Rs.108,908 as at relevant year. Similarly, the expenses such 31 December 2005, was Rs.417,913 as at as the grants received to the Government 31 December 2016. As compared with the Institutions, expenses made for the per person debt which amounted to development assistance activities of social Rs.373,462 as at 31 December 2015, an welfare nature , the contribution granted to increase of Rs.44,451 representing about the Provincial Councils within the public 12 per cent as at 31 December 2016 was investments are included . Accordingly, it observed as well. Moreover, a possibility was observed that a considerable amount of further increase in the actual per person had been used for the expenditure of debt exists due to devaluation of the Rupee recurrent nature from the total net in relation to foreign currency as a result borrowings by the Government. of reasons such as the inclusion of a Moreover, a considerable amount of the considerable amount of foreign debt in the domestic and foreign debt obtained by the total public debt (exceeding 40 per cent) Government during a long period has to be and its continuous increase. Further, used in paying debt installments and unaccounted debt (foreign debt interest. As such, the achievement of unaccounted due to lack of provisions and expected development targets of the the understatement of the face value of country had failed. Accordingly, public Treasury Bonds) and Off Balance Sheet debt had continuously increased during a Items are not included in the above debt National Audit Office| Annual Report - 2018 79
balance and after adjustment of the said increase. balance, the per person debt would further Financing the Budget Deficit (Settlement of the Budget Deficit)
According to the financial statements of review totalled 2,438 billion. However, the 2016, the total financing estimated for actual value of local and foreign financing the budget deficit amounted to borrowings amounted to Rs.1,616 billion. Rs.1,724 billion. However, as the actual As such, it amounted to Rs.822 billion total financing amounted to Rs. ------representing a decrease of 33.7 per cent as billion, it was a decrease of 61.4 per cent compared with the revised budget
as compared with the revised budget estimate.. The total actual borrowings by Special Audit Reports SpecialAudit estimate. According to the corresponding the Government in the year 2016 as revised budget estimate, the expected local compared with the revised budget estimate and foreign borrowings for the year under appear in Table 04 below.
Loan Borrowings in the 2016 Catagary Amendment Actual Increase in the actual debit in relation to Budget Estimate Borrowings the budget estimate Amount Percentage Rs. Billion Rs. Billion Rs. Billion Foreign 300 574 274 91.3 Loan Domestic 2,138 1,042 (1,096) (51.3) Loan* Total 2,438 1,616 (822) (33.7) Table 04 Increase in the actual debt in relation to the revised budget estimate. *Domestic debt includes the net value received from issuance of Treasury Bonds
Debt Balances not included in the Financial Statements
Off Balance Sheet Items amounting to Rs.826 billion received in several preceding years, had not been According to the financial statements included in the financial statements. presented to Audit, the debt balance payable by the Government as at 31 Even though debt totalling Rs.6 billion December 2016 amounted to Rs.8,861 comprising Rs.5 billion and Rs.1 billion billion. However, it was revealed at the out of foreign debt received in the year audit test checks that the following debt 2016 relating to 14 Loan Agreements and balance, remained as further payable in the year 2015 relating to 09 Loan 80 National Audit Office | Annual Report - 2018
Special Audit Reports Audit Special Agreements respectively had been in the financial statements. realized, those debt had not been included Financial Performance
The total public expenditure which was had declined to 25 per cent of the total Rs.2,357 billion in the year 2015 had expenditure in the year under review. increased to Rs.2,365 billion in the year Repayment of total domestic debt 2016 by Rs.8 billion representing a instalments in the year 2016 was 82.3 per percentage less than one per cent. cent of the total domestic borrowings and However, the total recurrent expenditure accordingly, net domestic borrowings were had increased by Rs.98 billion
only 17.7 per cent of the total domestic representing 5.9 per cent in the year under borrowings. Further, total domestic review as compared with the preceding borrowings in the year under review, year. The payment of interest on debt of payment of debt interests during the year 31.5 per cent of the total recurrent under review were 20.3 per cent thus the expenditure in the preceding year, had total borrowings had not been adequate to increased to 34.5 per cent in the year under the debt instalments and payment of review. As such, the expenditure on public interest. Accordingly, it was observed that investments which was 29 per cent of the the investment ability had not been total expenditure in the preceding year, available on domestic borrowings.
Budget Deficit Exceeding the Limit of 5 Per Cent of the Gross Domestic Product
According to the financial statements of million than the Estimated Budget Deficit. the Republic in the year under review, the The Actual Budget Deficit in the year Estimated Budget Deficit had been a sum under review is 5.63 per cent of the of Rs. 1,488 billion and it is an increase Estimated Gross Domestic Product amounting to Rs.317 billion or 27 per cent amounting to Rs.11,839 billion and as than the Estimated Budget Deficit in the such, it is an excess of the limit of 5 per preceding year. According to the financial cent of the Gross Domestic Product stated statements of the year 2016, the Actual in Section 3(a) of the Fiscal Management Budget Deficit had been a sum of Rs.666 (Responsibility) Act No.3 of 2003 as billion indicating a decrease of Rs.822 amended by the Fiscal Management
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(Responsibility) (Amendment) Act No.15 of 2013.
Incurring Liabilities In Excess of the Limit
The total liabilities of the Government as at 31 December 2016 had been a sum of
should not exceed 80 per cent of the Gross Rs.9 865 billion and, it was observed to be itReports Domestic Product in terms of the Fiscal an excess of the maximum limit of Management (Responsibility) Act No.3 of liabilities mentioned in the Fiscal 2003 as amended by the Fiscal Management (Responsibility) Act as being Management (Responsibility) 83.3 per cent as compared with the (Amendment) Act No.15 of 2013. Estimated Gross Domestic Product of the
According to the financial statements of year 2016 amounting to Rs.11,839 billion. SpecialAud the year 2016, the total value of liabilities Special Report of the Auditor General on the Construction of D.A Rajapaksha Museum and Monument at Madamulana by Sri Lanka Land Reclamation and Development Corporation Considering the critical situation occurred that the consent of the Foundation had at present, the objective of presentation of been obtained for the above increase of this special report is to present information expenditure and the differences made in in detail in connection with the irregular the structure of the project. activity which had been observed in audit Although the common practice of making for the year 2014 and reported summarily payment by a client to a contractor, the relating to the above construction (the payment is made to the office of the project) by incurring public property. contractor in a proper manner on the The Sri Lanka Navy had involved directly acknowledgement of the contractor, a sum to this construction and the Corporation of Rs. 25 Million had been credited to the had prepared a bill of quantity (BOQ) account of the Corporation by an unknown valued at Rs. 33.94 million. However, person on 31 August 2015.The there were no evidence to prove that the Corporation was unaware of receiving this BOQ had been forwarded for the consent money until the bank account was checked of Foundation. Although the actual cost by the Deputy General Manager (Finance) had been exceeded the estimated cost up to of the Corporation. Rs. 81.31 million (including tax and The corporation had entered in to an interests), there were no evidence to prove agreement with a state bank to obtain a
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Special Audit Reports Audit Special loan amounting to Rs. 14,277 Million Reclamation and Development creating an extra burden to the Treasury Corporation Act No 35 of 2006 and agreed to be paid in 24 six months (amended).In such a situation, utilization instalments by Rs. 592.79 due to non- of limited resources to activities deviating availability of funds to fulfil the objectives the objectives was questionable in audit. which should be fulfil by the Corporation according to the Sri Lanka Land Special Audit Report of the Auditor General on Process of Supplying Medical Supplies carried out by the Medical Supplies Division of the Ministry of Health, Nutrition and Indigenous
Medicine
Reaching the highest setting up standards and laboratory items required possible level of health guidelines for healthcare for patient care service through providing the delivery, human resources supplied by all hospitals people of Sri Lanka with development, under the purview of the a perfect, apex, management, planning line Ministry and qualitative, equal, and systems development, Provincial Councils and effective and sustainable resource allocation, other institutions health service by monitoring, supervision belonging to the field of responding to the and evaluation of Health, are called medical people‟s needs and acting programmes and projects supplies. collectively was the are more vital. The Medical Supplies Mission of the Ministry Medical supplies have Division has been of Health, Nutrition and proved to be unparalleled established under the Indigenous Medicine. among the physical Ministry of Health, Providing patient care resources required for Nutrition and Indigenous service and physical and supplying patient care Medicine for human resources needed service, as we cannot implementing, therefor included in the imagine a patient care controlling, monitoring main functions such as service without medical and supervising the entire policy formulation, supplies. process of procurement, implementation of ordering, taking over, programmes and projects Drugs, surgical materials, payment to suppliers, for the health sector, radioactive materials and National Audit Office| Annual Report - 2018 83
storing and issuance for 2011 to the year 2016 been incurred relating to implementation of the had been Rs.685,152 the State Pharmaceuticals entire requirement of million and out of that, 26 Corporation and other medical supplies. per cent or Rs.180,544 institutions for medical million was for medical supplies by 31 December The total net provision supplies. The actual 2016. The total made for the Ministry of expenditure incurred for expenditure of the Health, Nutrition and medical supplies during Government during those Indigenous Medicine by those 06 years amounted 06 years amounted to the annual budget to Rs.165,162 million. In Rs.11, 404,759 and 1.4 estimate during the period addition to that, liabilities per cent out of that was Special Audit Reports SpecialAudit of 06 years from the year of Rs.7,266 million had for medical supplies.
Special Report of the Auditor General on the Solid Waste Management of the Colombo Municipal Council The main duties of a a colossal dump of Council had disposed of Municipal Council garbage. Due to constant waste for a period of 8 include: ensuring healthy public uproar against the years, thus resulting in the communities, well-being disposal of waste, the garbage dump to expand and welfare of the public, Supreme Court returned a through an area of 23 and securing the verdict preventing the acres. Eventually, the recreational facilities in disposal of waste at the colossal garbage dump the city. Hence, the Bloehmendal garbage had collapsed on 14 April management of waste disposal site. Later, 2017, causing 32 deaths, should be prioritized by approval had been and damages to a large the Municipal Council. granted to dispose of number of properties. Fire waste at a land in extent broke out on the garbage The Colombo Municipal of 2 acres located in dump in Meethotamulla Council had disposed of Pothuvilkumbura, on 2 occasions in January the waste generated Meethotamulla for a 2018, and no attention within the jurisdiction period of 2 years from was drawn on the thereof in the April 2009. Defying the negative impact caused Bloehmendal area up to verdict of the Supreme by such a disaster on the April 2009 by paving for Court, the Municipal
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Special Audit Reports Special environment and the not considered the and converting waste into routine life. verdicts returned by the an asset, had caused the Court, Laws and Rules Municipal Council to Waste should be imposed by the spend a significant considered as a property Government on the amount of its revenue of the Municipal Council. management of waste, annually on garbage However, the Colombo and the existing policies disposal. Moreover, Municipal Council had relating to waste. In financial provision had obtained services from addition to continuously been made through the private companies by seeking for areas suitable annual budget from the incurring heavy costs for for disposal of waste, the year 2010 for purchasing the disposal of waste in Municipal Council has so vehicles required for the an area outside the far been unable to find a waste disposal activities jurisdiction of the sustainable solution for of the Municipal Council, Municipal Council, and the disposal of waste. but instead of being compacting the waste in Contrary to being pointed purchased in that manner, the colossal garbage out by the local and vehicles had been dump. Furthermore, in the foreign scholars, the obtained on lease basis disposal of waste, the failure in recycling waste, from the same institution. Municipal Council had Performance of the Department of Wildlife Conservation
Sri Lanka is a country animals resists with the of 1949, (Amendment) awash with a great Government legally. The Act No. 44 of 1964, number of wild animals Department of Wildlife (Amendment) Act No. 01 and the significance of Conservation has been of 1970, (Amendment) the wild animals found entrusted with above legal Act No. 49 of 1993 and herein has immensely responsibility by the (Amendment) Act No. 22 contributed towards the Fauna and Flora of 2009 and accordingly, promotion of tourism Ordinance, Nos.2 of the Department of industry. The absolute 1937, 31 of 1942, 12 of Wildlife Conservation responsibility regarding 1944, 12 of 1945 performs the the protection and the (Cap.469) and the responsibility regarding coexistence of the (Amendment) Act No. 38 the protection of the wild
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animals for the sake of Environmental Authority, the society. the Government. Legal Ministry of Sustainable Intensification of the provisions, too, have been Development and conflict between human made under the Fauna Wildlife, Geological and wild animals, killing and Flora Ordinance for Survey and Mines of tuskers and a large the protection of wildlife Bureau, Coastal number of elephants resources found outside Environment Protection considered as an the wildlife reservations Authority, Department inestimable resource can and that legal power, too, Cost Conservation and be outlined as the main has been vested in the Costal Resources reasons attributed thereto. Department of Wildlife Management and the Special Audit Reports SpecialAudit Further, it was revealed in Conservation by this Act. National Aquatic audit that some animal Resources Research and The Department of species are gradually Development Agency can Wildlife Conservation has subject to the extinction be cited as examples been provided with all while some other animal therefor. However, the facilities and resources species are highly Department of Wildlife required for this purpose proliferating exceeding its Conservation holds the and the fully average population limit. prime responsibility for responsibility relating to (Example:- Tuskers and the wildlife conservation. taking decisions rests Peacocks respectively ). The fact as to whether the with the Department of However, the Department Department of Wildlife Wildlife Conservation. In of Wildlife Conservation Conservation had duly addition, several lacks a clear database accomplished its institutions have joined capable of obtaining responsibility on the hands with the information in this conservation and environment protection connection and evidence protection of wild animals initiatives and the could not be found to over a number of years Department of Wildlife establish whether there has resulted in the Conservation, Ministry of was a specific formation of a vast Mahaweli Development arrangement towards that dialogue in that regard in and Environment, Central end.
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Special Audit Reports Special The Special Report of the Auditor General for the Uma Oya Multipurpose Development Project Under the Ministry of Mahaweli Development and Environment Various studies had been carried out project activities through FARAB through-out a number of decades around Company of Iran as the contractor under the Uma Oya basin and more attention had the grants of the government of Iran in been paid to decide the most attractive order to supply irrigation for an area of alternative of two options of development 5000 Hectares in extent in the north east of inter basins in the Uma Oya aquifer area dry zone by diverting water of Uma Oya to or development of inside the basin. Kirindi Oya through an underground
Accordingly, the feasibility study had been tunnel in extent of 20kms and to produce divided into two stages and as the first Electricity at a capacity of 100Mega Watts stage to recommend the most appropriate by constructing a water power station. alternative out of the feasibility study Due to various issues such as delays in carried out inter-basin and inside the basin. acquisition of lands and delays in engaging Secondly actions had been taken to carry feasibility studies the Uma Oya out an extended feasibility study regarding Multipurpose Development Project had the recommended alternative and to ascend been commenced in the year 2010. the ability to implement the project. The Problems had occurred in providing funds first stage of this Feasibility study had for this project due to imposing sanction to been carried out by S.N.C. Lavalin the Iran government in 2013 and Company Limited in the year 2002 and the afterwards all the expenses regarding this proposal of inter-basin had been project up-to now had been borne by the recommended by their report. Sri Lankan Government. And also, many According to the memorandum of environmental and social issues were understanding entered in between the occurred due to the 1st water leakage in government of Sri Lanka and the December 2014 and the massive water government of Iran in the year 2007, It leakage in December 2016. was agreed in the year 2008 to commence
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Special Report of the Auditor General on the Role Played by the Information and Communication Technology Agency of Sri Lanka (Pvt) Limited relating to the Digitalization of Public Service The requirement for the 03/060/134/022, dated 09 During the period 2004 – establishment of an April 2003, and 2014, the ICTA had institutional framework Information and implemented projects for planning and Communication under e-Sri Lanka implementation of Technology Act, No. 27 Development Programme Information of 2003. The ICTA is in respect of 06 main
Special Audit Reports SpecialAudit Communication vested with the main areas identified Technology strategies had responsibility of thereunder with World arisen with the spearheading the process Bank and other foreign publication of ICT of utilizing the assistance, and Development Roadmap Information Government funds, and e-Sri Lanka concept Communication whereas the projects are under the objective of Technology in view of being fully implemented improving the social and successful on consolidated funds economic development implementation of since the year 2015. through the utilization of economic development Re-engineering the Information programmes in Sri Lanka. Government sector had Communication The ICTA is authorized been identified as a main Technology. Accordingly, in terms of the component in the the Information and Information and Information Communication Communication Communication Technology Agency of Technology Act, No. 27 Technology development Sri Lanka (ICTA) had of 2003 to take all programmes. In the wake been established under necessary measures to of ICTA‟s endeavor in the Companies Act, No. implement the that connection, Sri 17 of 1982 on 12 May Government‟s Policy and Lanka, ranked number 2003 as a private Action Plan in relation to 115 in the year 2012 company fully owned by ICT. among 192 countries in the Government in terms accordance with the e- of Cabinet Decision, No. 88 National Audit Office | Annual Report - 2018
Special Audit Reports Audit Special Government Index, had institution, the total responsibility of the secured 74th rank expenditure incurred ICTA with respect to the climbing higher up by 41 thereon during 2010 – digitalization of Public positions. However, the 2016, amounted to Rs. service, has not been rank had dropped to 79th 5,799.9 million. exercised properly. position in the year 2016. However, as per the observations made, it is According to the financial concluded that the statements of the Special Report of the Auditor General on the Project for the
Import of Dairy Cattle
In keeping with the National Livestock Notwithstanding the Government Policy and Development Board. matters referred to above, the Mahinda Chinthanaya in granting approval for Of 4,495 dairy cattle thus formulated in the year the import of 20,000 dairy imported comprising 2006, popularization of cattle under the third 2,000 dairy cattle under fresh milk consumption phase in pursuance of the the first phase in the years and the formulation of Cabinet Decision dated 2012 and 2013 and 2,495 Government tax policies 20 June 2014, a decision dairy cattle under the and the policies had been taken not to second phase in the year pertaining to the import distribute the imported 2015, 2,500 dairy cattle of dairy products to suit cattle directly to the imported in the year 2015 to that endeavor, had been farms. Instead, it had had been made available recognized. been decided to keep such to the Hambantota cattle under the care of For the purpose of Ridiyagama Farm which the Government farms minimizing the cost is situated in an area not and subsequently, incurred on the import of resisting to those animals. distribute the cattle of milk powder by avoiding The National Livestock second generation to the existing shortage of elite Development Board had farmers. Nevertheless, cattle, a decision had been failed to settle, as without being complied reached to import 15,000 expected, the foreign loan with that decision, action elite cattle and distribute obtained as a sub-loan for had been taken in the year them to the farms of the this project . 2017 to directly provide
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5,000 dairy cattle for the had not been abided by at standard. Even though a dairy farmers. the second and third sum of Rs. 7.9 billion had phases of the importation been spent for the project, Relevant procurement of dairy cattle. Further, the officer concerned had procedures had not been the feasibility study report failed to execute the adopted in a manner applicable to the project project in a manner beneficial to the had not been presented at achieving the expected Government and the an adequate professional results. procurement procedure Special Audit Report on the Paddy Fertilizer Subsidy Programme
in Sri Lanka Special Audit Reports SpecialAudit The national economy of cent out of the total extent lower position. Hence, it Sri Lanka is basically of agricultural lands has can be observed that the founded on the been reserved for the above matter has given agriculture and the paddy cultivation. rise to move the farmers background associated gradually out of the Provided however that, as with the demand for rice paddy cultivation. a result of certain issues and the historical, Accordingly, it is a cropped up recently on climatic and geographical responsibility of the the paddy farming, a importance connected to Government to develop gradual deterioration of the agriculture has led to infrastructure facilities the contribution of this create an atmosphere including irrigation field for the national more incline towards the systems essential for the economy could be paddy production. Out of paddy cultivation as well witnessed. It was mainly the total employment, the as to formulate policies at attributed to the contribution for the national level in relation prevalence of earnings at agriculture sector stood at to this field and provide a minimal level as 27 per cent in the year various services compared with the cost of 2016 while the connected thereto. the inputs used in the contribution of the agriculture, thus resulting Accordingly, in the year agriculture sector for the falling of living standard 2006, it was expected to national income of the farming community minimize the cultivation accounted for 7.5 per comparatively in to a cost by way of cent. Besides, 13.5 per
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Special Audit Reports Audit Special introducing a subsidy community expected year 2016, particulars scheme for the fertilizer from this subsidy such as failure in granting which is used as a main programme implemented relevant financial application in the field of since year 2006 remained assistance to the farmers paddy cultivation. While at a minimal level. who were actually giving priority to the eligible for the receipt of The financial provision above expectation, the financial assistance, made by the Government main objective of this payment of financial in respect of the fertilizer programme was to assistance exceeding the subsidy programme provide a hundredweight maximum payable limit amounted to Rs. 24,254 of fertilizer at Rs.350 for and credit of money to the million or 01 per cent of the farmers. However, accounts of the irrelevant the total Government while this subsidy persons have been expenditure by the year programme was in brought to light. 2016. In the progress up to the year According to the sample implementation of this 2015, it was switched to examined thereon, the programme, contribution grant of a financial value of uneconomical of various Government assistance instead of payments thus made institutions are made providing fertilizer at totaled thereon and it paves the subsidized rates in the Rs.1,266,733,838for the way for the overall year 2016 and thereby, it Yala and Maha Seasons effectiveness of the was expected to in the year 2016 and the programme. implement this subsidy Yala Season in the year scheme more efficient. In view of the matters 2017. Further, instances revealed in the were observed where The performance of the examination conducted financial assistance other sectors inclusive of on the programme of required to be granted increasing paddy harvest, granting financial prior to the relevant expansion of the lands assistance commenced in season had been granted under the paddy lieu of providing fertilizer following the expiry of cultivation, minimization with the change of the due date and the value of rice importation and Government policy of the payments thus amelioration of the living regarding the fertilizer made during the foresaid standard of the farming subsidy programme in the National Audit Office| Annual Report - 2018 91
s 03 instances amounted to carrying out procurement achievement of the Rs.5,475,649,532. activities relating to the aforesaid objectives import of fertilizer. which could have been Similarly, expected However, failure in expected from the results had not been purchasing relevant Fertilizer Subsidy received from the fertilizer on a Programme was not at a computer system procurement plan had satisfactory level. introduced in the year resulted in facing a severe Therefore, the 2017 to make payments fertilizer shortage during development of other more accurate and the Maha Season, 2017 . infrastructure facilities efficient manner.
Herein, instances of required in the paddy Special Audit Report SpecialAudit Simultaneously to the changing the Cabinet cultivation and further subsidy programme, it is decisions given for the streamlining the the predominant duty of import of fertilizer from implementation of the National Fertilizer time to time and fertilizer subsidy policy Secretary to determine the containing unfounded and simultaneously, fertilizer requirement of matters in the Cabinet further expansion of the the country in order to Memorandums could be Organic Fertilizer meet that requirement and observed. Programme can be herein take action to provide identified as the basic Accordingly, it is fertilizer to the farmers in requirements. observed that the proper time by duly Special Audit Report on Sports in Sri Lanka and Its Administration The support of the sport to help a citizen of setting up a separate ministry for sports, a country become enthusiastic, healthy, creating a sports act for the construction of disciplined and proud is vast. With this a legal background for sports, introducing hope, every country in the world is greatly an administrative structure through the involved in the development of sport. introduction of sports regulations for national sports associations of each sport Sri Lanka also had attempted to adapt it. and administrative functions had taken so Accordingly, various actions such as far by Sri Lanka.
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Special Audit Reports Special Although it was recommended to prepare Although various actions had been taken specialized government regulations to suit for the development of sports of Sri Lanka with the International Olympic Committee as above, there have been tough Regulations and to amend the Sports Act discussions about the achievements and No. 25 of 1973 within 06 months the progress achieved in sports from both amendments had not been done so far even national and international. It is clear when after a 5 years‟ time. considering sports achievements of Sri Lanka taken in the past few decades.
Special Report of the Auditor General on the effect to the Government Revenue made by holding over of issue of automated assessment reports by the Revenue Administration Computer System of the Department of Inland Revenue Sri Lanka Government Revenue consists Return had been implemented from the of tax and non-taxable revenue and the year 2002 to 31 March 2012. Department of Inland Revenue can be Through issuance of these automated identified as one of the parties responsible assessment reports, several important tasks for administration of revenue from tax. such as reporting in case of a default, Out of the revenue from tax collected by imposing of penalties on outstanding tax the Department of Inland Revenue, and indicating outstanding tax in the approximately 65 per cent is collected computer system had been performed and from Indirect Revenue from Tax and the the Department of Inland Revenue had VAT and NBT included in the said held over the issuance of automated Indirect Revenue from Tax are highly assessment reports from 01 April 2012 and significant. Hence, in case payments of commenced the process of carrying it out VAT and NBT are defaulted by tax payers, through officers manually. As a result of the decrease in the revenue from tax holding over the automated assessment thereby to the Government is inevitable. system as mentioned above, this report Therefore, earning maximum revenue reveals a tax balance of VAT and NBT from tax for the Government is the amounting to Rs.15,283 million to be responsibility of the Department of Inland recovered / settled as at 31 December 2015 Revenue and with a view to achieving that, and that the penalty recoverable on those a procedure in issuing automated tax according to computations of the Audit assessment reports on outstanding Tax on amounts to approximately Rs.9,237 National Audit Office| Annual Report - 2018 93
million. Moreover, this system comprised outstanding balances of tax exceeding the of a large number of outstanding balances value of Rs.1000 had been considered in of tax with less values. Hence, only the the preparation of this report. Auditor General‟s Special Report on the Performance of the Development Officers in the Public Service Out of the employed population of the According to the audit test check carried public service (Government and Semi- out more than 86 per cent out of the government Sector) established with the Development Officers enrolled were Arts primary objectives of providing a quality Graduates and nearly a proportion of 75 service to the people by the Government per cent out of those officers were female
Special Audit Reports SpecialAudit Institutions and strengthen the officers. Even though the Development Government Institutions, a proportion of Officers Service is considered as a field 14.5 percentage of officers are employed. occupation, about 22 per cent were Enrollment of Graduates as Development stationed officers out of the officers and Officers had been a prominent reason to the number of field officers were 78 per the quantitative growth of the public cent. Further, the number of projects service in recent period. In this regard it undergone on supervision by those officers was revealed that according to the current during the year had been ranged between surveys conducted, out of the total number 02 and 09. of public officers 41,668 are Development As a result of non- implementing an Officers. annual transfer procedure by preparation The attention should have been paid in the of a Scheme on Transfer for the matter of obtaining a knowledge in respect Development Officers employing in the of evaluation of the materiality of the same work station for a long period has services provided, framing the nature of also effected to the performance and it was the duties commensurate to the salary paid, confirmed that the expected performance being stationed on duties, proportion of the from the service of Development Officers work environment structured and how far had not been fulfilled. this service focused to the requirements of the people from the graduates joined to the public service in this manner.
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Special Audit Reports Special Special Audit Report on Export of Gold Mixed Soil
Special Audit Report on Export of Gold carried out without the approval and Mixed Soil Wastage of Goldsmith Burnt license of the Geological Survey and Residue from Jewellery manufacturing Mines Bureau and its exportation without institutions had been exported to several obstruction by the Sri Lanka Customs, had foreign countries showing as soil by three been controversial. An audit examination private companies for extraction of gold had been carried out on how far the Sri from the soil and the said materials were in Lanka Customs and the Geological Survey process for export as well at the time. Fifty and Mines Bureau being two Government
one containers loaded with these materials Institutes, which are directly involved in had been already exported to foreign this process, had performed their countries through the Sri Lanka Customs functions. and another 23 containers being so The irregularities occurred in the Sri exported had been taken into the custody Lanka Customs and the failure in proper of the Sri Lanka Customs. Customs implementation of provisions cited in the inspections had been completed relating to Mines and Minerals Act, No.33 of 1992 by 04 containers out of them and penalties the Geological Survey and Mines Bureau. imposed thereon. Moreover, customs inspections are being carried out for the Deficiencies in the systems and controls of remaining 19 containers. Containing of a the said institutes as well as the failure in large quantity of gold in the Wastage of coordination between the institutes had Goldsmith Burnt Residue being exported, supported the export of Wastage of was doubtful and the export process Goldsmith Burnet Residue in this manner. Special Report on the Evaluation of Contribution Extended by the Agriculture Research and Production Assistants for an Enhanced Agricultural Economy The Department of Agrarian Development pioneering institution operating in relation which is functioning in keeping with its to the agriculture sector at regional level. mission - Encouragement of farming With a view to achieving the above community to bring forth optimum yield mission more effectively, the post of from all the agricultural lands in Sri Agriculture Research and Production Lanka, has been recognized as a Assistant (A.R.P.A.) was created in the
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year 1999 and a strength of about 9,600 of was further observed at the audit test check the above officers presently engage in the conducted in this connection within the service throughout the island. The Kegalle district that the failure in properly Commissioner General of the Agrarian handling the Agriculture Research and Development had, under Section 74 (1) of Production Assistants appointed to achieve the Agrarian Development Act, No.46 of the mission of the Department of Agrarian 2000 as amended by the Agrarian Development and the failure of such Development (Amendment) Act, No.46 of officers to properly accomplish their duties 2011, appointed the Agriculture Research in the field in certain instances had and Production Assistants to implement resulted in the above situation. Further, it
the provisions of the Act within the was recognized that by way of adopting Special Audit Reports SpecialAudit relevant Agriculture Research and measures to set up a strong internal control Production Assistants Divisions and assist mechanisms to properly handle the the other Government institutions Agriculture Research and Production engaging in the activities relating to the Assistants and monitor their activities, agriculture. duly manage the issues they face in the discharge of field duties and find solutions, The agriculture sector‟s contribution to the give policy decisions to the matters that Gross Domestic Production demonstrates a remain beyond the control of the gradual diminishing trend at present and Agriculture Research and Production according to the data pertaining to the Assistants, the ensuring maximum paddy cultivation in the Kegalle district, possible service of these officers is decrease in the harvest and the extent of essential for the enhancement of the field cultivated paddy lands and increase in the of agriculture. extent of fallow lands could be revealed. It Special Audit Report on the Performance of the Department of Ayurveda, North Central Province With the advent of Provincial Councils in Provincial Ayurvedic Commissioner. The terms of the 13th Amendment to the Ayurvedic Hospital in Anuradhapura, 03 Constitution of the Democratic Socialist rural hospitals, and 10 central dispensaries Republic of Sri Lanka, the Department of had been established under the purview of Ayurveda had been established in the the said Department. By the year 2017, North Central Province in the year 1987 nine Ayurvedic hospitals, 32 central under the supervision and instructions of a dispensaries, a drugs manufacturing unit,
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Special Audit Reports Audit Special and a traditional cottage hospital had been of requirements, had also contributed established in the North Central Province thereto. under purview of the Department of In this backdrop, expectations of the Ayurveda. people seeking treatments of the Only a limited provision from the overall indigenous medicine, could not be financial provision made annually for the satisfied. It was also observed that public North Central Provincial Council, is funds had been made use of in an allocated for the provincial Department of uneconomic manner due to failure in Ayurveda, and that represents about 3 per following the Procurement procedure cent of the estimate for the year 2017. properly. The Department faces many
Although the locals as well as the environmental problems owing to the foreigners have shown even more interest failure in taking necessary action for the on the indigenous Ayurvedic Medicine at management of solid waste being disposed present, it was observed that the of by the Ayurvedic hospitals. Department had been unable to offer a Accordingly, it seems that the duties productive service due to lack of expected from the provincial Department provisions, and human and physical of Ayurveda had not been performed, and resources. Moreover, it was further the North Central Provincial Council had observed that the factors such as, failure to not taken action to provide a productive properly prepare plans, failure in the service for the public through that management of physical and human Department. resources properly, and non-identification Special Audit Report on the Impact of Filling up of Fallow Paddy Lands in Kagalle District It has come to light in the analysis of was observed that due to failure in taking statistics pertaining to the period from the action to halt this filling up of fallow year 1990 to 2017 that the extent of land paddy lands and not properly taking hectares remained under the paddy necessary steps to encourage the farmers cultivation and the production of paddy towards re-cultivation, the contribution had gradually dwindled in Kegalle district. which could have been made by the The ongoing irregular filling of fallow Kegalle district to enhance the domestic paddy lands has been identified as a one agriculture economy seemed gradually major reason behind the above incident. It decreasing.
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An extent of about 63 Acres 02 Roods and to the paddy lands due to the disposal of 12 Perches of paddy lands had been filled wastes could be revealed at the audit test up only upon the approval obtained check carried out in that connection. through the permits in 372 instances Accordingly, it is hereby recommend that within the Kegalle district subjected to our necessary steps should be taken to prevent inspection. In the preparation of this the irregular filling up of paddy lands by report, information was collected through way of reconsidering and revising the the perusal of books and registers, physical powers vested in the Commissioner inspections and the discussions. General of Agrarian Development under Accordingly, a large number of Section 28 of the Agrarian Development observations such as issue of permits Special Audit Reports SpecialAudit Act, providing assistance for the farmers in deviating from the formal methodology, order to encourage them towards the filling up of lands exceeding the permitted cultivations and implementing the limits in a manner causing damages to the provisions imposed by the Agrarian cultivated paddy lands, failure in taking Development Act and the circulars through action to halt the reclamations carried out the officers. on informal permits and causing damages Special Audit carried out on Thirty Second (32) Colombo Airport Super Draw Lottery, New Airport and Dollar Fortune Lotteries conducted by the National Lotteries Board
The Cabinet of Ministers had granted lotteries and to organize this lottery by the approval on 02 October 1991 for operating Airport and Aviation Services (Sri Lanka) a lottery named “Foreign Exchange Motor Limited. Car Lottery” in the Katunayake According to the aforesaid proposal, the International Airport with the motive of provisions of conducting this lottery had promoting the Colombo International been declared by the Gazette Airport as an attractive centre of transit to Extraordinary dated 02 December 1992 of travelers around the world and to increase the Democratic Socialist Republic of Sri the income earned from the Airport. Lanka and this lottery had been named Accordingly, it had been proposed to “Colombo Airport Super Draw conduct the said lottery by the National Lottery” therein. In addition to the above Lotteries Board, which is the authorized lottery, the National Lotteries Board had institute in Sri Lanka for conducting launched 02 other lotteries named Dollar 98 National Audit Office | Annual Report - 2018
Special Audit Reports Special Fortune and New Airport Lottery which lottery, determining and maintaining the carry out transactions in foreign currency price without a market research, mainly targeting high end segment of weaknesses in supervision and decline in customers, Sri Lankans abroad and the financial discipline and losses of income customers visiting Sri Lanka from foreign from lotteries through conducting lotteries countries. in a manner of losing the customer trust were observed relating to all these Even though the said lottery tickets had lotteries. Therefore, the achievement of been issued with the intention of achieving objectives intended by the Board in the the aforesaid objectives, it had fallen into a methodology of conducting the said lottery situation in which the said objectives could draws had failed and it was also apparent not be achieved specially in the thirty that the trust of the public towards the second (32) Colombo Airport Super Board was lost. As such, the lottery draws Draw Lottery and in other draws as well. should be organized in a manner of Further, the weaknesses such as failure in gaining maximum benefit by paying formulating and notifying by Gazette of attention to the objectives of conducting the rules relating to lottery draws, weak lotteries. Further, action should be taken to condition in implementing Treasury minimize the existing deficiencies through Circulars and instructions, improper conducting of lotteries with transparency contributions to the Consolidated Fund and efficiency. and relevant institutions, launch of the Special Audit Report on the Evaluation of Performance of Strategic Enterprise Management Agency (SEMA) According to the Article 33 of Constitution objective had not been achieved and of the Democratic Socialist Republic of Sri accordingly this audit had been planned to Lanka, strategic Enterprise Management examine the effectiveness of carrying out Agency had been established in year 2004 this entity further. as per the powers of His Excellency the Although the power should be given President. The main objective of through a warrant by His Excellency the establishing this agency was forming of President in order to make this entity not for profit state entities as autonomous effective, it was a specialty that the present commercially viable enterprises through President had not signed such warrant and strategic plans without privatization. However, it was observed at the audit that
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this entity had been carried out without Although this entity had been assigned for obtaining such power. the preparation and supervision of strategic plans of 12 state institutions at the initial, Further, a Board of Directors had not been later 10 another state institutions other appointed for the administrative matters in than these institutions, the sufficient here and all the operational activities had evidences that preparation and supervision been done based on the financial powers of the strategic plans for those institutions granted by the presidential Secretary to the was done as such had not been presented Chairman of the entity. Also, a cadre had to the audit. been recruited to the entity without proper Scheme of Recruitment and cadre that Accordingly, it is likely to show that the
Special Audit Reports SpecialAudit should be in the entity or even salaries and liquidation of the existence of this entity allowances that should be paid had not properly is suitable ass it is not productive been approved properly even by the to operate such entities further by spending present. Further, although the allowances public money unnecessarily as such of about Rs. 19 million had been paid from without sufficient benefit or to operate January to September 2017 to the with the Board of Directors appointed Advisory Board that recruited to the entity, properly by enforcing through a warrant it was observed that the necessity of those by consolidating productively with other advisors had not been identified properly state institutions that engaged in parallel and the role performed by them had not works. been documented properly.
Special Audit Report for Evaluation of the Performance of the National Water Supply and Drainage Board The National Water Supply and Drainage as well by producing a unit of purified Board has been established in the year water. However, the Board incurs a high 1975 in terms of National Water Supply employee cost and thereby giving rise to a and Drainage Board Act, No.02 of 1974. situation in which a loss of Rs.4.57 is By 30 June 2018, sustained by a unit of purified water.
the Board had taken steps to supply pipe Moreover, it was observed as well that borne water to about 49.9 per cent of the approximately 166 million cubic metres of population and a contributory beneficial the capacity of purified water produced, rate of approximately 42 per cent is earned becomes non-revenue water annually.
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Special Audit Reports Special Burdening the consumers with the increase of non-revenue water existing in a level as in the cost of a unit of purified water is high as 43 per cent reported annually and inevitable and due to the said reason, the that even the performance of water Board had taken steps to revise water tariff projects implemented therefor at present as from time to time. Proposals on the well is at a very low level. Moreover, the revision of water tariff expected to carry Board had to incur a high cost due to out during the period of 03 preceding years inability of completing the projects which are not implemented up to now. However, have been already commenced within the if those proposals were to be implemented, due period, having to incur an additional the people would have been pressured to cost exceeding the estimated values
bear it. Accordingly, the objective of thereby and due to making payments for issuing this report was to examine the water projects based on the overestimates reasons for taking steps to revise water submitted by contractors. tariff without taking necessary action to It was identified that the cost incurred by control the cost, to minimize the quantity the Board should be controlled through of non-revenue water and to improve the taking steps such as controlling the cost performance of projects. Accordingly, the incurred for production and distribution of performance of the Board had been purified water of the Board through examined during a period of 10 years from control of employee cost, reducing the the year 2008 to the year 2018 and non-revenue rate of water of 43.14 per examination of books and registers, cent in the Colombo city at least up to the holding discussions with relevant parties average non-revenue water level of 23 per and analyzing the information obtained cent of other regions and avoiding etc. had been carried out for the said payments exceeding the engineering examination on performance. It was estimate etc. It is concluded that the Board observed that adequate steps had not been can earn a profitable income by taking taken at present, in minimizing the level of action as mentioned above, and that non-revenue water being gradually burdening the people through revision of increased annually, particularly in water tariff is unnecessary. Colombo city, in minimizing the quantity
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The Special Report of the Auditor General on the process of Caring, Securing, Rehabilitation and Socialization of prisoners The prison was In the incipient of the carried out relating to established in the year Department of Prison incur this provision, 1832 as a result of reform administrated under the identify the achievement of Judiciary introduced by Ministry of Judicial and of objectives of the the Governor Cameron Prison reform, caring and department and it‟s who was the comptroller securing of Prisoners had management and the of the Ceylon in the era of been identified as situations socialized British imperialism. ultimate objectives. about the prisons in
Special Audit Reports SpecialAudit Accordingly the prison of However with the present. Welikada was established complication of society It was observed that it compatible with the and expansion of process was difficult to maintain British bostal system in of prison caring, securing caring, securing and accordance with the Law and rehabilitation had rehabilitation process and Judicial act number been identified as an properly due to the prison 18 of 1844. Further this ultimate objectives. act which is older than service was re-established A number of 7,872 staff 140 years was not being on 16 July 1905 as a had been approved to revised according to the department controlling carry out duties of 30 current requirements, under a commissioner prisons Island wide. congestion of prison cells according to the prison Budgeted provision of Rs. and wards, delays in act No 16 of 1877. 30,119 million had been examining appeals of Likewise concurrence allocated by the prisoners, using with the social expansion Government to maintain prohibited substances in it was mentioned in the these institutions during prisons and problematic prison history as a result previous five years. situations of the officers of blistering of the Examination of books and of the prison. It was service, the Bogambara records, collecting concluded that the Prisons prison had been information by a were not managed constructed on the form questionnaire, conducting properly and the of the prison of Been interviews and physical Department was failed to Field of England in 1875. examinations were fulfill the main objectives
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Special Audit Reports Special of caring, securing, be taken to provide good Further it was observed rehabilitation through the accommodation facilities that long term plans process of prison. for prisoners in making should be prepared and amendments to the prison implemented in order to To avoid this situation it ordinance as suitable for rehabilitate prisoners to a was identified that the present, local and continuous and proper immediate action should international standards. process.
Special Audit Report on the Performance of Fund Management of the Employees‟ Provident Fund for the Years 2015 and 2016.
The Employees‟ of the Central Bank of Sri questioned at the
Provident Fund has been Lanka. The number of Committee on Public initiated under active members of the Enterprises held for the Employees‟ Provident Employees‟ Provident examination of the Fund Act, No.15 of 1958 Fund as at 31 December controversial issuance of with the motive of 2017 stood at 2.63 million bonds carried out during establishing a social while the total net worth February 2015 and March insurance scheme for the of the Employees‟ 2016 by the Central Bank employees of Private and Provident Fund as at that of Sri Lanka and the Semi-Government date amounted to Presidential Commission Service in Sri Lanka and Rs.2,066,299 million. appointed there for. This the operations thereof had Accordingly, it was report was prepared for been commenced on 30 subjected to discussion in examining the May 1958. In terms of several instances during performance of the fund Section 4(1) and Section the preceding years that management of the Fund, 5 of the said Act, the this Fund, which has been focusing on the period in responsibilities of general created by the which decisions had been administration of the Act contributions of taken to suspend the and the management and employees of Semi- issuance of Treasury custody of funds Government and Private Bonds in Direct respectively have been Sector in Sri Lanka, has Placement by taking the assigned to the directly and indirectly aforesaid matters Commissioner of Labor been affected. As such, identified at those and the Monetary Board this matter was widely instances as well into
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consideration. In the running at a loss without has been mismanaged and preparation of this report, a proper study by the it is clear that decisions methodologies such as Employees‟ Provident required for selecting examination of Fund. Accordingly, an more productive and documents related impairment loss of efficient sources of thereto, holding Rs.1,300 million and an investment are necessary discussions with relevant actual loss of Rs.42.8 in the reinvestment of parties and analyzing the million had occurred by moneys. Further, it is data obtained was investing in 42 million observed that the followed. shares and the Fund had financial and to incur an additional cost administrative functions Special Audit Reports SpecialAudit It was observed that the of Rs.316 million as a of the Fund could be quality of the Fund has result of purchasing performed efficiently by been affected directly and bonds from the secondary updating the Employees‟ indirectly due to failure in market instead of Provident Fund Act in an carrying out the purchasing from the appropriate manner, investment approval primary market. Further, taking steps to enter into process, non-participation a loss of Rs.347 million transactions relating to at auctions despite the had been incurred due to the Fund with availability of adequate purchase of the same transparency and expedite moneys for investments Treasury Bonds from the implementing of in the Fund and re- secondary market within recommendations given purchase of the same a few days of sale of by the Commission on bonds under low yield Bonds at the Secondary Bonds relating to the rates from the secondary Market. Therefore, it is Employees‟ Provident market and investment of apparent that the Fund Fund. money in companies Special Audit Report on the Performance of the State Printing Corporation The State Printing 1968 with an initial State Printing Corporation has been capital of Rs.15 million. Corporation established in the year The objectives of the (Amendment)Act, No.24 1968 under State Printing Corporation as in this Act of 1978, State Printing Corporation Act No.24 of and subsequently adopted Corporation
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Special Audit Reports Special (Amendment)Act, No.51 creating an uncertainty on proposals for a staff of of 1981 and State Printing the going concern of the 715 employees had Corporation institution. Under such a resulted in increase in the (Amendment)Act, No.7 circumstance, the employees cost. Further, of 1998, had been objective of this audit was the use of machines older referred to as to ascertain the reasons than 20 years by the accomplishment of attributed for the Printing Corporation had printing requirements of deterioration of the deteriorated the the Government, state efficiency of this leading production efficiency, corporations, statutory Public instruction and thus resulting inability to
boards, local government look into the measures accept the orders institutions and private that can be adopted to received. Moreover, the establishments, and convert the same into a dependency of the manufacture, import, profit generating Corporation upon the export, sale and purchase institution. Further, the printing orders received of books and stationery. matters contributed for from the Lottery Board The Corporation which is gradually declining the and the Education governed by a Board of Corporation into a Publication Department Directors headed by a position of continuing was observed as a risk. Chairman consists of a losses from the year 2013 This was vividly staff with 715 members at to 2017, too, were distinguished according present. The Corporation examined. to the situation faced by which was successful in the Corporation following Accordingly, the higher generating a net profit of the cancellation of the employee costs as well as Rs.41.8 million in the concession by the increase in the financial year 2013 has gradually Education Publication cost on short term loans declined to a position of Department to print books could be recognized as sustaining losses by the deviating from the tender the main factors attributed year 2017. It was further procedure. Accordingly, to the losses observed in observed that the liquidity it is crystal clear that if the years 2016 and 2017. position and the Return the Corporation does not Accordingly, granting on Capital Employed of adopt measures to shift to salary increase as the Corporation remained the production required by the budget deteriorating, thus diversification with the National Audit Office| Annual Report - 2018 105
use of new machinery, it to come. Further, it was institution by way of is unavoidable for the observed that it is resolving the liquidity Corporation to get rid of essential to bring the issues prevailing. the severe hardships Corporation back to a inevitably face in the days profit generating Report on Industrial Sand Mining Project done within the Yan Oya Reservoir Premises Report on Industrial Sand for the project by such and to propose the Mining Project done CAMCE Company that solutions that can be within the Yan Oya assigned the construction given for this.
Special Audit Reports SpecialAudit Reservoir Premises Yan works of this project. Yan The fields such as the Oya project had been Oya project office had procedures followed commenced by crossing informed that tentative when removing sand Yan Oya that connect to estimate of this sand deposit, implementation the sea from Pulmude deposit was of committee area by flowing around approximately 675,000 recommendations given 145 kilo meters starting cubes and its value was regarding the projects and from Ritigla Mountain grossly Rs. 2,700 million. charging fees when range, from Accordingly, the licenses supplying materials for Pamburugaswewa area in for mining of this sand Yan Oya project had been Trincomalee District. deposit had been issued checked when preparing This project had been by Geological Survey and the report and scheduled to be Mines Bureau to CAMCE examination of required completed by 31 May Company and 183 other documents for that and 2018 by incurring Rs. parties. The objectives of discussions with relevant 36,855 million and it had this report were to parties had been done. been identified that a examine on the social, Here, sample tests were huge sand deposit had technical and carried out regarding been deposited inside the environmental issues mining licenses as earth within the area arisen due to the resources and time was submerged to the informalities that not sufficient, and it could reservoir when mining to occurred when issuing not calculated the sand supply required materials licenses and mining as stocks collected in the
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Special Audit Reports Audit Special reservoir premises and deposit by Central environmental damage confirmed the actual Environmental Authority, occurred and future quantities of rocks, sand, not taking actions to existence of the reservoir soil and gravel that mined rehabilitate the and filling the places by CAMCE company as environment by mined currently in the the technical knowledge supervising the license reservoir premises, the was not sufficient. owner who escaped from premises should be the responsibility of restored by flattening the The responsible entities rehabilitation of stacks of soil. Further, the regarding the removal of environment by Bureau should be taken sand deposit were entities Geological Survey and action to introduce and such as Geological Mining Bureau and not implement the Survey and Mines taking required action to appropriate arrangement Bureau, Department of stop taking the illegal to take follow up actions Irrigation and Department money by the unofficial on that after issuing of Forest Conservation parties. On this situation, mining licenses and and the activities of the recommendations had enforce the Act. removing above sand been stated to solve issues deposit had been Therefore, it was by appointing a improper due to the non- concluded that it had been committee of three for execution of these entities affected unfavorably to examining the mining properly. Further, it was the environment as it had works. But, it was identified that there was not been managed observed that even the no transparency and properly and informality recommendations given formality of the mining when removing the sand by that committee had not activities as many issues deposit valued at Rs. 2.7 been implemented including giving sand billion even the income properly. mining licenses without that should be received to calling competitive and Accordingly, it was the government had been open bids, not revaluing suitable to stop sand lost from that. the environmental impact mining due to the impact from removing sand badly on the
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Special Audit Report on Feasibility Study and Procurement Activities of the Central Expressway Project Construction of a information provided by preparation of bid Northern Expressway had the Ministry of Higher documents and the been identified according Education and Highways, accuracy of evaluation of to the Expressway Master Road Development bids is doubt to the audit. Plan for the year 2007 to Authority and the Project (iii) The names, 2017 of the Road Director at the COPE signatures and the Development Authority discussion held on 19 designations of the (RDA) by the Ministry of September 2017 at 1430 officers for preparation,
Special Audit Reports SpecialAudit Higher Education and hour on the progress of approval on the Highways, presently the the Central Expressway engineering estimates for Ministry of Highways and Project and on the current the Project, approved date Road Development. In issues of the Project. and seal of the prepared further consideration, it is (i) SMEC, the consultant officers had not been confirmed that plans had for feasibility study had mentioned. been implemented to been paid an amount of construct a Highway to iv) The procedure for Rs.1,759 million as at 31 the Central Province since selecting a consultant and December 2014 and since 1990. Since there was no a contractor for the the reports are not in an national policies related Section I, II and III of the acceptable position, a to these constructions, the Central Expressway had sum of Rs..65 million had loss to the country cannot been contravened to the also been paid to outside be estimated and some of Section 1.1 of the Public institutions for various the observations had been Procurement Guideline - studies. However, a final included in this report. 2006 feasibility study report However, this report is had not been prepared (v) Because of not forwarded according to even up to date. following a competitive the concurrence with the bidding process, it had request made to the (ii) As the estimates had been contravened to the Auditor General to not been revised after Section 1.2.1 of the prepare a special audit identification of actual Public Procurement report based on the trace of the highway, the Guidelines -2006.
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Special Audit Reports Audit Special (vi) According to the with Fujitha Corporation It was observed that procedure followed in that had been stated in the public money and other selecting the contractor, it memorandum of the resources are wasted due had been contravened to Subject Minister by to the above mentioned the procurement cancelling the present mismanagement and there principles in the 1.4.2 and bidding process was is a big difference 1.4.3 of the Public contrary to the between the cost and the Procurement Guidelines. Procurement guidelines. value addition. Public debt utilized for projects (vii) The recommendation (x) Even though, the bid should be spent had not been obtained submitted by Fujitha had efficiency, economically from the Technical been rejected due to lack and effectively. It is the Evaluation Committee to of capacity, accepting and responsibility of the call bids from the implementing the request management to plan, institutions named by the made by the Japanese implement and maintain Japanese Ambassador. special advisor to adequate internal control reconsider and evaluate (viii) Even though the systems to ensure that the the bid once again was Embassy of Japan has public resources are contrary to the shown their un-wiliness utilized such manner. procurement guidelines. for following such an Further, when designing informal procurement (xi) Although the and implementing such process, the Secretary of procurement committee large scale Projects the Ministry had not been has recommended that the implemented under taken care of that and sent Fujita corporation is not foreign funds, the officers letters to the embassy by qualified, making effort who are involving with contrary to the by forcing Thaisei project activities should Procurement Guidelines. Corporation, the selected carry out a proper bidder to form a professional behavior and (ix) Although the Minster Consortium with Fujita is the related institutions of Finance has expressed contrary to the principles should work in a good his un-wiliness against of the procurement governance framework. the proposal of being guidelines. considered and negotiate
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Special Report of the Auditor General on the Performance of the Paddy Marketing Board The Paddy Marketing to restore the Board into out a comprehensive Board has been an efficient entity. The study to decide that incorporated in the year matters relating to the commercial activities can 1972 under the Paddy period from 2008 – 2018 be carried out before the Marketing Board Act, were examined and the establishment of the No.14 of 1971. The purchasing, selling, Board, failure in carrying Board has been import export process and out an optimum control established in achieving storing facilities were over stores, issuing of
Special Audit Reports SpecialAudit purchasing, selling, examined in the consumable stocks of supplying and distributing examination of operating paddy as animal food, paddy and rice as a efficiency of the Board issuing of stocks of paddy business considering as during the said period. to various institutions at the main objectives and Accordingly, in less than the cost and achieving several other consideration from the unavailability of an objectives as well. Even year 2008, except the year updated price policy. It though this Boardhas 2011, a gross loss had had been realized that been established in been reported every year steps such as sale of achieving the said in addition to the paddy through proper objectives, the Board had incurring of operating quotations, speedy become an unprofitable losses. This status had recovery of moneys entity during the period arisen in the Board as a recoverable to the Board from the year 2008 to the result of the irrational and release of year 2016 and it had sales price decided by the commitments by payment reported an operating loss Government or the Top of loans, establishment of of Rs.5,894 million by the Management. Moreover, a proper control over year 2016. This audit was in accordance with the stores and issuing rice at a carried out to examine the opinions of the Central rational price to external reasons or the Board to Bank of Sri Lanka, the institutions should be fall into this inefficient inefficiency had further carried out promptly. situation and to examine increased due to reasons However, it is concluded the steps that can be taken such as failure in carrying that action should be
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Special Audit Reports Audit Special taken to break the competing with the the Paddy Marketing monopoly existing in the private sector through the Board and making it an private sector by expedite restructuring of efficient institution. Special Audit Report on the Performance of Development Projects implemented by the District Secretariat, Nuwara Eliya Nuwara Eliya District that provision of Rs. study on weather 1,741 square kilometers 4,768,574,578 had been condition of the area, the in extent is consisted with allocated from 2013 to failures of projects by 5 divisional secretariats 2016. The make it accomplish by and 496 Grama Niladari implementation of 7,537 community based divisions. The projects had been societies without calling accomplishment of public commenced by utilizing open quotations when requirements efficiently, Rs. 3,613,421,660 out of awarding the contract and fairly, reasonably and it and the activities of evaluating about the friendly by a coordination 5,812 projects had been financial strength of that monitoring resources completed out of it. societies had been arisen. and institutions Although more than Further, it was observed productively for the 1,000 projects had been that the expected sustainable development implemented annually by objectives could not be that enables to contribute accomplishing these accomplished from the for the national projects by divisional projects implemented development with proper secretariats and local within the district as it planning in compliance government authorities, it was not done the with government policies was observed that issues identification of projects, by the public of the such as the officers with preparation of cost district is prioritized out technical knowledge were estimates, completion of of the main functions of not sufficient within the continuing projects, the District Secretariat. In district and actions had following proper order to achieve above not taken to recruit those procurement procedures, objectives, the financial officers, delays in preparation of indicators provision had been projects due to of division of provisions allocated annually by the commencement of accurately. Many government and, financial contracts without pre economic as well as National Audit Office| Annual Report - 2018 111
social issues had been departments as well as vacancies of officers, arisen from the generation ministerial and member taking proper actions of the projects free from of parliament in addition regarding misused public proper standards and to the capital provisions finance ,black listing the uncompleted projects due allocated from the Budget contractors who not doing to above issue and misuse annually in the period contracts properly. In that of public finance when from 2013 to 2016 and, manner, if actions will not implementing projects. the objective of this audit take immediately, the was evaluating the legal expected regional It was the main mechanism of that development could not be responsibility of the methodology and its achieved. Special Audit Reports SpecialAudit officers in District operation. Secretariat and Divisional
Secretariat that the Accordingly, it was responsibility of projects essential matter that
from capital provision taking steps such as given to implement the smooth the procurement regional development process for avoiding the projects by provisions of identified defects, various ministries and completion of prevailing
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Consolidated Fund National Security Public Enterprises Local Government Foreign Funded Projects Banking Plantation Industry Land Affairs Education Labour and Trade Union Relations Environment Foreign Affairs Foreign Employment Development of Fisheries Health and Nutrition Mass Media Law and Order and Southern Development Ports and Shipping
Highways Disaster Management Sports Women and Child Affairs Tourism Affairs Urban Development Industry and Commerce Housing and Construction Transport Social Empowerment Science and Technology Communication Higher Education
Sectorwise Power and Renewable Energy Petroleum Resources Rural Economic Affairs City Planning and Water Supply Irrigation and Water Resources Agriculture Cultural Affairs Prison Reforms, Rehabilitation and Resettlement Pension Benefits for Public Service Description of Provincial Councils Western Provincial Council Central Provincial Council Southern Provincial Council Northern Provincial Council
Summary of Audit of Summary Observations North Western Provincial Council North Central Provincial Council Uva Provincial Council Sabaragamuwa Provincial Council Eastern Provincial Council
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Inadequacy of the income to cover recurrent expenditure Increase in the balance of Public Debts annually
Increase in the per capita debt continuously Lack of the income collected to pay the installments of public debts and interests thereon Failure to account domestic bank loans obtained for the payment of pensions gratuity Omitting the balances of foreign loans from accounts
ConsolidatedFund
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Consolidated Fund ConsolidatedFund
In terms of the Article 148 of the Chapter Legal provisions required for the XVII of the Constitution of the expenditure of the Government for year Democratic Socialist Republic of Sri 2018 have been made by the Lanka, Parliament shall have full control Appropriation Act No 30 of 2017. over public finance. In terms of the Accordingly allocations to the value of Rs. Article 149 of the constitution, the 4,298 billion have been made for the Government shall remit income collected supplies and services of the Government to the Consolidated Fund. The method for for the year under review. Particulars are the payments from Consolidated Fund has given in table 05 below.
been stipulated in Article 150 and 152.
Source Provision Provision Total for capital for recurrent expenditure expenditure Rs. billion Rs. billion Rs. billion Provisions made for supplies and services by Appropriation Act. 831 1,312 2,143 Provisions for specific legal services , which have become a financial burden to Consolidated Fund and approved by existing laws 1,153 852 2,005 Provisions made additionally for the supplies and services 30 - 30 Provisions made additionally for the expenses on specific legal services 86 34 120 Total 2,100 2,198 4,298 Table 05 –Provision made for the supplies and services of the Government Source – Department of Public Accounts
In terms of the section 6 of the Department of National Budget –vote 240. Appropriation Act No 30 of 2017, an Rs. 312.97 billion out of the above additional provision of Rs. 313.30 billion provisions have been transferred during has been made only for the utilization of the year under review to other votes. provision for the purposes mentioned in Accordingly Rs. 0.33. billion out of the para 2.3.3 of annual budget estimate under provisions made for the projects was supplementary assisting services and remaining unspent by the end of the year urgent requirement obligations project under review. Particulars are given in table under the development programme of the 06
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Nature of the Net provision Transfer of Balance Balances as a expense provisions to other percentage of net votes provision Rs. billion Rs. billion Rs. billion
Recurrent 130.99 130.92 0.07 0.05
Capital 182.31 182.05 0.26 0.14 Total 313.30 312.97 0.33 0.11 Table 06 –Provision and transfers under supplementary assisting services and urgent requirement obligations project Source – Department of National Budget
Provisions of Rs. 4,298 Rs. 880 billion has been remained unutilized.
Consolidated Fund Consolidated billion have been made provided for capital These balances during the year under expenditure of the year consisted of a range review for the supplies under review and Rs. 625 from 25% to 99% and services of the billion out of the above from the net government and the has been utilized. provision provision made for the Accordingly 28.9% out of previous year has been the provisions made i.e Provision for capital Rs. 3,860 billion. Rs. 225 billion remained expenditure was Rs. 880 Comparatively to unutilized. The balance of billion except payment of previous year the the provisions can be loans relevant to the year provision of the year undr shown as per vote in the under review and Rs. 625 review has been increased following manner. billion i.e. 71.04% out of by Rs. 438 million. i.e. by it has been utilized. 11.3 %. Rs. 3,971 billion Total provisions of During the previous year out of the provisions Rs. 7 billion made for capital provisions of Rs. made for the year under 121 recurrent votes 658 billion has been review has been utilized of 59 heads , and Rs. utilized. Accordingly the and Rs. 327 billion i.e. 37 billion which have utilization of capital 7.6% from the provisions been made for 369 provisions has marked a made remained unspent. recurrent votes decrease by 3Rs. 32 relevant to 101 heads billion during the year The total net provision remained unutilized. under review made for recurrent Rs.36 billion out of comparatively to previous expenditure has amounted the Rs. 59 billion year. But the provision to Rs. 2,181 billion and provided for recurrent for recurrent expenditure Rs. 2,109 out of the above expenditure and Rs. for the year under review has been utilized. 186 billion put of Rs. was Rs. 2,181 billion and Accordingly Rs. 73 372 billion provided Rs. 2,109 out of the above billion remained for capital i.e. 96.69% has been unutilized and it held expenditure ( Total of utilized. It has marked an 3.3% from net provision. Rs. 222 billion) increase by Rs. 163
118 National Audit Office | Annual Report - 2018 billion when comparing the year under review comparing with the ConsolidatedFund with the previous year. except payment of loans previous 7 years, it has Accordingly the total has held 19.25% from become possible by the expenditure of the estimated gross domestic end of the year under previous year, which has product and the value of review to reduce the total amounted to Rs. 2,603, the same in previous year expenditure of the state (Except payment of was 19.59%. (Except payment of loans) , has marked an Comparatively to the loans) as a percentage of increase up to Rs. 2,734 previous year it has gross domestic product. billion by Rs. 131 billion. marked a decrease in the Particulars are given in The total expenditure of year under review. When Diagram 30.
22
21.5 21 20.5 20 Total expenditure as a 19.5 percentage of gross domestic production 19
grossdomestic production 18.5
Totalexpenditure a as percentage of 18 2011 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 30 –Total expenditure as a percentage of gross domestic production Source – Financial statements of the government and annual reports of the Central Bank
Rs. 852 billion has been spent during the expenditure and the income collected year under review for interest of local and during the year was not sufficient to cover foreign loans, discounts on treasury bills the total recurrent expenditure. and treasury bonds. It has held 40.41% Accordingly the recurrent expenditure from the total recurrent expenditure and it over the total income of the state during has marked an increase by Rs.117 i.e. the year under review was Rs. 174 billion. 15.85% comparatively to the previous Further Rs. 625 billon has been spent year. In addition to the above, Rs. 485 during the year under review for capital billion, Rs. 599 billion and Rs. 172 billion expenditure and it has to obtain local and have been spent for personal emoluments, foreign loans to settle a part of recurrent grants and aids and expensed for other expenditure and investment of the goods and services respectively. Above government and installments of loans. expenditure has caused a significant Accordingly it has to pay a huge amount contribution for the total recurrent as annual loan installments and interest
National Audit Office| Annual Report - 2018 119
and that cost was showing gradual increase Rs. 3,971 billion and 31.14% and 21.46% annually. have been made out of the above to pay loans and interest of loans and discounts. Total of recurrent expenditure, capital The way that the total expenditure has expenditure and settlements of loans have been distributed among 16 identified amounted during the year under review to sections is given in Diagram 31
Magapolis, Western Development
Consolidated Fund Consolidated Education 2% 2% Health and Other Sections Defance Nutritions 7% 7% 4% Agricalture, Plantation and Irrigation 2% Provincial Council and Local Government 5% Repayment of Domistic and Foreign Loans 31%
Payment of Interest on Domistic and Foreign Loan 21%
Public Housing, Administration, Constuctions and Home Affairs Engineering 7% 1% Development of Wildlife, Forest Public Enterprises Conservation Law and and Rural Economy Social 1% Order,Prision Higher Education, and Commerce Empowerment and Rehabilitation and Highway, Technical Affairs Walfair, and National Integration Education and 3% 1% Women and Child Vocational Training Affairs 6% 1% Diagram 30- The way that the total expenditure has been distributed among 16 identified sections Source – Financial statements of the republic 2018
120 National Audit Office | Annual Report - 2018
Income of the state ConsolidatedFund
In terms of the annual budget estimate showed a growth by Rs. 90 billion i.e. 2018 approved by the Parliament of the 4.9% to over Rs. 1,845 billion, which was Democratic Socialist Republic of Sri collected in previous year. When the Lanka, the income of the state estimated as income collected by the state during the income from tax, non-tax income and year under review and previous year, it has other income has amounted Rs. 2,233 held values as 13.4% and 13.7% billion. When it is compared with Rs. respectively. Accordingly the income of 1,914 billion, which is the estimated the state has decreased as a percentage of income of the previous year, it has marked gross domestic products. The percentage an increase by 319 billion i.e. 16.7%. of the year 2016 was 14.3% and then it
Comparatively to estimated income, Rs. showed a gradual decrease in later years.
1,935 billion has been collected as the Relevant particulars are given in Diagram income of the year under review and it 31.
16.00
14.00
12.00 10.00 8.00 Government Revenue as a 6.00 percentage of gross domestic product 4.00
ofgross domestic product 2.00
Government a percentageas Revenue 0.00 2011 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 31 – Government Revenue as a percentage of gross domestic product Source - Financial statements of the Government.
The income of the state has been reported though it was expected to collect Rs. 1,243 under two main categories as Tax income billion from tax on local goods and and Non-tax income and that tax income services only Rs. 1,060 out of the above has again been categorized on as income has been collected. In the meantime it has tax, tax on local goods and services, tax been estimated to collect Rs. 42 billion on international trade etc. and then shown from tax on international trade, only Rs. in financial statements of the state. Even 341.7 billion has been collected by the end though it was expected to collect Rs. 370 of the year under review. Even though it billion as the income tax for the year under was expected to collect Rs. 2,034 billion review, only 310 billion out of the above from taxes it has become possible to could have been collected. Further even collect only Rs. 1,712.3 billion i.e. 84%out National Audit Office| Annual Report - 2018 121
of the above. It has been estimated to the year under review are given in collect Rs. 199.1 billion from other Diagram 32 income, which are non-tax income, during the year under review, Rs. 222.8 billion has been collected by exceeding the estimated target by Rs. 23.7 billion. Estimated income and collected income of
1400
1200
1000
Consolidated Fund Consolidated 800
600 Estimated Revenue 400 Actual Revenue
200 GovernmentRevenueRs.Billion 0 Income Tax Tax on Tax 0n Non-tax Other Domestic International Revenue Goods and Trade Services
Diagram 32 - Estimated and actual income Source - Financial statements of the republic - 2018
Budget deficit
'To reduce the loans of the Government to Accordingly General Treasury has failed the farsighted level by way of ensuring to take action as per the provisions of that the budget deficit at the end of year Financial Management (Responsibilities) 2006 may not exceed 5% from the gross Act. domestic product estimated for the year and further that level is maintained Total income of the Government of the continuously' has been mentioned in year under review is Rs. 1,935 billion and section 3 (a) of Financial Management total expenditure of the Government (Responsibilities) Act No 03 of 2003 as an (Recurrent expenditure+ Government objective based for a responsible financial investments) is Rs. 2,734. Accordingly the management to be followed by the deficit of the budget has amounted to Rs. Government. However the estimated 799 billion. Income, expenditure and budget deficit in the previous year and budget deficit of the state in the year under year under review has been 7.77% and review and previous 7 year are given in the 5.83% from gross domestic product. following Diagram 33.
122 National Audit Office | Annual Report - 2018
ConsolidatedFund
3000
2500
2000
1500 Total Government Revenue Total expenditure 1000 BudgetDeficit Budget deficit
500
0 GovernmentRevenue, Expenditure and 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 33 - Total income, total expenditure and budget deficit of the Government Source - Financial Statements of the Republic
Financing the budget deficit
Comparatively to the previous year, the billion. Accordingly the positive balance budget deficit of the year under review has of Rs. 20 billion , which is the net change marked an increase by Rs. 41 billion i.e. of savings accounts and liabilities and Rs. 5.42% and further net foreign loans has 108 billion received for granting also marked an increase by Rs. 83 billion Hambantota Harbour on lease and Rs. 26 i.e. 21.63% from 382 billion to Rs.465 billion on recovery of sub loans have made billion. However net local loans has a higher contribution for financing the marked a decrease by Rs. 39 billion i.e. budget deficit of the year under review. 18.52% from Rs. 209 billion to Rs. 170 Inadequacy of the income to cover recurrent expenditure
In terms of the financial statements of the billion, it was not sufficient to cover the Government, the recurrent expenditure for recurrent expenditure of the year under the year under review was Rs. 2,109 review. Accordingly Rs. 174 billion has billion and capital expenditure was Rs. 625 been spent as recurrent expenditure over billion and the aggregate of both was Rs. the total income of the Government. 2,734 billion. Since the total income earn Particulars for year 2010 up to 2017 are by the Government was only Rs. 1,935 given in Diagram 34.
National Audit Office| Annual Report - 2018 123
2500
2000
1500
Government Revenue 1000 Recurrent Expenditure
500 ExpenditureRs.Bilion
Consolidated Fund Consolidated 0 2010 2011 2012 2013 2014 2015 2016 2017 2018
GovernmentRevenueand Recurrrent Year
Diagram 34 - Inadequacy of the income of the Government to cover the recurrent expenditure Source - Financial statement of the Government
Public debt
As per Article 148 of the Constitution of billion and non local loans, which were not the Democratic Socialist Republic of Sri bank loans, obtained was Rs. 2,178 Lanka, Parliament shall have full control billion and the aggregate of both was Rs. over financial control including public 3490 billion. When comparing them with debt. Accordingly approval of the the loans of Rs. 3,150 billion obtained in Parliament should be obtained for all the previous year, it has marked an increase by loans of the Republic. Accordingly Rs. 340 billion i.e. 10.79% . Government approval of the Parliament has been has paid more attention to obtain local granted to obtain loan within or outside Sri loans and when the local loans obtained by Lanka for or on behalf of the Government the Government during the year under as per section 2.1.(a) of Appropriation Act review was compared with the local loans No 30 of 2017. of Rs. 2,549 billion obtained during previous year, it has marked an increase by In terms of the financial statements of the Rs. 170 billion i.e. 6.66%. Particulars are Government, the foreign loans obtained given in table 08 for the year under review was Rs. 772
124 National Audit Office | Annual Report - 2018
Description 1027 1028 ConsolidatedFund Rs. billion Rs. billion Foreign Loans 601 772 Local Loans Treasury Bills 1,624 1,653 Treasury Bonds 549 763 Foreign Exchange Bank Units (Non- Project) 33 62 Development Bonds 339 234 Foreign Exchange Bank Units (Non- Project) 4 6 Total of Local Loans 2,549 2,718 Total loans obtained during the year 3,150 3,490 Table 08 - Local and foreign loans
Source - Department of Public Accounts/ Financial Statements of the Government
In terms of the financial statement of the 9,588 by 31 December 2017, it has marked Government, the total of the public debts an increase by Rs. 1,688 billion i.e. 17.61 to be paid by 31 December 2018 was Rs. % . The particulars of total public debt in 11,276 billion and when it was compared previous year and at the end of the year with the balance of public debt of Rs. under review are given table 09
Loan category Balance as at 31 December 2017 2018 Rs. Billion Rs. billion Treasury bills 725 759 Treasury bonds 3,755 4,000 Rupee loans 24 24 Sri Lanka Development Bonds 638 614 Local loans from Foreign Exchange 64 101 Foreign Exchange Bank Units (Projects) 14 19 Loans obtained to construct Suhurupaya building - 7 Lease creditors 12 8 Total local loans 5,232 5,532 Foreign (Projects) 2,664 3,194 Timely loan facilities from foreign funds 217 330 International Sovereign Bonds 1,475 2,220 Total Foreign Bonds 4,356 5,745 Total balance of public debt 9,588 11,276 Estimated gross domestic product 13,500 14,200 Total balance of public debt as a percentage of estimated gross domestic product 71.02 79.40 Table 09- Composition of public debt Source - Department of Public Accounts/ Financial Statements of the Government
National Audit Office| Annual Report - 2018 125
In terms of the Financial Management General Treasury that that the Ministry of (Responsibilities) Act No 03 of 2003 Finance has taken action in compliance amended by Financial Management with such limits, it is evident that limit (Responsibilities) Act No 15 of 2013, the has exceeded when considering the maximum value of the liabilities, which relevant liabilities of public enterprises , can exist at the end of a certain year, which have been accounted outside the should not exceed 80% from the estimated statement of financial position. Particulars gross domestic product of the year. Even are included in table 10 though it is shown as per the reports of
Liabilities Liabilities as at 31 December 2018
Consolidated Fund Consolidated Rs.Billion Bank overdraft 149 Advance of Central Bank 199 Public debt 11,276 Liabilities not accounted in financial statements: Foreign loans which are accounted outside balance 366 sheet Under accounting of the balance of treasury bonds 344 Foreign loans not accounted due to lack of provisions 58 Loans obtained from commercial banks for the 65 payment of pension gratuity Loans obtained to make payments for the construction 4 of International Stadium at Suriyawewa Total liability 12,462* Gross domestic product 14,200 Total liabilities as a percentage of the gross domestic product 87.76 Table 10 – Year ended to be the Liabilities * Rs. 829 billion, which is the value of the statement of liabilities of annual guarantees and letters of concessions financial statements of Department and issued to the banks for the loans special expenditure units ( As per the obtained by public enterprises on the reports of the Department of Public guarantees of General Treasury, and Accounts) have not been included in Rs. 259 billion, which are included in the above mentioned liabilities.
Per capita debt When the balance of public debt is marked an increase up to Rs. 520,363 by compared with the mid-term population, 31 December 2018. When it is compared the per capita debt, which is at the level of with Rs. 447,123, which is the per capita Rs. 291,304 by 31 December 2013, has debt by 31 December 2017, it has marked
126 National Audit Office | Annual Report - 2018 an increase by Rs. 73,241, i.e. 16.38% as Balance of public debt for the period of ConsolidatedFund at 31 December 2018. Due to holding 45% previous 05 years and the year under of the balance of public debt by foreign review , mid-term population and per loans and devaluation of Rupee, the value capita debt are included in table 11 of per capita debt has recorded further a higher value.
Description 2013 2014 2015 2016 2017 2018 Balance of public debt as per financial statements of 5,996 6,577 7,685 8,794 9,588 11,276 the Government (Rs. billion) Mid-term population („000)** 20,585 20,771 20,966 21,203 21,444 21,670 Per capita debt (Rs) 291,304 316,664 366,544 414,751 447,123 520,364 Table 11- Balance of public debt, mid-term population and per capita debt Source – Financial Statement of the Government and annual report of the Central Bank of Sri Lanka
Further the share of foreign in the total Rs. 1,029 has occurred on the balance of balance of public debt is at a significant foreign loans at the end of the year under level and the balance of foreign loans to be review due to devaluation of the Rupee. settled has recorded continuous growth The balance of the loans may record due to the effect made on the foreign loan escalation further in the coming years due balances in the face of the devaluation of to the increase in the loan installments and Rupee. An additional burden of loans of interests and devaluation of Rupee.
Lack of the income of the government to pay the installments of public debts and interests relevant to the year
Even though the income of the interest of the year under review. Under Government has recorded an amount of such circumstance the Government has Rs. 1,935 billion during the year under compelled to obtain Rs. 2,718 billion and review, Rs. 2,856 billion and Rs.852 Rs. 772 billion as local loans and foreign billion have been paid as the loan loans to cover the above requirement and installments and interests of the year under bear the expenses of the government and review and the aggregate of both is Rs. the aggregate of both has been Rs. 3,490 3,708 billion. Accordingly Rs. 1,773 is billion. Such situation is shown in table 12 required further over income of the comparing with previous years. government to pay loan installments and
National Audit Office| Annual Report - 2018 127
Description 1024 1025 1026 1027 1028 Rs. billion Rs. billion Rs. billion Rs. billion Rs. billion
2,020 2,793 2,518 2,549 2,718 Local loan obtained during the year* Foreign loans obtained 423 556 574 601 771 during the year Total of the local and foreign loans obtained 2,443 3,350 3,092 3,150 3,490 Payment of installments for 1,584 2,265 2,073 2,340 2,549 local loans **
Payment of installments for 107 187 145 219 307 Consolidated Fund Consolidated foreign loans Payment of interest for local 376 450 510 597 668 loans Payment of interest for 70 77 101 139 185 foreign loans Total of the loan installments 2,137 2,980 2,829 3,295 3,708 and interest Income of the government 1,127 1,394 1,699 1,845 1,935 Loan installments and interest which exceeded the 1,010 1,586 1,130 1,450 1,773 income of the Government Balance of the public debt as 6,577 7,685 8,794 9,588 11,276 at 31 December Table 12 – Obtaining public debts , payment of installments and interest, income of the government Source – Financial statements of the Government
Even though the total of the income of the total payment of loan installment and year under review has marked an increase interest of the previous year has held by Rs. 90 billion i.e. 4.88% comparatively 104.60% from the total amount of loans to the previous year, it has marked a obtained during the year and it has decrease by Rs. 298 billion i.e. 13.34% amounted to 106.23% in the year under comparatively to the estimated income. review. Accordingly the total loans Further the amount of net loans (Local and obtained during the year were not Foreign loans) has marked an increase in sufficient even to pay the loan installments the year under review comparatively to and interest of the year. Accordingly the previous year by Rs. 44,700 million and total balance of public debt at the end of payment of interest for loans has marked the year has recorded a continuous growth an increase by Rs. 117 billion i.e. 145.85% for several years . Particulars are included during the year under review in the Diagram 35 comparatively to the previous year. The
128 National Audit Office | Annual Report - 2018
4000 3500 3000 2500 Government Revenue 2000 Loan installments and Interest Rs.Billion 1500 1000 Obtained by Domistic and 500 Foreign Loan 0 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 35 – Obtaining public debts, payment of installments and interest, income of the government Source – Financial statements of the Government Fund Consolidated
Observations made at the development projects accounting the audit conducted on public as expected. face value of debt are given in brief in As per the financial treasury bonds the following manner.. statements of the instead of net government submitted values in their The total balance of for the audit, the issuance. public debt, which has outstanding balance However the face been Rs. 11,276 of the public debt as value of treasury billion by 31 at 31 December 2018 bonds issued December 2018, has has amounted to Rs. before 2016 has amounted to 79.40% 11,276 billion. further not been from the estimated However that balance adjusted in the gross domestic has been understated accounts and product, which has by Rs. 828 billion in therefore thealato been Rs. 14,200 financial statements oit ioiai li billion. Accordingly a due to following adatrsdi lyrr atr considerable amount reasons. aay syradrataar of local and foreign i r. 344billion loans obtained by the The accounting in financial Government have policy on treasury statements by 31 been utilized for a bonds included in December 2018. long time to settle financial loan installment and statements of the The balance of the interest. Under such government has loan to the value circumstance it has been rectified of Rs. 366 billion, become impossible to from year 2016 which existed by make sufficient and accordingly it 31 December investment for the has started 2018 relating to
National Audit Office| Annual Report - 2018 129
08 foreign loan balance of loan When note 29 of agreements under obtained by the financial the agreed Government to statements of the liabilities, has not build Hambantota Government, loan been included in harbor, has been balance in foreign financial obtained by exchange in the statements. General Treasury statement of from the effective foreign loans as at Rs. 172 billion out date of the 31 December of the loan aforesaid 2018 has been balances included agreement. But converted to in 08 foreign loan the balance of the Rupees, the
agreements said loan has not adjustment of Consolidated Fund Consolidated mentioned above, been included in exchange as at 31 has to be settled the financial December 2018 from the loans statements of the which is relevant obtained by the Government. to above Government to Further the mentioned construct balance of loan realized loans but Hambantota has been removed not accounted so harbor. Approval from the financial far, has also been of the Cabinet of statements of Sri adjusted the loan Ministers has been Lanka Ports balance. Due to granted on 04 Authority as at 31 such situation the August 2017 to December 2018. balance of foreign the Cabinet loans at the end Memorandum Rs. 39 billion in of the year has submitted by the relation to 50 been overstated by Ministry of Ports foreign loan Rs. 9 billion and Shipping agreements relating to 36 Affairs under the realized in year foreign loan title „ 2018 and Rs. 19 agreements and Concessionary billion in relation understated by Rs. Agreement for to 15foreign loan 13 billion in Hambantota agreements have relation to 02 harbor” and not been foreign loan bearing no accounted as agreements. MPS/SEC/2017/3 foreign loans even 2 dated 20 July by 31 December The outstanding 2017. 2018 and the balance of the Accordingly the aggregate of both loan obtained by responsibility to has amounted to the Department of pay the Rs. 58 billion. Pensions from outstanding Commercial banks 130 National Audit Office | Annual Report - 2018
to pay pension payment of the Government in the ConsolidatedFund gratuity from year interest of the loan previous year. 2014 was Rs. 65 has been Accordingly it has failed billion as at 31 commenced from even in the year under December 2018 year 2018 by way review to transfer the tax and that value has of providing income to the customer. not been necessary budget
accounted allocations. The In terms of the identifying them payment of financial statements as local loans in installments of of the Government in financial loan has to be year under review, statements. commenced from more that 27% from 2021 after lapse of VAT on local goods Sri Lanka Potrs the concessionary and services and Authority has period of 03 years. nation building tax obtained a loan However that has been contributed from Peoples value has not been to the total income of Bank in order to accounted the Government. The pay the identifying them contribution from the outstanding as local loan in tax imposed on amount of Rs. 4 financial alcohol and cigarettes billion, which has statements. (Excise) was 5.88% to be paid to the and more than 19% of contractor for the Audit observations made the total income has construction of in the sample tests made been covered from the Suriyawewa on the collection of production tax international income of the government imposed on cigarettes, cricket ground. As are given in brief in the alcohol, motor vehicle per the Cabinet following manner. and petroleum Memorandum No productions. 17/2660/706/111- The tax imposed on local
1 dated 20 goods and services out of In terms of the November 2017 the tax income collected financial statements and the cabinet during the year under of the Government, decision, the review has amounted to Rs. 342 billion has responsibility to Rs. 1,060 billion or been collected from pay the aforesaid 61.91% from the total tax the tax imposed on loan and relevant income and 54.78% from international trade and interest has been the total income of the it has held 19.95% entrusted to the Government. It has held from the total tax former Ministry of 61.32% from total tax income and 17.65% Finance and income and 55.51% from from the total income Media. total income of the of the Government. Accordingly the National Audit Office| Annual Report - 2018 131
However the As per the annual collection of income Imposing a higher estimates of 2018, from the taxes tax ration by the income estimate of imposed on Government Provincial Councils international trade has Growth in the tax was Rs. 99 billion but marked a decline by income due to the records have not been Rs. 30 billion i.e. increase in the maintained on the 7.97% during the year imports on special actual income under review occasions. relevant to the above. comparatively to the Growth in the tax previous year. Main income due to In terms of the reason for such escalation of the matters revealed by decline is the decrease
Consolidated Fund Consolidated prices of goods the Guideline No in importation tax by and services in the 01/2015 dated 20 July Rs. 40 billion during foreign market. 2015 of the the year under review. Department of the Enhancement in Public Finance the income on tax Even though the Policies for the due to the growth following factors have estimation, collection, of import cost made a considerable supervision and occurs as a result contribution for reporting of the of the decline in higher contribution income of the foreign exchange and growth in the Government, rate. Further income, which can be evidences have not comprehensive treated as indirect been submitted to the details on the taxes in the income audit by the effect made to the structure of the Department regarding income of the Government as the review of non-tax Government due mentioned above, income or action to emitting of Departments which taken to take further taxes on foreign are collecting income measures in this trade agreements have not made respect. and other laws, adequate measures to mitigation and calculate the financial Even though income releasing of taxes value of these effects. has not been have not been Under such situation, estimated under 06 considered in the it is observed that revenue codes of the evaluation of the only the growth in the budget prepared for performance of income collected is the year under review, the relevant not sufficient to an income to the Departments. measure the real value of Rs. 229.9
performance of the million has been Department, which collected by the end are collecting income. 132 National Audit Office | Annual Report - 2018
of the year under submitted for the ConsolidatedFund these 06 revenue An income of Rs. 3 audit. codes. billion remained in arrears by the end of Charges recovered for Even though it was the year under review the service deliveries expected to collect under 3 revenue have not been revised income of Rs. 18 codes, which were billion for the year remaining in arrears for previous 3 years in under review under 06 for years. Particulars terms of the Public revenue codes, no on the action taken Finance Circular No income has been either by Accounting collected under these Officer or Department 01/2018 dated 17
revenue codes by the of Public Finance January 2017.
end of the year under Policies have not been
review.
National Audit Office| Annual Report - 2018 133
134 National Audit Office | Annual Report - 2018
Delay in Amendments to Acts on National Security
Non- performance of the function of the Ministry relating to the Controls on Explosives
Maintenance of Internal Funds and Projects by the Security Forces
Construction of the Headquarters Building of the Ministry of Defence Failure to make amendments to the Defence Academy Act
Non-operation of the Teaching Hospital of the University of Defence in full capacity
National Security National
National Audit Office| Annual Report - 2018 135
136 National Audit Office | Annual Report - 2018
National Security Security National
The objectives of the Ministry of Defense Assist in maintaining the dignity and are the maintaining the territorial integrity majesty of Sri Lanka. of Sri Lanka and ensure the defense of air, Implementation of the policies on sea and land zones of the Island. The programmes and project related to following activities are carried out by defense. five Departments and eight Statutory To assist the Police in the maintenance Bodies under the purview of the Ministry of law and order when required. to achieve the said objectives. To ensure the security of life and property. Ensure the maintenance of the Regulations of Small Arms. territorial integrity and defense of Sri Lanka. The matters observed at the audit test Maintain the defense of the air, sea and check carried out on the Ministry of land zones. Defense and the institutions functioning Directing the research and under the purview of the Ministry are development activities related to summarized below. defense. Delays in Amendments required to be made in the Parliament Acts on National Security The amendments are required to be made revision of charges under the Private on recovering of general charges on Security Services Regularity Act, No. 45 services provided by the government in of 1998 and Firearms ( Amendment ) Act, terms of the Circular No, PED/04/08/01/59 No. 22 of 1996 had not been made even at of 11 December 2015. However, the the end of the year under review.
Functions of the Ministry of Defense relating to the Controls on Explosives not implemented
As per the Explosive Law, No. 21 of 1956 district, it was reveled that records to be , the powers on use and controls over the maintained to control over the use of explosive within the country is rest with explosives such as details of license the Ministry of Defense and such powers holders and issues of explosives etc had are implemented by the Ministry through not been maintained in proper manner, Assistant Directors of Explosive Controls Further, it was revealed at the site assigned the each District Secretariats. inspections made in Kurunegala and According to the audit tests carried out at Puttlam districts that 35 metal quarries the Explosive Control Offices at were running without a license thereon. Kurunegala, Puttalm and Anuradhapura
National Audit Office| Annual Report - 2018 137
Internal Funds and Projects maintained by the Security Forces
It was regularly pointed out in the Auditor November 2009 , proper action had not General‟s Reports in the previous years been taken thereon. It was revealed in the that the need of strengthening of the detailed audits carried out in this parliamentary controls over the various connection that 03 Holiday Resorts and internal funds and projects managed by agriculture farms had been conducted by the security forces for commercial the Sri Lanka Air Force and conducting purposes to generate profits . Further, the of 07 Holiday Resorts and 05 Reception directions had also been issued by the Halls by Sri Lanka Navy on commercial
Committee on public enterprises thereon basis and no information on financial and National Security National and no action taken to stipulate a proper operating results were presented along mechanism. According to the directions with the financial statements . Further, the issued it was expected to form such share ownership of the Company rested projects which use the physical and human with 05 officers of Sri Lanka Air Force resources of the tri forces, as statutory and the Committee on Public Accounts fund under a common platform, as enable had directed to reform the Company as to supervise by the parliament and enable to receive the share ownership to subject to audit annually. Eventhough the the General Treasury. However action had Secretary of the Ministry of Defense had not been taken to initiate the process even issued instruction in this connection by as at 31 December 2018. the Letter No EA/IA/05/05(02) of 11
Providing of welfare facilities to the families of war heroes deceased or disabled The institutions established under the Rs. 833.51 million had been made to 03 Ministry of Defense to provide welfare institutions established under the Ministry facilities to the family members of war to implement housing projects and out of heroes deceased or disabled had limited that a sum of Rs. 787.53 had been utilized. their services only to provide houses and housing loans and implement the Further, the Ministry of Defense had not scholarships to the children .It was taken action to conduct studies to observed that proper coordination among understand the social issues faced by the the institution had not been maintained on war heroes, spouses and other family the activities implemented . A provision of members and launch a proper mechanism to solve such issues.
138 National Audit Office | Annual Report - 2018
Construction works of the Headquarters Building of the National Security National Ministry of Defense
The progress on construction works of the remained in the Sri Lanka Army building for Headquarters of security Headquarters located at Galle Face area forces were remained with further delays. had been shifted to other government and The estimated cost amounting to Rs. 25 private owned buildings in Colombo and billion in 2011 on construction works had suburbs and located since 2011. It was increased upto Rs.55.60 billion due to observed that building rents amounting to amendment of the designs of the Rs 1,566 million had been spent up to 31
constructions subsequently. The offices December 2018.
Academic activities of the Sir John Kotalawala University of Defense The Sir John Kotalawala University of Officers of armed forces , 819 students Defense had been established under the transferred from the South Asian Institute Sir John Kotalawala Defense College of Technical and Medical studies Act, No.68 of 1981 , amended Acts of (SAITAM) and 192 foreign students. No. 27 of 1988 and No.50 of 2007 and Eventhough the provision had not been according to the provisions of said Acts, made to award Medical Degrees for local the degree programmes conducted by the students, it was observed that intake of 64 institute had been limited to studies on students had been made as the foreign defense purposes only. However, the students who were local students having University had conducted degree duel citizenships programmes for sectors such as Medical, Law and Engineering etc due changes of Eventhough there is a competition in the the subsequent requirements and awarded market to promote students for degree degree certificates, without being obtained programmes in the universities on necessary authorization through making charging fees , no action had been taken by amendments to the above mentioned Acts. the Defense University to prepare a business plan for next years. Therefore, it The student population of the Medical indicated that there was no attention made Faculty of the Defense University as at 31 adequately to meet the future market December 2018 consisted with challenges . 1,393 students including 112 Cadet
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The Teaching Hospital of the Sir John Kotalawala University of
Defense Eventhough the operational activities of December 2018. Further, 85 officers the Teaching Hospital had been deployed under contract basis had been commenced in December 2017, it was not vacated the posts as at 30 June 2018. The functioned in full capacity . The Teaching Teaching Hospital consisted with all the Hospital consisted with 433 patients beds facilities had remained underutilized due as at 31 December 2018 and only the to delays in preparation and obtaining treatments had been made to 2,012 in door approvals on Scheme of Recruitment of patients during the period from 31 March the staff. to 31 December 2018, Therefore, the The Loans of US$ 177.33 million in National Security National average bed utilization ratio had remained only at 04 patients during the said period. foreign currency and Rs 3,165,12 million Further, only 25,735 patients had been obtained from the National Savings Bank treated as at 31 December 2018 through 16 under the guarantee provided by the outdoor clinic centres implemented, General Treasury to construct the eventhough there was a capacity to Teaching Hospital had been restructured provide treatments for 25,735 patients. on 17 September 2017. Therefore, US$ 82.33 million equivalent to Rs 12,733.34 The inadequate deployment of staff million had been converted as the Rupee member was the reason for running of the Loan and added the interest amounting to Teaching Hospital with less capacity. The Rs 717.92 million payable as at 31 cadre of the medical and administrative December 2018 and loss on foreign staff of the Teaching Hospital consisted currency exchange amounting to with 1,380 officers and 516 officers Rs.617.47 million to the Rupee Loan. As a respectively and actual cadre consisted result total loan to be payable by the with only 437 officers 284 officers General Treasury and the Defense respectively including the officers University since 2013 had become as recruited though contract basis and US$ 95 million and Rs 17,274.55 million released from armed services as at 31 respectively. Assets Management
A loss of Rs 74.76 million had been Action had been taken by the Civil incurred by the Sri Lanka Air Force, as a Security Department to construct an new result of misplacing of Rader Receiver and building Headquaters office at Molpe in an Antenna Scanner while transporting by Panadura. The land of the building air to China on 25 April 2014 for constructed was belongs to a temple and repairing purposes. A preliminary report acquired on lease basis for 30 years period. in this connection had been furnished on Further, the clauses were included in the 31 August 2015 and no futher action had lease agreement to transfers the ownership been taken even as at 31 December 2018. of the building to the temple, after end of the period of the lease.
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Main Quarry
es lands According to Information presented, 101 of 389 Institutions running at a Loss
Expression of Adverse Opinions relating to 13 Institutions on the Financial Statements presented to Audit
Financial malpractices and frauds Non-presentation of Financial Statements to Audit of 59 Public Enterprises Public Institutions relating to the year 2018
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Public Enterprises Enterprices Public
A public enterprise means is an entity with Specified Business Enterprises the power to contract in its own name, has Statutory and Non statutory funds been assigned the financial and operational Government Owned Limited Liability authority to carry on a business, sells Companies goods and services in the normal course of Regulatory and Monitoring Institutions its business to other entities at a profit or Universities, Research and Other full cost recovery and is controlled by a Training Institutions public sector entity. The commercial Other Development and Non-profit enterprises and financial institutions which Oriented Institutions. providing utility services are also include in the public enterprises. The public enterprises generally operate to make a Strategically vital areas of the economy profit, although some may have limited are operated by public enterprises such as community service obligations under electricity, water, petroleum products, which they are required to provide some telecommunications, and airlines, etc. The individuals and organizations in the corporate governance of all public community with goods and services at enterprises is of great importance to the either or charge or a significantly reduced overall equity and competitiveness of the charged. Regulatory, promotional and economy. The composition of the total educational public enterprises do not assets of each category of 389 Public typically have this commercial potential Enterprises as at 31 December 2018 as and are considered as non-profit oriented compared with that as at the end of the organizations and their performance needs preceding year is depicted in the following to be examined using different criteria Diagram 36 other than profitability. The Public Enterprises in Sri Lanka can be broadly categorized under the following headings.
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7000
6000
5000 Rs.Billion
4000 -
3000
2000 2018 Tptal Assets TptalAssets 1000 2017 0 Specified Statutory and Government Regulatory Universites, Other Business Non Statutory Owned and Research Development Enterprises Funds Limited Monitoring Other Training and Non- Public Enterprices Public Liability Institutions Institutes profit Companies Oriented Institutes Punlic Enterprises
Diagram 36 - Total Assets of public Enterprises in the year 2018 as compared with year 2017
In 2018, state-owned enterprises received billion and Rs.20 billion respectively in approximately recurrent grant of Rs. 28.6 comparison to last year. Accordingly, there billion for recurrent expenditure and has been a decline in the allocation of approximately capital grant of Rs. 21 government grants. billion for capital expenditure. Fifty five
Performance Evaluation
Audit of Public criteria. Profit is not the the objectives for which Enterprises is not only key criterion of the enterprise was set up confined to financial and performance; have been served. One of compliance audits but management's the first tasks of the Audit also to the efficiency, performance in the is to identify the criteria economy and economical and efficient for assessing the effectiveness with which use of public funds and performance of an these operate and fulfill achievement of objectives enterprise. In the case of their objectives and goals. is more relevant. The a manufacturing objectives vary from enterprise such as CPC The efficiency and enterprise to enterprise. for example, the objective effectiveness audit of The appraisal analyses and the basis of Public Enterprises is whether the performance investment, capacity, conducted on the basis of of an enterprise is to bring costs and time schedules, certain standards and out the extent to which norms of consumption,
144 National Audit Office | Annual Report - 2018 yields, productivity, costs, management, whether the financial and Publ rate of return, etc. are construction other resources provided relevant. These provide management, etc. and to the public enterprises
yardsticks by which the these guidelines provide have been utilized for the ic Enterprices ic performance is measured. another basis for achievement of its The enterprises have their appraising enterprise expected objectives. long and short term performance and its capital and operational systems. Other sources of By selecting several plans and these provide criteria are technical controversial incidents another set of reference studies conducted by which created serious points for assessment of internal and external social and economic the performance. experts and the standards. impacts and fallen to
public consideration, 26
Where appropriate, rated Performance audit is a performance audit reports capacity of the unit timely requirement. In the have been issued with provides an acceptable financial audit it is regard to the adverse bench mark against which certifying the financial effects to the general physical performance is controls and accuracy of public and environment evaluated. Utilization of the accounts. However, in thereof. the rated capacity is, the performance audit it is External Audit performed however, assessed along expected to examine by the Auditor General is with norms for whether the resources an instrument of consumption of raw have been economically, accountability. But an materials and utilities, efficiently and equally important purpose yields and rejections as effectively. In addition to of Public Enterprises well as requirements for above three factors, the audit is to help the proper maintenance and impact to the environment Government and the servicing of equipment. is too examining at enterprise managements Cost efficiency is another present. Several names to improve their important basis for are using for performance efficiency and appraising performance. audit such as, effectiveness. This is Standard or target costs achieved by bringing out are determined on the Value for money audit Management audit the financial and basis of norms of capacity operational deficiencies, Operation audit utilization, consumption, inadequacies or 3Es audit productivity, yields, etc. ineffectiveness of Treasury has issued By giving an equal state systems, shortfalls in guidelines to be followed to the performance audit performances, non- by the Public Enterprises as well as the financial compliances with laws, in respect of corporate audit through present rules, regulations, etc. and governance, general audit reports of the by analysing causes of management, financial National Audit Office, it non-attainement of management, is analyzing in detail acceptable standards of procurement National Audit Office| Annual Report - 2018 145
performance. Financial regular meetings with the the Public Enterprises to performance is linked managements of the adverse findings of the with physical entities my officers Auditor General. performance and issues of discuss the needed Repetition from year to efficient and economic systems and operational year of adverse findings operations and improvements. It is also on the same matter and a management of resources important to ensure high incidence of are highlighted in the follow-up by the Boards qualified audit opinions. audit report. During and the managements of
Financial Performance Public Enterprices Public According to the information made public enterprises are shown in the table available, the particulars relating to 338 13
Name of the Institution Number of Number of Number of profit Number Institutions Institutions loss making making not provided the Institutions Institutions information
Other Development and Non-profitable 70 23 34 13 Oriented Organizations
Statutory and Non-statutory 54 04 22 28 Organizations
Regulatory and Monitoring 29 10 18 01 Organizations
Specified Business Enterprises 58 12 38 08
Universities, Research and other 66 28 29 09 Training Institutions
Government Owned Limited Liability 112 24 51 37 Companies
Total 338 101 192 96 Table 13 – Information of 338 Institutes of Public Enterprises
According to the above information, 75 Universities including University College public enterprises were shown the deficit and 15 Universities were with considerable of Rs. 135,821 million in their financial deficits. financial results. The National Housing Development Authority Ceylon Electricity In addition to that, 97 institutions had Board” Ceylon Petrolium Corporation” recorded the financial surplus of Paddy Marketing Board and 15 Rs.237,487 during the year under review.
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Sustainable development Enterprices Public The rapid consumption of natural The sustainable development goals have resources paves way for the future been introduced with a view for the UN generations to face a scarcity of resources. member countries of different economic, It is also seen that the waste being social, and environmental time frames to generated as a byproduct of the be brought to an equal time frame by the consumption of resources, threatens the year 2030. The state leaders who had taken equilibrium of the environment. The part in the sustainable development linking of mandatory economic summit of the UN taken place in development and the sustainability of the September 2015 , had expressed their environment is centralized in the concept agreement thereon. The 2030 agenda for
of sustainable development. It is sustainable development is based in that emphasized that economic development connection, and it is a universal expression and environmental conservation should that should be implemented by all the exist mutually and the entire world should member countries targeting humankind, be made aware thereof. the earth and the prosperity. Being a member of the UN, Sri Lanka is abide by As stated by the Global organization on this universal expression. As such, the environmental development, the primary progress in the implementation of this objectives of the sustainable development universal expression is examined with include : to satisfy the basic human needs, respect to the auditees from the year 2017. to improve quality of human life, to The sustainable development has been safeguard the environment, and increase identified as a specific observation that productivity. As such, the concept of draws attention when carrying out state sustainable development involves the audits and reporting with respect to the utilization and management of biosphere preparedness of the state institutions for by humans while maintaining the potential achieving the sustainable development for the future generations to meet their goals and the progress thereof. requirements.
Auditor General‟s Opinion on the Financial Statements
Public Enterprises prepare financial statements give a true and fair view of the statements annually comprising statement state of affairs of the institutions. This of financial position as at the end of the assurance is provided in the form of year, statement of income, cash flow expressing an opinion on the financial statement, statement of changes in equity statements. The opinion simply states the for the year then ended, a summary of Auditor General's conclusion that the significant accounting policies and other financial statements do or do not fairly explanatory information. The Auditor represent the financial position and General provides independent assurance to financial performance of the Public Parliament as to whether the financial Enterprises, and that they do or do not
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conform to the financial reporting Disclaimer of opinion standards either Sri Lanka Accounting Standards or Sri Lanka Public Sector The pervasiveness of the scope limitation Accounting Standards which are now in would lead to express disclaimer of line with the respective International opinion Accounting Standards. Adverse audit opinion Four types of audit opinion are expressed. The pervasiveness of the disagreement These are expressed in instances of would lead to express an adverse audit material misstatements or noncompliance, opinion In expressing an audit opinion the management disagreements or limitations assistance of the computerized audit of work. software is obtained in view of express a
Public Enterprices Public Unqualified Opinion fare opinion. The audit opinion is decided based on the results arrived after adjusting This opinion is expressed when there are the total uncorrected misstatements as a no material misstatements or non- percentage of audit samples selected compliance reported in the financial during the course of audit and their statements. materiality level.
Qualified Opinion (Subject to The audit opinions expressed on 330 Opinion) Public Enterprises on which the Audit Reports have been issued for the year 2018 Reported the material misstatements or as compared with the preceding year are as non-compliance in the financial statements following Table 14 but not pervasive to the financial results.
Audit Opinion 2018 2017 Unqualified 75 80 Qualified 160 113 Disclaimer 9 20 Adverse 13 6 Not yet decided 73 228 Table 14- Auditor General’s Opinion on the Financial Statements
Maintaining records on Fixed Assets
Maintenance of proper records such as accountancy for assets and property which Registers of Fixed Assets (RFA), cannot easily be converted into cash. schedules and other records on Non- Fixed assets normally include items such current Assets is generally poor and in as land and buildings, motor vehicles, certain cases very poor. Non-current furniture, office equipment, computers, Asset, also known as property, plant, and fixtures and fittings, and plant and equipment (PP&E), is a term used in machinery. In a large corporation, the
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task of identifying and locating a specific Circular No. 05/2016 of 31 March 2016 Public Enterprices Public fixed asset could be difficult unless had not been conducted and as a result the numbering is scientific, systematic, and existence and the condition of assets had up-to-date. A common problem in most not been confirmed. enterprises is the improper maintenance of the Registers of Fixed Assets. As a result it The unserviceable assets had been kept was observed that physical verification of idling in most of the organizations and as a fixed assets becomes a futile exercise. The result of not dispose the disposable goods managements of the enterprises have the and assets as per the provisions in Public responsibility to maintain proper records Finance Circular No. 438 of 13 November and the safeguard of the assets owned by 2009, the government is losing the income the institution. It was observed that in most obtainable from sales of these items. It was of the cases Annual Boards of Survey in further observed that the additional cost terms of provisions in Financial had been incurred for stores and safeguard Regulation 756 and Public Finance of these assets.
Preparation and submission of Annual Financial Statements
Draft annual report and Financial the elapse of 9 months after the end of the Statements must be submitted to the financial year. Auditor General within 60 days of the end of the Accounting year as per Public The Auditor-General shall, within three Enterprises Circular No. PED/12 dated 2 months of the receipt of the approved June 2003. annual financial statement and other relevant documents and information of a The financial statements of 330 Public public corporation or a company in which Enterprises for the year 2018 had been the Government or a public corporation presented to the Auditor General for audit holds fifty per centum or more of the by 30 September 2019. However it was shares, present a report to the Chairman of observed that 59 Institutions had not the governing body of such public submitted their financial statements for the corporation or company for publication in year ended 31 December 2018 even after its annual report.
Lack of Autonomy to recruit and to retain Professional Staff The numerous approval requirements have higher salaries. Especially in the posts of the overall effect of constraining the Accountants, Engineers, Valuers, etc. most ability of Directors to make commercial of the Public Enterprises were struggling decisions and to recruit and retain skilled to recruit and retain qualified professionals staff. Due to this constraint it was due to poor salary structure as compared observed that most of the enterprises with the private sector. recruit professionals on contract basis with National Audit Office| Annual Report - 2018 149
Government owned Limited Liability Companies
There is a further set of public-type indirectly by the Government. In recent enterprises in the country. They are years it was observed that considerable companies with a majority shareholding by number of limited liability companies the Government (General Treasury). These Universities have been incorporated under companies are incorporated under the the Companies Act by certain Public Companies Act and therefore not coming Enterprises and the Universities even under the Auditor General‟s examination. sometimes without the approval of the These companies are sometimes fully Cabinet of Ministers. owned by the Government or in certain percentage of the share capital which are Limited Liability Companies with 100 per in operation as public private joint cent of the shares owned by the Public Enterprices Public ventures. Typically private sector Government or a Public Enterprise would involvement brings into play a set of be one in which the Government would control mechanisms that help to avoid have the power to appoint Directors and in many of the problems which beset purely which no private individual would receive Government-Owned Enterprises. There are a share of the profit. It would be virtually also Government Owned Companies the same as a Public Corporation apart formed by Public Enterprises and from the fact that the simple sale of shares registered under the Companies Act by by the Government would be sufficient to capital infusion by the respective Public transform it into a normal „private sector‟ Enterprises and the Universities without company. The sale of less than 50 per cent the involvement of the General Treasury of the shares would still give the as Subsidiary or Associate Companies. Government the power to appoint the Directors of the company. Even the sale of There were instances where certain more than 50 per cent of the shares might companies have refused to appear before still place the Government in a sufficiently the Committee of Public Enterprises when dominant position to influence corporate they were summoned for examination. An policy. However it was observed that most amendment has already been proposed in of the Public Corporations do not exercise the draft Audit Bill to cover any body or their controlling power over the authority established by or under any subsidiaries although their members written law with public resources provided constitute the majority of the Board of wholly or partly and whether directly or Directors. Other Non-Profit oriented Public Enterprises
These enterprises consist of regulatory and a levy imposed by the Government on monitoring institutions, Universities, certain goods or services. According to the research and other training institutions and financial statements of these entities 152 other development and non-profit oriented institutions had earned surpluses over institutions. The main features of these expenditure aggregating Rs.43.8 billion institutions are that the main source of after taking into consideration the revenue is the annual Government grant or recurrent grants provided to these
150 National Audit Office | Annual Report - 2018 institutions by the General Treasury in the after taking into consideration the year 2016 amounting to Rs.40.8 billion. recurrent grants from the General Enterprices Public However 35 institutions had incurred net Treasury. deficits aggregating Rs.2.8 billion even
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152 National Audit Office | Annual Report - 2018
Main Quarry
es lands Deficiencies in Contract Administration
Improper Disposal of Garbage
Financial malpractices and frauds Despite Acquisition of Assets, Non-utilization in relevant Objectives
Failure in taking action to recover Arrears of Rates
Local Government Local Non-recovery of Arrears of Lease due to shortcomings in Lease Agreements
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154 National Audit Office | Annual Report - 2018
Local Government Government Local
There are 341 Local Authorities Sabhas Act, No. 15 of 1987 respectively in comprising 24 Municipal Councils, 41 Sri Lanka. A summary of the information Urban Councils and 276 Pradeshiya on the presentation of the accounts for the Sabhas established in terms of the year 2018 by these Local Authorities to Provisions in the Municipal Councils Audit and the audit opinions expressed on Ordinance (Cap.252), the Urban Councils those accounts is given in table No 15
Ordinance (Cap.255) and the Pradeshiya below.
Category Number Number of Number Audit Opinions expressed on the Reports of Local of Accounts of Audit issued as at 15 August 2019 Authority Accounts furnished Reports Qualified Clear Disclaimer Adverse as at 15 issued August 2019 Municipal 24 24 24 22 - 01 01 Councils Urban 41 40 40 40 - - - Councils Pradeshiya 276 272 271 266 03 02 - Sabhas Total 341 336 335 328 03 03 01
Table …. – Presentation of Accounts to Audit by Local Authorities and Audit Opinions issued Source – Auditor General‟s Reports 2018
A summary of several Kudahakapola only 2012 and 2013 and significant observations by laying a foundation the file relating to the made in the Audit due to non-receipt of said construction had Reports on the financial statements of Local provisions therefor. not been made Authorities is given As such, the available to Audit. It below. contractor had filed a was further revealed The Ja-Ela Pradeshiya case regarding the that the foundation Sabha had loss sustained by him. thereof had been discontinued the Accordingly, a removed by 30 constructions of a compensation of September 2019. multi - purpose Rs.2.40 million had building at been paid in the years National Audit Office| Annual Report - 2018 155
Contributions for the Pradeshiya Sabha. registered in the Employees‟ Even though the personal name of the Provident Fund for revised rate had been Mayor. A sum of 105 project labourers confirmed by the Rs.1.69 million had who were in the Court, measures had been paid as hiring service of Urban not been taken by the charges for the said Council had not been Sabha for the vehicle during the paid by the recovery of arrears of period from June Katunayake, Seeduwa rates of Rs.557,600 2018 to 11 July 2019.
Urban Council during recoverable by 31 Further, a sum of Local Government Local the period from the December 2018. Rs.260,000 had been year 2004 to 2011. As payable from 12 July such, a sum of Action had been 2019 to 11 September Rs.12.22 million had taken to deploy a 2019. been paid in the year motor vehicle under review as obtained from a arrears of private institution, in In terms of the contributions for the service instead of agreement entered Employees‟ an official motor into for the Provident Fund and vehicle of the Mayor, establishment of a as surcharges relating Matale Municipal Geographical to the said period. Council contrary to Information System provisions of Section in the area of 179 (a) of the authority of Galle Legal action had been Municipal Council Municipal Council, taken by the Business Ordinance (Cap.252). the said Project Institute in respect of Moreover, action had should have been the assessment rate of been taken to deploy completed on or a metal roof factory the said motor vehicle before 02 June 2013. for assembling motor in the service before However, the Project cars in the completing the had not been Japalawatta Industrial procurement process completed even by 31 Estate, assessed by and the said motor December 2018. the Minuwangoda vehicle had been Even though a sum of 156 National Audit Office | Annual Report - 2018
Rs.2.03 million had private bacho Government Local been spent in addition respectively for A sum of Rs.1.59 to the contractual levelling the said million had been paid amount, expected garbage dump for to the Water Supply objectives of the 2,703 hours from the and Drainage Board project had not been year 2015 to October by the Hakmana achieved. 2018. Moreover, Pradeshiya Sabha for public protests had constructing 02 tube A number of 30,725 arisen day by day due wells for supply of
tractor loads to improper disposal water under the
containing recyclable of garbage. Kurundu Piyasa and decayable Water Project under garbage and 1,661 provincial specific tractor loads Ten motor bicycles development grants in containing non- had been purchased the preceding year. recyclable garbage by spending Rs.2.68 The relevant activity had been disposed of million for the Solid had not been carried to the Kotawila Waste Management out even by the year garbage yard in an Programme in the under review due to irregular and year 2012 by the failure in identifying improper manner Matara Municipal water sources. during a period of 04 Council. In years from the year purchasing those 2015 by the Matara motor bicycles, A Truck of Tata Municipal Council, attention had not been Super make had been thus resulting in a paid on matters such purchased by garbage dump as spare parts needed spending Rs.2.17 therein. Sums of therefor and servicing million in the Rs.1.31 million and of them. As such, 06 preceding year by the Rs.2.63 million had motor bicycles valued Pasgoda Pradeshiya been spent as at Rs.1.61 million had Sabha for the expenditure on fuel been removed from commencement of a for a bacho machine being used due to mobile library. of the Sabha and for a lack of spare parts. However, the said National Audit Office| Annual Report - 2018 157
motor vehicle had not recovered due to activities based on been made use of for failure in obtaining various provisions achieving the electricity and due to received from intended objective defects in doors. As Government even by the end of the such, a revenue of at institutions had been year under review. least Rs.3.28 million paid by the had been deprived of Kurunegala A bacho loder costing to the Sabha. Paradeshiya Sabha to Rs.5.81 million 22 officers of the
owned by the In terms of paragraph Sabha without the Local Government Local Tissamarama 3(b) of the Circular approval of the Pradeshiya Sabha was dated 05 June 1990 of Governor. being decayed in a the Secretary to the private garage being Ministry of Provincial exposed to natural Councils read in The Pompakele City disasters for a period conjunction with Park with high of 07 years. Section 1 of Chapter biodiversity and IX of the natural swimming Establishments Code, pool with natural The Super Market the approval of the water filter owned by Complex had been Governor should have the Ratnapura vested in the Mahawa been obtained for Municipal Council Pardeshiya Sabha in payment of had not been properly September 2016. allowances to the maintained. As such, Lessees had been staff of the Provincial the water filter is selected for leasing Council. A sum of inoperative at present out stalls of the said Rs.2.39 million out of and the swimming Super Market administrative pool as well had Complex. Even expenditure received become polluted and though keys had been to the Sabha Fund unusable. This Park handed over in from the year 2011 to with an initial extent September 2018 to the year 2017 for of 56 acres, had been lessees so selected, carrying out restricted only up to rentals could not be development 35 acres in extent at 158 National Audit Office | Annual Report - 2018
present due to illegal November 2000 on length of the said Government Local constructions, long term basis for a road had come off resettlement of period of 33 years at and as such, a sum of displaced persons and an annual lease rent Rs.1.42 million had providing space of Rs.350 without been spent for the facilities for Greater proper valuation. reconstruction of the Ratnapura Water Even though 18 years said part. Project. Even though had lapsed by 30 proposals had been September 2019, the The penalty of
made in the years lease rent had not Rs.1.52 million
2012 and 2015 for the been revised and no imposed on 08 conservation of the money whatsoever August 2016 by the said Park, the Sabha had been recovered as Assistant had failed to lease rental to the Commissioner of implement those Sabha. Excise, Ratnapura proposals whatsoever, regarding the even by the end of the possession of 163,110 year 2018. The access road for ml of foreign liquor, the Thunkama Maha in the Balangoda The land of 05 acres Vidyalaya, with 264.4 Restaurant owned by in extent and the metres in length had the Balangoda building, two Tennis been laid with Municipal Council on courts and the concrete by spending 21 May 2016, the Badminton court Rs.1.92 million by Vesak Full Moon located therein with a the Ambilipitiya Poya Day for the high commercial Pradeshiya Sabha purpose of selling, value, situated at the under provisions of contrary to conditions centre of the city the Ministry of of the license, had owned by the Provincial Councils been paid by the Ratnapura Municipal and Local Council on the basis Council had been Authorities. The of recovery from leased out to the cement and granite responsible parties. Lawyers‟ Association layer of the surface of Even though cases in Ratnapura in about 195 metres in had been filed against National Audit Office| Annual Report - 2018 159
three defendants for Moreover, the Lavinia, had been the recovery of number of ratepayers leased out by the penalties from who pay rates more Dehiwala Mount responsible parties, than Rs.10.00 Lavinia Municipal the Council had not million, stood at 25 Council to the Mount taken action to and despite having Lavinia Hotel for use include other charges arrears of rates of as a motor vehicle including charges Rs.349.50 million, no park. The arrears of such as the sale of amount whatsoever rental of the said
liquor on Vesak Full had been paid by 19 property by 31 Local Government Local Moon Poya Day persons of them. December 2018 had which was mentioned been Rs.5.12 million in the charge sheet of Sixty four houses had due to shortcomings the Assistant been constructed on of those agreements Commissioner of the laundry land and those rentals Excise, as charges of located at Paradise could not be the case. Place, Colombo 12 by recovered from the spending Rs.200.86 lessee. million by 28 Arrears of rates as at February 2016 by the The Public Salary 31 December 2018 of Colombo Municipal Formulation System the Colombo Council. Action had had been used for the Municipal Council not been taken even formulation of amounted to by 30 April 2019 to salaries of the staff Rs.3,203.55 million. provide those houses comprising 532 Out of that, the value for entitled residents permanent and casual of arrears of rates and for low income employees of the relating to 753 and homeless people. Anuradhapura properties exceeding Municipal Council. Rs.500,000 had been The misappropriation Rs.1,507.22 million. The land of 01 Rood of salaries of It had been 47 per 4.1 perches depicted Rs.40.85 million had cent of the total in the Plan No.4/89 at been committed due arrears of rates. Hotel Road, Mount to failure in proper 160 National Audit Office | Annual Report - 2018
administration of data allowances by the by spending Rs.73.40 Government Local base and in Municipal Council million in the year controlling input for the period from 2017 by the Badulla controls for entering September 2013 to Municipal Council persons names and June 2018. and 09 employees basic salaries, no had been deployed authority for A waste recycling therein and a extraction, failure in centre had been computer operating carrying out proper constructed by system as well had
internal examination, spending Rs.13.66 been installed therein
non-maintenance of million in the year for the management personal salary 2013 under of the said vehicle sheets, Widows‟ and provisions of the park. Even though Orphans‟ Pensions National Solid Waste about 170 motor Register and Public Management Project vehicles can be Service Provident of the Ministry of parked therein per Fund Register. Provincial Councils day, a number of 10- and Local Authorities 15 motor vehicles by the Mahiyangana have been parked An office aide who Pradeshiya Sabha. therein at present and has served in the The electricity a monthly revenue of Anuradhapura connection as well approximately Municipal Council had been obtained by Rs.58,000 had been had transferred to spending Rs.18,846 earned therefrom. An Provincial in the year 2017. arrangement for Department of However, the said directing motor Engineering from 19 Project had not been vehicles which are August 2013. The commenced even by parked improperly at said transfer had not 31 December 2018. various places in the been recorded in city, to the said motor salary registers and as vehicle park, had not such, a sum of Rs. been made and as 1.82 million had been A motor vehicle park such, the entire paid as salaries and had been constructed capacity of the National Audit Office| Annual Report - 2018 161
vehicle park could However, the sub- Rs.200 owned by the not be utilized. office had not been Giribawa Pradeshiya established therein Sabha had been sold A building had been and furniture and by the lessee at a cost constructed and office equipment of Rs.2.00 million completed in June valued at Rs.1.48 without informing the 2017 by spending Million provided by Sabha. Rs.29.25 million for the Project had
the Hingurukaduwa remained idle.
sub-office under the Local Government Local Pura Neguma Project Seven stalls located at by the Badalkumbura Haththi Kuchchi at a Pradeshiya Sabha. monthly rental of
162 National Audit Office | Annual Report - 2018
Main Quarry
Failure in Settlement of Contractors’ Bills for completed
Works
Non-utilization of Scientific Equipment distributed to Schools due to low quality
Financial malpractices and frauds
Non-presentation of Financial Statements of 18 Foreign Funded Projects
Foreign Funded Projects Funded Foreign
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164 National Audit Office | Annual Report - 2018
Foreign Funded Foreign Project Foreign Funded Projects
According to the Annual Report of the During the year under review, 39 new Ministry of Finance for 2018, the Loans foreign financial loan agreements had aggregating Rs 437 billion from domestic been entered into with Foreign resources and other loans aggregating Rs Development Parties and with Lending 324 billion from foreign sources had been Agencies and scheduled to obtain US$ proposed to obtain for the purpose to 1,241.60 million in the forthcoming years . settle the total Budget Deficit for the year It included US$ 1,108.70 million to be under review amounted to Rs. 761 billion. received through 25 Loan Agreements The loans aggregating Rs 439 billion had and US$132.90 million to be received been obtained in the previous year from from other 25 Grant Agreements and foreign sources and it was a decline by 26 expected to be used for developments of per cent of foreign loans obtained during education and training ,environment, the year under review. health and sanitary facilities and social infrastructural Development sectors . Presentation of financial statements of the Foreign Funded Projects to the audit
There were 164 Foreign Funded Projects compulsorily by the Auditor General as a remained in the implementation stage by result the financial statements of such the end of the year under review and out of Projects financial statements of the that the annual financial statements of 146 projects had not been furnished for audit. Foreign Funded Projects had been The details of the Foreign Funded furnished to audit. The Loan Agreements Projects implemented by Foreign entered in to with Indian Loan Scheme, Development Partners and Lending Chinese Agencies and other bilateral loan Agencies is given in the Figure ------schemes had not comprised with the below. clauses for the audit to be carried out The performance of the Foreign Funded Projects
Power Section
For the purpose of improve the quality of Ceylon Electricity Board and the services supplied in the power sector in Sri Sustainable Development Authority had Lanka , 11 Foreign Funded Projects had implemented the components of such been implemented during the year under Projects separately. Further, there were no review. However the physical Progress of mechanisms establish to maintain a proper such Projects were remained behind the co-ordination between the Divisions and targets as a result of separate Project no separate recording system maintained monitoring Units had not been established to record the Plant, property and for each projects .The Divisions of the equipment procured by the Project. As a National Audit Office| Annual Report - 2018 165
result, the financial and physical progress The Integrated Road Investment Program of the Projects was remained difficult. It had been implemented since 2015 to was necessary to review the mechanism rehabilitate 285 kilometres of the national adopted by the Implementing Agencies roads and 3,038 kilometres of rural roads to optimize the utilization of foreign loans in the Southern, Central, Sabaragamuwa, invested through the above mentioned North Western and North Central Projects to carry out development Provinces and Kalutara District in the activities in the Power Sector. Further, Western Province. According to the the progress of the Projects implemented progress reports, the rehabilitation works by the Ceylon Electricity Board for of 25 kilometres of national roads and renewable energy absorption transmission 2,338 kilometres of rural roads in the ign Funded Project Funded ign development purposes had remained respective Provinces had been completed behind the target changed subsequently as at 31 December 2018. Under the Part - due to subsequent changes of the scope of 02 of the above mentioned Prpject, the
Fore the works and delays in the road rehabilitation works of 400 implementation of the activities of the kilometres of national roads and 3,750 Projects. kilometres of rural roads in the Northern, Eastern, Uva and Western Provinces were Highway Sector expected to be completed. However, the It was observed that the progress of the procurement activities thereon had many of Foreign Funded Projects remained at the initial stage as at 31 implemented during the year under review December 2018. The rural roads identified by the Ministry of Highways & Highways to be rehabilitated at the planning stage Development and Petroleum Resources had been revised at the later stages and the Development had remained behind the delays of the works of the contractors etc targets. The delays caused due the had caused delays on slow progress of the weaknesses of the contractors involved as activities of the Project. well as the failures of the Line Ministry to take immediate actions to settle the bills presented by the contractors. Water Sector complete the works under many Projects on due dates. As a common feature, the level of the physical progress of the Foreign Funder The activities under Jaffna Kilinochchi Projects implemented by the National Water Supply and Sanitation Project Water Supply and Drainage Board was implemented to improve water supply and remained unsatisfactory. The reasons such sanitation infrastructure for residents as changes of the proposed plans at the living in the Jaffna peninsula using later stages, delays in supply of water Iranamadu Tank as the main source of pipes and other equipment, tame taken to water had been suspended due to strong receive the approvals from the Road protest of the people in the Iranamadu Development Authority and Local area. However, it was subsequently Authorities etc had caused delays to decided to transform the activities of the Project to desalinate sea water to fulfill the 166 National Audit Office | Annual Report - 2018
Foreign Funded Foreign Project water requirement of people of Jaffna of the Project by US$ 120 million. Peninsula. For that purpose the Asian However, the activities of the Sea Water Development Bank had agreed to finance Reverse Osmosis Plant had not been under 02 new Loan Agreements No. 3603 completed and as a result, 15 allied SRI and No.3604 SRI of 15 December water towers and water transmission lines 2017 had been entered into with Asian completed as at the end of the year under Development Bank and increased the cost review were remained idle. Urban Development Sector
The activities under the Metro Colombo under the Metro Colombo Development Development Project and the Strategic Project implemented to improve the Cities Development Projects implemented facilities within the Colombo Municipality by the Urban Development Authority had and suburbs, only US$ 103.66 million remained very slow due to changes of the equivalent to Rs.14, 890.18 million had political policies thereon. As a result the been utilized as at 31 December 2018. The additional expensed had to be incurred and activities under the construction works of the intended benefits had not been t. Sebastian Canal and Kollonnawa entertained by the citizens in the urban Canal, constructions of flood control gates areas. at Thalangama and Bauddhaloka Mawatha on construction works of Out of the allocation of US$ 213 million tunnels at Mutwal and Torrington Place equivalent to Rs.27,890.02 million made had remained slow.
Education and Skill Development Sector
There were several Forein Funded Projects school teachers, inadequate building were in operation during the year under facilities etc were observed in audit. review for the development of primary and Further, scientific equipment valued at Rs secondary education in the schools and 13.07 million distributed to 45 schools in technical education and action had been the Ratnapura district had not been used taken to promote infrastructure facilities to due to inferior quality. The supplier had implement the Technology Stream of not taken action to supply the computers education in the schools under the valued at Rs 24.90 million to the Transforming the School Education Provincial English Education Centres on System as the Foundation of a Knowledge due dates. Hub Project . However, the instances of school equipment distributed by the According to the information made Project not receiving to the schools on available, there were 10,284 students in scheduled dates, as a result of weakness of the Special Education Units in 112 the distribution system and remaining such national schools and 704 provincial equipment unused due to shortage of schools in Sri Lanka.. It was observed that 597 posts of qualified teachers to National Audit Office| Annual Report - 2018 167
serve in the Special Education Units had subjects. Further, 189 teachers trained for remained vacant as at 31 December 2018 special education purposes had been whilst deploying 158 teachers trained for assigned to the schools which do not have special education purposes to teach other Special Education Units. General Observations
It was observed in audit that the posts of It was observed in audit that the financial the senior management levels of the statements are prepared and presented by Project Monitoring Units were remained the Project Monitoring Units on going constantly vacant and that fact was a concern basis eventhough the active major barrier to achieve the intended period of the Projects were completed. objectives of the Projects in efficient That situation was arisen due to lack of
manner. The progress of the activities of proper instructions issued by the Ministry Foreign Funded Project ForeignFunded the Strategic Cities Development Project, of Finance and Media on preparation of Greater Colombo Water and Wastewater financial statement at the last year of the Management Improvement Investment operations of the Project. Further, the Line Programme, Rural Infrastructure Ministries had not taken action to carry Development Project were remained out follow up reviews on usage of Plant behind the performance targets due to Property and Equipment of the Project for vacant positions of Project Directors, intended purposes, after end the period of Environment Officers, Land Acquisition the Project and handing over to the Officer. respective Implementing Agency.
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Increase in the Nonperforming Loans and Advance Balance of the Bank of Ceylon, It Increases from 2.9 per cent to 3.6 per cent.
Deterioration of the Market Share of the National Savings Bank from 13.7 per cent to 9.9 per cent
Increase in the Fraudulent Money Withdrawals from the Banking Banking National Savings Bank
Payment of PAYE Taxes of employees of the Housing Development Finance Corporation Bank and the Pradeshiya Sanwardhana Bank by the Banks
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Banking
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Banking
Banking Sector consists of Licensed development throughout the year by Banking Commercial Banks (LCBs) and Licensed enhancing banking services and Specialized Banks (LSBs). By the end of expanding its networks and accessibility 2018, the banking sector consisted of 26 throughout the country. Accordingly, 34 LCBs and 7 LSBs. There were 13 foreign new branches were opened and 801 new
banks within the total number of LCBs. ATMs were installed during the year The banking sector continued to contribute 2018. Distribution of Banks and Branches to economic activity and by the end of 2018 is summarized in table 16
Category Banks Branches Student ATMs
Saving Units
LCBs Domestic banks 13 2876 3309 4655
Foreign banks 13 51 LSBs National Level Saving Banks 1 261
- 376 Housing Finance Institutions 2 64
Other LSB‟s 4 371
Table 16 - Distribution of Banks and Branches by the end of 2018 Source – Central Bank of Sri Lanka (Revised or Provisional Data)
Assets
The banking sector asset base surpassed Rs. Bank of Ceylon and People‟s Bank were 11 trillion by end of 2018; with year-on-year Rs.2,268 billion and Rs.1,735 billion growth reaching 14.6 per cent by end 2018 respectively which accounted for 33.9 per from 13.8 per cent by end 2017.The asset cent from the total assets of the banking portfolio mainly consisted of loans and sector. advances, which accounted for 65.2 per cent of the banking assets. Assets of the main two state banks,
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Banking Diagram 38 –Total Assets of the Banking Sector Source – Central Bank of Sri Lanka (Revised or Provisional Data)
Non - Performing Loans (NPL)
The overall NPL ratio of the banking accordingly NPL ratio reported as 1 per sector increased from 2.5 per cent at end cent and 2.48 per cent respectively 2017 to 3.4 per cent at end of 2018. showing lower ratios than banking NPLs of the main two state banks, Bank sector at the end of 2018. of Ceylon and People‟s Bank were Diagram 39 Non – Performing Rs.53.75 billion and Rs. 31.47 billion Advances of the Banking Sector respectively by end of 2018 and
Diagram 39 - Non – Performing Advances of the Banking Sector Source – Central Bank of Sri Lanka (Revised or Provisional Data)
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Liabilities and Capital
The customer deposits continued to be the sector increased significantly by Rs.156.3
major source of liabilities which accounted billion (9.7 percent) in 2018 compared to the Banking for 72 per cent of the total liabilities and decline of Rs.89.3 billion (negative growth of Capital of the banking sector. Deposit of the 5.3 per cent) in 2017.This increase in 2018 main two state banks, Bank of Ceylon and was mainly due to the increase of Rupee People‟s Bank were Rs.1,765 billion and borrowing which grew by 23.7 per cent Rs.1,423 billion respectively as at the end of the year 2018 which accounted for 37.5 per (Rs.142.3 billion) in 2018.Borrowing of the cent from the total deposits of the banking main two state banks were Rs.237 billion. sector. Total borrowings of the banking Diagram 41 – Liabilities and Capital of the Banking Sector
Diagram 41 – Liabilities of the Banking Sector Source – Central Bank of Sri Lanka (Revised or Provisional Data) Deposit
The deposit base of the banking sector at end 2018 compared to 63.6 percent at end increased by Rs.1, 100 billion during the year 2017.Time Deposits of the main two state reaching Rs.8, 500 billion at end 2018.The banks totaled Rs.1,743 billion by the end of share of time deposits in total deposits had 2018. increased to 65.5 percent Diagram 41 Deposits of the Banking sector
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Banking Diagram 41 – Deposits of the Banking Sector Source – Central Bank of Sri Lanka (Revised or Provisional Data) Central Bank of Sri Lanka The Central Bank of Sri The Monetary Board of monetary policy. The Lanka (CBSL) was the CBSL shall endeavor main monetary policy established under the so to regulate the supply, instruments currently Monetary Law Act No.58 availability, and cost of used are policy interest of 1949 as amended, as money as to secure, so far rates, open market the apex authority as possible by action operations (OMO) and responsible for the authorized by the the statutory reserve administration, Monetary Law Act to requirement (SRR) on supervision and determination of commercial regulation of monetary, domestic monetary policy financial and payment for domestic monetary system of Sri Lanka. stabilization. The changes bank deposit liabilities. Central Bank of Sri in money supply are a Policy rates such as Lanka is charged with the primary causal factor Standing Deposit Rate objectives of securing affecting price stability. and Standing Lending economic and price Price stability is to be Rate had been increased stability and financial achieved by influencing to 8 per cent and 9 per system stability with a changes in broad money cent from 7.25 per cent view to encouraging and supply which is linked to and promoting the reserve money through a 8.75 per cent respectively development of the multiplier. during the year 2018. productive resources of Reserve money is the Reserve money expanded Sri Lanka. operating target of only by Rs.21.3 billion to
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Rs.961.1 billion during decline of Rs.203.9 Accordingly, the 2018, compared to an billion in the previous Exchange rate of the Sri expansion of Rs.83.6 year. The expansion in Lankan rupee depreciated billion recorded in 2017. NDA of the Central Bank against the Euro by 12.68 Banking Commercial banks‟ was the result of a per cent, the Indian Rupee deposits with the Central significant expansion in by 8.72 per cent, the Bank, which recorded a credit extended to the Japanese Yen by 18.05 cumulative increase of government on a net basis per cent and the Sterling Rs.43.1 billion the first by the Central Bank, Pound by 11.35 per cent. ten months of 2018, reflecting an increase in The financial sector subsequently contracted the Treasury bill holding continued to expand by Rs.64.7 billion in the of the Central Bank. moderately during the months of November and year without causing any December 2018, with the The external value of the major macro prudential reduction in SRR to 6 per Sri Lankan rupee concerns, amidst cent from 7.5 per cent continued to depreciate in challenging market effective mid November 2018. The rupee conditions both globally 2018. depreciated by 16.4 per and domestically. Assets side of the reserve cent against the US dollar However, credit quality money consists of Net from Rs.152.85 as at the of the banking sector and Domestic Assets ( NDA) end of 2017 to Rs.182.75 the Licensed Finance and Net Foreign Assets as at the end of 2018. Companies (LFCs) and (NFA) of the Central Depreciation of rupee Specialized Leasing Bank. As per the assets against US dollar was 2 Companies (SLCs) sector side of reserve money, per cent from Rs.149.8 to deteriorated considerably the growth of reserve Rs.152.85 during the year during 2018 with money was entirely due 2017. increased non performing to the expansion in Net Other major currencies loans and advances Domestic Assets of the depreciated against the compared to 2017. Central Bank. NDA of US dollar in line with the Licensed Finance the Central Bank was broad based strengthening Companies (LFCs) and increased by Rs.116.9 of the US dollar, amidst Specialized Leasing billion in 2018 in rate hikes by the US Companies (SLCs) sector comparison to a sharp Federal Reserve Bank. comprised of 43 LFC s National Audit Office| Annual Report - 2018 175
and 5 SLCs at end 2018. Finance PLC (CIFL) and paid to depositors of However, Licenses of The Standard Credit TSCFL as at 31 Central Investments and Finance Limited December 2018.
Finance PLC ( CIFL) and (TSCFL) at the time of With the implementation The Standard Credit cancellation the licenses of Sri Lanka Financial Finance Limited were Rs.3,966.39 million Reporting Standard ( (TSCFL) had been and Rs.2,656.12 million SLFRS) 9: “Financial
Banking cancelled by the respectively. Out of this, Instruments”, financial Monetary Board of the the eligible compensation reporting of financial Central Bank of Sri payable to depositors of assets and liabilities of all Lanka with effect from 5 CIFL and TSCFL was entities for annual periods March 2018 and 25 July Rs.1,656.71 million beginning or after 1 2018 respectively due to representing 15,126 January 2018, was in line financial problem and depositors and with the new Accounting liquidity crisis of those Rs.1,235,91 million Standard. Accordingly, companies. representing 6,793 licensed banks are Depositors of those depositors respectively. required to provide for Companies are entitled to Accordingly, a sum of loan losses under the get compensation up to Rs.597.61million (36 per expected credit loss Rs.600,000 from the Sri cent) had been paid as approach instead of the Lanka Deposit Insurance compensation as at 31 previous incurred loan and Liquidity Support December 2018 to loss approach. Scheme. depositors of CIFL. Total deposit balance of However, No Central Investments and compensation had been
Bank of Ceylon
Bank of Ceylon is a licensed commercial The mission of the Bank is to provide bank established under the Banking Act highly efficient, customer focused, No. 30 of 1988 and duly incorporated on 1 technologically sophisticated, resilient and August 1939 under the Bank of Ceylon innovative financial services to the Nation Ordinance No. 53 of 1938. with global access, empowering
176 National Audit Office | Annual Report - 2018 employees and enhancing value to the branches, 281 CDM machines and 776 stakeholders. ATM machines by the year 2018. In addition, 8,724 numbers of staff had been To achieve the above mission, the Bank involved. Banking has distributed their services through 577 Bank
According to the financial statements The operations of the Bank had recorded a presented, total interest income of the pre-tax net profit of Rs. 41,480 million for Bank had been increased by 14 per cent or the year under review as compared with from Rs. 171,344 million to Rs. 195,394 the corresponding pre-tax net profit of Rs. million during the year 2018. Total loans 37,592 million for the preceding year, thus and advances had been increased by 22.9 indicating an increase of Rs. 3,888 million per cent or from Rs. 1,163,161 million to or 10.3 per cent in the financial results. Rs. 1,429,107 million as at the end of the Return on Average Asset (ROAA) and year under review compared with the Return on Average Equity (ROAE) had previous year. In addition, total deposit been decreased by 0.2 and 4.1 per cent base of the Bank had been increased from respectively when compared with previous Rs. 1,546,832 million to Rs. 1,765,026 year. million at the year end.
Further, in the local banking sector, Fitch Lanka Limited awarded a credit quality Ratings Lanka Limited reaffirmed the rating as “(SL) AAA with stable outlook” Bank‟s National Long Term Rating as during the year 2018. “AA+ (lka) with stable outlook” and ICRA Group
Group reported a profit of Rs. 42.2 billion advances and total deposits had been for the year 2018 representing a 10.6 per increased by 23.3 per cent and 13.9 per cent increase as compared with the cent respectively compared with the year previous year. Total assets base of the 2017 and the group was able to maintain Group had been increased up to Rs. 2,313 Non performing loans ratio at a rate of 1.3 billion as at the end of year representing per cent. The Group also passed Rs.1 15.7 per cent increase as compared with trillion milestones in customer loans & previous year end. Gross Loans & advances during the year 2018.
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Regulatory requirements on licensed banks end of December 2018, the Bank‟s Tier I necessitate the maintenance of a Tier I declined to 10.4 per cent from 10.9 per (core) Capital Adequacy Ratio (CAR) of cent and an overall CAR increased to 14.6
not Less than 5 percent and an overall per cent from 14.5 compared with the CAR of not less than 10 percent. As at the preceding year.
Peoples Bank
Banking People‟s Bank, as a government owned cent surpassing Rs.1,734.7 billion by end bank was incorporated in Sri Lanka by of December 2018. The increase in assets People‟s Bank Act No.29 of 1961 and was was mainly attributed to increase in loans established as a licensed commercial bank. and receivables to other customers of The purpose of the Bank in terms of Rs.253 billion. The asset quality of the Section 4 of the Act and amendments Bank declined during the year recording thereto shall be to develop and assist the the non performing loan ratio of 2.5 per Co-operative movement of Sri Lanka, cent compared to 1.9 per cent reported in rural banking, agriculture and industry and 2017. to carry on the business of a commercial Bank reported the profit before tax of bank, pawn broker and merchant bank. Rs.24.4 billion which was 5.8 percent People‟s Bank operates with 738 Branches decrease against the previous year. Island wide as at the end of the year 2018. However, net interest income of the Bank In addition, 256 ATMs, 111 CDMs and 97 was Increased by Rs.9.6 billion or 19.1 per Kiosks were installed during the year cent compared to year 2017. while 108 express banking centers and 2 The capital adequacy ratios of the Bank service centers were also established in demonstrated an increasing trend, and year 2018. Total deposits base of the Bank continued to be a level higher than the was expanded by Rs.179 billion or 14.4 minimum regulatory requirements. The per cent during the year reaching to Core Capital Adequacy ratio and total Rs.1,423 billion by the end of the year Capital Adequacy Ratio stood at 11.02 per 2018. cent (minimum 8.875 per cent) and 14.47 Total assets base of the Bank was per cent (minimum 12.875 per cent) expanded by Rs.267.7 billion or 18.2 per respectively at the end of 2018.
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National Savings Bank
National Savings Bank, to Rs.840 billion by the income and increase in
as a government owned end of the year 2018. personal expenses were Banking bank was incorporated in the main reasons for the Total asset base of the Sri Lanka by National deterioration. Bank was expanded by Savings Bank Act No.30 Rs.27 billion or 3 per cent The net interest income of 1971 and was granted during the year reaching had decreased by Rs.249 the status of the licensed to Rs.1,037 billion by end million or 1 per cent as Specialized Bank in terms of December 2018. The compared with the of the Banking Act No 36 increase in assets was previous year due to non- of 1988. The objective of mainly attributed to consideration of notional the bank in terms of increase in loans and tax relating to the nine Section 2 (a) of the Act advances of Rs.49 billion month period in 2018 and and amendments thereto which was primarily increase of cost of deposit shall be the promotion of funded by a growth of due to increase in fixed savings among the people deposit of 14 per cent deposit interest rates.Net of Sri Lanka particularly during the year. The asset gain from trading had among those with limited Quality of the Bank also declined by Rs.1,914 means and the profitable improved during year million or 159 per cent investment of savings so recording the Non due to declining the fair mobilized. performing loan ratio of value of equity and National Savings Bank 1.34 per cent compared to government security had established two new 1.44 per cent reported in portfolio of the Bank. The branches during the year 2017. net operating income has 2018 and accordingly declined by Rs.630 Bank reported the profit total branches stood at million or 37 per cent before tax of Rs.8 billion 255 at the end of the year compare to the previous which was 44 per cent 2018. Total deposit base year due to non- decrease against the of the Bank was declaration of dividend by previous year. The expanded by Rs.102 NSB Fund Management decrease in net interest billion or 14 per cent Company (A Fully owned income, net gain from during the year reaching Subsidiary of the NSB) trading, net operating
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for 2018. Personal Fitch Rating has revised text Savings and Loans – expenses of the Bank had the National Long-Term ARC award competition”, increased by Rs.2,376 Rating of NSB to “Bronze award Interior
million or 35 per cent due „AA+(lka)‟ from design - Savings and to salary increments „AAA(lka) in February Loans – ARC award granted to employees as 2019 following the competition”, “Bronze per the collective recalibration of the Sri award Non-trading annual
Banking agreement with effect Lankan National Rating report-Savings and from 1 January 2018 and scale after the sovereign‟s Loans-ARC award absorption of some Long-Term-Foreign- competition” and “Silver contract basis employees Currency Issuer Default award-cover photo in grade VI and VII into Rating was downgraded design-Savings and the permanent cadre to “B” from “B+” with a Loans-ARC award during the year 2018 Stable Outlook on 3 competition” for the December 2018. Bank‟s Annual Report - The capital adequacy However, the Bank has 2017. ratios of the Bank are been assigned (SL) AAA higher than the minimum The Bank won another with Stable Outlook by regulatory requirements. two website awards ICRA Lanka Limited on The core capital adequacy namely “Most popular June 2019. ratio and total Capital corporate website award” Adequacy Ratio stood as The Bank has received 8 at the bestweb.lk 2018 13.3 percent (minimum awards namely “Silver competition organized by 10%) and 16.1 per cent award – State Banks by LK Domain Registry and (minimum 14%) CA Sri Lanka”, “Most “1st runner up award” respectively. The deposit Improved Integrated under the best website based market share of the Report and among top 10 category in Financial Bank compared to the best Integrated Report by Sector at “SLT Zero One Licensed Specialized CMA Sri Lanka”, “Best Award for Digital Banking Sector had Integrated Report in State Excellence 2018”. decreased by 1.8 per cent. Owned Enterprises by CMA Sri Lanka”, “Bronze award written
180 National Audit Office | Annual Report - 2018
State Mortgage and Investment Bank
State Mortgage and Investment Bank is a advances by Rs.1.2 billion compared to the
government owned bank which was preceding year. Banking incorporated in State Mortgage and The Bank reported the profit before tax of Investment Bank Law No. 13 of 1975 and Rs.480 million which was 27 per cent amended thereto and according to Section increase against the previous year result. 2 of the Law, the purpose of the Bank shall Further, net interest income of the Bank be to assist in the development of increased by 304 million or 19 per cent agriculture, industry and housing by compared with the previous year. providing financial and other assistances in accordance with the provisions of this law. The total capital adequacy ratio of the Bank was decreased by 2.05 per cent The total deposits of the Bank as at 31 compared to the previous year and it was December 2018 was surpassed Rs.34 22.24 per cent as at 31 December 2018. billion and it was an increase of 1.9 per The non-performing loan ratio was cent compared with the previous year. decreased by 1 per cent compared with the Total assets of the Bank expanded by preceding year and it was 22 per cent as at Rs.0.6 billion or 1.4 per cent and it was 31 December 2018. Total Deposits was surpassed Rs.43 billion as at 31 December increased by Rs.652 million compared to 2018. The increase in assets was mainly the preceding year and it was Rs.34,272 attributed due to increase in loan and million as at 31 December 2018.
Housing Development Finance Corporation Bank
Housing Development Finance Section 12 (a) of the Act and amendments Corporation Bank (HDFC) as a there is to become the undisputed market government owned bank was incorporated leader in providing housing related in Sri Lanka by Housing Development finances; to realize the dream of shelter for Finance Corporation Bank Act No.07 of all in Sri Lanka. 1997(amended by Act No. 15 of 2003 and HDFC Bank had not established new Act No. 45 of 2011) and was granted the branches in the year 2018 and accordingly status of the Licensed Specialized Bank in total branches stood at 39 at the end of the terms of the Banking Act No 30 of 1988. year 2018. In addition, Loans granted were The objective of the Bank in terms of
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expanded to Rs. 37.9 billion in 2018, cent increase against the previous year. compared to Rs.34.9 billion in 2017 which Further, net interest income of the Bank was an increase of 8.4 per cent. Hence, increased by Rs.367 million or 19.59 per
interest income during the year was cent compared to year 2017. increased by 1 per cent, reaching Rs.6.68 The Core Capital Ratio (Tier 1) was 16.41 billion, from Rs. 6.61 billion in the per cent as against the regulatory previous year. Further, the Bank expanded requirement of 7.87 per cent. However, As Banking its deposit base from Rs. 36.65 billion to per the Central Bank (CBSL) direction No. Rs. 37.02 billion during the year and it was 02/17/402/0073/002, issued in conjunction reported as 1 per cent increase. with the Master Plan on Consolidation of Total assets of the Bank had declined to the Financial Sector dated 17 January Rs. 49.28 billion, from Rs. 49.72 billion in 2014, the Bank should maintain Rs. 5,000 2017 and Bank‟s total assets declined by million as its core capital balance as on 1 Rs.440 million, due to the strategic January 2019. The Central Bank has decision to reduce the low yielding granted a further extension of six months investment portfolio and liquid assets. to comply with this direction in Non-performing loan ratio of the Bank had consideration of the ongoing proceedings increased from 18.2 per cent in year 2017 to obtain government approval to the to 20.46 per cent in year 2018. proposed source of the long term capital qualified as core capital under the Basal Bank had reported the profit before tax of 111 guidelines. Rs.629 million in 2018 which was 6.79 per Pradeshiya Sanwardhana Bank
Pradeshiya Sanwardhana Bank, as a state the development of agriculture, industry, owned Licensed Specialized Bank was trade, commerce, livestock, fisheries established in Sri Lanka with the activities and empowerment of women, amalgamation of six provincial mainly by granting financial assistance to development banks in 2010 by Pradeshiya Micro Finance Institutions and Small and Sanwardhana Bank Act No.41 of 2008. Medium Enterprises. The objective of the Bank in terms of Total branches of the Bank stood at 265 at Section 6 of the Act shall be to facilitate the end of the year 2018. Total deposit the overall regional economic base of the Bank expanded by Rs.1.7 development of Sri Lanka by promoting
182 National Audit Office | Annual Report - 2018 billion or 1.2 per cent during the year The Bank has maintained minimum reaching to Rs.141.6 billion by the end of Capital Adequacy Ratio as at 31 December the year 2018. Total asset base of the Bank 2018 and accordingly, the Tier I capital expanded by Rs.7.7 billion or 4.5 per cent adequacy ratio and total CAR stood as Banking surpassing Rs.176.9 billion by end of 11.58 per cent (minimum 7.875%) and December 2018. The increase in assets 13.61 per cent (minimum 11.875%) was mainly attributed to increase in loans respectively. Further, Pradeshiya and receivables from other customers by Sanwardhana Bank has acquired 100 per Rs.5.9 billion. However, asset quality of cent equity stake in Lankaputhra the Bank had been decreased during year Development Bank in line with the recording a Gross Non performing loan government budget proposal of the year ratio of 5.40 per cent as compared with 2016 thereby proposed to Lankaputhra 3.27 per cent reported in 2017. Bank Development Bank to be merged with reported the profit before tax of Rs.2.1 Pradeshiya Sanwardhana Bank for a billion which was 4 per cent decrease purchase consideration of Rs.4.176 billion. against the previous year. However, Net Purchase consideration was settled by way interest income of the Bank increased by of new share issue in favour of General Rs.2.2 billion or 23 per cent compared to Treasury with effect from 31 December year 2017. 2018.
Lankaputhra Development Bank
The Lankaputhra Development Bank percent equity stake in Lankaputhra Limited, was a fully government owned Development Bank in line with the public limited liability company government budget proposal of the year incorporated in Sri Lanka under the 2016 thereby proposed to Lankaputhra provisions of Companies Act and a Development Bank to be merged with Licensed Specialized Bank established Pradeshiya Sanwardhana Bank for a under the provisions of Banking Act No.30 purchase consideration of Rs.4.176 of 1988 with a vision to be the vibrant Billion. Purchase consideration was settled facilitator of economic and social by way of new share issue in favour of development in Sri Lanka. Pradeshiya General Treasury with effect from 31 Sanwardhana Bank has acquired 100 December 2018.
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Total branches of Lankaputhra as compared with 37.2 per cent reported in Development Bank stood at 8 at the end of 2017. Bank reported the profit before tax the year 2018. Total deposit base of the of Rs.297.5 million for the year 2018 as
Bank had been decreased by Rs.77.7 compared with the profit before tax of million or 19 per cent during the year. Rs.298.1 million for the year 2017. Total asset base of the Bank expanded by The Bank has maintained well above the Rs.244 million or 2.6 per cent. Loans and minimum Capital Adequacy Ratio as at 31 Banking receivables to customers have been December 2018 and the Tier I capital decreased by Rs.404 million or 12.9 per adequacy ratio and total Capital Adequacy cent as at the end of year 2018. Further, Ratio stood as 95.09 per cent (minimum asset quality of the Bank had been 7.875%) and 95.76 per cent (minimum decreased during year recording a Gross 11.875%) respectively. Non performing loan ratio of 46.5 per cent The Sri Lanka Savings Bank Limited
The Sri Lanka Savings Bank Limited year reaching to Rs.1,089 million by the (SLSBL) was established in July 2006 end of the year 2018. Loan and advances under the Banking Act and incorporated of the Bank decreased by Rs.272 million under the provision of the Companies Act or 6 per cent during the year under review mainly with the purpose of provide relief while the Repo and fixed deposit to the depositors of the failed Pramuka investments are increased by 95 million or Savings and Development Bank (PSDB). 2 per cent compared with the previous The Sri Lanka Savings Bank commenced year. its business in 2008 as a state owned Bank reported the profit before tax of Licensed Specialized Bank. The Bank Rs.488 million which was 19 per cent merged with National Development Trust decrease against the previous year. Fund (NDTF) Company in the year Reduction of other operating income, 2010.The major operations of the Bank higher personnel and other expense and include deposit mobilization, loan increase in VAT, NBT, and being liable to granting, leasing, hire purchase and income tax with effect from 1 April 2018 pawning. were the main reasons for this decrease. Total deposit base of the Bank expanded The gross non performing advance ratio of by Rs.11 million or 1 per cent during the the Bank excluding non-performing
184 National Audit Office | Annual Report - 2018 customers of PSDB for the year ended 31 The total Capital Adequacy Ratio of the December 2018 was 11 per cent which is Bank stood at 89.9 per cent as at 31 higher than Licensed Specialized Banking December 2018 while the minimum sector average ratio of 4.8 per cent. requirement is 12.5 per cent. Banking
Major Audit Findings
Central Bank of Sri Lanka
The distributable on 17 January 2014 had not been profit for the year with the objective of completed even up to under review was nil developing a strong the end of March as determined in Banking/ Non- 2019, though the terms of Sections 38 Banking Financial Bank had incurred a and 41 of the Institutions sector sum of Rs.53 million Monetary Law Act with enhanced in this regard. In No.58 of 1949 and resilience to internal addition to the above profit distribution and external shocks in expenditure, the policy of the Bank. order to cater to the Bank had incurred an Accordingly, no any growing demands of additional sum of Rs. amount could have the economy. 59 million for been distributed to the Accordingly, the preparing Information Consolidated Fund. Consolidation Plans Memorandum, Due However, a sum of with 19 institutions Diligence, Valuation Rs.15 billion had been including Banks, reports and other distributed to the Financial companies matters relating to 20 Consolidated Fund and Leasing Institutions which out of the companies had been were not included in distributable profit in completed as at 31 the above the preceding year. March 2018 by Consolidation Plan. The Bank had spending Rs.74 As per the Finance unveiled the Master million. However, the Leasing Act, No.56 of Plan on Financial Consolidation Plans 2000, duties of Sector Consolidation with 14 institutions lessors, lessees and National Audit Office| Annual Report - 2018 185
supplier are described place the lessor in a on Microfinance from the clause position the lessor Business are carried number 11 to 31. As would have been if out by the Monetary
per the clause number the lessee had Board of the Bank 11, only right of the complied with the under the Lessee is the provisions of the Microfinance Act, No undisturbed and finance lease. As per 06 of 2016 with effect
Banking peaceful possession of the provisions from 15 July 2016. the equipment included in the Act, Companies which are provided to the lessee the all benefits such accepting deposits under a finance lease. as possession of the and providing As per the clause equipment, recovered financial services number 15, upon the money and if any mainly to low income expiration of the recovered damages persons and micro period of a finance whether or not the enterprises (Micro lease, the lessee shall lessee has paid the Finance Business) return the equipment due amount as should obtain a to the lessor in the scheduled under license under the Act. condition in which it finance lease are Accordingly, only two was delivered to the entitled to the lessor companies had lessee subject to fair and overall obtained the licenses wear and tear and to responsibilities under to carry on any modifications finance lease are microfinance business agreed to by the assigned to the lessee. from the effective parties to the finance Therefore, it may be date of the aforesaid lease. As per the required to review the Act to 9 May 2019. clause number 20, at Act for identifying the Companies which are any default of the necessity to do any not accepting deposits lessee, the lessor has amendments to the but providing right to recover Act. financial services to possession of the The Licensing, low income persons equipment provided Regulation and and micro enterprises and recover such Supervision of in the country do not damages as would Companies carrying require obtaining a 186 National Audit Office | Annual Report - 2018
license under the Act. January 2016. Out of However, fines had Therefore, those total irrecoverable not been imposed
companies are not amount, Rs. 2.1 against any Primary Banking licensed, regulated billion was appeared Dealer as the Bank and supervised by the to be irrecoverable to was unable to enforce Monetary Board of the four departments the System Rules. The the Bank under the of the Central Bank Monetary Board
Act. which handle internal instructed the Public The Bank had funds. Debt Department of entrusted the Section 2.2 of Lanka the Bank in management of a settle System Rules September 2015 to particular primary version 2.1 (2013) develop an dealer company to the which was issued for appropriate National Savings the operations of the framework to impose Bank on 04 January Lanka Settle System fines against Primary 2016. Unrecoverable by the Bank states Dealers who act amount of investment that fines can be against the interest of with accrued interest imposed against customer. However, to the Customers due Primary Dealers when such appropriate to Security shortage a Primary dealer framework had not for repurchase violates rules and been developed even transactions was regulations that they up to the end of Rs.7.2 billion as at 04 are required to follow. March 2019.
Peoples Bank
According to the direction 4(5) dated 8 per cent of the total credit granted to May 2008 issued by the Central Bank the customer the total credit facilities of Sri Lanka (CBSL) when multiple extended to such borrower need to be credit facilities are granted to a single classified as NPL .However, several borrower and if the aggregated amount customers were not classified as NPL of outstanding classified as non- according to the said instructions. performing loans (NPL) exceeds 30
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Bank had not collected Value Added September 2009, all Licensed Tax (VAT) on some revenue items and Commercial Banks are required to as a result of that the Bank had to bear maintain a real time monitoring system an output tax of Rs.19,412,393. for the monitoring of all deals done by Thereby it is recommended to check the dealers at the front office to ensure the mapping of revenue accounts with the dealers do not engage in excess of VAT payable. their delegated dealer limits. However,
Banking According to the Bank Circular- No. treasury limits of the Bank have been 614/2007(4), Temporary Overdrafts input to the Finnacle Treasury System (TOD) should be recovered without and due to absence robust online any delay. However, several instances monitoring system in the Bank. with delays were noted in recovering Monitoring is done during the day at the TOD facilities. frequent intervals or on the following According to the CBSL Direction day. No.03 (4.1 (xi)) of 2009 dated 01 Bank of Ceylon
Loans and Advances
Gross loans and advances granted by had shown in all loans and overdrafts the Bank as at 31 December 2018 was and it was 64 per cent improvement Rs. 1,510,534 million compared with during the year 2018. previous year balance of Rs.1,219,914 The total non-performing loans and million indicating an increase of 23.8 advances as at 31 December 2018 was per cent. The main reason for the Rs. 53,753 million as compared with aforesaid increase is the rise of the said value of Rs. 34,261 million for overdrafts during the year under the year 2017 and showing an increase review. Out of the above balance, a of 57 per cent. Non-performing Loan sum of Rs. 1,136,530 million or 75 per ratio of the Bank had increased from cent of total outstanding had consisted 2.9 percent to 3.6 per cent in year 2018 with term loans, overdrafts and compared with the previous year. personal loans. An increasing trend Further, it was identified that reported highest non-performing Corporate, Second Corporate branches amounts totaling to Rs. 20,636 million and Offshore Banking Division had as at the end of the year 2018 and it is
188 National Audit Office | Annual Report - 2018
38 per cent of the total non-performing Rs. 2,738 million, Rs. 1,532.48 and Rs. loans and advances of the Bank. In 1,455 million respectively as at the end
addition to that, Second Corporate of the year 2018 and it is 15 per cent of Banking branch was handling Non performing the total non-performing loans and advance totaling of Rs. 5,354 million. advances of the Bank.
It was observed three highest non-
performing customers amounting to
Banking Written off loans & advances
The total capital part of the loan written of Rs. 40 million were related to the off in the year 2018 was Rs. 40 million Recovery Provinces Unit and capital part and it represents 2,843 customers of the of Rs.14.8 million and interest of Rs.12.5 Bank. Interest related to above outstanding million were related to Recovery was Rs. 53 million. Out of the above, Corporate Unit. capital part of Rs. 26 million and interest National Savings Bank
Though total deposit base of the December 2018 is Rs.110.5 million Banking Sector had improved by 228 and this indicates Rs.15.7 million or per cent from year 2010 to 2018, NSB 16.6 per cent increase compared to the achieved a growth of only 136 per cent previous year. The fraud occurred in during the said period. Therefore, the Head office Branch in 2018 mainly market share of NSB has deteriorated causes to increase this receivable from 13.7 per cent in 2010 to 9.9 balance. Out of the above balance, a percent in 2018. Market share of NSB sum of Rs.85 million had remained with compare to the licensed outstanding for more than one year specialized banking sector also and a sum of Rs.29 million had deteriorated from 82.1 per cent in 2010 remained outstanding for over five to 77.4 per cent in 2018. years period. Receivable amount to the Bank from fraudulent withdrawals as at 31
Out of 5,406 number of approved for the Staff Assistant and Office cadre of the Bank, the cadre approved Assistant posts were 2,066 and 563
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respectively. Accordingly 48.6 per cent applications from qualified candidates. of the total cadre was allocated for the Therefore, it was observed that it is above posts. The recruitments to the unfair for the whole masses who are above posts are done by using a list seeking jobs in the Sri Lankan job Banking forwarded by the ministry and market. management, without publicly calling
State Mortgage and Investment Bank
The credit division of the Bank during shifted into a new premises in January the period from 01 September 2016 to 2018 just after nine month the 31 March 2017 had granted loans completion of the partition work. amounting to Rs.68.34 million to Therefore, the expense incurred for the fourty seven (47) applicants who were partition became a fruitless presenting themselves as the expenditure. employees of two fake private Even though a sum of Rs.38,312,700 organizations. It was revealed that the had been paid as rental for the Head applicants presenting themselves as Office building for the year under employees of the two fake review, most of the facilities such as organizations had submitted forge office and parking space, wash room, documents in applying for respective lunch room, stores, wiring systems etc. loans. Total amount of above loan was of the building are not in a satisfactory included in the non-performing loan level as the building is very old. balance at 31 December 2018. However, the Bank had failed to obtain The Bank had spent Rs.1.16 million an insurance coverage as per for the Partition and construction provisions in the rent agreement. works of the Kiribathgoda branch in Hence, the staff, assets and customers‟ March 2017. However, the branch has safety is at a risk. Housing Development Finance Corporation Bank
A sum of Senior Citizens outstanding for over Rs.75.14million was subsidy receivable one year without shown in the Special account and out of being recovering from Interest Scheme on that, Rs.41.19 million government. Fixed Deposits of or 55 per cent
190 National Audit Office | Annual Report - 2018
Contrary to the Public for the investment of 808 loans valued at Enterprises Circular Rs.25million. Further, Rs. 282.27million had No. PED 03/2016 of it was observed that been granted during 29 April 2016, the market value of the the year 2018 which Bank had paid Pay As unit trust was were transferred to You Earn (PAYE) tax significantly non performing amounting to Rs. deteriorating during category due to non- 22.39 million for the last 3 years when repayment of single year 2018 out of its compared with initial installment and out of own funds on behalf investment price of that, 798 loans valued of its employees Rs.10. The market to Rs.264.03million instead of being rate of the unit trust or 93.6 per cent were deducted from the for the year end was represented by EPF salaries of the Rs.7.50. Loans. respective employees. 37 loans amounting to 280 loans valued at According to the Rs.57.17million were Rs.107.92million Board Paper No. in arrears without any granted during the 09/188/2015, the secondary recovery year 2018 were Bank had planned to option to the Bank transferred to non gain potential due to the performing category estimated annual unavailability of due to non-repayment return of 15 per cent security and they were after the settlement of per annum from the categorized as under first installment and Ceybank Unit and watch states which out of that, 274 loans manage the assets and have risk of amounted to liability maturity gap. subsequently Rs.107.48million or However, no return becoming to non- 99.6 per cent were had been received performing states. represented by EPF since the year 2015 Loan.
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Pradeshiya Sanwardhana Bank
Contrary to amounting to amalgamation of
Procurement Rs.191.48million for Lankpauthra Guideline reference the year 2018 out of Development Bank No.2.1.1 and Public its own funds on contributed towards Finance Circular behalf of its increase in the
PF/429(i), Bank has employees instead of equity.The staff cost Banking used its own being deducted from to operating expenses developed the salaries of the of the year 2018 was procurement manual respective employees. 75.01 per cent as without obtaining As per PED 03/2016, compared with the approvals from the Board of Directors Sector ratio of 54.2 Director General of and Senior per cent. Adverse Public Finance. Management of SOEs trend in assets quality Contrary to the should ensure to was observed with the Section 114 of Inland deduct PAYE tax and significant increase in Revenue Act, No. 10 remit to Inland NPL ratio up to 5.40 of 2006 and Section Revenue Department. per cent as at 31 83 of Inland Revenue Return on Assets and December 2018 from Act, No. 24 of 2017 Return on Equity had 3.27 per cent as at the (effective from been decreased up to previous year end due 01.04.2018), Public 0.62 per cent and 7.30 to poor credit Finance Circular No. per cent respectively evaluations and PF/PE/06 of 31 as at 31 December ineffective & January 2000 and 2018. Impairment unsustainable Public Enterprises charges due to high recovery efforts. Circular No. PED Non Performing Loan Further, as at 31 May 03/2016 of 29 April (NPL) ratio and 2019, NPL of the 2016, the Bank had higher staff cost Bank has been paid Pay As You Earn resulted low increased up to 9.87 (PAYE) tax profitability level and per cent.
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Lankaputhra Development Bank
The Bank had financial statements had been paid as
invested a large of Lankaputhra capital and interest Banking proportion of Bank‟s Development Bank installments of GOSL money in fixed had not been prepared USD loan balance to deposits at a risk free in accordance with the Treasury by using SLFRS 9 and CBSL buying interest rate without granting loans to its therefore, impact on exchange rate. customers. This is the above standard to However, that USD contradicted with the the financial loan installments need primary objective of statements could not to be converted using the Bank of assisting be assessed. CBSL selling rate. in the promotion, A loan balance of Therefore, payment of establishment, USD 16.41million 2018 loan expansion, and interest payable installments had been modernization and of USD 20.51million understated by Rs. development of the have been converted 2.47million. industrial, to LKR using CBSL A difference of agricultural, buying rate of Rs.6.89million had commercial, Rs.180.72 instead of been observed construction and other using CBSL selling between the balance enterprises. rate of Rs.184.6966 as as per physical Sri Lanka Financial at 31 December 2018. verification and Reporting Standard Therefore, the loan balances as per SLFRS - 9 “Financial payable balance and general ledger in Instruments” shall be interest expense have respect of applicable for been understated by consumables, financial reporting Rs.65.33 million as at stationeries and periods beginning on 31 December 2018. promotional items of or after 01 January During the year, total head office as at 31 2018. However, of Rs.109. 39 million December 2018.
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Sri Lanka Savings Bank
The Banks‟ main According to Section 31 December 2017,
objective as per the 1.3 of the an amount of Rs.15
Articles of Memorandum of million or 2 percent Associations is to Cabinet Paper No. was recovered during identify, develop, PED/NDTF dated 24 the year under review.
promote, catalyze and May 2010; the Bank Accordingly, the loan Banking support sustainable was established in balance to be income generating 2006 to provide relief recovered by the Bank opportunities and a to the depositors of as at 31 December higher quality of life the failed Pramuka 2018 was Rs.1,020 for the poor through a Savings and million. range of activities Development Bank Out of the total loan including productive (PSDB). The Bank portfolio of the Bank, self-employment micro had paid Rs.541 a sum of Rs.1,319 enterprises and rural million during the million or 33.3 per work by the provision year 2018 to the cent represented the of financial assistance PSDB depositors and micro finance loan as and services. Oppose this balance at 31 December 2018. to the above objective, represents 47 per cent Out of total the Bank had of the outstanding outstanding amount of maintained nearly 66 deposit liability micro finance loans as per cent of its total balance of the at 31 December 2018, assets in different previous year. a sum of Rs.568 investments such as Further, the PSDB million or 43 per had repo, fixed deposits, liability outstanding been granted to six debentures and equity balance as at 31 community based instruments. The loans December 2018 was organizations and and advances Rs.656 million. each loan exceeds represented only 26 Out of the PSDB non- Rs.50 million. per cent of the total performing loan Securities provided assets of the Bank. outstanding amount of against the above Rs.1,035 million as at loans covered only 13
194 National Audit Office | Annual Report - 2018 per cent to 45 per cent heavily on few considerable credit of the outstanding customers creates a risk to the Bank. loan balance. Reliance Banking
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196 National Audit Office | Annual Report - 2018
Non-revision of the Rentals considering the Commercial Value of the Lands
Though Expenditure on Tea
Promotion had increased, Export Quantity of Tea had Decreased
Though Subsidies for Replanting Tea had been Paid, Tea Replanting had not reached to the Expected Level
Annual Coconut Harvest of the Plantation Companies had
Plantation Industry Plantation decreased from 11 to 54 Nuts
Though Rubber Subsidy Programmes have been implemented, the Overall Rubber Production has been Declining Continuously
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198 National Audit Office | Annual Report - 2018
Plantation Industry Industry Plantation
Improvement of productivity, profitability, Taking necessary steps for uplifting the and sustainability of targeting the export industry for enhancing the value market with the objective of achieving an addition of the plantation crops. accelerated economic development of the Issue of licenses relating to Tea and country is expected from the Plantation Rubber. Sector. The Ministry and 14 Statutory Issue of permits for the export of Tea. Institutions should have performed the Issue of licenses for fragmentation of following functions in order to achieve the Tea and Rubber and control. expected results set out below. Optimum use of plantation lands through multi-crop cultivation and
Formulation, taking follow-up action collective farms and thereby achieving and evaluation of policies, programmes increased production and employment. and projects, and projects relating to plantation industry Matters relating to the development, promotion and research activities of Providing support and other facilities tea, rubber and coconut industries needed for increasing the productivity of plantation crops Introduction of enterprise and structural changes to industries Enhancing the international affiliated to the Ministry. competitiveness for the productivity of Plantation Industry. A summary of audit observations revealed in connection with execution of the said activities,is given below. Vesting of Lands on Lease Basis and Collection of Revenue
Out of estates in total extent of 617,486 state lands. Action had not been taken to acres owned by the Government given out credit the 20 per cent fee from the revenue to 23 plantation companies in the year from rent amounting to Rs.36.51 million 1992, the annual revenue from lease rent recovered for the year 2018 relating to 05 received from one acre had been ranging plantation companies sublet before the from Rs.433 to Rs.2,780. Action had not year 2017. been taken to revise the lease rent recovered by considering the commercial A plantation company had leased out a value of lands at present. land in extent of one acre to the Sri Lanka Air Force on a sublease value of Rs.12.22 According to the Letter million annually for the period from 31 No.PE/PL/RP/Gen/2017 dated 15 May 2011 to 17 June 2045. In terms of the February 2017 of the Director General of agreement by which state lands had been the Department of Public Enterprises, it leased out to the said plantation company, had been ordered to charge a 20 per cent the Ministry may recover the possession of fee from the revenue to the Consolidated the lands leased out to plantation Fund from rent earned by subletting the companies on the requirements of the
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Government. However, attention had not been paid therefor. Implementing the Programme on Promotion of Tea Sales
A private company had been selected for implemented as expected due to production and creative activities of the incompletion of media activities. Global Tea Promotion Campaign which Moreover, as compared with the preceding had been planned to be implemented by year, promotion expenditure had been utilizing Rs.8 billion from earnings of Tea overspent in the year 2018 by 18.87 per Promotion Fund and incurred Rs.199.67 cent. Nevertheless, the quantity of export million for commercials and creative of tea had decreased by 2.21 per cent. work. The programme could not be Details are given in Table 17. Year Local Tea Tea Sales
PlantationIndustry Export Promotion (Kg. millions) (Rs.Millions) 2014 317.8 381,134,199 2015 298.9 481,352,966 2016 280.8 884,151,296 2017 278.2 560,202,236 2018 271.7 665,959,711 Table 17- Local Tea Export and Promotion of Tea Sales Source - Statement of Statistics Data and Financial Statements of the Sri Lanka Tea Board
Tea Replanting Subsidy
The tea replanting subsidy had been paid three stages. However, those planters had under five stages during the period from not carried out replanting and as such, the the year 2012 up to the year 2016. Planters expected objectives could not be achieved owning lands of 577 hectares in extent had by granting those subsidies. The attention obtained the tea replanting subsidy of of the management had not been paid Rs.920.13 million under only the first thereon. Coconut Industry
Various programmes had been increased in quantity from 2,450 million implemented for the Coconut industry to coconuts in the year 2017 up to 2,623 provide the highest contribution to Gross million coconuts in the year 2018. Domestic Production from the plantation Nevertheless, as compared with the industry, and to become the global leader coconut harvest of 3,056 million coconuts in sales diversification of products. in the year 2015, the coconut harvest had However, the coconut harvest had slightly declined. Details are given in Diagram 42
200 National Audit Office | Annual Report - 2018
3500 Industry Plantation
3000
2500
2000
1500
Coconuts millions 1000
500
0 2018 2017 2016 2015 2014 Year
Figure 42- Annual coconut production Source – Performance Report 2018 of the Ministry of Plantation Industries
Annual Coconut Harvest
According to standards of the Coconut have been taken by companies to reach the Research Institute, the annual average standards of the Coconut Research harvest of a coconut tree should be Institute by carrying out the soil test and to approximately 72 coconuts. However, the use fertilizer and chemicals and to create said number had been 31-54 and 11-36 in irrigation systems to obtain the due harvest 07 and 06 estates managed by Kurunegala from new cultivations. Nevertheless, Plantations Ltd. and Chilaw Plantations action had not been so taken. Ltd. respectively. Necessary action should Rubber Production
The Rubber Development Department had from the year 2014 up to the year 2016 and implemented subsidy programmes for the rubber production of 83,070 metric increasing the extent of rubber cultivation tons in the year 2017 had decreased up to lands and to improve the productivity of 82,560 metric tons in the year 2018. rubber cultivation lands. The total rubber Details are given in Diagram 43 production was on continuous decrease
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120000
100000
80000
60000
40000
TotalRubber Metrictonns 20000
0 2018 2017 2016 2015 2014 Year PlantationIndustry
Figure 43 Annual rubber production Source – Annual Performance Report 2018 of the Ministry of Plantation Industries
Export of Raw Rubber
The export of rubber which was 17,230 rubber in the year 2017 had decreased up metric tons in the year 2017, had to Rs.5,088 million representing 14 per decreased up to 13,982 metric tons in the cent in the year 2018. Details are given in year 2018 representing 19 per cent and Diagram 44 income of Rs.5,920 million from export of
40000
35000
30000 MetricTons
25000 – 20000 Quantity of Export – Metric Tons 15000 Export Revenue Rs. Millions 10000
Export RevenueMillions Rs. 5000 Quantityof Export 0 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 44 - Export of Raw Rubber Source – Annual Performance Report of the Ministry of Plantation Industries
202 National Audit Office | Annual Report - 2018
Non-achievement of Objectives Industry Plantation
Rubber had been expected to be replanted Even though it had been planned to on lands of 1,000 hectares and 500 cultivate rubber on new lands of 750 hectares in extent of Rubber Small Holders hectares in extent in traditional and non- and Plantation Companies respectively in traditional areas in the year under review, the year under review. Out of the said only 342.5 hectares of land had been extent, only 523 hectares and 319 hectares cultivated with rubber. As such, the extent had been cultivated with rubber not achieved had been 54 per cent of the respectively. Accordingly, out of the extent planned. extent planned, the extent not achieved had been 48 per cent and 36 per cent
respectively.
Idle Assets
The equipment named Walk in Type Four equipment valued at Rs.15.74 million Environmental Facility had been imported purchased by the Rubber Research from India on 08 May 2018 by spending Institute during the period from the year Rs.14.03 million, received to the Tea 2010 up to the year 2017, had remained Research Institute for special projects. The idle for a period ranging from 2 years to 8 said equipment had been imported without years without repairing and making use of. deciding the expected active level. As such, a year had lapsed after receiving the A generator had been purchased for a cost equipment to the Institute. However, it had of Rs.1.39 million on 19 March 2018 by remained idle without being made use of the Chilaw Plantations Ltd. for obtaining for research purposes. water to the coconut seedling garden maintained in a portion of the Keeniyama Laboratory items valued at Rs.5.80 million Estate. The said machine had not been had been purchased since the year 2014 made use of due to non-completion of without identifying the requirement. As laying water pipes even by 31 August such, stocks valued at Rs.3.46 million of 2019. the said stocks had remained idle. Out of 06 factories owned by the A number of 4,076,000 stickers valued at Elkaduwa Plantations Ltd., 03 factories Rs.7.18 million had been purchased for had been in inoperative condition and pasting on coconut related products during action had not been taken to utilize the the period from the year 2014 to the year inoperative factories for production of tea 2018 without identifying the requirement. or to lease them out. Those stocks had remained idle over a period of 2 years.
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Management Activities
A land of approximately 160 acres in Even though the Cashew Corporation had extent of the Suduwathura Ara seedling been informed by the Committee on Public garden owned by the Cashew Corporation Enterprises held on 24 July 2012 that and an extent of 10 acres of the portion of action should be taken to vest the land at Ottukolama of the Kamandaluwa ownership of lands without legal Estate had been illegally enjoyed by ownership to the Cashew Corporation, external parties and cultivations including action had not been taken even by 31 May seasonal crops and betel was being carried 2019 to vest the legal ownership of 15,329 out. The Cashew Corporation had not acres of land cultivated with cashew by the taken legal action necessary to reacquire Corporation.
those lands. PlantationIndustry Fruitless Expenditure
The raw material required for operating been available and an adequate income the production activities of the rubber from sales could not be earned. As such, factory with maximum capacity by the production activities of the factory had spending Rs.12.08 million in the year 2016 been discontinued by the end of the year without carrying out a feasibility study by under review. Accordingly, the amount the Kurunegala Plantations Ltd., had not spent for the factory had become fruitless. Operating Inefficiencies
A number of 4,131 cashew plants had been of the year 2018. Out of cashew trees cultivated in the year 2013 on a land of grown from cashew plants so cultivated, 20.75 hectares in extent in St. John B and 3,685 or 89 per cent trees had been Marichchikattuwa estates belonging to the destroyed due to weaknesses in Chilaw Plantations Ltd. A sum of Rs.7.06 maintenance and supervision. million had been spent therefor by the end
Progress of Foreign Funded Projects
Provisions of Rs.1,400 million had been been planned to be developed, only 1.344 made in the year 2018 for the Smallholder hectares of tea estates, 293 hectares of Tea and Rubber Revitalization Project rubber and 24 roads had been completed. implemented during the period from the As such, the expected targets could not be year 2016 to the year 2021 under the reached. financial contribution of the International Fund for Agricultural Development and In terms of conditions mentioned in the Government of Sri Lanka. Even though agreements on payment of subsidies, the 2,115 hectares of tea estates and 1,000 recommendation of the Tea Inspectors of hectares of rubber estates and 31 roads had the Tea Smallholdings Development Authority should have been obtained for 204 National Audit Office | Annual Report - 2018 releasing the subsidy installment to for replanting of tea, the second and third Industry Plantation planters. Even though lands totalling 47.23 installments of the subsidy could not be hectares in extent of 331 Tea smallholders obtained due to delay in the in the District of Kandy had been prepared recommendations of Tea Inspectors. The basic subsidy totalling Rs.3.58 million District of Ampara. Nevertheless, the said had been paid to 109 recipients who had subsidies paid for those rubber cultivations obtained licences for replanting of tea in had become fruitless due to drought, 23.85 hectares of land in the District of destroying by wild elephants and Kandy. However, replanting of tea had not acquisition for construction of the been commenced. Warapitiya reservoir.
A sum of Rs.4.88 million had been paid to Fifteen planters in the District of Ampara 99 recipients in the years 2016 and 2017 had obtained basic subsidies totalling for cultivating lands of 59.457 hectares in Rs.849,317 for 12.135 hectares cultivated extent owned by the Damana and in the years 2016 and 2017 and abandoned Lahugala areas and the Divisional those cultivations thereafter. Secretariat Division of Maha Oya in the
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Payment of a Sum of Rs. 542.71 million as Interest on Compensation due to the Delay in Paying Compensation for Acquired Lands
Out of the Income Earned from Land Lease, an Income of Rs.
2,657 million Remained Outstanding
Lands are not leased out properly
Deterioration in the
Land Affairs Land performance of mapping
Non-preparation of the Land Use Plan in fun
Taking slow action on the misconducts of the Surveyors as Regularly
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Land Affairs
The optimum use of lands for sustainable Issue of Grants to ensure title to State development is the result expected from Lands. Land the land sector. The following functions Lease of State Lands on long term and were required to be performed by the short term basis for development and
Ministry of Lands, 4 Departments and 4 residential purposes. statutory Boards for achieve the above Registration of Title Certificates to expectations. ensure land title. Land surveys, mapping and Formulation and implementation of preparation Of tracings, targeting Policies, Programmes and Projects national planning. related to the subjects of Lands. Formulation of an information system Giving instructions to the relevant on all lands of the country. sectors based on the studies conducted in accordance with the Land use The following deficiencies were revealed Policies for sustainable development. in the audit test checks carried out relating Administration and Management of to the performance of those functions by State Lands. the Ministry, Departments and the Land alienation as determined by Law. Statutory Boards under the purview of the Land acquisition for national Ministry. requirements.
Acquisition of Lands
According to the Secondary direction 8029 files had presented for the activities order of 38 (a) of the Land Act No.9 of of the acquisition of Lands like that out of 1950 process of the acquisition of Land these 1368 files or 17 per cent like less from private sector for the government quantity of the activities shall be done had development process had to be fulfil in been completed at the end of the year collectively by the Land Ministry, Institute under review. In the reason of delay in the which is the implement the development payments of compensation for that Lands activity, Department of Assess, Divisional which were acquired from the year 1970 Secretary office, Survey Department and upto the year 2015, a sum of Rs.452.71 other institutions which are connected to million had been paid as interest on this, for fulfilment of that task including compensation during the year under the time period an action plan had not been review. prepared. Therefore within the period of from the year 2014 upto the year 2018,
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Informations on State Lands and Management System
Using the information technology on Information about the all Lands leased had behalf of the informations on State Lands not been included into this system even as
and create a management information is at 31 May 2019. Therefore necessary
being carry on since the year 2013 and a information in connection with collecting sum of Rs.115.71 million had been spent lease could nit be obtained from this for that as at the year 2018. system. Land
Management of the Income on Land Lease
Collecting of the income on Land lease in Administration of the State Lands and the area od Inter Provincial colonies had supervision of the officers who are related been functioned by the Land to the administration in that areas entire Commissioner General‟s Department and authority had been assigned to the Land follow up activities relating to the Commission General as per the 91 Section collecting of that income had existing in of the State Land Ordinance and President poor situation. Office Circular No.SP/RD/02/10 dated 03 In this reason income of Rs.35.65 million February 2010. However, leasing process had existing in outstanding as at the end of and supervision activities of the collecting the year under review. leasing money has been existing in poor Expect the area of Inter Provincial situation in the reason of that revenue colonies, collection of Lease income in amounting to Rs.2,656.59 million has other areas had been functioned by the existing in outstanding at the end of the provincial Land Commissioner General‟s year under review. Department.
Non Reaching towards the planned targets
Although it had been planned to initiate the Bimsaviya programme in Also between the rights clearing the year 2002 and to complete it in the process 34,428 files were lay down in year 2021. But spend time for that was the year 2018 and total number of 16 years at the end of the year 2018. 414,543 files had been lay downed as But Bimsaviya programme had been at the date of 31 December 2018. Out implanted in 3659 Grama Niladharies of the lay downed that files only Division under 57 Divisional 12,341 files had been clear and copy Secretariats by 31 December 2018. rights had been issued. Surveys had been completed only in Therefore progress of the work had 1695 or 46 per cent of Grama been 36 per cent in respect of the lay Niladharee Division. downed files.
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Leasing of Lands had not in function as Regularly
Approval of the Cabinet of Ministers had recommendations of the relevant to be obtained in Leasing of lands for institutions during the year under review.
projects where the instances extent of the Also, a granite stone situated in a 10 acres Land Land is over 5 acres. But 50 acres of land belongs to the estate of Horaekanda at Maddey Gedhara watta in Kaluthara milleniya although excavating had been District had given on lease for the done without permission from the year agricultural activities by the Council of the 2003 upto the year under review action Land Commission without the approval of had not been taken in respect of that by the the Cabinet of Ministers. Only the basic Land Reform Commission. Non payment estimated amount had been collected for of Lease money by the Lessees and in the that an according to the government reason of non obtaing the approval from assessment lease amount had not been the relevant institutions eventhough collected. agreements were entered with the Land Reform Commission had been cancelled Lands should have to be lease on a regular but action had not been taken to stop the lease agreement in obtaining the non permission excavations. Therefore, recommendations such as the institutions lease amount of Rs.47.43 million had of Central Environment Authority and existing in outstanding as at the date of 30 Geology and Excavation Bureau in respect November 2018. Also, although 173 acres of leasing of granite lands for over a one in Puttalam District had been given year. Granite Lands situated in 22 acres without permission and on lease basis to which lands belongs to the estates of cultivate prawns in the reason of non Olaboutuwa, Yahalakelle and Ingiriya follow up a appropriate methodology belongs to the Land Reform Commission income amounting to Rs.16.42 million had had been leased in the years 2001, 2004 existing in outstanding at end of the year and 2005 without lease agreement and 2018.
Maintaing a Register in Connection with Lands
A register had not been updated relating to possession at present, relevant notice the Lands acquired by the Land Reform published in the Gazette and disposal of Commission from the date of established Lands. Also, the Commission was failed to the Land Reform Commission in the year explained that by the supporting 2016 including the all details such as documents. Therefore, existing of the number of acres of that lands, situate area acquired lands valued at Rs.676.17 of each land, from whom had been million and correctness of the valuation acquired, details on the assign of could not be confirmed.
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Alienation of Lands
Although alienation of Lands had been assign for possession 760 acres and 31 prohibited by the Cabinet of Ministers in perches had not been return backward.
the year 2004 lands had been alienated Action had not been taken to refund the exterior to the leasing of lands advance money to that applicants for the methodology for the projects by the Land advance money had obtained from the Reform Commission from the year 2002 1689 acres of land which the non assign Land upto the year 2004. It had been listed in 2 for possession and the follow up actions ways assign for to possession and non had not been functioned in connection function assign for possession lands with that lands. alienated in that manner. Out of the lands
Performance of the fulfilment of Survey Requisitions and Mapping
Survey General Department‟s a surveyor failed to complete by the Department. work had been done on the standard of Likethis, overall performance had existed minimum of 20 number of Norms should at 34 per cent level on the fulfilment of the be surveyed for a month from 36 years Survey requisitions. Although it had been ago. Action had not been taken to revise decided to creation of 1. 50,000 92 maps at the standard which was established before the end of the year 2017 only 70 maps had 36 years ago make review in the way of done at the end of the year under review. match at present with the technical Although it should be create 1.10,000 improvement of the instruments. Out of 1,834 maps covering with the all Island the total Survey requisitions of 33,443 was only 700 maps had been completed at the received from the year 2009 upto the year end of the year under review. 2018 Survey requisitions of 22,039 had
Preparation of plan on use of National Lands
With the prime objective of preparing a dated 20 May 2010. The Department had land use plan and implementing the Land not prepare necessary legal background for use Policy Planning Department had been the preparation of land use plan and established by the notification published in implementation of Land use policy even the Gazette (Extraordinary) No.1654/ 21 by the end of the year under review.
Examination of the acts of misconducts of the Surveyors and Regulations
With the objective of ensuring proper and its practices and the maintenance of maintenance of the Surveying profession standards and procedures relating to land
212 National Audit Office | Annual Report - 2018 surveying and professional discipline the Council. The persons who are among persons engaged in Land Survey functioning the survey activities who were Council had been established in terms of not registered in the Council to search it Survey Act No. 17 of 2002. The total sufficient procedures had not been number of complaints made by the people followed also. against the professional misconducts of the Surveys had been 78 during the year under review where as only 45 or 58 per cent of
the above complaints had been settled by Land
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Admission of Students to National Schools by Exceeding Limits
Vacancies for Teachers in the Technology Stream
Non-completion of Disciplinary Inquiries
Non-assignment of any duty to a Portion of the Staff attached to a Large Number of National Education Schools
Non-fulfilment of the required qualifications by 1,906 Teacher Librarians in Schools
Failure to fill Vacancies for Principals in 258 National Schools
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Education
Ministry of Education, 02 Departments Proper maintenance of the quality of and 04 Statuary Institutions should have education and discipline within the Education performed the following functions as the entire school system. pioneer of providing education effectively Administrative and personnel through reconstructing it to befit the management affairs of the Sri Lanka changing world in order to accomplish the Education Administrative Service, national general objectives pertaining to Principals‟ Service, Sri Lanka Teacher the general education field within the Educators‟ Service and Sri Lanka national education policy framework. Teachers‟ Service. Promoting Buddhism and Pali Creation of a National Educational Education and upgrading Piriven System which enables to access the Education. global competition with self- Promotion and Development of school confidence and thereby reach success libraries to encourage students for with self- assurance on behalf of Sri reading. Lankan young generation. Proper management and preservation Supervision of all Schools in Sri Lanka of Government documents. in compliance with the National Ensuring the opportunities for Educational Policies. education of students with special Formulation, follow up and evaluation needs. of policies, programmes and projects relating to the subjects of Education. The audit observations revealed in the Taking necessary steps to provide discharge of the said functions by the physical and human resources required Ministry, Departments and the Statutory for National Schools. Institutions, are summarized below. Providing free text books, uniforms, shoes and lunch. Underutilization of Provisions Provisions totalling Rs.10.27 million performing the functions of the Ministry of comprising Rs.5.46 million and Rs.4.81 Education for the year under review, had million made for 21 Capital Objects and not been utilized for any purpose 04 Recurrent Objects respectively for whatsoever. Admission of Students to Intermediate Grades
In terms of Circular No.37 of 19 maximum number of students for a September 2008 of the Ministry of parallel class in Secondary Grades as 45 Education and the Cabinet Decision dated and the maximum number of students 14 October 2015, it had been stipulated selected per class in the admission to that the maximum number of students for a Grade One as 38 of the year 2018 in a parallel class in Primary Grades as 40, the National School. However, 3,339 students
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had been admitted by 73 National Schools beyond those limits in the year 2018.
Appointment of Officers for Covering up Duties
According to the Establishments Code of Principal had been vacant by the end of the the Democratic Socialist Republic of Sri year 2018 from many years and officers Lanka, an acting officer can be appointed had been appointed for covering up duties on temporary basis until a substantive in those posts. Moreover, it had been failed appointment is made. However, in 258 out to fill those vacancies even by 31 of 353 National Schools, the post of December 2018. Education Vacancies of Teachers for the Technology Stream
There were 166 vacancies of teachers Subject for the Technology and for the Bio island wide for the Technology Stream by Systems Technology existed. The Ministry the end of the year under review. Out of of Education had failed to fill those those vacancies, thirty five, 117 and 14 vacancies even by the end of the year vacancies respectively of teachers for the under review. Engineering Technology Subject, Science
Incompletion of Disciplinary Inquiries
Three hundred and ninety seven matters remaining less than two years, 30 disciplinary matters relating to the matters, from 02 years to 07 years and 09 Ministry of Education, National Schools, matters, over a period of 7 years. Teacher Training Colleges and other Moreover, among those disciplinary institutions that come under the Ministry matters, there were 42 on financial had not been resolved even by the end of irregularities, 62 on admission of students the year under review. Among those to schools and 19 matters on child abuse. disciplinary matters, there were 128
Past Pupils‟ Associations in Schools
It has been mentioned according to the Associations by using name of the schools Education Circular No.1964/27 dated 20 should have been spent on behalf of November 1964 and letter dated 21 June welfare and performance of those schools. 1996 of Past Pupils‟ Associations that Past However, a sum of Rs.129 million had Pupils‟ Associations should be established been collected by Past Pupils‟ for enhancing the welfare and performance Associations in 18 schools in the year of schools. As such, the entire or more of 2018. Out of them, only a sum of Rs.24 funds collected by Past Pupils‟ million had been spent for 08 schools. A
218 National Audit Office | Annual Report - 2018 sum of Rs.70 million collected by Past been spent for any purpose whatsoever in Pupils‟ Associations in 09 schools had not those schools.
Commencement and Close Down of Schools Education
According to statistic data of the year respectively. A clear policy on the manner 2018, one hundred and one schools had in which action is taken on physical been closed down in 21 Districts. Out of resources existed for the usage of schools those, 31 and 45 schools had been closed so closed down, had not been made down due to inadequate number of available to Audit. students and the situation of the country
Programme of Producing Talented Sportsmen/Sportswomen
The approval of the Cabinet of Ministers said programme had not been implemented had been received to a project proposal of in the year 2016 and provisions of Rs.250 the Ministry of Education for endowing a million and Rs.300 million had been healthy generation, physically and received in years 2017 and 2018 mentally balanced with the country and respectively. Out of provisions amounting producing skilled sportsmen/sportswomen. to Rs.300 million made for the year 2018, A sum of Rs.18,394.5 million had been only a sum of Rs.99 million had been estimated for the implementation of the spent for activities of the said programme. said programme from the year 2016 to 05 However, the programme had not been ensuing years based on 07 objectives. The implemented as per above objectives. Special Education Units
Special Education units had been appointed to another subject. Hundred and established in 112 national schools and eighty nine Teachers who were appointed 704 provincial schools. A number of and trained for the special education are 10,284 students with special needs are engaged in the teaching works where those studying in those schools. A number of Units have not been established and 54 1,189 and 597 Teacher vacancies existed Teachers, in other class rooms of schools in special education units in National where those Units have been established. Schools and Provincial Schools Accordingly, Teachers who had undergone respectively. Out of the Teachers of the Special Education Teacher Training had Special Education Unit, 158 representing not been attached so as to fulfill the said 13 per cent are the Teachers who were requirement. Operating Private Schools
In terms of Section 25 of the Assisted (Supplementary Provisions) Act, No. 8 of Schools and Training Colleges 1961, no person shall establish any school
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for the education of children who are proper methodology as well had not been between the age of 05 years and 14 years. prepared by the Ministry for collecting Contrary to that provision, a large number information regarding those schools.
of International and Private Schools had been established. Those schools had been The Ministry had not implemented a registered under the Companies Act, No.7 process for supervising matters such as of 2007 or under the Board of Investment whether these private schools are equipped as private institutions. Even though the with minimum qualitative and quantitative supervision of international schools in criteria which should be equipped with compliance with the National Education Government schools, with a qualified and Education Policy was one of the main objectives of experienced staff for providing a the Ministry of Education, they had not qualitative education to students according been registered in the Ministry of to each level and whether these schools are Education as schools by which elementory updated on changes occurred timely within education is provided in Sri Lanka. A the education system.
Balancing, Transferring and Assignment of Duties of Teachers
A number of 1,359 teacher vacancies and 601 Teachers of 107 National Schools had 898 excess existed for 1,069 subjects and been attached for teaching subjects for 584 subjects respectively in 113 extraneous to the subjects, for which they National Schools due to failure in were appointed. Even though the Deputy balancing teachers. The Ministry had and Assistant Principals and Teachers of failed even by the end of the year under National Schools should be assigned 10, review to balance the said excess and 12 and 35 periods per week respectively, vacancies. Even though the the number of Deputy and Assistant implementation of the annual transfer Principals and Teachers of 164 National scheme had been commenced, there are Schools, who had not been assigned even a 2,276 teachers who are still engaged in the single period of teaching activities stood at teaching in 115 National Schools for over 139, 42 and 549 in the year 2018. a period of 08 years whilst, a number of
Results of Subjects of the G.C.E. Advanced Level and Teachers Feasibility Out of students who had followed subjects approximately 1/3 students had failed the such as Information and Communication examination. Achievement of distinction Technology, Physics, Chemistry, passes for subjects such as Agriculture, Combined Mathematics, Logic and Agro Technology, Engineering Scientific Method and Science Subject for Technology, Bio Systems Technology and Technology in the year 2017, Science Subject for the Technology was at
220 National Audit Office | Annual Report - 2018 a level as low as 1 per cent. It had been Japanese and teachers had not been 0.82 per cent, 0.44 per cent, 1.11 per cent, recruited for Russian and Japanese 0.61 per cent and 0.37 per cent languages during 05 preceding years. No
respectively. Fifty two teacher vacancies Teacher Training Programme whatsoever existed in foreign languages such as had been conducted for English Literature English Literature, French, Russian and from the year 2014 to the year 2018. Sisu Aruna Education Fund
The Sisu Aruna Educational Fund had million by 31 December 2018. Even
been established in the year 2001. though the limit decided by the Board of Education According to the report of the Meeting of Directors had exceeded by the end of the the Board of Directors, held on 29 April year 2015, action had not been taken even 2003, it had been decided that necessary by the end of the year under review to steps should be taken to offer scholarships offer scholarships. The name of the Fund after reaching the value of fixed deposits had been withdrawn due to failure in amounting to Rs.2.5 million of the Fund. carrying out an adequate supervision on The value of relevant fixed deposits by the this Fund and as such, properties and end of the year 2015 had reached Rs.2.6 Rights of the Fund had been vested in the million and it had increased up to Rs.4.4 General Treasury. Development of School Libraries
The total number of schools in the island Rs. 3.6 million under 3 stages in the year at present stood at 10,162 and out of those, 2018. However, achievements of the said only 3,499 schools are equipped with training had not been provided to schools permanent library facilities, 2,185 with through the provincial officers. A number reading rooms and 3,314 with temporary of 2,607 persons had been deployed as libraries. Eighty Directors of Subjects in Teacher Librarians in schools and out of 98 zones in 09 provinces had been trained them, 1,906 persons had not been fulfilled on the Library Development by spending required qualifications therefor. Achievement of Sustainable Development Goals
According to the 2030 “Agenda” of the targets of functions thereof in the plan and United Nations for sustainable to identify indices for measuring the development, action had not been taken to achievement of said focal points and include the procedure for reaching the targets. Issuance of Results of Examinations
It was observed that a large number of Education (Ordinary level) and (Advanced applicants arrive daily at the Department Level). This situation had arisen due to of Examination for obtaining the result failure in taking action to issue a certificate certificates of General Certificate of from schools, equal to the certificate in
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high quality issued by charging money by was unable to deploy an adequate staff for the Department. the purpose of confirmation of results. Therefore, results of 10,660 could not be Moreover, as a large number of applicants confirmed by 31 December 2018. Even arrive daily at the Department for though 40 out of 49 vacancies in the post obtaining certificates through the one-day of Data Assistant existed in the approved service, more officers attached to the cadre of the Department, the Department Certificates Branch, had been attached to of Examination had failed to fill those counters of the one-day service. As such, it vacancies.
Education Printing and Distribution of Text Books
A number of 39,714,000 copies of 419 extent possible. However, quality tests and books valued at Rs.3,499.25 million had tests methods relating to 04 quality tests been printed for the year 2019 through 02 specifications had not been implemented. Government institutions and 27 private printers by the Educational Publications The English Work Book, Writing Book Department of the year 2018. Even though and the Text Book of Grade 3 prepared in a committee comprising a Commissioner accordance with the new syllabus for and two Deputy Commissioners had been distribution in the year 2018 had been nominated and the responsibility of revised again in the year 2019 due to printing of text books had been assigned to errors therein. As such, a number of printers at several instances on 27,275 books valued at Rs.5.72 million recommendations of the said Committee, printed in the year 2018 exceeding the approval of the Cabinet Appointed requirement, had been removed from Procurement Committee had not been being used. obtained therefor. According to paragraph 7 of the According to paragraph 9 of the Internal Specification Committee Report 2018, it Circular No.2017/09 of 31 May 2017 of had been decided to increase the quality the Commissioner General of Educational and level of the brightness up to 85 per Publications, instructions had been given cent of papers due to increase in the to schools to apply for text books by reusage of text books of Grades 6, 7, 8 and computing the required number of 9 up to 50 per cent. A penalty of Rs.6.13 essential text books accurately so as not to million had been charged due to changing store surplus books in stores. However, a the brightness of 106 out of 357 total types number of 10,545 Text books had been of books for the year 2018 printed in the issued to 11 schools in Colombo area by year 2017. The Tensile Index test to be the Department exceeding the requirement carried out for outer covers and inner thereof. pages of books printed in the year 2018 for the year 2019 in granting approval for According to Guideline 5.6.3 of the printing and storing according to Government Procurement Guidelines, the specifications prescribed by the standards adopted by Sri Lanka Standard Department, had not been carried out Institution should be used to the maximum regarding any book whatsoever.
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The annual requirement of books had not books, teachers‟ manuals and been correctly identified, thus indicating supplementary books had been disposed of the increase in the stocks of surplus books. in the years 2016, 2017 and 2018 due to
Moreover, a number of 1,190,691 text weaknesses in storing of those books. Education Construction of the Lavatory System in the three storeyed Hostel
A sum of Rs.1.20 million representing 5 Education at an estimated cost of Rs.27.85 per cent of the contract value had been million in the year 2008. Even though 10 paid as consultancy charges for preparing years had elapsed after the said payment, plans and estimates for the construction construction activities had not been of a lavatory system in the three storeyed commenced even by 31 December 2018. hostel of the National Institute of
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224 National Audit Office | Annual Report - 2018
Non-utilization of the 02 Laboratory Premises owned by the Occupational Hygiene Division
Moneys referred to the
Union Relations Union Employees‟ Provident Fund by Court Decisions had been retained in the Department without paying to employees
There were 4,921 dormant cases and a sum of Rs.1,547.62 million had to be recovered
therefrom Labour and Trade Trade and Labour
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LabourUnion Trade and
Labour and Trade Union Relations
The following functions should have been Registration of Trade Unions and the performed by the Ministry of Labour and introduction and implementation of Trade Union Relations and two practical steps for the activities of all Departments and 03 Statutory Trade Unions in the State and Private Boards/Institutions under its purview with Sectors for the development of the the intention of developing effective country industrial relations, free of industrial Implementation of the National disputes. Manpower and Employment Policies Implementation of Vocational and Job Formulation of policies, programmes Guidance Programmes and projects related to the subjects of Industrial Relations and Settlement of Labour and Trade Union Relations Industrial Disputes
Administration of the Employees‟ Formulation of Laws and Rules related Provident Fund, the Private Provident to Labour Relations and Regulatory Fund and the Private Retirement Functions Schemes Formulation and implementation of The summary of Audit observations policies related to the International revealed at the Audit test check carried out Labour Standards, Labour on the performance of functions mentioned Administration and Welfare above, by the Ministry, Departments and Maintenance of Inter Co-operation Statutory Institutions appear below. with the International Labour Organization and the International Social Security Organization
Occupational Safety and Health in Sri Lanka
Building a safe working place free of providing sufficient light had been accidents and injuries is instrumental in ordered by the Gazette Extraordinary enhancing the efficiency and productivity No.14577 of 04 December of 1965. of workers. Legal provisions had been That order had not been updated to suit made by the Factories Ordinance No.45 of present conditions. Moreover, in terms 1942 to the employers in achievement of of Section 12(2) of the Factories the said objectives. The following Ordinance, the Minister may, by deficiencies were revealed at the Audit test regulations, prescribe a standard of check carried out on the occupational adequate ventilation for factories. safety and health in Sri Lanka. However, action had not been so taken.
In terms of Section 13(2) of the Even though 02 laboratory premises Factories Ordinance, the standard on are owned by the Occupational
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Hygiene Division of the Department Research Assistant in the approved of Labour, they had not been cadre. maintained so as to be made use of. Blood tests of employees had been The National Institute of Occupational carried out free of charge by these Safety and Health had been laboratories. However, carrying out established by the National Institute of blood tests free of charge after the year Occupational Safety and Health Act, 2004 had been discontinued. No.38 of 2009 on occupational safety Laboratory equipment used therefor and health in Sri Lanka. The Standards had remained decayed in the on occupational safety and health laboratory premises. Moreover, which is one of their main objectives, vacancies had existed in 03 posts of had not been stipulated even by the end of the year 2018.
Labourand Trade Union Settlement of Employees‟ Benefits
Out of moneys referred to the Employees‟ Provident Fund Account of the Central Provident Fund through judgements of Bank of Sri Lanka. The balance so Courts from the year 2011 to November retained in the year 2011 amounted to 2018, a cash balance totalling Rs.299.35 Rs.1.11 million and by the year 2018, the million unpaid to employees, had been said balance was on the increase up to retained by the Department of Labour Rs.219.34 million annually. Details are without crediting to the Employees‟ given in Diagram 45.
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
Moneysreferred Court by Rs. 0 2011 2012 2013 2014 2015 2016 2017 2018 Year
Figure 45- Moneys granted by judgements of Courts Source – Information made available to Audit by the Employees‟ Provident Fund
The moneys deposited in Courts by Rs.93.09 million existed relating to employers are sent through cheques in 181 cases for which payments could installments to the Commissioner of not be made due to the various Labour. Moreover, a balance of shortcomings in “C” Forms and
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LabourUnion Trade and
requisition forms prepared for the said moneys. It had been agreed at the discussions held with the Central Bank that speedy Out of other recoveries which do not measures will be taken through Labour belong to Employees‟ Funds, Offices to account the contributions of recovered through cases by Labour work places, retained in the Offices, a sum of Rs.409. 76 million Contributions Account of the Central had been retained even by 01 July Bank of Sri Lanka. There were several 2019 without paying the employees. institutions with balances over Rs.10 million by 31 December 2018 and In sending the moneys collected by those moneys had remained without Courts to the Department, only the being accounted, due to non-receipt of Case Number is mentioned and the correct “C” Forms. relevant Labour Office is not mentioned. As such, the employees to Even though moneys for which Court which the said moneys are payable, decisions had been given and which could not be specifically identified and should have been credited to a large amount of time had to be spent beneficiaries‟ accounts, a sum of therefor. However, in sending money Rs.43.69 million had not been so by Courts in such a way, the relevant credited even by the end of the year Labour Office had been identified and under review due to shortcomings in mentioned. Nevertheless, an unpaid “C” Forms. sum of Rs.0.79 million had remained even by 01 July 2019.
Adequacy of Labour Inquiries
Out of entire institutions of 146,468 to be Labour Offices of Maharagama, Colombo examined relating to 40 District Labour West, Anuradhapura, Colombo North, Ja Offices, 75,086 institutions representing Ela and Nuwara Eliya, which were not 51 per cent had not been examined in the subjected to examinations, had been 84, year under review. Among them, the 80, 64, 66, 65 and 75 per cent respectively. percentage of institutions of District
Action on Public Complaints and Petitions
The total number of various public of Labour Departmental Circular complaints remained at the beginning of No.06/2011 of 29 April 2011, complaints the year under review and received in the should have been resolved within 14 days. year under review relating to 40 District However, out of them, 10,064 or 40 per Labour Offices had been 24,972. In terms National Audit Office| Annual Report - 2018 229
cent of complaints had not been resolved even by the end of the year under review. Dormant Cases
The total number of dormant cases as at 31 2,994 cases remained as open warrants and December 2018 stood at 4,921 and a sum a sum of Rs.933 million should have been of Rs.1,547.62 million should have been recovered thereunder. Out of them, 2,047 recovered thereunder. Out of those cases, cases were being brought forward for a the cases filed for over a period of 05 years period over 05 years and it had been 68 per had been 3,186. It represented 65 per cent cent of the total number. of the total number of cases. Moreover,
Settlement of Employees‟ Compensations Labour and Trade Union and Union Trade Labour A sum of Rs.17.29 million recovered from number of 384 accounts valued at Rs.9.96 employees by the Office of the million brought forward during a period Commissioner for Workmen‟s ranging from 01 to 25 years which should Compensation as compensation for have been released to minors who had employees subjected to distress or completed of age, had not been settled by deceased from the year 2013 up to the year the Office of the Commissioner for 2018 had been retained even by 31 Workmen‟s Compensation even by 14 December 2018 without paying to February 2019. recipients, indicating various reasons. A
Project on Re-registration of Members
Phases one, two and three of the cent and 14 per cent under each phase Project on Re-registration of Members respectively. had been implemented in the years 2007/2008, 2010/2011 and 2016/2017 Sums of Rs.12.61 million and Rs.2.75 respectively. Out of provisions made million had been spent respectively for by annual estimates of the Department purchase of 15,000 cards and 05 kiosk of Labour from the year 2008 to 31 machines in December 2008 under December 2018, a sum totalling phase one of the Project of installing Rs.247.1 million had been spent kiosk machines. The cards, even after therefor. However, out of the number printing details such as the names and of members estimated, the number of National Identity Card Numbers of members from which thumb members, had been stored throughout impressions were obtained, had been at 10 years by 31 December 2018 without a level as low as 38 per cent, 25 per distributing to members. Moreover,
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there was no information that the kiosk purchased in the year 2015 by machines so purchased had been in spending a sum of Rs.14.92 million operation from the date of purchase under phase two, 10 machines had itself. As such, the amount spent under been inoperative by 31 December phase one of the Project had become 2018. fruitless. Moreover, out of 30 machines
Unsettlement of Moneys recovered by filing of Cases
A sum of Rs.301.47 million recovered by Labour since the year 2011 without filing cases against employers who had crediting to the members‟ accounts. As a failed to send contributions to the result of retaining the said moneys, the Employees‟ Provident Fund, had been members had been deprived of the interest retained in a deposit account by 31 income due to them.
December 2018 of the Department of
Unsettled Benefits
Out of applications submitted to 18 afterwards they had been rejected for District Labour Offices during the period various reasons. Moreover, out of those from 01 January 2016 up to 31 December applications, 90 applications representing 2018 by members for claiming benefits, 80 per cent of the total number of reference had been made to the Central applications had been delayed during a Bank of Sri Lanka for making payments period ranging from 06 months to 03 years relating to 112 applications of benefit by 01 March 2019. Nevertheless, action amounting to Rs.17.92 million and had not been taken to settle same .
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Inability to implement the Uma Oya Multi-Purpose Development Project within the
specified time frame
Non Initiation of Constructing the Waste Containers under the Project of Constructing Solid Waste Disposal Facility even by the End of the Year
Environment Action had not been Taken to Construct 30 Compost Yards Anticipated to construct under the Pilisaru Project
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Environment Environment Two Departments and 08 Statutory Preservation and conservation of Institutions had been established under the forests, wildlife and flora and fauna. purview of the Ministry of Mahaweli Promotion of the commercial Development and Environment to take plantation of forests to fulfill the action for a sustainable development. The timber requirement of the country. following functions had to be executed by Promotion and regulation of the Gem those Institutions. and Jewelry Industry and the sale of Gem and Jewelry.
Compilation of policies and Preservation and conservation of the programmes for various fields of coast. environment.
Conservation of environment for the The audit observations revealed at the audit present and for the future generations. test checks carried out on the execution of Compilation of programmes and the functions given above by the Ministry implementation of those programmes of Mahaweli Development and effectively for the elimination of Environment are summarized and given environmental pollution. below. Carrying out the disclosure of marine pollution and solid waste management.
Uma Oya Multi-Purpose Development Project
A mutual agreement had been entered into project consists of a sum of USD 450.00 between the Government of Sri Lanka with million provided by the Export the Government of Iran on 27 November Development Bank of Iran (EDBI) and a 2007 with the key objective of annually sum of Rs.15,474.25 million or USD 79.06 diverting 145 million cubic meters of water million, provided by the Government of Sri to the Kirindi Oya Basin in the Southern Lanka. It had not been able to achieve the Zone which suffers from the shortage of intended results due to not being able to water in that basin, in a manner that would either complete or to wind up all the on make an impact on the environmental activities of the Project during the required and other needs of water in the Uma Oya time frame. Basin. The provisions required for this
Construction of Slid Waste Disposal Facility Project
The total estimated cost of the Construction loan amounting to USD 33.54 million as of Solid Waste Disposal Facility Project Financial Assistance in this connection had carried out with Korean Loan Assistance been obtained on Korean Loan Assistance had been a sum of USD 41.89 million. A on a 0.15 per cent of annual interest in a
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manner that should be repaid in a period of 40 years, after a concessional period of 10 Action had not been taken in the initiation
years. The local provision of funds for the of the Project to select places for the Project had been a sum of USD 8.35 Sanitary Waste Containers by carrying out million. The loan agreement had been a proper feasibility study. A period of entered into between the Fund and with the approximately 2 years had lapsed after the Government of Sri Lanka on 23 July 2013. initiation of the project that had been The facilities had to be supplied for the initiated to construct these waste containers final disposal of waste generated in the only in Jaffna, Keerimale, Madirigiriya and areas under the Local Governance under the Yudaganawa instead of constructing them Cluster Method within a period of 04 years in Panadura, Malamulla, Udunuwara and in Environment by this Programme.it had been planned to Gonadhikawatte. As such, it had not been construct 04 Sanitary Waste Containers in able to achieve the objectives intended by Kirkkulama in Anuradhapura, the Project timely and efficiently and the Monrowyawatte in hikkaduwa, Malamulla constructions of the Waste Containers had in Panadura and in Gonadhikawatte in not been initiated even by the end of the Udunuwara for the achievement of that year under review. objective.
Pilisaru Project
The proper conservation of resources and Rs.03 billion from the “Green Tax” that the confirmation of solid waste had been introduced by the Annual management, the development of Budget knowledge and competencies of the relevant persons relating to solid waste One- hundred and eight operative management, the implementation of solid Compost Yards, 12 Compost Yards that waste management projects, the remain being constructed and 14 observation of programmes, facilitation, inoperative Compost Yards remained out making available the necessary initial of 139 Compost yards from the initiation provisions, th establishmsnt of a Solid of the project and by the year under Waste Recycling Banking Scheme, taking review. It had not been able to implement legal action relating to the Local at an average level due to not properly Authorities that do not manage solid implementing a large number of operative waste properly are the key objectives of Compost Yards by Local Authorities and the Pilisaru Project. The total cost of the not taking follow- up action properly by Project had been a sum of Rs.5.6 billion the Project. as per the Fund Plan for 06 years. It had been intended to obtain a sum of Rs.2.675
billion from the Treasury and a sum of
236 National Audit Office | Annual Report - 2018
Building owned by the High Commission of
Building owned by the High
Commission of Canberra
Payment of Rent to Missions
Renovation of the Consular General Office
Sending Imprests to the Foreign Affairs Foreign Embassy
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238 National Audit Office | Annual Report - 2018
Foreign Affairs Foreign Affairs Foreign To be a friendly country in the world of internationally hostile antagonistic acquiring mutual benefit is the expected propaganda. outcome of the Ministry of Foreign Maintaining diplomatic relations with Affairs . The following roles would have foreign countries, discussing Treaties , to be carried out by a global network of Agreements and Conventions. missions of the Ministry as 18 Divisions Grant Diplomatic Immunities and in local and 37 Embassies in overseas, 13 Privileges. High Commissions, 01 Deputy High Assisting in the promotion of foreign Commissions, 13 Consulates, 02 trade and tourism.
Permanent Missions for the United Study of geopolitical trends and Nations , 01 Representative Office by the advise the government on these trends. end of the year 2018 to obtain that Taking necessary actions for the outcome. welfare of Sri Lankans living abroad.
Formulation, follow up and evaluation of policies, programmes and projects The audit observations revealed in related to foreign affairs. carrying out the above functions by the Promote a favorable image of Sri Ministry are summarized as follows. Lanka and proper respond on
Building owned by the High Commission of Canberra
Two buildings valued at Australian convert one of the buildings into the Dollars 2,589,000 belonging to Canberra official residence of the High Sri Lanka High Commission in Australia Commissioner. Even though a sum of Rs. have been removed from use in the years 260 million was allocated from the Budget 2012 and 2007. The approval of was 2018 for this purpose any utilization in given at the meeting of Cabinet of that regard had not been made. Ministers on 26 September 2017 to
Payment of Rent to Missions
A sum of Rs. 93 million had been spent review. Arrangements had not been made on rent to Missions and Official Residence to draw attention on the ability of in Toronto and Ottawa, Canada (excluding purchasing of properties as an alternative the Ottawa Residence) for the year under to minimize those costs.
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Renovation of the Official Residence of the High Commissioner
Without looking into alternative measures High Commissioner in Canada a sum of to renovate the official residence which Rs. 26.71 million had been incurred during was about 100 years old of the Ottawa the year under review. Fees charged for Consular Functions
Fees charged for consular functions carried determined in respect of how to convert out by Sri Lankan Missions abroad, had currency of countries that do not use the been amended and published by the monetary units specified in that Gazette. notifications bring out in the Gazette with As a result of that, the conversion rates
ForeignAffairs effect from 01 March 2018 . However, a had been determined based on various general mechanism had not been criteria. Renovation of the Consular General Office
The Consular General's office Mumbai due to the failure of the repair work had been renovated at a cost of Rs properly a sum of Rs. 999,626 had to be 28.16 million in the year 2016. However, spent again for repairs. Sending Imprests to the Embassy
Due to sanctions imposed by the United had been an insecure and costly and a sum States, sending of imprests to the of Rs. 5.12 million and Rs. 3.83 had been Embassy of Tehran had been made by the incurred respectively in the years 2017 Consulate General of Dubai. For this and 2018 as air tickets and other purpose, the Ambassador of Tehran had to allowances. travel to Dubai every month. This process
Daily Income from the Pilgrim Rests
A list of pilgrims whom visits to the the daily income from the pilgrim rest and Pilgrim Rest administered under the High whether all the income received deposited Commission Office of Sri Lanka in New in bank. Further, a proper recruitment Delhi had not been updated. As a result, procedure had not been followed in respect an adequate mechanism had not been of the Reverent and an officer who was introduced to ascertain the accuracy of attached on contract basis for the activities the number of receipts issued in relation to of there.
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Non-maintenance of an Updated Information
Non-implementation of an Adequate Programme to Promote
the Field of Foreign Employment
Not Taking Action on Irregularities
Non-settlement of Kuwaiti Compensations Duly
Charging Various Fees from the Labourers Emigrated from the Country
Payment of Allowances for the
Foreign Employment Employment Foreign Staff without getting a Systematic Approval
Implementation of an Insurance Scheme for Employees without a Systematic Approval
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242 National Audit Office | Annual Report - 2018
Foreign Foreign Foreign Employment
Formulation of policies required to Establishment of the welfare of increase foreign employment opportunities migrating employees and the welfare and to augment the contribution of foreign of nonresidential Sri Lankans. Employment remittances to the National Economy was Regulation and supervision of the expected outcome in the field of registered foreign employment foreign employment. The following role agencies. had to be accomplished by 02 statutory Boards / Institutions which are under the Career guidance for foreign purview of the Ministry of Foreign employment. Employment. The Audit observations revealed in the Formulation and implementation of audit test checks carried out pertaining to policies, programmes and projects the accomplishment of the aforementioned related to foreign employment. roles by the statutory institutions under the purview of the Ministry are summarized and stated below. Non-maintenance of an Updated Information System related to the Field of Foreign Employment In terms of Section 53 (1) of the Sri Lanka getting information of labourers, who Bureau of Foreign Employment Act, No. leave the country for getting foreign 21 of 1985, the Bureau shall maintain an employments and who return to Sri Lanka, Information Date Bank in respect of Sri in collaboration with the Data system Lankans employed outside Sri Lanka and maintained by the Department of who return on completion of such Immigration and Emigration. This employment. However, the Ministry of situation had hindered the process of Foreign Employment and Sri Lanka giving accelerated solutions to various Bureau of Foreign Employment had not issues in the field and the implementation maintained an updated Information Date of national emigration and migration Bank with the coordination of the policy and the other national and institutions related to the field even by the international laws and policies on end of the year under review. Specifically, emigration. the Bureau had not received the facility of
Making Arrangements to Promote the Field of Foreign Employment
It is very important to maintain the migrated from Sri Lanka, confirmation of coordination with Sri Lankan labourers the safety of the migrated labourer,
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establishment of a high standard Understanding. However, when the issues qualitative foreign employment market for prevailing in the field are considered, it is emigrated labourers, obtaining diplomatic clear that an adequate programme has not assistance for exchanging knowledge been implemented for maintaining the among states and exchanging the other aforementioned relationships. resources and maintaining strong Modes of
Taking Action on Irregularities
Special Investigation Unit had been amounting to Rs. 108.46 million initiated in the Bureau in accordance with committed by promising to provide foreign a Decision of the Cabinet of Ministers for employment opportunities during the
ForeignEmployment making necessary arrangements on various period of 13 months in the year 2017 and irregularities occurred in the field of 2018 had been received to the Unit. Those foreign employment. Thirty Six (36) complaints had been referred to police employees including 17 police officers had stations after getting statements at the been attached to this Unit. Two thousand Special Investigation Unit as it was not four hundred and fifty two (2452) possible to find written confirmations for complaints had been lodged to the Unit in such promises given for the provision of the year 2018 and investigation of 1,364 foreign employments. Following up out of those complaints had been finalized. activities had not been carried out in Steps had been taken to refer 322 relation to those complaints and it was not complaints to the Police Stations and 1088 possible to minimize such irregularities complaints were being investigated even occurred in the field of foreign by 31 December 2018. employment merely by initiating the Unit.
Two hundred and seventy four (274) complaints related to financial frauds
Minimizing the Number of Employees Attending Security Houses
10,324 Sri Lankan women, out of the million had been spent by the Government women came to Middle East countries in the year 2017 for paying rents of those seeking employments during the previous houses, for food and medical assistance. A three consecutive years, attended the total of Rs.87.32 million had been spent Foreign Missions for the protection and for that purpose during the year 2018 as they had been directed into security well and 2,383 detainees had attended the houses. Two hundred and fifty (250) security houses. Action had not been taken detainees had stayed until the end of the to investigate the reasons for women to year 2017 and 20 women out of those attend security houses constantly and a detainees had stayed in those houses over methodology for minimizing the situation 06 months. Further, a total of Rs.43.30 had not yet been implemented.
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Foreign Employment Foreign Non-settlement of Kuwaiti Compensations Duly
The balance of Rs. 3,177.56 million was in employed in Kuwait during the Gulf War the Fund Account as at 31 December 1990/199. The actual amount that should 2018, which had been maintained in be paid to the claimants had become Rs. relation to the compensation received from 251.45 million. However, the Bureau had the United Nations Compensation invested the amount without settling it and Commission for the payment of had collected a total income amounting to compensation for Sri Lankans who had Rs. 2,926.10 million. Rataviru Project
Under the housing loan scheme with the Agreement and weaknesses in implemented for the emigrants in implementing the project and in carrying collaboration with the Samurdhi Authority out following up activities. The Bureau of Sri Lanka and the Bureau, a loan had not recorded any information amounting to Rs. 3,557 million had been pertaining to this. The Bureau had provided to 12,078 emigrants by 20 deposited a sum of Rs. 100 million in the September 2018 by the Samurdhi Bank. Account maintained in favour of the 2,157 persons migrated had default the Samurdhi Authority in the Bank of Ceylon payment of loans amounting to 214.68 instead of depositing a sum of Rs. 100 million. Loans had been granted to 1,573 million in favour of the Bureau in terms of emigrants in contrary to the Conditions of the Agreement related to the providing loans and without any bond. aforementioned function. As a result, the This Scheme had become inactive due to Bureau had been deprived of the interest not performing functions in compliance related to that amount from the year 2014. Charging of Various Fees from the Labourers Emigrated from the Country In terms of the Provisions of the Sri Lanka charged fees by various methods from Bureau of Foreign Employment Act, No. emigrating labourers without obtaining 21 of 1985, the Bureau can charge an formal approval and without adopting a amount of Rs. 15,200 in an initial systematic methodology for determining registration and Rs. 3,200 in re-registration the fees. Therefore, The Bureau was able from persons emigrating for foreign to earn an income of Rs. 391.67 million employments. However, the Bureau had merely during the year 2018. Payment of Allowances for the Staff without getting a Systematic Approval Action had been taken to pay staff the Public Enterprises Circular No. allowances under 09 methods on the PED/12 of 02 June 2003. Amounts of Rs. criteria determined by the Bureau without 83.17 million and Rs. 86.40 million had obtaining the approval of the Secretary of been incurred in the years 2017 and 2018 the General Treasury as per Section 9.7 of respectively in this regard. Likely, in
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addition to the incentives of Rs. 90.35 accordance with the decision taken by the million paid in the year 2018, the Bureau Cabinet of Ministers on 20 June 2018 and had paid a sum of Rs. 17,500 per one thereby, a total of Rs. 28.63 million had officer as special incentive allowance in been paid by the Bureau. Implementation of an Insurance Scheme for Employees without a Systematic Approval An Insurance scheme of reimbursing years 2017 and 2018 respectively. It is not medical bills and paying compensation for allowed to incur such expenditure from the accidents had been implemented from the Funds of the Bureau in terms of Sub year 1995 for the staff of the Bureau Section 17 (3) of Part II of the Sri Lanka without obtaining the approval of the Bureau of Foreign Employment Act No. Public Enterprises Department. Full 21 of 1985.
ForeignEmployment amount of compensation amounts in relation to the scheme had been paid annually using the income of the Bureau and amounts of Rs. 45.09 and Rs. 44.29 million had been incurred on that in the
246 National Audit Office | Annual Report - 2018
Building owned by the High Commission Gradual Decline in the Annual Fish Production
Non-Removal of Silt in Lagoons for which Provisions had been made
Purchase of Boundary Stones for the Demarcation of Lagoons without complying with the relevant standards
Manufacturing of an Ambulance Boat
Manufacturing of Multi-day Vessels
Allowing to Misappropriate Public Funds Resources Purchase of Fishing Nets exceeding the Requirement
Underutilized Assets
Payment of Salaries and Wages of the Officers released
Development of Fisheries and Aquatic Aquatic and Fisheries of Development
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248 National Audit Office | Annual Report - 2018
Development of Fisheries Developmentof
Development of Fisheries and Aquatic Resources
The expected result from this sector had Establishment and implementation of been to establish people with high ice factories, cold rooms, and other nutritional level, fisher community with infrastructures required in fishing high foreign exchange and high industry. socioeconomic status. In order to achieve the said objective, the following functions Development of animate and inanimate should be discharged by the Ministry of national aquatic resources. Fisheries and Aquatic Resources Manufacture, import, and distribution Development, a Department and 05 of fishing vessels and fishing gear. Statutory Boards/Institutions. Development and management of aqua Formulation, taking follow-up action, farming including salt water fish.
and evaluation of policies, programs, and projects relating to the scope of the Sale and distribution of fish and fish Departments, Statutory Institutions, related products. and Corporations functioning under the purview of the Ministry of Fisheries Expansion of the research activities on and Aquatic Resources, and the fisheries, and taking action to make use Ministry. of the results thereof for the betterment of the fishing industry. Development and management of marine brackish water and fresh water Facilitation of the researches relating fisheries. to aquatic resources through state- ofthe-art scientific methodologies. Operation and management of fishing vessels belonging to the Government. The audit observations revealed in audit test checks carried out in respect of Development and management of discharging the said functions by the fishing activities within the exclusive Ministry, Department and Statutory economic zone. Institutions are summarized below. Gradual Decline in the Annual Fish Production
Even though the expected target of fish 2014 had been 535,050 metric tons, it had production of the year under review was declined by 7,990 metric tons up to 633,750 metric tons, the quantity produced 527,060 metric tons by the end of the year had been 527,060 metric tons. Even 2018. Details are given in Diagram 46 though the fish production of the year
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540000 535000
530000 525000 Fish Production Metrictons 520000 515000 510000 2014 2015 2016 2017 2018 Year
Table 46 - Annual Fish Production Source: Statistic Division of the Ministry of Fisheries and Aquatic Resources
Developmentof Fisheries Increase in the Import of Total Fish and Fish Products
The import of total fish and fish products 2017. Nevertheless, the contribution of in the years 2017 and 2018 had been fish and fish products to the Gross 24,827 metric tons and 27,998 metric tons Domestic Production had been 1.3 per cent respectively and it had increased by 3,171 and 1.2 per cent in the years 2017 and metric tons as compared with the year 2018 respectively. Removal of Silt in Lagoons
A provision of Rs.1,000 million had been Puttalam, Nayaaru, Arugambay and made by the Annual Estimate of the year Rekawa by utilizing the said provision, no 2018 to remove silt and clean 10 lagoons. development work of any lagoon had been Even though it had been stated that priority commenced even by 31 May 2019. was given to remove silt in lagoons at
Purchase of Boundary Stones for the Demarcation of Lagoons
The necessity of demarcating lagoons had been identified for maintaining as a special reservation by the Department of Fisheries and Aquatic Resources. Accordingly, it had been planned to purchase 19888 boundary stones with 5x 6 square feet at a cost of Rs.31.96 million for the demarcation of 10 lagoons and 11264 boundary stones had been provided by January 2019. A sum of Rs.7.70 million had been spent for providing 4831 boundary stones as at 31 December 2018. However, the said boundary stones had not been used for the demarcation of lagoons despite a lapse of 6 months as at June 2019. Those boundary stones were piled up at the lagoons nearby and it was revealed that certain boundary stones were not complied with the relevant standards.
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Development of Fisheries Developmentof
Construction of the Building of Vessel Monitoring Centre
In terms of Guidelines 4.3.1 and 4.3.2 of Resources based on the total cost estimate. the Government Procurement Guidelines, A payment up to Rs.15.93 million had the variance should have been been made for physical contingencies Rs.8,974,795 as per the maximum exceeding the said value. As such, a sum contingencies payable for the construction of Rs.6.96 million had been overpaid contract of extending the building of without an approval contrary to the Vessel Monitoring Centre of the Procurement Guideline. Department of Fisheries and Aquatic
Manufacturing of an Ambulance Boat
An Ambulance Boat had been Evaluation Committee to the effect that it manufactured at a cost of Rs.4.52 million complied with the relevant specifications. by the Ceynor Foundation Limited upon The buyer had rejected to purchase the an order placed by the Uva Provincial boat as the said engine overheats. As such, Ministry of Health Services in the year the cost of Rs.4.52 million incurred on the 2015 without entering into a written boat and engine was not possible to be agreement. A boat engine valued at recovered. A formal inquiry on the officers Rs.1.13 million had been purchased and responsible in this connection, had not installed in the boat without an assurance been held even by 29 October 2018. after having examined by a Technical
Manufacturing of Multi-day Vessels
The Cabinet of Ministers had decided on by the Cey-Nor Foundation while other 05 06 July 2016 to manufacture and provide vessels had been commenced to be 10 multi-day vessels to the Cey-Nor manufactured by two private yards Foundation with a view to supplying registered in the Department of Fisheries quality fish products to the consumers by and Aquatic Resources under the minimizing the post-harvest losses of fish. supervision of Cey-Nor Foundation. The manufacturing price of a multi-day vessel had been assessed at Rs.26 million Even though the manufacturing work of 05 and the Government subsidy was fifty per multi-day vessels should be completed by cent while the fisherman should bear fifty the Cey-Nor Foundation before 15 per cent. The said activity was planned to December 2016, manufacturing of one be carried out before 15 December 2016 multi-day vessel by the Cey-Nor and as such, 05 of the multi-day vessels Foundation and the manufacturing of 3 had been commenced to be manufactured multi-day vessels by a private company
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had not been completed as at 31 December Engineer Assistant of the Department of 2018. Fisheries and Aquatic Resources had confirmed on 20 February 2018 that the A vessel manufactured by the Cey-Nor multi-day vessel had properly Foundation and given to a fisherman was manufactured, a formal inquiry on the said destroyed from fire in the first voyage on damage had not been held in terms of 22 March 2018. Even though the Marine Financial Regulation 103 and 104. Misappropriation of Public Funds
The National Aquaculture Development of advances and signatures were forgery Authority had paid a sum of Rs.42.57 and advances amounting to Rs.42.57 million to the supplier for the purchase of million had been paid based on those 03 machines valued at Rs.161.40 million forged documents. The said advances had to remove weeds and debris under the been recovered after giving opportunity to Lagoon Development Programme. The utilize on private purposes for a period Development of Fisheries Development documents of bonds presented for payment about 06 months. Purchase of Fishing Nets exceeding the Requirement
Fishing nets valued at Rs.21.41 million been spent on the purchase of fishing nets. had not been distributed and remained in Even though a stock of nets valued at 15 centres including the Head Office of the Rs.17.71 million existed in the centres at National Aquaculture Development Dambulla, Kala wewa, Udawalawa, Authority as at 31 December 2017. Out of Iranamadu and Muruthawela, nets valued Rs.8.93 million spent on the management at Rs.4.90 million had been distributed to of parent fish as at 30 September 2018, a the same centres mentioned above in the sum of Rs.7.18 million or 80 per cent had year 2018 as well. Underutilized Assets
An old By-product Factory in in Kurunegala owned by the Ceylon Anuradhapura, 07 Ice Plants in Fisheries Corporation had remained idle Polonnaruwa, Ratnapura, Puttalam, without being used over a period ranging Velani, Saindamarudu, Beruwala and from 02 years to 29 years. Further, 20 Hambanthota, an Government Quarter, dry motor vehicles belonging to the Ceylon fish yard, Net Mending Hall in Fisheries Corporation had remained idle in Trincomalee, an old dry fish yard in the premises of Corporation and relevant Mannar, Ice Plant in the land at Pesalai, 03 regions. Moreover, 07 compressors, 13 parts of cool room containers in Batticaloa, cool rooms, 04 deep cool rooms and 02 land and cool room building at Kareipur in condensers had remained idle. Jaffna, the land and old circuit bungalow
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Development of Fisheries Developmentof
Payment of Salaries and Wages of the Officers released
Five officers of the Ceylon Fisheries funds of the Corporation had been paid as Corporation had been released to 04 other salaries and wages for three officers out of Government institutions in the year under the said five officers. review. A sum of Rs.1.66 million from
Purchase of Fish Harvest contrary to Expected Prices
Stocks of fish had been purchased and sold of excess fish harvest of the fishermen on the approval of the then Deputy until the sanction imposed by the Chairman of the Ceylon Fisheries European Union was lifted. As such, a loss Corporation contrary to the expected of Rs.47.36 million had sustained during a prices of the Tuna Project commenced period of 02 weeks. under the Treasury grants for the purchase
Reinstatement in the Post without holding a Disciplinary Inquiry
The Ceylon Fishery Harbours Corporation Manager who was responsible for the had paid a sum of Rs.2.79 million as failure in obtaining those fuel tanks to the advances to the contractor in respect of the Corporation, the relevant Supplies contract of obtaining 06 fuel tanks at a cost Manager had been reinstated in the post of Rs.5.06 million in the year 2007. Even without holding the said disciplinary though instructions had been given to hold inquiry. a disciplinary inquiry against the Supplies
Non-installation of Bridge Scales for Use
The contract of Rs.4.48 million for the though the contractor should have install purchase of bridge scales with a capacity the bridge scales in 04 Fishery Harbours of 40 tons for the Fishery Harbours in within 120 days from 28 December 2016, Galle, Mirissa, Kudawella and Beruwala the date of accepting the contract to 26 under the National Competitive Bidding, April 2017, no bridge scale in any harbour had been awarded by the Ceylon Fishery had been installed for use despite a lapse Harbours Corporation to a private of 777 days as at 12 February 2019. company on 23 December 2016. Even
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254 National Audit Office | Annual Report - 2018
Failure to credit the collected income to the Consolidated Fund
Failure to use Finger Scanners
Irregular Payment of Overtime
Purchase of Busses without a Feasibility Study
Ordering Drugs in accordance with a Proper Timetable
quality failed medical supplies
Expired Medical Supplies
Payment of Salaries to the Medical Officers who had Vacated the Service Failure to recover the Possession of the Properties belonging to the Dr. Neville Fernando Hospital Health and Nutrition and Health Remaining Two Hydroclave Machines in idle Purchase of a Land in the Name of Hospital Development Association Irregular Payment of Specimen Allowances
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256 National Audit Office | Annual Report - 2018
Health and Health Nutrition Health and Nutrition
The Ministry of Health and Nutrition is Resource Allocation, Monitoring and expected to ensure aqualitative health Evaluation of Programmes and service through theformulation of policies, Projects strategies anddevelopment activities for Administration of Main Hospitals. the sake of ahealthy citizenry contributing Regulation and supervision ofPrivate to a rapideconomic development in the Health Institutions. country. Inorder to achieve that result, the Matters relating to National Ministrycomprises a Department, and 12 HealthInsurance Programmes. StatutoryBoards/Institutions. Those Formulation and implementation of Institutions shouldexecute the following Programmes to Improve PublicHealth duties. and Nutrition. Policy Formulation, Implementation of Expand Research Opportunities inthe Programmesand Projects for the Health health sector. Sector A summary of audit observations made in Setting up Standards andGuidelines for audit test checks conducted on the Healthcare Delivery. execution of the said functions is given Human Resource Development. below. Management, planning, andsystems development.
Failure to Utilize Provision
Provision worth Rs. 2,664 million of 6 months from December 2016 out of comprising Rs. 1,198 million of provision the service and maintenance charge made for 15 Capital Objects by the totalling Rs. 3 million paid in August 2016 Ministry of Health, Nutrition & Indigenous Medicine, and provision relating to the period 2016/2017, had amounting to Rs. 1,466 million made on become uneconomic. Furthermore, the 12 Objects through supplementary said 2 Hydroclave machines and the 2 estimates & transfers as per Financial Regulation 66, had been saved in full electronic steam boilers connected to the without being utilized. machines , had remained idle from December 2016.
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Procurement of a Pet CT Scanner
The lowest bid of Rs. 156 million had been been executed by the Hospital; instead, the furnished for the procurement relating to welfare association of the employees of supply , installation, inspection and the Hospital had executed the activation of a Pet CT Scanner for the procurement. The rent income amounting Apeksha Hospital, Maharagama. The to Rs. 7 million, instead of being credited contract had been awarded to the bidder to the Government revenue, had been who furnished the second bid which credited to an account belonging to the welfare association. Failure to Credit the Income Eight locations of the Teaching Hospital, to the Government Revenue Jaffna had been provided for the welfare
Health and Nutrition Health and The sum of Rs. 120 million received by association, and 05 of those locations had the National Blood Transfusion Service been given on lease to private sector by the through the sale of 31,572 liters of excess welfare association thus earning an blood plasma, had not been credited to the income. As the welfare association had Government revenue in terms of Article been allowed to collect the lease rent that 149 of the Constitution of the Democratic should have been received by the Hospital, Socialist Republic of Sri Lanka; instead, the Government had been deprived of an that sum had been credited to the National income totalling Rs. 4.21 million. A Blood Bank Development Fund monthly income ranging from Rs. 30,000 maintained under the National Health to Rs. 300,000 had been earned through Development Fund. the business activities maintained by the welfare association at the other 03 Furthermore, the procurement activities locations of the building. No income relating to the rental of the cafeteria at the whatsoever had been credited to the General Hospital, Kurunegala had not Consolidated Fund therefrom. Failure to Use Finger Scanners
A number of 224 finger scanners 2017, it is necessary to ensure that no purchased by the Ministry by spending a overtime payments should be made under sum of Rs. 32 million in the year 2017 and the new salary, in case that finger scanners the years prior, had not been made use of are not used. However, the Ministry had even by 31 May 2019. In terms of the made overtime payments based on the Public Administration Circular, No. current salary. Due to Medical Officers of 03/2017 , dated 19 April 2017, and the the top level management refusing to use Letter, No. DMS/0016 of the Deputy the finger scanners, the other employees Secretary of the Treasury, dated 12 May had also refused to do so.
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Health and Health Nutrition Irregular Payment of Overtime
Contrary to provisions set out in Section that should have been paid only to the 1.1 of Chapter XXVIII of the Medical Officers performing clinical Establishments Code of the Democratic duties, for a period of one or two hours per Socialist Republic of Sri Lanka and Public day. Administration Circular, No. 09/2006, dated 30 May 2006, the Secretary to the The Medical Officers who had obtained Ministry had issued the General Circular, the overtime allowance, did not use the No. 02-20/2014 on 05 February 2014 finger scanners to record their arrival and fixing office hours for the Medical departure in terms of Public Officers. Administration Circular, No. 03/2017, dated 19 April 2017 read in conjunction
Based on the said Circular, the Medical with Section 1.3 of Chapter XXVIII of the
Officers performing duties relating to Establishments Code. Instead, the general administration of health services at overtime payments were made based on various sections of the Head Office of the records on arrival and departure in a diary Ministry without being directly involved in that had been signed once a month by a clinical duties, had been paid the overtime supervising officer. Irregular Collection of Monies and Bearing Expenses
A total of Rs. 5 million comprising a sum Action had been taken focusing on a of Rs. 3 million from 04 Government predetermined institution without paying institutions, had been collected to a bank attention of the said bid which had been account under the name of Director presented based on bogus documents, and General of Health Services with no deviating from the Government authority at all to hold a ceremony to pay Procurement Guidelines, the contract had tribute to the Minister of Health, Nutrition been awarded to the predetermined & Indigenous Medicine, thus spending a institution. Among the parties who had sum of Rs. 7 million on the expenses of funded the ceremony, was the contractor the ceremony. As for the event supplying medical gasses to a majority of management of the ceremony, a minimum hospitals functioning under the Ministry. bid of Rs. 6 million had been presented. Allowing a Non-government Officer to Proceed Abroad and Incurring Expenses Although not being appointed as an officer September 2018, and a conference held in of the staff of the Minister, a non- Switzerland during 01 – 06 October 2018. government officer who had posed as The Ministry had spent a total of Rs. Media Secretary of the staff of the 1,173,045 in that connection comprising a Minister, Event Manager and Coordinator sum of Rs. 487,500 on air tickets and a of Functions, had been allowed to sum of Rs. 685,545 on incidental & participate in a conference held in New combined allowances. York , United States on 26 and 27 National Audit Office| Annual Report - 2018 259
Purchase of Busses without a Feasibility Study
Five air-conditioned luxury busses with 54 study, had remained underutilized and seats at Rs. 10.6 million each, had been parked at the nursing schools due to purchased at the expenditure of Rs. 53 reasons such as, difficulties in running on million for 05 nursing schools in the year the roads in areas of the nursing schools, under review by exceeding the financial impossibility to drive into the premises of limit of Rs. 40 million approved by the the nursing schools, and various technical National Budget Department. Those issues. busses, purchased without a feasibility
ealth and Nutrition ealth and Failure to Order Drugs in accordance with a Proper Timetable H The Medical Supplies Division had within the year. Owing to this delay, purchased the estimated items by medical supplies with higher costs had following the policy of issuing orders to been purchased from the local market in the State Pharmaceuticals Corporation every year. Accordingly, due to the delay with a supply period of 11 months. in the supply of main order, the total cost Nevertheless, the State Pharmaceuticals of the medical supplies purchased from the Corporation had failed to provide supplies local market during the year under review without delays. As for the medical supplies through the State Pharmaceuticals relating to the year under review, the total Corporation together with the commercial number of items ordered, had been 8,918 stock of the State Pharmaceuticals whereas 5,544 items therefrom equivalent Corporation, amounted to Rs. 5,242 to 62 per cent, had not been supplied by million. the State Pharmaceuticals Corporation
Medical Supplies with Quality Failures
The total cost of 48 items of medical gauze. At the time of receiving orders to supplies that had been withdrawn during withdraw the quality failed medical the year under review due to quality supplies, it was revealed in audit test check failure, amounted to Rs. 538 million. That that certain items had already been issued included 08 types of antibiotics, and 100 per cent to the patients. As such, it medicines for dengue, cholesterol, was revealed in the year under review that epilepsy, diabetes and ophthalmic the drugs so issued to the patients, had diseases, as well as surgical items and been quality failed. Expired Medical Supplies
It was verified in accordance with the 126 million, comprising supplies costing information obtained from the Pronto Rs. 31 million existed at 08 stores in the software that medical supplies worth Rs. Medical Supplies Division and supplies 260 National Audit Office | Annual Report - 2018
costing Rs. 95 million stored at 50 Supplies Division whilst 10 items costing hospitals and institutions under the Rs. 12 million each costing over Rs. 1 Ministry, had expired in the year 2018. Of million, had expired in 08 hospitals. that, 4 items costing Rs. 9 million had Overestimations and being slow-moving expired in the stores of the Medical items had attributed to this scenario. Obtaining Stocks of Drugs on Overestimations
The item, Calcium Lactate 300 mg approval of the Family Health Bureau. administered to pregnant mothers, had Furthermore, action had been taken to been obtained on overestimates. In order to administer an overdose of that drug to get rid of the excess stocks, the said item lactating mothers. Stocks of the drug worth had been distributed among the school Rs. 13.5 million, the distribution of which children over 13 years and the participants could not be completed, had become in Suwanari clinics without seeking expired. Nutrition Health and Failure to Return to the Service after Proceeding Abroad on Academic Affairs
A sum of Rs. 118 million remained The sum receivable from 141 other receivable from 69 officers who had officers had not been calculated by the breached bonds entered into with the Ministry. Furthermore, due to failure in Government due to reasons such as, failure taking into account the overpaid salaries, to report for duty after proceeding abroad receivable loan balances, and other for post graduate studies, failure to provide payments, the sum recovered from 06 the Government with mandatory service Medical Officers had been Rs. 2 million after returning to the service, abstaining to less before closing their files whilst the report to the duty after proceeding abroad sum receivable from 06 more Medical on no-pay leave for job opportunities, and Officers had been undercalculated by Rs. abruptly ending the training opportunities. 2.8 million. Permanent Appointments Made Irregularly
There existed no possibility for the despite the impossibility in granting employees recruited on contract basis to permanent appointments to the employees the projects implemented under not belonging to the service categories Management Services Circular, No. 33, stated in the Public Administration dated 05 April 2007, to be made Circular, permanent appointments had permanent in accordance with Public been granted to 120 such project Administration Circular, No. 25/2014, employees. dated 12 November 2014. Furthermore, Retention of Consumables without being Distributed
The Family Health Bureau had received days had been spent for the clearance of consumables worth US $ 500,000 those consumables from the airport provided by the SAARC Development thereby incurring clearance charges Fund as donations. A period of 27-105 totaling Rs. 15.7 million including
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demurrages amounting to Rs. 6 million. A without being distributed. The lifetime of stock of 145,000 units of Dispo Van those items had expired in the months of Single Use 24 G 20 ml syringes included March, July, and October, 2017. As such, in the said stock of consumables, had been the demurrages and the clearance charges retained at the premises of the Family totaling Rs. 1.9 million spent on the said Health Bureau and the Chintana Trainintg 145,000 syringes, had become futile. Center, Nainamadama since the year 2015 Payment of Salaries to the Medical Officers who Vacated Service
Letters of vacation of post had been issued addresses of the Medical Officer who after a delay of 01 – 57 months from the vacated the service, legal action could not date of the Medical Officers‟ vacation of be taken for the recovery of Rs. 53 million service. There existed instances in which receivable from them. Instances were
Health and Nutrition Health and salaries had been paid with respect to observed in which follow up action had periods during which they had not served. not been taken on the legal action taken in Due to failure in finding out the present that connection. Deficiencies in the Management of Vehicles
it was verified in accordance with the data collected from the Department of Motor Traffic that there were 5,556 vehicles The Secretary to the Ministry had registered under miscellaneous requested the Department of Public designations in the health service such as, Finance on 24 March 2017 for the Secretary to the Ministry, and Director elimination of 584 vehicles of which the General of Health Services, but according physical existence could not be verified, to the register of vehicles maintained at the from the Register of Fixed Assets. Ministry, that number was 5,792 of which However, approval had not been granted the physical existence of 1,794 vehicles on that request. had not been verified. According to the In excess of the number of vehicles Department of Motor Traffic, the physical entitled in terms of Section 4.1 of the existence of 171 motor vehicles and Circular, No. CA/1/17/1 of the President‟s motorbikes out of 202 vehicles not Secretary relating to the Management of included in the register of vehicles made Government Expenditure, dated 14 May available by the Ministry despite being 2010, sixteen vehicles had been assigned owned by the Ministry, had not been to the Minister, the staff, and the Office of verified. the Minister, whilst 8 vehicles had been Albeit included in the register of vehicles assigned to the Deputy Minister, the staff, made available by the Ministry, the basis , and the Deputy Minister‟s office. in regard to 177 motor vehicles and Furthermore, in addition to the fuel motorbikes verified by the Department of allowance that the Minister and the Deputy Motor Traffic as being transferred to Minister were entitled to, the Ministry external parties, had not been ascertained provided fuel worth Rs. 2 million and Rs. by the Ministry. 262 National Audit Office | Annual Report - 2018
Health and Health Nutrition 4 million respectively during the year 2017 vehicles assigned to the Minister, Deputy alone. Minister, and the staff. As for 102 instances therefrom, fuel expenses totaling During a period of 06 months in the year Rs. 795,375 had been incurred by the 2017 alone, pool vehicles had been Ministry with respect to 56,182 Km. provided in 314 instances in addition to the Deviation from the Loan Agreement
The loan agreement valued at US $ 20 health centers in 09 provinces had also million or 75 million Saudi Riyals (appx been spent on the construction of epilepsy Rs. 3,000 million) had been signed on 26 hospital. In order to construct the 09 March 2008 for the construction of an epilepsy health centers - an objective of epilepsy hospital at the National Hospital the project, an additional loan agreement
of Sri Lanka and epilepsy health centers in had been entered into on 30 October 2015
09 provinces in the island. According to for obtaining a loan of 45 million Saudi the said loan agreement, the project had Riyals equivalent to US $ 12 million (appx been scheduled to be completed by 31 Rs. 1,800 million ) from the Saudi December 2009. Only the epilepsy Development Fund. The loan , instead of hospital had been constructed after a delay being utilized on the construction of health of 08 years though, the constructions of centers, had been utilized to purchase health centers in 09 provinces had not at diagnostic medical imaging equipment for least been commenced. Furthermore, the epilepsy hospital contrary to the contrary to the loan agreement, the loan conditions of the loan agreement. amount approved for the construction of Taking Possession of the Properties belonging to the Dr. Neville Fernando Hospital, Malambe
Considering the Cabinet Memorandum the properties should be transferred to the that proposed : to reach an agreement for Government of Sri Lanka, approval of the transferring the physical possession of the Cabinet had been granted on 05 July 2017 buildings including the properties so as for the Government to take over the belonging to Dr. Neville Fernando Sri Hospital. Lanka – Russia Friendship Teaching Hospital in Malambe, to the Government Even after a period of 2 years since the of Sri Lanka on a sublease for a period of Cabinet approval had been received, a 10 years ; until a loan of Rs. 1,013 million sublease agreement had not been entered obtained by a private institution from a into in order to vest the physical state bank for the establishment of the possession of buildings and properties of Hospital is repaid, the ownership and the Hospital with the Government. legality of the said properties should be However, the Ministry had spent a sum of retained with said private institution ; and , Rs. 583 million on the settlement of once the loan is settled in full, the revenue expenditure of the Hospital ownership of the Hospital along with all relating to the period from 01 August 2017 to 31 December 2018.
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Overpayments Made on Nutritional Supplements
A nutritionist with knowledge about Furthermore, food items on which bids had nutritional supplements had had not been been presented promising to supply in appointed to the Technical Evaluation cans, had been supplied in sachets, and Committee relating to procuring food vice versa. The supplier who had furnished items for the National Hospital of Sri a bid of Rs. 1,390 per tin containing 05 Lanka for the year 2016/2017. The unit of sachets of the nutritional supplement, measurement for 05 nutritional named Impact, had been overpaid a sum of supplements had been shown as cans or Rs. 25 million as payments had been made sachets in the estimate prepared based on to him in the manner of Rs. 1,390 per monthly requirements and sachet for a total of 23,304 sachets. The recommendations of the Medical Officers average market price of a sachet of Impact
Health and Nutrition Health and and Nutritionists, but the weight and types weighing 74 grams was only Rs. 365. of nutrients had not been mentioned.
The Two Hydroclave Machines Remaining Idle
A private institution had been entrusted to Funds had been raised with a citizen‟s service and maintain the two Hydroclave organization for purchasing the machine, machines installed at the National Hospital and the funds had been credited to an of Sri Lanka for destroying clinical waste. account maintained under the name of However, the process of destroying National Health Development Fund. clinical waste by using those machines had However, prior approval of the Secretary been halted prior to 6 months of the to the Ministry of Health, Nutrition & expiration of the agreement period. As Indigenous Medicine, and the National such, the sum of Rs. 1.6 million paid for Health Development Fund had not been the period was also the highest and obtained thereon. revised, amounting to Rs. 192 million. In terms of Guideline 5.4.5 of the The said citizen‟s organization that had not Procurement Guidelines, an advance been properly authorized by the payment not exceeding 30 per cent of the Department of Social Services to act as a value of Letter of Credit may be paid on charity organization to provide social the submission of an acceptable guarantee. welfare and common amenities, had raised Contrary to that, the Bio Medical funds from the general public. A television Engineering Service Division had opened channel had only involved in promotional Letters of Credit under the name of the activities whilst the said citizen‟s parent company of the Pet CT Scanner to organization had not donated any amount the value of 80 per cent of the value of the for purchasing the machine. The said machine. The supplier had been paid a organization had influenced the officials of sum of Rs. 179 million in regard to this the Ministry whilst commenting on the Procurement as at 30 March 2018. specifications of the machine.
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Health At present, that organization functions attention on the said organization enjoying using letter heads mentioning as a limited an improper authority to collect monies company, but the Ministry has not drawn from the general public.
Purchase of a Land Under the Name of Hospital Development and and Nutrition Association
Letters had been exchanged with the Instead of purchasing the land by directly District Secretary of Jaffna with respect to paying to the owner, an indirect payment the Director of the Teaching Hospital of method had been followed to conceal the Jaffna and the Hospital Development irregularity of the transaction. Association purchasing a land. It was verified according to those letters that an Before the funds being released by the
NGO, named Jaffna Teaching Hospital District Secretariat for purchasing the land,
Development Association was expecting it was necessary to have been satisfied to purchase the land. However, by with the transparency and fairness of the exceeding the powers vested in the District transaction by verifying the information Secretary and the Director of the Hospital, such as history, plan , and assessment public funds amounting to Rs. 12.5 million value of the land through folios. However, had been released to the Hospital by the it had not been so done. District Secretary without any authority or The land had been purchased on 02 August approval whatsoever, and then again the 2011, and later, the assessment report had Director of the Hospital had released those been obtained on 19 September 2011. The funds to the Hospital Development assessment report had been issued with the Association. objective of providing the land owner with The Hospital Development Association the value that he had expected. had purchased the land under their name Furthermore, the land had been assessed by paying a sum of Rs. 12.5 million. by considering the land as having a commercial value. Constructions at the Teaching Hospital of Jafffna
Three hundred and ten contracts with the above. Accordingly, this association that total contract value of Rs. 170 million had not fulfilled the requirements set out in relating to the constructions at the Guidelines 3.9.1 and 3.9.2 of the Teaching Hospital of Jaffna, had been Government Procurement Guidelines, had awarded to an association registered as an been awarded the aforesaid contracts NGO , in the years 2016, 2017, and 2018. without obtaining recommendations from The said association having only 06 a Committee comprising two members Consultants of the Teaching Hospital of appointed by the Divisional Secretariat of Jaffna as its members, could not be the division and the Head of the considered as a community-based Department. organization, and had not been registered with the ICTAD under the grade M8 or In accordance with the Guideline 3.9.1 of the Government Procurement Guidelines, National Audit Office| Annual Report - 2018 265
the contracts assigned, should not be drawings by including the location of the subcontracted to other parties. However, project, how the task should be done, all of those contracts had been measurements, and the essential items subcontracted to a welfare association used, before preparing the BOQs. chaired by the Director of the Teaching However, without such drawings, the Hospital of Jaffna. Furthermore, the said Central Engineering Consultancy Bureau welfare association - the subcontractor, did had prepared the BOQs with only not have prior experience and quantities and rates included. In the professionally skilled employees, nor had preparation of BOQs for the contracts and registered with ICTAD. As such, the repairs relating to public institutions, the subcontracts awarded to them had been rates issued by the Buildings Department executed by deploying professionals at with respect to each area, should be taken personal level. The transparency of into consideration; nevertheless, the
Health and Nutrition Health and procurement had been deprived since the Central Engineering Consultancy Bureau Director of the Hospital chairing the had used the rates prepared by them for the Procurement Committee, had directly Hospital. As the Technical Officer of the obtained the hospital contracts for the Hospital had used rates other than the ones welfare association also chaired by him. provided by Central Engineering Consultancy Bureau, the cost estimates The BOQs relating to 310 contracts had shown in the BOQs prepared for the said been prepared by the Central Engineering items of contract, had been neither Consultancy Bureau. It is the generally accurate, nor realistic. accepted methodology to prepare
Irregular Payment of Specimen Allowances
The officers in the paramedical service, Discrepancies existed in the Circulars on such as Radiologists, Physiotherapists, overtime allowances issued from time to Electrocardiogram Technicians, and time with respect to the values of specimen Medical Laboratory Scientists (MLT) allowance, overtime allowance, waiting attached to the 3 hospitals in Polonnaruwa, allowance, and maximum overtime Jaffna, and Badulla selected as samples, allowance. A permanent and common had irregularly and illegally obtained criteria for overtime payments had not overtime payments and specimen been formulated. allowances without transparence. Action had not been taken to control Efficient and fully-automated machines overtime payments by regulating the with lower risks had been introduced for possibility of earning overtime equivalent the officers in the paramedical service. to several times of the basic salary through However, due to lack of an unambiguous implementation of a roster . It was verified definition for the specimen and specimen in many instances examined that a number allowance, overtime payments had been of tests two or three times more than the made in an impractical and unfair manner. ones carried out during the normal
266 National Audit Office | Annual Report - 2018 working hours had been carried out during obtained using fake notes stating that the the overtime period thereby obtaining tests actually carried out during the normal overtime in an unusual manner. There working hours, had been carried out within were instances in which allowances were the periods of interval.
Idle or Underutilized Bio Medical Equipment
Due to reasons such as, obtain the relevant that, 03 high energy existence of vacancies, licenses in terms of the radiology equipment lack of Medical Officers, Sri Lanka Atomic Energy purchased at the value of non-construction of Act, and failure to make Rs. 726 million for cancer buildings, lack of repairs, 854 bio medical treatment units of the
accessories and spare equipment costing Rs. Teaching Hospitals in Nutrition Health and parts, transfer of the 3,030 million had Jaffna, Karapitiya, and Consultant who had made remained either idle or Batticaloa, had remained the request, receipt of underutilized at 33 idle for a period of over equipment without being hospitals for periods 03 years due to non- requested sans ranging from 05 months availability of bunkers to requirements, failure to to 07 years. In addition to install those machines.
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Non-compliance with Procurement Guidelines
Payment of Surcharges to the Employees‟ Provident Fund
Decrease in the Sale of Newspapers
Mass Media Mass Non-implementation of Projects
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Mass Media
The objectives of this Sector are of public finance and mass media to ensure Media Mass formulation of Strategies for the Mass the optimum use of public resources in Media as a proactive agent in economic, expediting the economic growth and social social, cultural and political fields towards progress of Sri Lanka and contributing as a better public attitudes. The following proactive agent in economic, social, functions should have been performed by cultural and political fields towards better the Ministry of Finance and Mass Media public attitudes. and one Department and 09 Statutory The summary of Audit observations Institutions under its purview in achieving revealed at the Audit test check carried out those objectives. on the performance of functions mentioned Formulation and implementation of above, by the Ministry, Department and policies and strategies relating to matters Statutory Institutions, appear below. Purchase of Communication Equipment
In the procurement for purchase of service assistance on any day of the week. communication equipment from a foreign However, the 64x64 Digital Video Switch supplier by spending a sum of Rs.48.60 had become inoperative before the lapse of million to the Main Studio of the Channel 09 months of purchasing. The supply of of Coexistence, the warranty period for the service therefor had been commenced after parts of equipment had been mentioned as 21 days. Moreover, it had been agreed 5 years according to technical according to specifications, to provide an specifications of the Sri Lanka Rupavahini additional system for this equipment and Corporation. However, the warranty to provide additional accessories required period in the contract agreement had been for certain equipment. Nevertheless, action limited to one year. Moreover, the had not been taken accordingly. contractor had agreed to provide 24 hour Non-compliance with Procurement Guidelines
In terms of Guideline 3.6.1 of the supplier for the supply of the same Goods, Government Procurement Guidelines, in the value of the said order should not placing repeat orders with the original exceed 50 per cent of the original contract
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value. However, the Sri Lanka Rupavahini cameras had been purchased in the months Corporation had purchased two cameras of January and February 2018.
again in the months of March and April for Accordingly, the value of 50 per cent of US$ 47,685.52 from the contractor itself the contract had been exceeded by US$ from whom three Broadcast quality HD 6,557.46. Delay in Payments An agreement had been entered into 125,000 had to be paid to the foreign
between a foreign private company and the company in August 2016. The Corporation MassMedia Sri Lanka Rupavahini Corporation for had lost a sum of Rs.2.12 million due to obtaining broadcasting rights of the Rio the disadvantageous difference in the Olympic Series held in August 2016. currency ratio as a result of the delay of According to the said agreement, US$ over two years in making that payment. Broadcasting of Lottery Draws The Sri Lanka Rupavahini Corporation Agent‟s commission and Sales Executive‟s had earned an income of Rs.763.36 million commission amounting to Rs.91.40 by broadcasting the lottery draw in the million and Rs.1.08 million respectively. year under review. The Corporation had The Corporation had been deprived of spent a production expenditure of Rs.91.40 million due to failure in direct Rs.154.01 million therefor. The sum connection in the said transaction by totalling Rs.246.49 million comprised of Government institution. Non-recovery of Advances paid The Cabinet of Ministers had granted paid as advances on 02 January 2015 to a approval in December 2014 on the company distributing satellite technology concurrence of the Ministry of Finance to for commencement activities thereof. operate a television channel in a studio Moreover, no written agreement had been established in Italy or another country in entered into for the said payment and the Europe via satellite technology and to concurrence of the Ministry of Finance as temporarily obtain equipment therefor on well had not been obtained. However, the lease basis for taking Sri Lanka‟s identity said function had been completely to the world and promoting the knowledge abandoned after January 2015 and action and appreciation of Sri Lankans living had not been taken even by the end of the abroad. A sum of Rs.3.45 million had been
272 National Audit Office | Annual Report - 2018 year under review to recover the advances paid.
Payment of Surcharge to the Employees‟ Provident Fund Mass Media Mass According to Section 15 of the Lanka Broadcasting Corporation had Employees‟ Provident Fund Act, No. 15 of delayed in remitting the contributions of 1958, the contributions of Employees‟ the Employees‟ Provident Fund abated in Provident Fund should be remitted to the the years 2007 and 2008. The Corporation Employees‟ Provident Fund before the last had paid surcharges of Rs.15.05 million
day of the succeeding month in which relating to the period from April 2007 to contributions of Employees‟ Provident December 2009 due to this delay. Fund were deducted. However, the Sri
Non-implementation of Projects
Even though provisions of Rs.81 million Sri Lanka, those projects had not been had been made for implementation of 10 implemented in the year under review, internal development projects in the thus saving the entire provisions made Department of Government Information of therefor.
Decrease in the Sale of Newspapers The number of copies sold in the year decreased, ranging from 9 per cent to 11 under review relating to Sunday Observer, per cent. Daily News, Dinamina and Silumina As compared with the preceding year, the newspapers published by the Associated income of the Commercial Publication Newspapers of Ceylon Limited had Division, Special Publications and Digital decreased, ranging from 5 per cent to 12 Prints of the Associated Newspapers of per cent. The number of copies sold Ceylon Limited had decreased by 13 per relating to periodicals of “Tharuni”, cent, 21 per cent and 63 per cent “Manchu”, and “Subasetha” as well had respectively.
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Increase in Motor Vehicle Accidents
Decrease in solving of complaints on crimes as compared with the preceding year
Failure to develop the Information communication system
Underutilization of provisions made for “Gamata Polisiya” concept
Non-participation in the United Nations Peacekeeping Operations
Law and Order and Southern Development Southern and Order and Law
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Law and Order and Southern Development LawOrder and The expected result of this Sector was to order, development of strategies maintain law and order for a law abiding including wide reforms ensuring social society and enhance the development of discipline. the Southern Province. The following Vehicular traffic control. functions should have been performed by Control and prevention of crimes and the Ministry of Law and Order and anti-social activities. Southern Development, a Department Conservation, safety and rehabilitation and three statutory bodies/institutions in of the historical Galle Fort. order to achieve this objective. Establishment of the Southern
Development Board. Formulation of policies, programmes and projects relating to the scope of the The summary of the audit observations Department and statutory bodies for made in the audit test check carried out on Law and Order and Southern the performance of above functions is Development, taking follow up action given below. and evaluation, maintaining law and
Prevention of Vehicular Accidents
Taking necessary steps in order to vehicular accidents had dropped by 2,133, streamline the vehicular traffic so as to whereas number of fatal accidents and the secure the lives and property of the people accidents with serious injuries had has been the key function of the Ministry increased by 31 and 173 respectively. The of Law and Order and Southern number of vehicular accidents occurred Development. As compared with the during the period from the year 2016 to preceding year, the total number of 2018 is shown in the Table 13
Type of Accident No. of Accidents as at 31 December 2016 2017 2018 Fatal 2,824 2,922 2,953 Serious Injuries 8,148 8,302 8,475 Minor Injuries 14,604 13,592 12,264 Damages 13,510 13,072 12,064 Total 39,086 37,888 35,756 Figure 13 Number of Vehicular Accidents Source : Annual Report of the Law and Order Division.
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Solving Complaints on Crimes
A key index which reflects the progress of percentage of the number of complaints safeguarding the law and order in the solved from the total number of country is the absolute number of crimes complaints received by Sri Lanka Police reported in the country and the relative had become a low in value relating to 09 number of solving crimes so reported. As types of crimes other than 01 type. The compared with the preceding year, the details appear in the Table 14.
Type of Crime 2017 2016 Reported Solved Percentage Reported Solved Percentage of
Law and Order and Law of Solution Solution Grave Crimes 35,979 28,016 77.87 36,355 28,246 77.69 Minor Offences against 42,224 29,303 69.40 41,888 27,831 66.44 Persons Minor Offences against 32,881 16,664 50.68 31,415 14,143 45.02 Properties Minor Complaints 1,029,087 1,029,04 100.00 971,617 971,617 100.00 7 Crimes against children 2,911 1,998 68.64 3,344 1,572 47.01 Crimes against women 790 498 63.04 775 326 42.06 Liquor related offences 120,198 103,022 85.71 129,813 104,048 80.15 Offences related to 107,944 104,592 96.89 124,940 120,052 96.09 narcotic drugs Corruptions 1,055 1,025 97.16 954 868 90.99 Statutory Offences 49,013 46,857 95.60 40,607 38,102 93.83
Table 14 - Reported number of crimes and solutions Source – Annual Performance Report 2018- Sri Lanka Police
Drugs Control One of the key functions of the Ministry and it had been 40,997 and 54,685 during was to prevent using and trafficking of the year under review. The quantity of dangerous drugs. The number of persons drugs arrested in the year under review and arrested for the offences related to Heroin the preceding year is shown in the Table and Cannabis during the preceding year 15 stood at 29,288 and 51,788 respectively
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Institute Heroin ( k.g.) Cannabis ( k.g.) Hashish ( k.g.) Cocaine ( k.g.)
2017 2018 2017 2018 2017 2018 2017 2018 LawOrder and Police 23.598 669.310 206.587 543.555 1.122 1.667 2.050 18.266 Narcotics Bureau Police Stations 236.814 46.658 3,876.945 2,420.902 3.040 9.814 218.647 0.134 Special Task 0.295 3.831 512.882 1,267.644 - 1.846 - 0.036 Force Other 54.246 12.325 390.644 546.648 34.009 19.983 - 2.768 Institutions Total 314.953 732.124 4,987.058 4,778.749 38.171 33.310 220.697 21.204
Table 15- Quantity of Narcotic Drugs arrested
Source- Annual Report of Police Narcotics Bureau-2018
Development of Police Information and Communication System
Although provisions of Rs.440 million had Lanka Police in keeping with the present been made for the development of requirements, the entire provision had Information and Communication systems been saved as it had not been used for any and the Crime Investigation Unit of the Sri purpose.
Development of Community Police Concept
Provisions of Rs.150 million had been stations. Nevertheless, Rs.143.67 million made for the purchase of equipment of the above provisions had been saved including motorcycles relating to the without being utilized for the relevant “Gamata Polisiya” concept and the purpose. community police activities of 483 police
Establishment of Police University
For the activities such as drafting Police However, those activities had not been University Act and purchase of furniture, carried out by the end of the year and provisions of Rs.125 million had been accordingly, Rs.102.94 million of the made during the year under review. provisions made had been saved
Progress of the Construction of Buildings of the Sri Lanka Police
The implementation of 04 construction physical progress of these 04 projects projects of the Sri Lanka Police under the relating to the construction of constable middle term budget frame 2016-2018 at a quarters, auditorium, official quarters and total cost of Rs.1,808.09 million had been Traffic Headquarters Building had ranged awarded to the Buildings Department. The from 2 per cent to 60 per cent. National Audit Office| Annual Report - 2018 279
UN MISSION Project of the Special Task Post
For the establishment of a specific troop in 2016. Sums totalling Rs.792 million had the Special Task Force to carry out been spent for the purchase of equipment operations of United Nations in the years 2017 and 2018 and those Peacekeeping mission, steps were taking equipment had been stored in the from the year 2016 to purchase necessary Katukurunda camp. The officers of the equipment including weapons, armed Special Task Force had not involved in the vehicles and communication equipment. United Nations Peacekeeping operations Three hundred and twenty officers had even by May 2019. been trained for that purpose in the year
Law and Order and Law
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Non-achievement of Expected Objectives.
Under-utilization of Foreign Loan.
Failure to Ensure the Optimum Utilization of Government Sponsorship.
Decline in the Terminal Operations.
Non-commencement of Operations of the East Container Terminal. utilization of Foreign L Elimination of Foreign Loans Ports and Shipping Shipping Ports and Obtained for the Construction of Hambanthota Port, from the Financial Statement without Proper Approval.
Failure to Install the CCTV System.
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P orts and Shipping Shipping and Ports
The expected result of this field was Assist in establishing Consultative Co- creation of marine harbour facilities ordination between shipping service without hindrance. To fulfil this desire the providers and users. Ministry of Ports and Shipping and three Receiving wrecks and ocean salvages statutory Boards/ Institutions following Administration of Shipping functions should have performed. Development Fund. Administration of freight and Shipping Formulation of Policies, Programmes Services. and Projects relating to the subjects of Coastwise passenger traffic. Ports and Shipping. Supervision of Institutions under the Development and administration of Ministry. ports, oil installations and equipment, lighthouses and beacons other than A summary of the audit observations on those belonging to the Admiralty. the performance of the function by the Arbitration of disputes between above institutions revealed at the audit test shipping services providers and users. check is given below. Establishment of rules of competition for Shipping Services Providers and users. Implementation of Major Development Projects
Provisions amounting to Rs.3,376.90 million had been allocated for 5 million had been allocated for development projects but total provision implementing of 8 capital projects under had been saved in the reason of non- 15 capital objects. Although out of that, implementing of that projects. provisions amounting to Rs.2,270.00 Non-achievement of Expected Objectives
Will the object of the regularize the the relevant constructions at the date of 31 maritime passenger transport service in the December 2017. Only the primary Jaffna peninsula and between Islands for constructions had been completed at the the supply of facilities such as registration date of 31 December 2018 while the of passengers and goods transportation developing of infrastructure facilities vessels, regulations and renovations 2 including water and electricity existed at projects had been implemented during the primary level even as at the date of 09 year 2016. It had been planned to complete April 2019.
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Under-utilization of Foreign Loan
Provisions amounting to Rs.1,350 million complete only about 5 per cent of the had been allocated during the year under relevant procurement activities and review to construct a administrative constructions relevant to the project during building and a store for direction and the year under review. But that planned development of activities of the activities were existed at primary level and Kankasanthurai Harbour on the approval total provision had been saved. Therefore, of the cabinet. That provision had been state loans provided for the project had financed under line of credit of Indian failed to utilize as optimum. Exsim Bank. It had been planned to Import of Government Section‟s Shipment PortsShipping and Import of shipments of the Government which are engage in import activities in Section including the foreign projects all huge the services of the company had not Government Institutions should have to be been obtained. Also, it was observed some done through Lanka Shipping Corporation Government Institutions had been Ltd. as per the regulations in the Public requested for importing of goods by other Finance Circular No.415 dated 06 May foreign shipping companies. The company 2015 in terms of the decision of the had issued waivers in connection with cabinet held on 13 January 2016. Also it such requests made more than 700 had been further confirmed by Public instances during the year 2017 and 538 Finance Circular No.03 dated 18 February instances for the year 2018. Therefore, 2016, also by the instructions gave on 11 suitable methodology had not been August 2016 by the Central Bank of Sri developed for function to obtain business Lanka for the Commercial Banks in occasions to the company in connection connection with import of goods for the with importing of goods. Action had not Government Section should be done been taken by the Lanka Shipping through Lanka Shipping Corporation Ltd. Corporation Ltd. as per the above Services of the company obtain by the mentioned circulars to enlarge company‟s Government Institutions had existing in market share by applying the provided limited while Government Institutions government assistance. International place in the container handling operations and the market share of the Ports Authority
According to the Alphaliner Report issued of the World as compared to the year 2017 by the Alphalyin Organization about the an increase of 13.5 per cent had been World Harbour for the year, Colombo achieved in that works. Also handling of Harbour remained in the placement No.20 containers of the Sri Lanka Ports Authority equivalent unit handling 7,047,486 had been increased by 14.6 per cent in the operations remain in the placement of 23 year 2018 as compared to the year 2017.
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Operational Activities of the Shipment Shipping and Ports
Although 5,023 number of ships came in from 4.91 million in the year 2014 up to the year 2016 for the harbours of 7.05 million in the year 2018. Also number Colombo, Galle, Hambantota and of traditional shipments handling in the Trincomalee had been reduced it up to year 2016 from metric ton 7.81 million 4933 number of ships as at the year of had been reduced up to metric ton 7.44 2018. But 4.91 million Twenty Equivalent million at the end of the year 2018. Details Units of containers had been increased are shown in the following table.15
Description 2014 2015 2016 2017 2018 Number of ships arrived (containerised, 4,298 4,760 5,023 4,942 4,933
Traditional, Other)
Number of twenty equipment container units 4,908 5,185 5,735 6,209 7,047 handled (units „000) Quantity of Traditional Shipments handled (Metric 6,339 7,156 7,811 7,735 7,438 Ton „000) Table.15-Quantity of container units handled in the main harbours and traditional shipments. Source.-.Performance Review Report of the Sri Lanka Ports Authority
Operational Activities of the Colombo Harbour
Decline of the Terminal Operational Activities
The container operations capacity of the company which commenced its operations Sri Lanka Ports Authority during the 18 in the year 2013 had achieved a rapid years period from the year 2001 to the end improvement from 1 per cent up to 38 per of the year 2018 had rapidly decreased cent. Other company‟s 19 per cent of the from 81 per cent to 33 per cent as market share in the year 2001 had been considering as a percentage of handling of improved up to 29 per cent as at the year total containers. However, out of the two of 2018. The details of containers handling private companies operating in in 18 years appear in the Diagram 47. competitively in the Colombo Harbour, the
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3,000,000
2,500,000
2,000,000
1,500,000 Sri Lanka Port Authority Private Company 1 1,000,000
Private Company 2 No ofContainer No Units 500,000
0 2001 2003 2005 2007 2009 2011 2013 2015 2017 Year PortsShipping and Diagram 47 - Operational activities of the Sri Lanka Ports Authority‟s Terminal Source – 2018 Performance Review Report of the Sri Lanka Ports Authority
According to the above data market share of the container operations of the Sri of container handling of the Sri Lanka Lanka Ports Authority as compared with Ports Authority had been gradually taken year 2017 had improved from 60 per cent possession by the private sector. In up to 65 per cent in the year 2018. considering the Terminal Occupancy Ratio Non-commencement of Operations of the East Container Terminal
Out of the working Terminals for direction could be occure in future in respect of of containers at present at the Colombo Terminal Service equal to the demand. Harbour is only the Terminal Colombo However, relevant to the Colombo International Container Terminal the ships Harbour Expansion Project with the Draft more than 14.25 metres able to come construction cost of Rs.11,168 million only its capacity is Twenty Equivalent draft 18 metres and length of 440 metres Units 2.4 million for a year. 308 ships had the funds compiled by a local bank the came for this Terminal which were over construction activities of the East 14.25 metres Draft during the year 2018 Container Terminal although had been and it had been directed containers more completed in the month of April 2016 but than totalling 2.6 million units. Therefore, for the direction of the shipment necessary there had been increased of 12 per cent equipments including Grants Cranes direction of containers in this Terminal as obtained by and to initiate the operational compared to the year 2017. Attention had activities of this Terminal action had not not been paid for the supply of container been taken by the Sri Lanka Ports services of the Colombo Harbour which Authority even as at the date of 30 April 2019.
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Foreign Loan obtained for the construction of Hambantota Shipping and Ports Harbour
Out of the foreign loan obtained for the accounting of this loan even as at the end construction of Hambantota Harbour, the of the year under review. loan balance amounting to Rs.147,746 A sum of Rs.31,544 million as the foreign million remaining in the accounts of the conversion exchange loss calculated as at Sri Lanka Ports Authority as at the date of the date of 30 November 2017 with 30 November 2017 had been eliminated relevant to the above loan also had been from the financial statements of the eliminated from the accounts of the Sri Authority without the concurrence of the Lanka Ports Authority. Foreign exchange General Treasury or without approval of cumulative loss from 30 November 2017
the cabinet. In that reason, that loan money up to the date of 31 December 2018 had not been included in any Government amounting to Rs.28,396 million had not Account. According to the records of the been entered in any account. Like this, in Department of External Resources of the connection with this loan cumulative General Treasury that loan balance was foreign exchange loss had been amounted Rs.179,546 million as at 31 December to Rs.59,940 million as at 31 December 2018. However, two parties had not came 2018. to a concurrence in connection with
Make Guarantee in respect of loan obtained by a company
Loan amounting to US$ 24 million had by that company had not been settled been obtained from a private bank by the sufficient money haven‟t owned by the Magampura Ports Management Services company to settle that loan as at the date of (Private) Ltd. while it had been guaranteed 30 August 2019. Action will be taken as by the Sri Lanka Ports Authority for that. against to the Sri Lanka Ports Authority in Operational activities of that company had legally to recover the arrears loan balances been suspended since the month of of US$ 22.3 million as the gurantee for the November 2017 while the loan obtained loan amount.
Non-fix CCTV Camera System
It had been planned to fix a CCTV Camera provision amounting to Rs.150 million had System by spending Rs.60 million in the been supplied for that in the year 2018, year 2017 for the security of the all boats relevant work had not been completed and Bonded Warehouses to confirm the even as at the end of the year under review security of the Ports Premises which has as expected. name as a high security zone. Although
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Penalty Imposed by the Custom
An appeal could be able to present to the However, contingent liability amounting to Minister of Finance an a decision of a Rs.1,577 million had been shown in the custom examination as per the section 165 financial statements in connection with of the custom ordinance for the simplify this. A case had been filed by the the custom penalty amounting to Rs.1,580 Authority in High Court in respect of million imposed by the custom in above matter, that had been rejected by the connection with the import of 27 cranes High Court. After that a case had been without acknowledgement make to the Sri filed by the Authority in the Supreme Lanka Custom in the year 2011. But such Court against the order of the High Court. an appeal had not been presented to the
PortsShipping and Minister of Finance by the Authority.
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Failure to Take Action for the Acquisition of Lands.
Utilization of Revenue from the Expressways.
Spending for the Police Department of Sri Lanka
Failure to Renovate Bridges in line with the Improvement of Roads.
Lack of a Proper Mechanism to Maintain the Iron Bridges. Highways Highways Failure to Complete the Construction of Roads within the Contract Period.
Recruitment of Staff before Commencing the Project.
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Highways
The objective of this sector is to improve Implementation of those projects Highways the quality of life of road users by Coordinate national policy based reducing travel time and cost by improving development activities in collaboration the circulation system and improving the with provincial councils and local safety and comfort of the road users. In authorities order to achieve this, the Ministry of Higher Education and Highways and two The audit observations made in sample statutory bodies had to perform the audit inspections carried out in respect of following functions the execution of the said duties by the Ministry and Statutory Agencies on their Formulating policies, programs and role are summarized below. projects within the scope of highway Expenses not related to improve the capacity of the Expressway system The total expenditure of Rs. 5,063 million Road Development Authority. However, which was done from 1991 to 2005 for the the expenditure incurred during that period Colombo-Katunayake Expressway was did not contribute to improve the capacity credited to the year 2018 as the cost of the of the Expressway system. Expressway system maintained by the Actions had not been taken to acquire the lands
Action had not been taken to acquire 546 statements of the Authority did not state plots of land of 7,586.39 hectares which the value of the remaining 164 plots of were subsequently handed over to the land to be delivered for the displaced Road Development Authority as at 31 persons and the acquisition of lands for the August 2019. Furthermore, financial expressway projects. Asset Management
The Asset Management and Revenue contrary to the provisions of the National Division of the Road Development Road Act No. 40 of 2008. The Authority Authority had leased 11 plots of 21.5 acres failed to generate revenue from the of land to outsiders. The said property was property and to keep the property under leased on six occasions with no lease proper supervision. Further, the Authority agreements and five occasions with lease did not have an adequate information agreements and there were significant system on road reservation and did not shortcomings of those agreements. It was implement a proper internal control system revealed that the agreements were entered for leasing of road reservation.
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Recovering the costs by the Income of the Expressways
The total revenue of the Expressway received from the expressways to cover
system, 169.13 km, under the scope of the the cost at the end of the year under review Road Development Authority was Rs. was 38 years for the Southern Expressway, 36,074 million as at 31 December 2018. 16 years for the Katunayake Expressway The government had spent Rs. 245,769 and 35 years for the Colombo Outer million for the construction of the above Circular Expressway. express system. Accordingly, the revenue
Utilization of Revenue from the Expressways Highways
According to the notification published in payment for the General Treasury. Only the Gazette Extraordinary No. 1912/2 Rs. 5,507 million from that income had dated 27th April 2015, the revenue of the been left in the account. expressways should be credited to the account of the Road Development However, the loan amounting to Authority and the money should be Rs.245,769 million taken by the utilized for the purpose of developing and government to construct the expressway maintaining the National Expressway and the interest of the loan was paid by the System to be charged. However, the total Treasury the highway revenue received by income of the expressway was Rs. 36,074 the Road Development Authority has not million as at 31 December 2018, been utilized for such payments. However, Rs.25,548 million from that income had the Expressway revenue received by the been expend for the daily expenditure of Road Development Authority has not been the Road Development Authority and the utilized for such payments. Spending for the Police Department of Sri Lanka
Rs. 414 million had been paid by the in behalf of the duties perform by the income of the expressway to Sri Lanka officers of Sri Lanka Police and Special Police for the purchase of assets and fuel Task Force in the expressway system Rehabilitation of bridges in accordance with the road improvements According to the Bridge Information the past few years, action had not been System of the Road Development taken to construct and rehabilitate the Authority as at 31 December 2018, the bridges at that time. number of flyovers under the National Highway Network was 15 and bridges The widening of the bridges on time of width more than 3 meters was 4,153. It widened and improved the roads was was identified that 46 bridges had to be inadequate and some bridges were rebuilt and 161 had to be rehabilitated dilapidated, thus obstructing to fulfill the from that. Although these roads had been mission of the Authority to serve the asphalted, widened and improved during people of the country.
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Lack of proper mechanism to maintenance of the Iron bridges
There are 615 iron bridges out of 4,168 Authority did not have a unit with
bridges, including flyovers located on the expertise for the maintenance of the iron Highways National Highway Network. Although bridges. For this reason, the maintenance these iron bridges were to be maintained of the iron bridges in the future could be periodically, the Road Development problematic for the Authority. The Road construction shall not be completed during the contract period
According to the information provided by from that improvement an expansion the Road Development Authority, out of agreement had been expired, the agreed the Rs. 1,871 million contracts for road activities had not been accomplished up to improvements and expansion agreements 31 December 2018. in the years 2016 and 2017 although 35 contracts amounting to Rs. 1,871 million Cancelation of Road Construction Agreements
19 agreements valued at Rs 1,245 million been cancelled due to various reasons. entered by the Road Development Action had not been taken to complete the Authority for construction of roads had construction work as 31 August 2019.
Double payment
Rs.1,759 million had been paid to an study by that company agreement had Australian company to conduct a been entered with several local companies feasibility study on the Central for Rs.97 million to carry out the above Expressway, without being carried out the feasibility study. Recruitment of staff before commencement of the Project
The contractor and consultancy firm had Land Acquisition and Project been selected for Pothuhera to Galagedara Management, therefore the expenses had Section of the Central Expressway in the been done for the recruitment of staff for year 2017 but had not been signed the the project, vehicle maintenance and contract or commenced the construction utilization without commencement of the activities. Rs.3,200 million and Rs 1,931 project. million respectively had been spend for the
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Payment of Mobilization Advances exceeding the performance Guarantee
The contractor who is engaged in the road Kegalle District had been paid Rs.30 rehabilitation work at the Package 1 of the million mobilization advances exceeding Integrated Road Investment Program in the Performance Guarantee. Payment of fruitless Commitment Charges
The disbursement of Asian Development Rs. 31 million from the Integrated road
Highways Bank loan had not been utilized timely, investments program 2 had to be paid as therefor Rs. 476 million from the commitment Charges fruitlessly. Integrated road investments program I and Removal of Construction Machinery by Contractor
Two packages from the Integrated Road suspend the contract and the contractor Investment Program in the Kegalle District had withdrawn his machinery plant paying and one Package from the Ratnapura the advance and without the approval of District had to be recovered Rs.1,087 the engineer. million. However, it was decided to
Payment for feasibility study
The objectivity of the Expressway 09 December 2014 and had completed on Connectivity Improvement Plan Project 31 August 2016. However, only 24 was to complete feasibility study and kilometers had been selected for preparation of detailed designs of 250 rehabilitation as at 14 March 2019. As a kilometers of 30 roads connected to the result, roads designs was out dated and southern expressway. The total cost of the expenditure incurred for the designing of Project was Rs.790.80 million and the roads become fruitless activities of the Project had commenced on
Sending back without utilizing the loan to the lending Agency
The allocation of US$ 6.12 million Project, due to slow progress on civil equivalent to Rs.923 million of the construction works and had refunded to National highway sector Project the Lending Agency. Sending back the representing 7.20 per cent of the total loan to the lending Agency without allocation made by the Lending Agency utilization. could not be utilized at the end of the
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Overpayment of Mobilization Advance
It was observed that the works under 235 not been attended by the contractors, thus
items of Bill of Quantities valued at indicated that the Engineers estimate of the Highways Rs.134.32 million under the Contract contract packages were not prepared in package - 1 and the works under 260 items accurate manner, allowing additional of Bill of Quantities valued at Rs.189 advantages to the contractors on receiving million under Contract package -3 of the mobilization advances for non attended Southern Road Connectivity Project had works valued at Rs.61.72 million
Payment of Idle Commitment Commission
It was observed that only Japan Yen 7,003 been recovered by the Lending Agency up million had been utilized as at 31 to 31 December 2018 on the proceeds of December 2018 representing 57 per cent the Loan undisbursed. The possibility to of the allocation of Japan Yen 12,381 utilize the entire allocation of funds was million made in Loan Agreement, due to remained in doubt during the period of the delays in completion of construction of Project scheduled to be closed on 05 July new bridges. Further, the commitment 2021, unless expedite action taken to charges amounting to Rs.68.53 million had complete bridge construction work.
Non utilization of Provision
The procurement plan of the Port Access the other Project. Further, a sum of Elevated Highway Project for the year Rs.84.55 million had been returned to the 2018 had included to commence the General Treasury without using by the supervision consultancy services, design Project at the end of the year under review. works of the buildings and construction supervision of the buildings and The contractor of the Ingiriya to workshops during the year under review at Rathnapura Road under Contract Package an estimated cost of Rs.44,945 -1 had obtained Arbitration award against million. However, such activities had not the Road Development Authority on 27 been commenced even as at 30 June 2019 February 2018. Accordingly, the except the piling works carried out for the contractor of the above road had submitted construction relocation of the buildings at claim amounted Rs.1,687 million for 7 the Port. As a result, out of the allocation disputes. This amount had included amounting to Rs.3,040 million made in the Rs.903.10 million interest up to 30 Budget Estimate -2018 to meet the capital April2018. However, this dispute had not expenditure of the Project, a sum of been settled by the Project even as at 30 Rs.2,925 million had been transferred to may 2019.
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Not Settlement of Arbitration Problem
According to the information made the Land Acquisition and Resettlement
available, it was scheduled to acquire Committees. In addition, a sum of 7,082 plots of land including 1,535 plots Rs.379.44 million had been paid as interest of crown land and out of that on delays in settlement of compensation compensation amounting to Rs. 1,933 up to 31 December 2018. The Project had million for 4,343 plots of land had been not completed the acquisition process of paid under the Section 17 of the Land any plot of land even as at 31 December
Acquisition Act. Further, the additional 2018, under Section 44 of the Land Highways payments amounting Rs. 4,134 million had Acquisition and Settlement Act, No. 13 of been made thereon under the decisions of 1986.
Non Settlement of Land Acquisition
According to the information made Committees. In addition, a sum of available, it was scheduled to acquire Rs.379.44 million had been paid as interest 7,082 plots of land including 1,535 plots on delays in settlement of compensation of crown land and out of that up to 31 December 2018. The Project had compensation amounting to Rs. 1,933 not completed the acquisition process of million for 4,343 plots of land had been any plot of land even as at 31 December paid under the Section 17 of the Land 2018, under Section 44 of the Land Acquisition Act. Further, the additional Acquisition and Settlement Act, No. 13 of payments amounting Rs. 4,134 million had 1986. been made thereon under the decisions of the Land Acquisition and Resettlement
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The Country Facing the Most Number of Natural Disasters.
Non-implementation of Amendments Proposed for the
Disaster Management Act of Sri Lanka.
Distribution of Aids to the People Affected by the Disasters.
Implementation of Disaster Mitigation Projects.
Doppler Radar System Becoming Non-functional.
Failure to Take Adequate Measures for the Achievement of Disaster Management Management Disaster Sustainable Development Goals.
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Disaster Management Disaster Disaster Management
The objectives expected from this sector is Initiation and coordination of foreign to create a protected environment aided projects for disaster mitigation, appropriate for living by taking effective response and recovery. measures to minimize and prevent natural Promotion of housing construction and manmade disasters. The following with technological standards to functions should have been performed by withstand environmental hazards. the Ministry of Disaster Management, a Encouraging research and development Department and 04 Statutory into appropriate technology for Boards/Institutions under its purview. housing and construction sectors. Carrying out Meteorological surveys Formulation of policies, programmes and researches. Forecasting of natural and projects in regard to the subject of disasters and sensitizing relevant Disaster Management. sectors regarding them. Coordination and management of Implementation of measures for rescue activities in relation to mitigation, operations during natural and response, recovery and relief in natural manmade disasters. and manmade disaster. Coordination of international Formulation of the National Disaster humanitarian relief service Management Plan and the National programmes. Emergency Operation Plan based on national policies. A summary of audit observations made in performing the functions by the above mentioned institutions is given below. Facing with natural disasters
According to the classification of countries Sri Lanka become second country faced with natural disasters published in 2019 with major incidents of natural disasters by the “German Watch Organization” during the period of 1998-2017. Thus it which is a recognized institution on indicated that the urgent need of attention studies of natural disasters of the world, on the management of natural disasters. The legal framework on disaster management in Sri Lanka
The legal provisions on disaster Management Act proposed in 2013 had management in Sri Lanka had been made not been furnished to the Parliament of Sri through the Sri Lanka National Disaster Lanka even at the end of the year under Management Act No. 13 of 2005. review. Eventhough the necessity of widening of the legal provisions included in the Further , the National Building Research Disaster Management Act had been raised Organization had not been established to meet the future challenges, the under a statutory provisions and as a result amendments made to the Disaster , the legal acceptance of the assessment
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reports issued on risks of landslips had not building construction works without been received. As a result, the legal action considering the assessment of disaster against the parties who involved in risks could not be implemented. Identification of probable natural and non- natural disasters in Sri Lanka
According to the Sri Lanka Disaster as the disasters. Further, the mitigation Management Act, No. 13 of 2005 it was activities carried out by the Disaster identifies 21 probable disasters in Sri Management Authority during the year Lanka. However, major disasters of under review had been limited to several which countries faced in the recent past disasters such as floods, earth slips and including global warming and increase of drought etc,. DisasterManagement sea water level etc had not been identified Preparation of Disaster Management Plans
According to the paragraph 2(a) of the as at 31 August 2018. As a result of Section 08 of the Sri Lanka Disaster delays in preparation of national Disaster Management Act, a Disaster Management Management Plan, the other sub plans Plan is required to be prepared in line with such as District Disaster Management the internationally recognized Plans, Institutional Disaster Management convention called “ Sendai Framework”. Plans, and National Emergency Operations However, the works initiated on 07 March Plans etc to be prepared in line with 2017 on Preparation of Disaster National Disaster Management Plan could Management Plan for the period from not be completed. 2018 to 2030 had not been completed even
Distribution of aids to the people affected by the disasters
It was identified that 1,444 families in on selection of plots of land outside the Kalurara district,312 families in Ratnapura risk areas etc had been revealed. Therefore district and 328 families in Kandy district in construction works of 167 houses in as vulnerable groups living in the high Kalutara district and 151 houses in risk areas due to the floods and landslide Ratnapura district had remained in the occurred in 2017 and need of assistances. initial stages. It was observed that According to the detailed audit carried out members of 125 families selected in in this connection, common deficiencies Kandy district remained in the high risk such as inadequate mechanism adopted on areas without any housing facilities. selection of beneficiaries, slow progress on construction of new houses and difficulties
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Disaster Management Disaster It was observed that the provision of Rs. assistance to the people affected in 700 million had been released to the emergency situations and a sum of Rs District Secretaries on 25 September 2018 294.43 million contributed by the local to provide drought subsidies for 451,224 and foreign donors had remained in the beneficiaries identified in 14 districts Bank Account unutilized as at 06 August during the year under review. However, 2018. The contribution of US$ 1.00 action had been taken to call the million received from the Republic of provisions return on 09 October 2018 China had also included therein. under the instruction issued by the Therefore, it was observed that the Secretary of the Ministry of Disaster intention of the donors in this connection Management. was not fulfilled.
A separate Bank Account had been maintained by the Minister to to provide
Implementation of Disaster Mitigation Projects
A allocation amounting to Rs 480 million A sum of Rs 104.97 million representing had been made to implement disaster 22 per cent of the allocation made to mitigation projects during the year under implement the disaster mitigation projects review. However the information relating had been utilized for 93 projects to the disaster mitigation projects implemented in Anuradhapura district and expected to be implemented in each thus evidenced that the distribution of the district had not been indicated in the allocations between the districts was not Action Plans of the Disaster Management done in fair manner. Further , a sum of Rs Centre. The allocation amounting to Rs 20 10 million had been allocated to develop million made to settle the bills of 15 the land of Aluthwattapara was revealed as projects implemented in the previous year an activity which was not related to the had also been included in the above disaster mitigation works. mentioned allocation. However, according to the progress reports of the Centre, a sum Out of the allocation amounting to Rs 50 of Rs 474.43 million had been released to million made under the “Development of the District Secretariats and out of that a Muti -Purpose Mitigation Aspects”, a sum of Rs 361.49 million had only been sum of Rs 20.31 million had only been utilized as at 31 December 2018. utilized during the year under review and no action had been taken to utilize the entire allocation made thereon. Doppler Radar System
A Doppler Radar System had been million made through a Budget proposal procured at a cost of Rs 320 million from in 2006 and established in the Deniyaya the World Metrological Association area in 2011. However, the System was under the allocation amounting Rs 400 not functioned even as at 31 December
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2016 due to various technical problems. Eventhough a sum of Rs 408.82 million The System was remained idle for long had been spent as at 31 December 2018 to period after being imported and it was the install the Rader System, no action had main reason for malfunctioning of the been taken to disclose the information in System. this regard in the financial statements of the Meteorological Department. Further, The Radar System remained out of order the Fixed Assets Register had not been had been removed and sent back to the maintained in updated manner and thus it Manufacturing Company in the United revealed the risk on concealing the State in 21 April 2017. However no any information in this regard. reports on the position of the repairing activities as at 31 December 2018 had been called by the Metrological
Department. DisasterManagement Achievement of Sustainable Development Goals
The subject of Disaster Management is Ministry of Disaster Management to directly related to the achievement of identify the Sustainable Development Sustainable Development Goals and no Indicators and take action to implement any action had been taken by the the activities thereon adequately. institutions under the purview of the
Human Resources Management
The institutions under the purview of the 35 posts in the Ministry of Disaster Ministry of Disaster Management were Management and 11 posts of the operated with shortages of the staff in key Meteorological Department including the positions and it influenced badly to post of Director General had remained implement the activities assigned thereto vacant as at 31 December 2018. in effective manner. It was observed that
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Delays in the Execution of Projects.
Failure to Complete Constructions of the Sports Complexes as Expected.
Over-payment of Salaries .
Projects without Progress.
Deviation from the Government Procurement Guidelines.
Sports Non- compilation of Rules against the use of Doping Materials.
Making Payments to Officers from the National Sports Fund.
Failure to Furnish Financial Statements to the Audit.
Financial Fraud.
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304 National Audit Office | Annual Report - 2018
Sports
The compilation, implementation and Taking steps for the encouragement of monitoring of the activities relating to the
sports and the development of the Sports local and international sports in the infrastructure necessary for the field of country for building a sportive nation and Sports. for uplifting the national image of the The promotion of Sports Education.
country at the international level had been The compilation of new strategies and
the intended result of the Ministry of the implementation of programmes in a Sports. The following functions had to be manner that Sports could be deployed executed by the Ministry of Sports and by for building the image of Sri Lanka at the Department of Sports Development, 05 the international level. Statutory Institutions and 64 Sports The carrying out of promotion and Associations, under its purview. coordination of facilities necessary for ensuring the physical fitness of the The compilation, carrying out follow- general public. up action and the evaluation of the Monitoring of Institutions. policies, programmes and projects relating to the subject of Sports.
International Achievements of Sri Lankans
Sri Lankan Sportsmen had acquired 79 been obtained in the year under review by Medals in the year 2017 by participating for participating for 10 competitions 23 Gold 08 international competitions as 29 Gold Medals, 16 Silver medals and 22 Bronze Medals, 39 Silver Medals and 11 Bronze Medals respectively Medals respectively. Sixty- one Medals had .
Delays in the execution of projects
Provisions amounting to Rs.429.39 million the construction of the Shooting and had been made available for the 04 projects Archery Training Centre of Maliyadeva of the construction of Walwetithurei College, by the Ministry. A sum of Swimming Pool Complex, preparing of the Rs.222.48 million had been spent for those 400 meters Race Track, the lavatory system projects in the year under review. Those and the access roads of the Diyagama projects had not been completed even by Mahinda Rajapakse Sports Academy and May 12019.
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Construction of Sports Complexes
Provisions amounting to Rs.1,000 million Complexes had been initiated in the year had been made available by the Department under review and a sum of Rs.692 million
of Sports Development for the construction had been spent in this connection. Works of of 12 District Sports Complexes and 7 6 District Sports Complexes and 2 Provincial Sports Complexes in the year Provincial Sports Complexes out of them under review. The activities of the had been completed and works of 4 District
Sports construction of 10 District Sports Sports Complexes had not been completed. Complexes and 7 Provincial Sports
Over- payment of Salaries
Over- payment of salaries had been made in million from retired Officers of whom that making salary conversions relating to the had been overpaid accordingly. Moreover, promotion of the Officers in the field of the retirement had been approved for an Sports to the post of Project Officer in the Officer who had not completed 55 years of Combined Service. A sum of Rs.1.70 age from 8 April 2017 and the salaries million remained recoverable by 31 overpaid to that Officer remained December 2018 as a sum of Rs.1.20 million recoverable. It had been failed to recover from 26 Officers who are currently being the salaries that were overpaid accordingly, deployed in service and a sum of Rs.0.50 even by the end of the year under review.
Projects that had not achieved Progress
The Project of identifying the children with been planned to be implemented from the sports talents in the age group of 13-14 year 2016 to the year 2018. A sum of years on scientific basis and referring them Rs.132.1 million had been spent relating to the Olympics which will be held in the thereto by the year 2018. This project had years 2024 and 2028 had been approved by been defaulted in the year 2018 and the the Department of National Planning. progress of the Project and reasons for the Provisions totaling Rs.474 million had been defaulting of the Project had not been made available for this project which had furnished to audit.
Deviation from the Government Procurement Guidelines
Contracts totaling Rs.54.63 million had had not been carried out in a manner that been awarded for supplying food for the achieves the objectives mentioned in the sportsmen in the National Pools. The Guideline 1.2 of the Government selection of contractors in this connection Procurement Guidelines.
306 National Audit Office | Annual Report - 2018
Non- compilation of Rules against the use of Doping Materials
Rules had to be compiled against the use of years had lapsed since the establishment of doping materials and had to be published in the National Anti-Doping Agency by the the Gazette and had to be enacted under the end of the year 2018, rules had not been Sports approval of the Minister in terms of Section prepared for taking action against the use of 33 of the Convention against Doping in doping materials, the key function intended Sports Act No.33 of 2013. Even though 5 from the Institution.
Making payments to Officers from the National Sports Fund
A total sum of Rs.1.19 million had been the coaching executed by those 4 Officers. paid as monthly allowances in several Moreover, a sum of Rs.1.60 million had instances from the National Sports Fund to been paid from the National Sports Fund 4 Staff Grade officers serving the for winning for the weight lifting Department of Sports Development, competitions in the Commonwealth Games considering them as coaches in the years under the coaches for 02 officers out of the 2017 and 2018. An Evaluation had not been Officers mentioned above. carried out on the performance relating to
Balances that remains receivable and payable from a long period of time
The total of the balances receivable as at 31 even by the end of the year under review. December 2018 of the Sugathadasa Action had not been taken to settle the National Sports Complex Authority had balance amounting to Rs.1.12 million that been a sum of Rs.39.99 million and even remained being settled from a period of though balances amounting to Rs.31.66 approximately 11 years to the Colombo million out of that balance remains Municipal Council, even by the end of the outstanding from a period of over 01 year, year under review. it had been failed to recover that amount
Not furnishing Financial Statements to Audit
A limited guarantee company named responsibility programmes and as such, a Cricket Aid (Guarantee) Limited had been sum of Rs.16.75 million had been provided established by 23 May 2016 by Sri Lanka to that Company from the year 2017 to 30 Cricket. It had been approved by the June 2019. The financial statements of the Executive Committee of Sri Lanka Cricket years 2016, 2017 and 2018 had not been to provide a sum of Rs.10 million annually furnished for auditing, to the Auditor as assistance for charity and social General.
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International Cricket Broadcasting Right
An agreement had been entered into with fraudulent foreign Bank Account Number an international television company by Sri and a fraudulent e- mail address to the Lanka Cricket to provide the international Invoice for obtaining that payment value, cricket broadcasting right of Sri Lanka Tour had been referred to the Special of South African National Cricket team for Investigations Unit of the Criminal a sum of .USD 1.25 million on 12 July Investigations Department in Colombo by
Sports 2018. The value of the final payment the Chief Executive Officer on 04 October amounting to USD 0.19 million or a sum of 2018. Even though it had been informed to Rs.29.83 million, 15 per cent of that agreed the Chief Executive Officer by that value, was scheduled to be obtained after Company that this amount had been the completion of the tour on 19 August provided to Sri Lanka Cricket on 10 May 2018. A complaint mentioning that it had 2019, proper action had not been taken by been informed that the Head of the Finance Sri Lanka Cricket relating to the recovery Division of Sri Lanka Cricket had referred of money even by 31 May 2019. to the relevant company by including a
Financial Fraud
It had been revealed in the investigations it had not been able to disclose the total carried out by the Sri Lanka Football amount of forged money even in the year Federation in the year 2017 that money had under review. A sum of Rs.14.53 million been obtained by the former Finance had been stated as unidentified transfers of Manager of the Sri Lanka Football funds in the financial statements of the year Federation by including false names as 2018 under the receivable accounts despite Referees. Further investigations relating to it had been indicated in this regard by the this financial fraud is being carried out by Auditor General‟s Report of the year 2017. the Criminal Investigations Department and
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Failure to Enforce the Laws and Policies.
Providing Quick Relief for Women and Children
Encouragement and Empowerment of Women.
Delay in Resolving the Complaints.
Social Protection Programme for Children.
Failure to Legalize the National Child Protection Policy.
Failure to Execute the Activities
Women & Child Affairs Child & Women of Early Childhood Development Project as Expected.
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310 National Audit Office | Annual Report - 2018
Women and Women Affairs Child
Women & Child Affairs
With the objective of ensuring a favorable Implementation and strengthening of and sensitive society in which rights and laws and policies for the prevention of protection of children and women are violence against women and child protected, the Ministry of Women & Child abuse. Affairs and Dry Zone Development should Accomplishment of Millennium have discharged the following functions Development Goals relating to women together with three institutions such as, a and child affairs. Department, a Statutory Authority, and a Implementation of Women‟s and foreign funded project. Children‟s Charter. Formulation and implementation of Formulation, follow up and evaluation policies, programmes and projects for of policies, programmes and projects the early childhood care development
relating to women and child affairs. and for the children who are under Formulation and implementation of unsafe situations so as to appropriate to strategies for the enhancement of the national policies and international women‟s participation and their standards. representation in the sphere of decision Implementation of Sevana Sarana making in public affairs and politics. Foster Parents Scheme. Adoption of measures for empowerment of women with special A summary of audit observations made in focus on women-headed households regard to the execution of aforesaid groups affected by conflict and poverty functions is given below. and to ensure gender equality and equity. Safeguarding the Children‟s and Women‟s Rights
The Laws formulated and the policies children and women, had not been prepared in view of ensuring , implemented. safeguarding and promoting the rights of
Construction of a Daycare Center at the Govijana Mandiraya
Provision amounting to Rs. 1.5 million had Secretary General of Parliament in been made for the construction of a September 2018 to execute the work. daycare center at the Govijana Mandiraya Those monies had been retained in the and providing instruments for the center. A General Deposits Account without being sum of Rs. 1.26 million out of the said utilized for the intended purpose. provision had been remitted to the
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Providing Quick Relief for Women and Children
In the year 2018, provision amounting to that provision, benefits worth Rs. 378,329 Rs. 3 million had been made for providing had been provided only for 6 beneficiaries. women and children with quick relief. Of
Encouragement and Empowerment of Women
With the objectives of providing a niche thereby establishing 2 sales centers in the market for the products of the women year 2018. Of that provision, a sum of Rs. entrepreneurs to maximize their income, 1.01 million had been spent and only one and encouraging them to provide goods center had been established. Even though 2 and supplies with proper standards sales centers had been established in the matching the market requirements, the year 2017 by incurring a sum of Rs. 5.47 Women Child and Affairs project for encouraging and empowering million, one of those centers had not been women with respect to environmental declared open even up to 08 May 2019-the tourism sector, had been implemented. date of audit, thus failing to fulfill the Plans had been prepared to obtain objectives expected from the project. provision amounting to Rs. 4 million
Delay in Resolving the Complaints
The National Child Protection Authority information relating to the complaints had received 9,266 complaints during the received annually by the Authority, failure year 2011 up to the end of the year 2018. to take follow up action on the Solutions had not been provided for 7,326 investigations and summoning of those complaints equivalent to 79 per information, and failure to supervise cent by 31 March 2019. As the issues such properly, had not been solved, the number as, inefficiency of the divisional and of complaints received had rapidly district officers in gathering and reporting increased. Social Protection Programme for Children
Under the social protection programme for Provision amounting to Rs. 7.8 million had children, the Department of Probation and been made in that connection, but those Child Care Services had planned to activities had not been executed. conduct 25 workshops in 25 districts, Furthermore, the National Child Protection establish 18 committees at national and Authority had also obtained provision provincial levels, conduct 11 training amounting to Rs. 20 million by including programmes, and implement 3 11 activities to the social protection programmes in view of 6 capacity programme. The activities such as, development programmes and providing training on the Guidelines strengthening the protection for children. relating to daycare centers for children, 312 National Audit Office | Annual Report - 2018
Women and Women Affairs Child formulation of national policy on the preparation of publications relating to protection of children, implementation of rights and problems of children, had not 25 programmes and preparation of been commenced even by the end of the publications & documentary programmes year 2018. for the prevention of child marriages, and Failure to Legalize the National Child Protection Policy
Even after a period of 20 years since the Protection Policy could not be legalized establishment of the National Child even in the year 2018. Protection Authority, the National Child Failure to Execute the Activities of Early Childhood Development Project as Expected The Early Childhood Development Project sector, construction of early childhood had been implemented under World Bank development centers in areas with low loans amounting to US $ 50 million with a benefits, providing training for the school view to developing early childhood in Sri teachers of the primary grades, and Lanka in a qualitative manner. Provision registration of early childhood amounting to Rs. 1,000 million had been development centers, had not been carried made on the project for the year 2018, and out as planned. Although provision a sum of Rs. 767.75 million had been amounting to Rs. 1,230.10 million had spent therefrom. The activities for which been made in order to be granted for provision amounting to Rs. 3,957 million developing the facilities of 1,500 early had been made and included in the Action childhood development centers, grants Plan for the year 2018 such as, amounting to Rs. 51.32 million only had construction of 28 early childhood been made for 259 early childhood development centers relating to estate development centers in the year 2018.
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Under-utilization of Provision.
Performing the Expected Activities.
Failure to Achieve the Targets Expected from the Sales Promotion Expenses.
Non-recovery of Embarkation Levy.
Tourism Affairs Tourism
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Tourism Affairs Affairs Tourism The main objective of the tourism sector is Registration and Regulation of tourism to earn foreign exchange to the economy agencies. by providing direct and indirect Promotion of activities relating to employment opportunities to the youth of provision of recreational facilities for Sri Lanka by formulating policies to holidaying. recognize Sri Lanka as the best island in Adoption of measures to lay emphasis the world for tourists' memory, authentic on conservation of eco- systems in and diverse experiences. The Ministry of promoting tourism industry in wildlife Tourism Development and Christian protected areas.
Religious Affairs, 4 Statutory Boards and a Fund should have fulfilled the following The audit observations revealed at the functions. audit test checks carried out in respect of performing above functions are Developing tourism industry in summarized below. accordance with the national policy on tourism and formulating standards.
Tourists Arrivals and Earning Foreign Exchange
Natural beauty beaches, rich wildlife with Contributing a sum of Rs. 712,027.3 friendly and friendly people and Nature, million in foreign exchange to Sri Lanka Culture, Culinary Arts, Archaeological during the year under review a number Heritage, Water-based Adventure and of 2,333,796 tourists had arrived. Tourist mixed with wonder as well as the fabulous arrivals increased by 10 per cent in the location of the Universal Travelers , year under review as compared to the awarded as Asia's leading adventure previous year. tourism destination at the World Travel Awards. Obtaining first place As a country, Sri Lanka is expecting a high internationally as per Lonely Planet foreign exchange earnings from tourism magazine, Sri Lanka is the "No. 1 industry and a revenues of US $ 4,380.6 Destination of 2018" and it had been million had been generated in the year enhanced the image as the Top Global 2018 . This amount can be mentioned as Safe Destination for Women Travelers as an increase of 11.6 per cent as compared to per People‟s Daily News in China. the previous year. Detail appear in Diagram 48
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5000
4000
3000
2000
1000 Revenue US$ RevenueUS$ Million 0 2013 2014 2015 2016 2017 2018 Year
TourismAffairs Diagram 48 - Income earned from Tourism Source: Sri Lanka Tourism Development Authority
However, the tourists arrivals from the average number of days a tourist spends in majority of major regions had increased in Sri Lanka can be cited as the main factors the year under review as same in the to grow tourism earnings. The average previous year. Similarly, the highest daily cost of a tourist in the year 2018 was number or 424,887 of tourists had arrived US $ 173.8 and that amount was US $ from India . This arrival is a growth of 170.1 in the year 2017 . Accordingly, this 10.46 per cent as compared to the also had affected for the increase of previous year. The next highest number of the earnings from tourism at a certain tourists arrival in the year under review rate. Similarly, The average number of was 265,965 from Republic of China . But days a tourist spends in Sri Lanka in the it had declined by 1.12 per cent as year 2018 was 10.8 days and when compared to previous year. compared with the average number of 13.2 days a tourist spent in Sri Lanka in the Increase in foreign tourist arrivals as well year 1987, it had been impossible to as average cost of a tourist and increase of achieve that target.
Under-utilization of Provisions
A provision of Rs.845 million had been million or 65.85 per cent had been made available Ministry of Tourism incurred by the end of the year under Development and Christian Religious review. Similarly, a sum of Rs. 10 million Affairs for the tourism development had been made available for the projects. Out of that although a sum of development of tourist villages in the year Rs.390 million had been made under review, only a sum of Rs. 2.19 available to develop tourist million had been spent by the end of the attractions, only a sum of Rs. 256.83 year .
318 National Audit Office | Annual Report - 2018
Performing Expected Activities Tourism Affairs Tourism Out of the expected 178 activities as per the activities of the Authority and the Annual Action Plan of Sri Lanka although a sum of Rs. 2446.9 million had Tourism Development Authority, only 72 been made available , a sum of Rs. 244.33 activities had been implemented. There million or 9 per cent from the provision are 07 divisions established to carry out made available had been utilized. Marketing Promotion Expenses The tourism promotion expenditure made countries had declined during the year by Sri Lanka Tourism Promotion Bureau under review as compared to the previous for the countries such as Middle East, year. Further, out of the number of China, Indonesia, Malaysia, Thailand and 152 promotional events planned to be Korea had taken a higher percentage implemented in 28 major countries for the during the year under review as compared year under review as per the Action plan to the previous year. Nevertheless, the of the Bureau, only 89 had been growth rate of tourists arrivals from those completed.
Non- recovery of Embarkation Levy The taxes are charged on every ticket such from the passengers who travel in issued for a passenger who leaves Sri ships and sent to the Authority . Since Lanka by a Ship and a portion of it 87631 passengers had left during the year should have been remitted to the Tourism 2018 , the Authority had not act to Development Fund as per the sub-section recover the embarkation levy receivable 2 (b) of the Finance Act No. 25 of 2003 . amounted to Rs. 23.56 million from 1.66 The taxes had not been charged as US $ from each passenger for that.
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320 National Audit Office | Annual Report - 2018
Failure to Commence the Activities Stated in the Master Plan for the Development of Trincomalee District.
Project of Improving Public
Transport and Bus Services.
Kottawa, Kaduwela and Kadawatha Township Development Project.
Western Region Mega polis Master Plan Project.
Science and Technology Township Development Project.
Aero City and Admin City Urban Development Urban Project.
Metro Colombo Urban Development Project.
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322 National Audit Office | Annual Report - 2018
UrbanDevelopment Ur ban Development
The expected result of this sector is the creation of the Western region and other Matters relating to reclamation and megapolis as highly modernized and development of low lying areas architecturally designed cities comprised of a community developed as economic, Provide necessary guidance to develop social and cultural. The following urban areas with low level of services functions should have been performed by and facilities and marshy lands the Ministry of Megapolis and Western according to a common plan Development, a Department and 02 Preparation of national physical plans Statutory Boards / Institutions. and regional physical plans
Formulation, follow up and evaluation Direct and regulate all construction of policies, programmes and projects work based on the national physical relating to the subjects of statutory plans to ensure an integrated urban institutions in regard to the subjects of development megapolis and Western development. Matters relating to all other subjects
assigned to the institutions coming Kottawa, Kaduwela and Kadawatha under the purview of the Ministry Township Development Project and Supervision of the institutions coming related activities. under the purview of the Ministry.
Integrated and systematic promotion The summary of the audit observations and regulation of economic, social and made in the audit test check carried out on physical development of urban areas. the performance of above functions is
given below. Urban Solid Waste Management
Master Plan of the Trincomalee District
With the objective of improving the year under review and US$ 982,000 agriculture, energy and tourism industry in equivalent to Rs.90.29 million had been the Trincomalee District, a consultancy spent thereon. However, subsequent to the firm in Singapore had been selected preparation of Master Plan of the without being followed Guidelines in the Trincomatee district, steps had not been Government Procurement Guidelines in taken to properly study the said Plan and order to prepare Master Plan for the execute the development activities Trincomalee district. The said Master Plan included therein even by the end of the had been forwarded to the Ministry during year under review.
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Project of Improving Public Transport and Bus Services
For the aforesaid project, sums totalling an induction programme on priority bus Rs.713.83 million comprising Rs.104.04 lane for the improvement of public million by the end of the year 2017 and transport service. The said Programme had Rs.609.79 million in the year 2018 had not been implemented by October 2019. been spent. A sum of Rs.346.93 million Hence, the expenditure incurred thereon had been spent for the implementation of had become fruitless.
Kottawa, Kaduwela and Kadawatha Township Development Project
Urban Development Urban The Kottawa, Kaduwela and Kadawatha present on Treasury provisions without Township Development Component (3K) obtaining loans. Accordingly, the had been commenced as a subcomponent administrative expenditure (salaries and of the Greater Colombo Urban Transport other expenses) payable to the staff was Development Project. The Project had approximately Rs.1.4 million per month been completed 31 May 2015 according to due to incompletion of the project within the relevant Loan Agreement. However, the scheduled period. Hence, the total functions which were planned to be administrative expenditure of the project performed under the Project, had been was approximately Rs.60.2 million and the failed to perform within the due period. As project was in progress at a snail‟s pace. such, this Project is being implemented at
Western Region Megapolis Master Plan Project
The Western Region Megapolis Master formal feasibility study had not been Plan Project had been commenced in May conducted on the implementation of 2015. It was being implemented over a projects planned under the Western Region period of 02 years by the end of September Megapolish Master Plan Project. Several 2017. A sum of Rs.330.23 million had different projects had been launched only been incurred on the Project. However, for the implementation of a part of the this project had been continued as a new plans presented by the Western Region project called Western Region Planning Megapolish Master Plan Project. However, Project by spending Rs.10.22 million the Department of National Physical during the year under review and a time Planning, too, had engaged in the frame had not been fixed for the preparation of various Region Planning completion of the project. Further, a Projects.
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Science and Technology Township Development Project UrbanDevelopment
Under the Science and Technology Lands Infrastructure Facilities and Township development project, the towns Transport of the Korea State on 24 May of Malambe, Homagama, Kaduwela and 2016 for the implementation of the project. Athurugiriya were proposed to be Subsequently, the Ministry of Korean developed. Development activities were State had commenced a feasibility study. expected to be implemented by dividing However, a sum of Rs.25.49 million and the project in to 05 zones as Tertiary Rs.40.72 million had been spent in the Education Zone, Scientific Research and year 2017 and 2018 respectively as Development Zone, Technology salaries and allowances of the staff Enterprises Zone, Nano Technology Zone attached to the Project Management Unit
and Biotechnology Exhibition Zone. This established for the Technology Township project had been initiated on 01 March Development Project. The main objective 2017 and scheduled to be completed by 01 of this project was to develop common March 2023. A Memorandum of amenities of the Science and Technology Understanding had been entered into town. between the Ministry and the Ministry of Aero City and Admin City Project
A sum of Rs.80.7 million had been spent project had not been obtained before the during the year under review for the staff commencement of the project. Similarly, salary and recurrent expenditure of the investors had not been found for the two projects of Aero City and Admin City discharge of functions planned by those 02 Town Project implemented under the projects and as such, these projects were Ministry. Nevertheless, a feasibility study also being implemented totally under the had not been conducted and assessment Treasury funds and they were in progress reports on the environmental impact at a snail‟s pace without specific plans resulting from the implementation of the .
Metro Colombo Urban Development Project
The Metro Colombo Urban Development equivalent to Rs.42,031.44 million. Out of Project had been commenced with the that, a sum of US$ 213 million or 66.35 objective of mitigating flood in the per cent of the total cost is financed by the catchment of the Colombo Water Basin International Bank for the Reconstruction and strengthening the capacity of local and Development and the remaining authorities in the Colombo metropolitan amount is financed by the Government of area and increasing the beauty of the Sri Lanka. The following deficiencies Colombo city. The total estimated cost of were observed during the course of audit the Project had been US$ 321 million test check carried out on the project.
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the dumping of waste from residences Even though this Project was and hotels near the Beira Lake. scheduled to be commenced on 10 July However, the development activities of 2012 and completed by 30 June 2017, the Beira Lake had not created an the period of the Project had been environment suitable for spending extended in 02 instances. Accordingly, leisurely to both tourists and local the Project was due to be completed by visitors and people had not received 30 June 2020. However, a sum of US$ benefits in commensurate with the 103.66 million equivalent to funds spent for the development of Rs.14,890.18 million from the funds Beira Lake. received under World Bank loans had been utilized by the end of the year According to the plan for the 2018 and in addition, a sum of establishment of flood mitigation
Urban Development Urban Rs.4,891.46 million or US$ 32.86 system, expenditure of Rs.390 million million had been spent out of the Sri or US$ 2.6 million had been estimated Lanka Government funds. for that purpose. A sum of Rs.105.5 Accordingly, an amount of million had been spent during the year approximately 48.66 per cent of the under review for the project. Out of the loan had been utilized after 05 1/2 amount so spent, a sum of Rs.24.74 years of the implementation of the million had been paid as the Project. remuneration of the Consultant of that Division , whereas Treasury approval A sum of Rs.1,552.07 million had been had not been obtained thereon. Action spent for various purposes of the had not been taken to obtain necessary development of Beira Lake by the accessories and equipment for the Project for increasing the beauty of establishment of prevailing flood Colombo city in an environmental mitigation system and that Consultant friendly manner. Another sum of had taken steps only to obtain weather Rs.470 million had been spent from forecasts while recording data on rain Treasury Funds. However, there was a falls with the assistance of the stench around the Beira Lake due to undergraduates of the University of failure in taking measures to prevent Moratuwa.
Strategic Cities Development Project
This Strategic Cities city regions of Sri Lanka. Project, the estimated Development Project had The Kandy city and Galle total cost of the Project been implemented with city had been selected as had been US$ 202 million the objective of the participating city equivalent to a sum of improving selected urban regions under this Project Rs.27,507 million. After services and public open and according to the the lapse of 4 ½ from the spaces in the participating financial agreement of the commencement of the
326 National Audit Office | Annual Report - 2018 project, that is, by 31 the year under review, projects estimated at UrbanDevelopment December 2018, only had remained less than 50 Rs.1,333 million had not US$36.38 million per cent and financial been implemented and it equivalent to performance of 33 had been 22 per cent of Rs.5,638.million projects had been less the estimated value. representing 18 per cent than 50 per cent. Further, of the total allocation had physical performance of Although provisions of been utilized. 03 projects completed by Rs.144 million had been the end of the year under made relating to the Under The Strategic review had ranged from consultancy services of Cities Development 62 per cent to 90 per cent. 03 programmes scheduled Project, provisions of Selection of contractors to be implemented under Rs.3,700 million had been without evaluating the the Jaffna City made from the budget financial viability of the Development Project for estimate for the Galle and contractors, not deploying the year under review, Kandy cities development an adequate number of those consultancy projects and out of that, technicians by the services had not been Rs.2,386 million or 64 contractors, defects implemented by the end per cent only had been founds in the estimates of the year. Similarly. spent. Similarly, prepared by the Provisions of Rs.5.8 provisions of Rs.1,400 Consultants, delays million had been made million had been made occurred in giving for the Contact Facilitate from the budget estimates consultancies had directly the Proposed for the Jaffna City attributed to the poor Developments Development Project and performance of the Intervention in Jaffna Rs.313 million or 22 per contract works. Peninsula Programme cent of which only had scheduled to be been utilized. Out of the projects for implemented during the which provisions of year under review, The physical performance Rs.6,100 million had been whereas that programme of 13 projects in progress made and scheduled to be had not been which had been planned implemented during the implemented. to be implemented during year under review, 26
Western Region Marine City Development Project
With the objective of developing coastal area for the development activities related belt from Negambo up to Kalutara Kelido to the Colombo Port and to establish beach by dividing it into 03 zones, a supplies and services network in Welisara project had been commenced from the area in which the Navy Headquarters is year 2017 to create the area from situated. Sums totalling Rs.47.2 million Kollupitiya to Dehiwala as a recreational had been spent on this project in the years coastal belt, to use Blumendal Kimbulaela 2017 and 2018. Nevertheless, that project
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was being implemented without environmental impact resulting from the conducting a feasibility study or obtaining implementation of the relevant project. an assessment reports on the
Urban Regeneration Project
Under the Urban Regeneration Project, constructed during the year under review 8,113 housing units had been fully through 02 continuous projects and 12 new completed by the implementation of 16 housing projects. Plans have been drawn to housing projects from the year 2013 up to construct 68,000 housing units for low the end of the year 2018 and law income income shanty dwellers and to settle them families had been settled therein. A in those housing units under this project.
number of 7,395 housing units were being Urban Development Urban Preparation of Urban Development Plans
In terms of Section 3 of the Urban However, despite being identified 243 Development Authority Act, No.41 of urban development zones by the end of the 1978, the urban zones to be developed year under review, development plans had should be identified and development been prepared only for less than hundred plans should be prepared for those zones. zones of the above zones.
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Development of Industrial Estate.
Non-implementation of Regulatory Methodologies.
Lack of Proper Procedure for Sale of Potatoes.
Non-renewal of Registration of Contract Agreements.
Loss of Revenue due to Failure in Registering Financial Reports of the Companies.
Abandonment of the Project for Computerizing the Registration of Companies.
IndustryCommerce and Registration of Trademarks Internationally.
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330 National Audit Office | Annual Report - 2018
Industry and Commerce and Industry
Industry and Commerce
The expected result of this sector is Formulation and implementation of creating a globally competitive and national pricing policies with regard to beneficial business environment. The consumer goods following functions should have been Take measures for the protection of performed by the Ministry of Industry and consumers Commerce, 09 Departments, 07 Statutory Development and popularization of Boards and 20 Public Enterprises under its designs for production in the handicraft purview for achieving that result. industry in Sri Lanka Matters relating to administration of Formulation, follow up and evaluation the International Convention on of policies, programmes and projects Intellectual Property and functions relating to the subjects of industry and
relating to World Intellectual Property commerce Office Promotion and development of industries Conduct of trade exhibitions The summary of audit observations made Take measures for the supply of during the course of audit test checks quality consumer goods at reasonable conducted on the discharge of the said price in the local market without a functions is given below. shortage Approval of credit agencies under Section 114 of Mortgage Act, No. 6 of 1949
Development of Industrial Estate
The Ministry of Industry and Commerce, Ministry in the year 2018 for encouraging Resettlement of Protracted Displaced the investment in the industrial sector at Persons, Cooperative Development and regionally and providing infrastructure Vocational Training and Skills facilities required therefor. According to Development makes its contribution the Annual Action Plan, a sum of Rs.25.85 through the industrial development million, out of the provisions totalling programme to diversify the development at Rs.26.11 million made in the year under regional level, which was restricted only to review for development of infrastructure developed areas and thereby, to enhance facilities in 02 industrial estates had been the contribution made by the industrial spent. No physical progress whatsoever sector, to the national income. A sum of had been achieved and 13 projects valued Rs.328.76 million had been spent for 33 at Rs.165.25 million planned to be projects of 18 industrial estates by the completed by the end of the year under Industrial Development Sector of the review, had not been completed even by
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the end of the year under review. Further, Rs.21.82 million had been spent for 07 a sum of Rs.11.37 million had been spent projects exceeding the estimated amount for 02 projects which were not included in therefor. the Annual Action Plan and a sum of
Non-implementation of Regulatory Methodologies
In terms of the Cabinet Decision dated 26 affairs of the Regulatory Unit established. April 2013, it had been decided that a Even though a period of 06 years had Special Regulatory Unit should be elapsed after the commencement of the established for regulating activities of Co- said Unit, the Department had not operative Rural Banks, Rural Bank implemented a proper procedure regarding Societies, SANASA Societies, SANASA those regulatory activities. Further, the
Sangams and other financial co- Department had not implemented the Industry and Commerce and Industry operative societies. Accordingly, a sum of regulatory methodology on behalf of other Rs.20.99 million had been spent by the financial services societies and SANASA Department of Co-operative Development Societies except for the Rural Bank Sector. from the year 2013 to the year 2018 for
Lack of Proper Procedure for Sale of Potatoes
It had been decided at the Cabinet Sub- granted to the Federation on 29 November committee to grant a sum of Rs.150 2018. The Secretary to the Ministry of million in 02 installments by the General Industry and Commerce had informed the Treasury to the Sri Lanka Consumer Co- Department that those moneys so granted operative Societies Federation Ltd. should be withdrawn and settled to the through the Department of Co-operative General Treasury and coordination and Development for the purchase of potatoes supervision of all activities relating thereto at a certified price of Rs.92 per 01 kg from are assigned with the Department. farmers in the Uva Province on the However, a number of 932,868 kg of recommendations of the Cost of Living potatoes valued at Rs.85.82 million had Committee held on 16 October 2018. rotted due to unavailability of proper Accordingly, provisions of Rs.75 million procedure for sale of potatoes with the had been received to the Department under Federation and inadequate supervision of Expenditure Head of the Presidential the Department. Secretariat. Those provisions had been
Non-renewal of Registration of Contract Agreements
Every public contract exceeding Rs.05 terms of provisions of the Public Contracts million should have been registered in Act, No.3 of 1987 by virtue of powers
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Industry and and Industry expressly conferred or imposed upon the awarding contracts. Even though action Registrar in terms of Sub section 5(1), 5(2) should have been taken to renew the and 2(1) of the said Act. Even though a registration of contracts after one year of number of 24,345 contractors who are its registration in terms of Sections 1 and 3 expected to carry out procurements had of the said Act, no contracts whatsoever registered in the year under review, only had been renewed. 398 contracts had been registered after
Commerce Taking Action in compliance with Provisions of the Companies Act
In terms of Sections 131 (1) and (2) of the Companies Act, No.07 of 2007, every In terms of Section 170(1) of the company shall deliver to the Registrar an Companies Act, every company that is not
Annual Return after 1 ½ years of its a private company, shall ensure that registration. The total number of financial statements of the company with a companies registered from the year 2007 copy of the auditor‟s report are delivered to the year 2018 stood at 83,225 and out of to the Registrar of Companies for that, 18,054 companies had delivered registration. Even though the number of annual returns relating to the year 2018, in companies which should register its the year under review. Moreover, the financial reports of the year under review number of companies defaulted from stood at 6,893, out of that, only 2,110 delivering annual returns in the year 2010 companies had registered its financial stood at 11,411 and it had continuously reports. Accordingly, income of Rs.9.57 increased up to 65,171 by the year 2018. million receivable for 4,783 companies The income from annual returns registered only for the year under review, recoverable by the end of the year under had been deprived of. review had been Rs.1,974.60 million.
Registration of Societies
According to the Societies Ordinance Act, As such, the outstanding income of No.11 of 2005, out of 12,307 registered societies only for the year 2018 had been societies, only 180 societies had delivered Rs.12.12 million. annual returns for the year under review.
Recovery of Lease Income
A sum of Rs.1,500 had been estimated as income should have been collected by basic lease income for the year under publishing a Gazette Notification for the review. No income whatsoever under the recovery of these lease income, it had not said Revenue Code had been collected in been so done, thus resulting in a the year under review. Even though problematic situation. Therefore,
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collection of revenue had been suspended for avoiding the said situation.
Computerizing the Process of Registration of Companies
A Project for installation of a software on by 31 August 2019. Only the first Computerizing the Process of Registration installment of Rs.1.52 million had been of Companies had been implemented. The paid for the completion of the first phase contract of the said project had been by the end of the year under review. awarded to a contractor on 30 May 2017 at Another contract had been awarded even the value of Rs.57 million with a view to in the year 2014 for the process of completing within 09 months. The contract computerizing the registration of period had been extended at two instances companies and a sum of Rs.13.27 million and even though 25 months had elapsed, had been paid therefor and the Project had
the contract had not been completed even been abandoned halfway. Industryand Commerce
Investment of Company Funds
The Department of Registrar of Development and Marketing. No benefit Companies had invested a sum of Rs.90.27 whatsoever had been received from this million from the Company Fund in the investment even by 30 August 2019 to the year 2007 in the share capital of a Company Fund from the date of company which was running at a loss. The investment and the value so invested had approval for the said investment had been been shown as non-current assets in the granted by a Cabinet Decision dated 29 financial statements. A Memorandum of March 2007 and moneys required for the Cabinet of Ministers dated 02 January investment had been remitted to the 2013 had been submitted by mentioning Secretary to the Ministry of Cooperative that the said company was bankrupt.
Registration of Trademarks Internationally
Provisions of Rs.93.00 million had been December 2016 to the Information and made by the Line Ministry to the National Communication Technology Agency for Intellectual Property Office of Sri Lanka the purchase, installation and maintenance from the year 2016 to 31 December 2018 of a Server required for the for the implementation of the Madrid implementation of the Project. A Project for the registration of trademarks Memorandum of Understanding had been internationally. Out of that, provisions of signed between two parties on the same Rs.79.43 million had been utilized. A sum day itself and according to Section 4.3 of of Rs.32.5 million had been paid on 30 the agreement, it had been indicated that 334 National Audit Office | Annual Report - 2018
Industry and Commerce and Industry the Information and Communication 06 months from the date of agreement. Technology Agency should be responsible However, action had not been taken to for the entire process of purchasing and the supply the Server even by the end of May said process should be completed within 2019. Interior Decorations of the Proposed Canteen
A sum of Rs.6.00 million had been on behalf of the said contract. However, estimated for interior decorations proposed the said contract had not been completed for the canteen of the Institute of Textile even by the end of the year under review. and Apparel. Provisions of Rs.6.41 million Even though the guarantee period of the had been made by the Treasury in security on advances had expired, action December 2017 therefor. The contract for had not been taken to renew it and even an the said purpose had been awarded on 28 engineer‟s report had not been obtained on November 2017 to a contractor who had completed works of the contract. Even submitted a bid at a cost of Rs.8.02 though an agreement had been entered into million. Advances of Rs.1.88 million had by stipulating that the contract should be been granted by the Institute of Textile and completed within 60 days from 09 Apparel to the contractor on 03 January September 2018, action had not been taken 2018 on a security for a validity period to renew the agreement. from 06 December 2017 to 06 March 2018
Obtaining a Building on Rental Basis
The old building is scheduled to be completed by 31 August 2019. The demolished for the construction of the new building obtained on rental basis had been 04 storyed building. As such, a building closed down for a period of one year. had been obtained on rental basis for a Sums of Rs.960,000 and Rs.8,353 had period of one year from 01 June 2017 at a been paid as rental and electricity charges monthly installment of Rs.80,000. The therefor. procurement process for the construction of the new building had not been
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336 National Audit Office | Annual Report - 2018
Model Villages Programme.
Bogaswewa Special Housing Project.
Viru Sumithuru Housing
Programme.
Grama Shakthi Udagammana Programme.
Visiri Housing Project.
Housing and Construction Construction and Housing
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338 National Audit Office | Annual Report - 2018
Housing and Construction and Housing
Housing and Construction
Providing suitable housing facilities for construction which bring cost effective every family with the objective of ensuring benefits ecofriendly. a better standard of living for all citizens Supply of mechanical engineering had been the result expected from this services for government institutions. sector. The following functions should Regulation, registration, regularization have been performed by the Ministry of and Standardization of the activities of Housing and Constructions two the construction industry consistent Departments and 08 Statutory Boards/ with relevant rules and regulations and Institutions under its purview in achieving standards. that result. Provision of consultancy and regulatory service for the construction Compilation, follow up and evaluation industry and operation of heavy of policies, programmes and projects construction equipment and training on relating to the subjects of Government maintenance. departments, statutory institutions and Management and regulatory activities corporations on housing and of Condominium property. construction. Reform of public condominium Assign standards and norms for property and transfer of the title of government quarters and other houses efficiency and speedily. buildings. Implementation of housing schemes Significant audit observations revealed and housing financial programmes to during the course of audit test checks meet the housing needs of the people relating to the functions performed are including low income earners and summarized and shown below. special community groups. Guidance for rural people about technical methods of housing
Model Villages Programme
This programme had been implemented by had been completely and up to the roof the National Housing Development constructed by the end of the year. Authority. Even though provisions of Accordingly, the performance of the Rs.937 million had been made for the programme had been at a weak level. project in the year under review. only a sum of Rs.581 million out of that had been A sum of Rs.632 million had been utilized. A number of 20,375 houses had estimated for the construction houses been expected to be constructed in the year which were could not be completed during under review. However, only 1,555 houses the year 2017 that were continue for the out of that target representing 08 per cent year 2018. A sum of Rs.486 million had
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been spent during the year under review should have to be complete at the date of for that. Therefore financial progress of the 30 September 2018, but the project had project had become 76 per cent. Out of the failed to complete it even the elapse of 03 targeted houses of 4960 only 3,099 houses months period at the end of the year under had been completed. Although the project review. Bogaswewa Special Housing Project
This project had been implemented by the Rs.280 million. Eventhough 1,566 houses National Housing Development Authority had been expected to be completed in the and an expenditure of Rs.449 million had year under review only 978 houses been estimated. A number of 978 houses representing 62 per cent out of that had had been constructed upto the roof and had been completed by the end of the year. been completed by spending a sum of
HousingConstruction and Viru Sumithuru Housing Programme This project which is implemented by the and completed by spending Rs.113 million National Housing Development Authority during the year under review. Accordingly, in amalgamation with the Ranaviru Sewa only about 74 per cent out of the number Authority had planned to construct 550 of houses to be completed by the end of houses on an estimate of expenditure the year under review had completed amounting to Rs.116 million. But 405 constructions. houses had been constructed upto the roof
Grama Shakthi Udagammana Programme (New) This project had been implemented by the million had been spended for that during National Housing Development Authority. the year under review, 255 houses had An expenditure of Rs.100 million had been been constructed completely and upto the estimated to construct and complete 1,200 roof. Out of the targeted number of houses houses through the project by the end of at the end of the year under review only 21 the year under review. Including the per cent of houses had been completed. additional provisions a sum of Rs.234
Visiri Housing Project (New)
This housing project had been cent. Out of the 7,000 targeted implemented by the National Housing construction of houses, 4879 houses had Development Authority. Estimated cost for been completed upto the roof and had been the year was Rs.709 million and a sum of completed in full. That number of houses Rs. 637 million had been spent as at the was 70 per cent of the number of targeted date of 31 December 2018. Therefore houses. financial progress of the project was 90 per
340 National Audit Office | Annual Report - 2018
Lack of Roadworthy Buses for the Express Ways
Issuance of Permanent Route Permits without Calling for Tenders Issue of Permanent Route Permits without Calling for Tenders Colombo Suburban Railway Project
Decrease in the Number of Train Turns
Poor land usage of the Sri Lanka Railway Department
Transports Declining the revenue earned from the freight transport
Delay in the Rehabilitation of Train Compartments
Decrease in the deployment of buses for the passenger transportD De Decrease in the Deployment of the Passenger uses for the Passenger Transport crease in the Deployment of Buses for the Pa
National Audit Office| Annual Report - 2018 341
Transport 342 National Audit Office | Annual Report - 2018
Implementation, development and acquisition of lands and infrastructure sustainable maintenance of higher standard facility development. transport infrastructure facilities with the Registration and licensing of motor use of futuristic technology strategies for vehicles. Transport the amelioration of living standard of the Issuance of driving licences. people had been the function to be Regulation and issuance of guidelines discharged by the Ministry of Transport and laws relating to motor traffic. and Civil Aviation. In order to achieve that Conduct development and regulatory result, the following functions had to be functions of airports.
discharged by the Ministry, two Regulation of progress, charges and
Departments and 07 statutory boards/ the quality of the services provided by institutions functioning under the Ministry. air ports. Taking necessary steps including Take necessary measures to ensure entering into agreements with other efficient operation of integrated countries for the expansion of passenger and freight rail transport international air travels. services by adoption of new Promotion and execution of regulatory technology, development of railway functions in relation to use of airports infrastructure, and provision of railway in Sri Lanka by foreign countries. services. Supervision and regulation of private Provision of passenger ferry services. air services. Provision of secured and reliable Registration of aircrafts. passenger transport service. Introduction of an environmental The Audit observations revealed at the friendly transport system. audit test checks conducted on the Regulation of private passenger discharge of the above functions by the transport services. Ministry and the institutions functioning All affairs relevant to the construction thereunder are analyzed below. of new railway lines including
Construction of Matara, Beliatta and Kataragama New Railway Line
The project of the construction of new 31 December 2018 and a sum of Rs.33,730 railway line from Matara to Kataragama million or 93 per cent of the project value was commenced on 01 August 2013 by the had been paid to the contractor by then. Ministry of Transport and Civil Aviation Although the railway line had been opened under a foreign assistance project at an in the year 2019 to run trains up to estimated cost of Rs.36,166 million and it Beliatta, the following deficiencies had was scheduled to be completed by 31 July been revealed thereon. 2016. Due to failure on the part of the contractor to properly complete the project In terms of Section 7.4 of the activities, project had been extended up to conditions of the contract agreement,
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quality of the rails and sleepers In terms of Section 1.3 of the supplied by the contractor should be conditions of the loan agreement locally examined by the Engineer and relating to the project, the loan should
issued a Quality Assurance Report. have been obtained within four years Nevertheless, the Quality Assurance from the dated of signing the Report related to rails and sleepers agreement. The relevant period had purchased at US$ 4,526,117 on 31 elapsed by April 2017 according to the March 2018 had not been submitted. loan agreement signed in April 2013. The consultancy company had failed to Owing to the delays occurred in the submit a report including the details on constructions, foreign exchange loss Transport number of rails to be purchased, of Rs.5.35 million had been incurred in number of rails used and the remaining respect of the payments made from quantity of rails relating to the May 2017 to 31 December 2018. construction of railway line.
Construction of Kurunegala- Habarana Railway Line
For the construction of a railway line of 84 had been transferred to the Matara- kilometer in length from Kurunegala to Kataragama railway line project. Even Habarana, provisions of Rs.500 million though this project should have been had been made under the Ministry in the implemented within the Five Year‟s Plan year 2018. Since land acquisition activities from the year 2016 to 2020, only Rs.56 relating to the implementation of the million had been spent for the acquisition project were in slow progress, provisions of lands by the month of May 2019. of Rs.420 out the provisions made thereon
Colombo Suburban Railway Project
Under the Asian Development Bank a housing construction project. This Assistance, the Colombo Suburban project inaugurated in January 2018 is Railway Project had been implemented required to be completed by the year 2020, under the Ministry. Provisions of Rs.1,000 only 30 per cent works of the preparation million had been made for the execution of of detailed designs had been completed by project activities, whereas Rs.700 million the year 2018. of such provisions had been transferred for
Sri Lanka Railway Department
344 National Audit Office | Annual Report - 2018
Sri Lanka Railway Department had been Rs.7.41 billion by 31 December 2018 and founded in the year 1867. The Department the recurrent expenditure amounted
had gained operating profits from that year Rs.14.08 billion as at that date.
up to 1934. About 57 per cent of the total Accordingly, recurrent loss had been Transport revenue had been earned by the transport Rs.6.97 billion and the recurrent loss of freight during that period. The recurrent exceeding the recurrent income had been income of the Railway Department was 94 per cent. Details appear in Table 17.
Recurrent Income, 2013 2014 2015 2016 2017 2018
Expenditure and Loss Rs.Millio Rs.Millio Rs.Millio Rs.Million Rs.Million Rs.Million Transport n n n Recurrent Income 5,425 5,910 6,335 6,623 6,490 7,412 Recurrent Expenditure 10,586 16,943 14,048 13,396 14,080 14,380 Recurrent Loss 5,161 11,033 7,713 6,773 7,590 6,968 Recurrent Loss as a percentage of Recurrent Income 95.13 186.68 121.75 102.26 116.95 94 Table 17: Recurrent Income, Expenditure and Loss of the Department of Sri Lanka Railways. Source : Financial Statements of the Department of Sri Lanka Railways.
Collection of Revenue
Collection of revenue of the Department of Railways, supplementary provisions of Sri Lanka Railways remains at an Rs.25.29 billion had been made by the extremely poor position and as compared General Treasury during the year under with the preceding year, recurrent review. The composition of the revenue of expenditure had increased over two fold of Rs.7,412 million collected by the the revenue collected during the year Department during the year under review under review. For the discharge of appears in the Diagram 49 functions of the Department of Sri Lanka
11% 3% 6% Passengers Season Tickets
13% Parcels and Mail Goods and Animals 67% Others
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Diagram 49 - Composition of Revenue 2018 Source : Revenue Accounts, 2018.
The mission of the Sri Lanka Railway economically and efficiently. The Department is the Provision of safe, following observations are made in this Transport reliable and punctual rail transport service connection. for both passenger and freight traffic,
Decrease in the Number of Train Turns
Even though Sri Lanka Railway had declined up to 117,189. Accordingly, Department had planned to operate 4,284 train turns had not been operated. 121,143 passenger train turns for the year The number of delayed turns stood at under review, the number of turns operated 50,997 and 4,284 turns had been cancelled. Poor Land Usage of the Sri Lanka Railway Department
Although there are 14,000 acres of lands Department had been deprived of a as the reservation of Sri Lanka Railways, a colossal amount of revenue owing to data system has not been maintained unauthorized occupation in those lands and thereon. Therefore, the Sri Lanka Railway default of taxes. Declining the Revenue Earned From the Freight Transport
The Sri Lanka Railway Department could freight transport revenue had declined by have earned an additional revenue through 2.25 per cent compared to the preceding the transport of goods by trains, whereas year. Details appear in Table 18.
Indicator 2017 2018 Increase/(Decrease) compared Percentage of to the preceding year Increase/(Decrease) Freight Km (Mn) 144.79 119.78 (25.01) (17.27) Freight Tons (Mn) 2.00 1.84 (0.16) (8.00) No. of freight trains 6,590 6,845 255 3.87 Freight Revenue 429.11 418.22 (10.89) (2.53) (Rs.Mn) Table 18-: Freight Transport Revenue of the Department of Sri Lanka Railways. Source : Annual Performance Report 2018 of the Department of Sri Lanka Railways.
Delays in the Rehabilitation of Train Compartments
346 National Audit Office | Annual Report - 2018
Out of 88 compartments given for the collaboration with a private party, only 52 repairs under the programme of the compartments had been rehabilitated by 31 rehabilitation of 200 passenger December 2018.
compartments implemented in Road Safety and Minimization of Road Accidents
The National Council for Road Safety had review. The National Council for Road earned an income of Rs.66 million at 01 Safety had not taken adequate measures per cent of the income received by the for the prevention of accidents caused by Insurance Institutions from the third party the trains. Although the minimization of Transport insurances and other income during the road accidents and maintenance of a data year under review. Out of that, a sum of base including all the details on new roads Rs.14 million only had been spent for the and vehicle population added to the road discharge of the functions of the Council. network in each year, number of road Even though the Council had invested accidents and property damages had been Rs.319.5 million , its attention had not an objective of the Act, passed for the been drawn on the discharge of functions establishment of the Council, the Council relating to the minimization of road safety. had failed to achieve that objective even In consequence of train accidents, 474 by the end of the year under review. incidents of imageries and 220 of deaths had been reported during the year under Decrease in the Deployment of Buses for the Passenger Transport
The Sri Lanka Transport Board possessed day and 5,151 of the above buses only had a fleet of 7, 302 busses in the preceding been in operation daily. According to the year, whereas it had dropped up to 6,929 time table requirement, the number of by five per cent by the end of the year busses needed in the year 2018 was 6,465, under review. The Board had 5,575 but 5,575 busses only had been made roadworthy buses that cab be operated per available for operations.
Failure to Deploy Busses for the Gemisaviya
The Sri Lanka Transport Board had Seriya and 142 busses been deployed for operated about 5,000 busses per day and the Nisi Sariya services in the year 2018. those buses had been driven on profitable Nevertheless, the Board had not taken routes as well as for office transport and steps to deploy buses for the Sisu Seriya school transport services. Accordingly, service operated in the rural routes during 726 busses had been deployed for the Sisu the year under review.
Failure to Obtain Expected Results from the GPS System
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In order to examine the information on the system was due to be operated for 125 operation of busses, the Sri Lanka Luxury busses of the Board and necessary Transport Board had made arrangements cameras and accessories therefor had been to operate GPS System from its Head installed. Officers had not been appointed Office. Accordingly, an agreement at a either in the Head Office or the depots to total sum of Rs. 33,628,840 had been monitor the above system and as such, entered into with a private company to expected results of the project could not be operate the aforesaid system. This GPS achieved.
Lack of Roadworthy Buses for the Express Ways
The Sri Lanka Transport Board operates operate busses obtained from external buses on the express ways, whereas the parties in those roads under the logo of the Board lacked appropriate and adequate Board and thereby, obtain 15 per cent of number of buses for those express ways. the income of those buses to the Board. Therefore, arrangements had been made to
Issue of Permanent Route Permits without Calling for Tenders
In terms of Cabinet Decision dated 06 of the total number of permits issued 91 October 2005, the Commission had been per cent had been granted without calling granted approval to issue permanent route for tenders, thus depriving of an income to permits according to the tender procedure. the Commission. Similarly, the Nevertheless, without being called for Commission had issued temporary route bids, the National Transport Commission permits for the buses on express ways had issued 3,440 route permits as at 31 based on the minimum technical value. December of the year 2018 of which, 64 Accordingly, 820 permits had been issued per cent had been granted only upon the maximum for 28 days during the year recovery of annual renewal fee of Rs.3,000 under review, thus depriving of the and 27 per cent upon the recovery of maximum income that could have been annual fee of Rs.15,000. Accordingly, out earned by calling for tenders. Failure to Issue Passenger Service Permits
The Mobile Inspection Division had Permits for 06 routes and thereby selected identified that about 28 busses were being the successful applicants. Since the Board driven to the North and East Provinces of Directors meetings had not been held, from various Provinces during the year approval could not be obtained for the under review without having Passenger award of Passenger Service Permits for the Service Permits. Accordingly, the National selected candidate and accordingly, it had Transport Commission had taken steps to not been possible to award the Permits issue 31 Passenger Service Permits for 17 during the year under review. As a result, routes. Herein, the Commission had called the Commission had been deprived of an for bids to issue 09 Passenger Service income of Rs.25.82 million. 348 National Audit Office | Annual Report - 2018
Failure to Fulfill the Requests made by the Students and Schools
Even though 31 requests had been made as a social responsibility of the National Transport by the students and schools for the Transport Commission to deploy the Sisuseriya Project, it had not been possible busses for the relevant service. to fulfill those requests during the year Nevertheless, necessary steps had not been 2018. In the implementation of this taken by paying attention in that respect. project, it has been a key function as well
Issue of Medical Certificate Obtaining Services of The Medical Officers on Hourly Wages Basis
Although the issuance of medical hourly wages basis. It was revealed at the certificates has been the key function of audit test check carried out in the year the National Transport Medical Institute, 2018 that at least one permanent Medical due to lack of adequate number of Medical Officer had not been appointed for 07 Officers in the institution to discharge the branch offices and medical certificates had above function, service of the Medical been issued by employing Medical Officers had been obtained on contract and Officers on hourly wages basis.
Failure to Discharge Functions Specified in the Act, Adequately
In terms of the National Transport Medical agencies, that motor vehicles of all Institute Act No.25 of 1977, the functions descriptions are operated or driven only by such as to provide medical services and persons who are physically and mentally assistance, to provide advice and special fit and competent and to set standards and guidelines relating to the quantum of prescribe parameters regarding transport compensation or damages payable in cases medicine to be adopted and implemented of accident, to appoint a panel of suitable by the relevant implementing authorities, medical officers for the purpose of had not been discharged by the Institute. discharging its functions, to ensure either by itself or in consultation with other
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350 National Audit Office | Annual Report - 2018
The Balance of the Social Security Fund had not been Utilized on the relevant
Failure to Conduct Researches on Positive Aging
Failure to Complete Constrctions of Vocational Training Centers for the Disabled Persons
Failure to Establish the Management Information Systerm.
Failure to Utilize the Provision
Made Social Empowerment and Welfare and Empowerment Social
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352 National Audit Office | Annual Report - 2018
Social Empowerment Social Social Empowerment and Welfare
The Ministry of Social Empowerment and suitable new revisions to the Public Welfare, together with 02 Departments Aid Scheme. and 05 Statutory Boards / Institutions, should discharge the following duties to Granting aid for patients suffering achieve the outcome of establishing an from tuberculosis, kidney diseases, economically and socially empowered leprosy and thalassemia, and for their Nation. dependents.
Formulation and evaluation of policies, Providing family counselling services. programmes and projects relating to Formulation of strategies to provide the subjects of social empowerment
vocational training and career and welfare. opportunities for disabled persons.
Introduction of strategies to empower Implementation of social security the rural lives and provision of schemes for disabled persons. financial assistance to execute such strategies. Making arrangements to care and safeguard the elders and to increase the Formulation of rural and regional participation of elders in social economic policies. developmental activities and to Implementation of Divineguma safeguard the rights of the elders. (Samurdhi) Programmes. Audit observations revealed in audit test Identification of disabilities of the checks carried out with respect to the persons with special needs and discharge of the aforementioned duties by rehabilitation of such persons. the Ministry, Departments and the Statutory Institutions are summarized and Reviewing and restructuring of Public mentioned below. Aid Scheme and introduction of
The Allowance for Senior Citizens
Provisions of Rs. 9,816.50 million had million had been paid for 410,397 elders been allocated for the payment of the during the year under review. A sum of senior citizens‟ allowance of Rs 2,000 Rs. 226.47 million out of the provisions each for 386,083 senior citizens who had made had been saved without utilizing as exceeded the age limit of 70 years and in at 31 December 2018. However, 117,598 low income group during the first 03 elders in 25 Districts were in the waiting months of the year under review and for list seeking the allowance paid for Senior 416,667 elders during the subsequent 09 Citizens. A sum of Rs. 100 each had to be months. Allowances of Rs. 9,590.03 deducted from this allowance provided to
National Audit Office| Annual Report - 2018 353
elders and the sum had to be granted to the Secretariat for Elders had not inquired on National Secretariat for Elders by the the recovery of this deficit from the Divisional Secretariats as per the decision Divisional Secretariats. taken by the Cabinet of Ministers dated 31 August 2016. Accordingly, a sum of Rs. The balance of the Social Security Fund as 490.82 million had to be remitted to the at 31 December 2018 was Rs. 1,476.16 Social Security Fund for the year under million and the balance had remained idle review. Nevertheless, an amount lower by without using it for any function stated in Rs. 5.36 million had only been remitted to the decision of the Cabinet of Ministers the Fund. However, the National even by the end of the year under review.
Research on Positive Aging SocialEmpowerment Provisions of Rs. 4.20 million had been elderly care system in Sri Lanka. allocated for National Secretariat for Researches related to the Project had not Elders in order to conduct researches on been conducted even by the end of the the development of community based year under review. Payment of Allowances for the Disabled Persons
Provisions of Rs. 1,151.77 million had disabled persons during the year under been allocated to the National Secretariat review. Provisions of 10.55 million had for Elders for the payment of allowance of been saved after paying allowances for Rs. 3,000 each for disabled persons per 31,956 disabled persons during the year month for 34,667 disabled persons in 25 under review. Districts as the payment of allowance for
Payment of Housing Aid to Disabled Persons
Works of 366 houses had not been period of 02 years to 06 years after the finalized even by 31 December 2018 commencement of construction activities. although the Programme of providing There were 67 houses of which work had housing aid for disabled persons in the low not been finalized even the period more income group was initiated in the previous than one year had passed after the years. The value of instalments to be paid initiation of constructions. A total of Rs. further for such houses had become Rs. 17.66 million had to be paid for such 25.11 million and even though instalments houses comprised of Rs. 14.26 million and were paid, there were 169 houses in which Rs. 3.40 million respectively. work had not been finalized even for the
354 National Audit Office | Annual Report - 2018
Social Empowerment Social Provision of Access to the Disabled Persons to Enter Buildings
The National Council and Secretariat for access for disabled persons as well as all Persons with Disabilities had been the functions related to that. The function assigned the responsibility of taking legal could not be accomplished successfully action under the Rights of Persons with since a technical Officer in the Approved Disabilities (RPWD) Act No. 01 of 2016 Cadre of the National Secretariat for and the responsibility of performing the Persons with Disabilities had not been following up activities and supervisory recruited even by 30 September 2019. activities on the fulfilment of facilities for
Non-utilization of Provisions Made
A total of Rs. 263.33 million had been the Head of the home for elders in allocated in the year under review Kataragama and a sum of Rs. 252.83 comprised of an amount of Rs. 2.50 received from the Social Security Fund for million incurred for recruiting and training the accomplishment of 03 main functions of 100 Elderly Care Assistants and Rs. for the welfare of the elders by the 5.00 million for Attamma Catering Project National Secretariat for Elders. for the promotion of traditional and local Nevertheless, the total provisions had not cuisines practised by elderly persons been utilized as fundamental activities within the society and Rs. 3.00 million for required to utilize the provisions had not the renovation of the official quarters of been performed. Land Utilization
The Holy cross land of Gampaha valued at Deeds of Gift in the year 2011 for the Rs. 13.00 million and land called Rajitha construction of elderly homes were Watte in Haragama valued at Rs. 3.20 remained idle due to the failure of million transferred to the Council by constructing the relevant houses. Purchasing of a Building
Sri Lanka Social Security Board had following the procurement process. At the purchased a building in the year 2013 by end of the year under review, 5 years had incurring a sum of Rs. 195.00 million from passed after the purchase of this building. the Pensions Fund to conduct the Head Nevertheless, a methodical decision had Office of the Board by exceeding the not been taken by the Board of Directors amount of Rs. 165.00 million which was regarding the valuation of the building for the Government valuation without obtaining the present value of it. allocating the required funds and without
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Purchasing of a Management Information System
Provisions of Rs. 12.51 million had been not be established. It was not possible to made in the year 2018 for the purchase of identify active and inactive contributors an information system for Social security due to the defects in the Management Pension Management. Even though it had Information System available at the Board. been scheduled to purchase this computer Therefore, The Board was not able to system from 03 years, the system could submit precise numerical data on that. Construction of Vocational Training Centre for the Disabled Persons Even though an amount of Rs. 25 million estimated value of the Centre was Rs. 100 had been estimated for the construction million. Even though a sum of Rs. 64.74
SocialEmpowerment and finalization of the Vocational Training million had been incurred for the Centre in Kottawa in the previous year, construction of the Centre by the end of Provisions of Rs. 5 million had been the year under review, the Vocational allocated from the annual estimate during Training Centre had not been commenced the year under review as the as expected. commencement of the project had delayed. Accordingly, the total expenditure by the It had been scheduled in the year 2016 to end of the year under review was Rs construct the Vocational Training Centre .12.06 million and the physical progress in Killinochchi in two stages for the was 50 per cent only. Therefore, it was not economic development of the youth of the possible to commence the Vocational Northern Province and the estimated value Training Centre by finalizing the Project of it was Rs. 64.00 million. Even though as expected. the construction had to be finalized in October in the year under review, an The construction of the Batticaloa amount of Rs. 54.37 million had been Vocational Training Centre had been incurred by the end of the year under scheduled to commence in the year 2016 review and the second phase had not been and to finalize in the year 2017. The completed.
356 National Audit Office | Annual Report - 2018
Non-performance of Planned Functions
Recruitment of Employees without proper approval
Officers who had breached Agreements on Foreign Scholarships
Underutilized Assets
Uneconomic Expenditure
Purchase of non-essential goods
Science, Technology and Research and Technology Science,
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Science and Technology and Science Science, Technology and Research
The outcome expected from this field was Making necessary arrangement to to establish a scientifically and expand scientific, technical, social and technologically developed country. The economic researches and following role has to be performed by the developmental activities. Ministry of Science, Technology and Planning and directing researches Research and 13 statutory institutions for through facilitation for researches and the realization of the Expectations. research institutions. Formulation, following up and Taking steps to direct and motivate the evaluation of policies, programmes and community for new discoveries and projects related to science, technology innovations. and research subjects.
Audit observations revealed in the audit Provision of necessary facilities test checks conducted on the required for the local researches and accomplishment of the aforementioned discoveries to be appropriate to the role are summarized and mentioned below. novel international discoveries and innovations in the scientific and technological fields. Non-performance of Planned Functions
The following functions had been included Establishment of a Centre for in the Annual Action Plan with the Excellence in Genetics. objective of accomplishing the functions in Even though Provisions of Rs. 44 the year 2018. However, the functions had million had been allocated in the year not been accomplished even by the end of under review, the construction of the the year under review. proposed laboratory for the Sri Lanka Selection of 100 teachers by Standards Institution. representing zones to conduct training Project for facilitating the testing of programmes for solar panel project. petroleum products, for which Registering of 250 students in provisions of Rs. 100 million had been technical colleges for solar panel allocated by the Industrial Technology project and conducting the programme. Institute of Sri Lanka in the year under review. Commencement of construction activities of the National Science Project of providing assistance for Centre in the last quarter of the year Product Designing Engineering (PDE) 2018 and initiation of the fundamental through Economic Development activities such as designing plans and Initiative empowered by Mechanical purchasing lands. Electronics (MEDI) for which supplementary provisions of Rs. 250
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million had been allocated during the Standards Institution for which year under review. provisions of Rs. 150 million had been allocated to be implemented in the year Enterprises Resource Planning Project under review. implemented by the Sri Lanka
Recruitment of Employees without getting Systematic Approval
The Industrial Technology Institute of Sri obtaining the approval of the Secretary of Lanka had employed 19 persons on the the General Treasury and a sum of Rs. work load basis in contrary to Provisions 10.29 million had been incurred for that stipulated in the Treasury Circular No. purpose. 1/2016 of 08 January 2016 and without
ScienceTechnology and Officers who had breached Agreements on Foreign Scholarships
A sum of Rs. 7.61 million had to be compliance with the agreements signed by recovered from 18 officers who were them. The Institute was unable to recover awarded foreign scholarships by the the amounts even by the end of the year Industrial Technology Institute of Sri under review. Lanka and who had not functioned in
Under-utilized Assets
The Sri Lanka Standards Institution had remained idle without utilizing even by purchased equipment worth Rs. 24.61 May 2019. Likely, a laboratory suitable to million on 12 November 2017 for the establish the System had not been establishment of a Gas Chromatograph designed even by May 2019 and necessary mass spectrophotometer GC/MS-MS to training for that purpose had not been test whether pesticide residues are provided to the staff even by May 2019. contained in food. The equipment was
Uneconomical Expenses
A sum of Rs. 1.68 million had been had not been practically executed even by incurred in the year 2017 for the April 2019. formulation of a media policy to promote and to establish an innovative media A private institution had been selected for culture within Sri Lanka. The media policy printed and electronic media advertising campaign of the Exhibition “Sahasak Nimavum 2018” and a sum of Rs. 2.65 360 National Audit Office | Annual Report - 2018
Science and Technology and Science million had been incurred for that purpose. advertisements had been carried out by the A sum of Rs. 1.25 out of the amount had Staff of the Sri Lanka Inventors been incurred for publishing newspaper Commission, a sum of Rs. 2.25 million advertisements in the Dinamina, had been paid to an intermediary for Thinakaran, Daily News, Lankadeepa and publishing such advertisements in the Daily Mirror. Since the designing of newspapers.
Purchasing of Non-Essential Goods
Arthur C. Clarke Centre had purchased 6 equipment, accessories and systems items of assets worth Rs. 24.08 million for purchased so, it was observed that the research and developmental projects. In assets remained idle without using. the audit test checks carried out on the
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Decrease in the Number of Internet
Subscribers in relation to the Population
Decrease in the Distribution of ADSL Internet Facilities
Lotus Tower Project
Communication
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Communication Communication
The Ministry of Telecommunications and facilities for all by adoption of modern Digital Infrastructure and 03 Statutory technology. Institutions under its purview have been Assisting to adopt appropriate established in achieving the objective of information technological solutions for building a digitally empowered nation. promoting productivity and efficiency The following functions should have been in the delivery of services by the public performed by those institutions. sector. Implementation of programmes for
Formulation, carrying out follow up promotion of computer literacy.
action and evaluation of policies, Development of strategies encouraging programmes and projects relating to the use of information and the subjects of telecommunication and communication technology. digital infrastructure. Taking necessary measures for the A summary of audit observations revealed provision of telecommunication at the audit test checks on performing the above functions has been given below.
Decrease in the Number of Internet Subscribers in relation to the Population
The number of fixed internet subscribers indicating an improvement in the number in the year 2016 was 4,921,000, and it had of internet subscribers. Nevertheless, it had been 5,904,260 and 7,263,098 in the years been at a very low level as compared with 2017 and 2018 respectively, thus the population of Sri Lanka.
Decrease in the Distribution of ADSL Internet Facilities
ADSL internet facilities were obtained by ranging from 0.48 per cent to 5.04 per cent 864,821 persons by the end of the year had been distributed in other provinces. 2018. Out of the said ADSL internet Accordingly, the distribution of ADSL facilities, 49.88 per cent had been in the internet facilities in rural areas had been at Western Province and only a number a very low level.
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Delay in Implementation of Digital Economy Project Provisions amounting to Rs.1,731.85 progress thereof had been 42 per cent and million had been made in the year 2018 no project whatsoever out of 14 projects to by the Ministry for the Digital Economy be completed during the year, had been Project. Out of that, only a sum of completed. Failure in taking action for Rs.637.96 million had been utilized in the achieving targets as planned in the year year under review. Moreover, bills under review and carrying out amounting to Rs.89.36 million had been procurements on due periods, had been payable by the end of the year under specially attributed to this situation. review. Accordingly, the financial
Communication Lotus Tower Project The Telecommunication Regulatory After completion of the contract period Commission which is the regulatory of the construction of the Tower, agency for telecommunications, was under approval had been granted in terms of the purview of the Presidential Secretariat, the Decision No.2K15.217.02(2) of 28 while at present this Commission is August 2015 of the Commission to functioned under the Ministry of Defence. extend the contract period up to In terms of the Cabinet Decision dated 29 October 2017. However, construction October 2010, the contract of construction activities had not been completed even of the Lotus Tower had been awarded to by 31 March 2019. 02 companies of the People‟s Republic of China. The Telecommunication The entire contractual loan could not Regulatory Commission and the Group be obtained due to delay in had entered into a contract agreement on construction works. As such, the loan 03 January 2012. The contract value of the released by the Export-Import Bank of Project was US$.104,300,000 and China (EXIM) had been restricted to according to the agreement, this contract US$ 67,259,754. The total amount of should have been completed within 912 loan being US$. 88,655,000 days from 12 November 2012 to 12 May had been utilized in the computation of 2015. Audit observations revealed in this the agreed charges from the beginning connection are given below. and as such, the agreed charges of Rs.91.88 million (US$. 636,508) had A Project Report and a proper been over paid. Feasibility Study Report had not been prepared and only a Financial The additional agreed charges that had Feasibility Study Report with to be paid for the loan, not utilized shortcomings had been prepared for during the period from 19 August 2016 the Project. to 27 October 2017 due to inability of obtaining the loan within the due period, had been Rs.49.61 million or US$ 322,984.
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The approval of the Cabinet of had agreed on 23 January 2012 for
Ministers had not been obtained for vesting and allocating the land on the Communication Rs.198.69 million due to be paid as basis of payment of Rs.11.7 billion as consultancy fees to the University of installments to the Urban Development Moratruwa and despite having Authority without computing the cost completed only 50.2 per cent of the incurred therefor by then. project by 31 December 2015, seventy five per cent representing Rs.150 Contrary to the Cabinet Decisions, a million of the consultancy service fees sum of Rs.2,250 million had been paid had been paid beyond the planned to the Urban Development Authority limits of the agreement. up to 10 April 2015 and according to
the Cabinet Decision or the
After making payments in 12 Memorandum of Understanding, the installments as consultancy fees, land had not been vested even by the further payments had been suspended. end of the year under review. Contrary to Conditions stipulated in the agreement entered into for paying Even though a process had been consultancy fees, having stated for initiated to lease this Tower to a inspection of contract, consultancy fees Property Management Company for was being paid at a rate of Rs. 3 further constructions, no Cabinet million per month from November approval had been obtained even by 2015. the end of the year under review for same. According to the Cabinet Decision dated 14 December 2014, both parties
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Non-implementation of Budget Proposals Decrease in the Performance of Foreign Aid Projects
Construction of a Building Complex in the Eastern University
Higher Education Higher Construction of the Building for the Faculty of Medicine in the University of Ruhuna
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Higher Education Education Higher
The outcome expected from this field is to achieve qualitative development in Maintaining the Educational standards education with the objective of enhancing in the higher education institutions and the efficiency and productivity of the higher regulation of the administration of education institutions and to create higher those institutions. educational opportunities for approaching to knowledge based economy through Implementation of projects related to improving local Universities and Higher universities and other higher education Education Institutions up to the institutions. international standards. For the accomplishment of the outcome, Ministry Significant audit observation revealed at of Higher Education, 36 statutory Boards/ the audit test checks carried out pertaining institutions have to discharge the following to the performance of the aforementioned functions. roles are summarized and mentioned below. Planning and coordinating the
University education in accordance with the National Policy.
Increasing the number of Students enrolled to the Universities and higher Education Institutions Increasing the number of students enrolled 2017/2018 were 30,660 and 30,550 to the Universities and higher education respectively and it was a reduction by 110 institutions from 27,000 students up to students in the year 2017/2018. Likely, the 40,000 students by starting from the year number of students selected for the 2017 up to the end of the year 2020 was university entrance the academic year one of the main objectives included in the 2017/2018 was 19 per cent out of the Action Plan of the year 2018. However, students who were qualified to the number of students enrolled in the University Education. adjoining years of 2016/2017 and
Construction of a Building Complex in the Eastern University
It had been planned to construct a building though financial provisions amounting to complex of 351,898 Square feet for the Rs. 288.5 million had been allocated Faculty of Health Protection in the Eastern during the year under review, only a sum University and construction had been of Rs. 31.3 million had been spent. The scheduled to commence in the year 2016 financial progress remained in a low level and to complete in the year 2019. Even of 14 per cent. Only the procurement
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activities of awarding the contract had under review. been completed by the end of the year
Construction of the Building for the |Faculty of Medicine in the University of Ruhuna The 8 storied Faculty Building of 85,935 been granted as advance for initiating the square meters in the University of Ruhuna work, work adequate to settle even the had to be commenced in the year 2017 and advance paid had not been completed even had to be finalized in the year 2020. one year had passed after the Provisions of Rs. 500 million had been commencement of the work. The financial
allocated for this project in the year under progress of the Work completed even by HigherEducation review and only a sum of Rs. 269.3 02 May 2019 had been only Rs. 101 million out of the Provisions had been million. utilized. Even though Rs. 200 million had
Student Loan Scheme
It had been targeted to provide loan courses in 08 non state Universities during facilities to 5000 students in the year under the year. Accordingly, only 27 per cent of review under the student‟s loan scheme. students out of the total targeted students Only 1382 applicants had registered under had obtained loans under this loan scheme. this loan scheme to follow 38 degree
Non-implementation of Budget Proposals
Provisions amounting to Rs. 663 million plans related to that purpose and executing had been allocated for 07 schemes and those proposals had been assigned to the projects during the year under review by Ministry, the total provisions allocated had the General Treasury with the objective of been saved without utilizing as implementing budget proposals. Even arrangements had not been made to though the responsibility of designing of achieve the related targets. Performance of Foreign Aided Projects
The projects for expanding higher million had been allocated for this education and accelerating the project during the year under review, development implemented under the the physical progress of this project at World Bank aids had been initiated in the end of the year was in such a low the year 2017 and it had to be level of 5 per cent. completed in the year 2023. Though provisions amounting to Rs. 714.21 372 National Audit Office | Annual Report - 2018
The physical progress of the Township Provisions of Rs. 133.5 had been Higher Education Higher Development Project of the University allocated during the year under review of Wayamba implemented with the aid for rehabilitation and reconstruction of the Government of Sri Lanka and activities of the Universities located in the Government of Saudi Arabia at an areas affected by Tsunami disaster estimated provisions of Rs. 280 million commenced in the year 2017 with the and technical resources development aid of the Government of Sri Lanka programmer for the Universities of and the Government of Kuwait. Kelaniya, Sabaragamuwa, Rajarata and Though activities of this project had to Colombo implemented under the aid of be finalized in the year 2019, the the Government of Sri Lanka and physical progress and the financial Asian Development Bank at an progress of the project at the end of the
estimated provisions of Rs. 1450 year under review remained at such a million and the project of low level of 37 per cent and 23 per commencement of the Faculty of cent respectively. Engineering in the University of Sri Jayawardenepura was in such a low level of 02 Per cent.
Applying For University Entrance through the Internet
Opportunity had been granted to apply for issues had been submitted by students in the University Entrance through the the registration of students for the Internet as well as under the normal academic year 2015/2016 in which both procedure in the academic year 2015/2016 systems, viz, the normal system and online for the first time. A sum of Rs.9.35 million system had been implemented. The had been incurred at the end of the number of issues submitted in the academic year 2017/2018 for this online academic year 2018/2019 in which only system and a sum of Rs. 0.70 million had the online system was activated had been incurred for the maintenance from increased up to 5602. the year under review. However, 1081
Sabbatical leave
As per number 07 of Chapter 5 of the that they would return to the service at the Establishments Code for Universities and end of the prescribed period after getting Higher Educational Institutions and in employed in another institution subsequent terms of the Circular of the University to receiving sabbatical leave or going Grants Commission No. 02/2018 of 17 abroad by obtaining study leave. However, December 2018, officers of academic and an amount of Rs. 761.3 million had to be non-academic staffs of the Universities recovered from 350 members of the should be entered in to a bond agreement academic and nonacademic staffs in National Audit Office| Annual Report - 2018 373 relation to 17 universities and higher agreements. Nevertheless, it was not education institutions as those officers had possible to recover the amount. not returned to service as per bond
Non-utilization of Capital Grants
A sum of Rs. 14,098 million had been had been retained even by the end of the provided by the General Treasury as year under review without utilizing the capital grants for the Universities during amount for relevant functions. the year under review. A sum of Rs. 2,261.2 million out of the Capital grants
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Payment of commitment charges due to non-commencement of the construction of the Moragolla Hydropower Plant of 31 MW
Delay in completion of projects Non-presentation of accurate information on import of coal
Non-vesting of Assets
Shortage in Supply of Coal
Payment of Pay As You Earn Tax by the Board, Which should be paid by employees of the Electricity Board
Payment of Allowances to the Staff
Power and Renewable Energy Renewable and Power Non-payment of interest on Consumers‟ Deposits
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Power and RenewablePowerEnergy and
Power and Renewable Energy
The following functions should have to be Exploring, planning, supervision and executed by the Ministry of Power and development of the activities relating Renewable Energy and 07 Statutory to the generation of power by the Boards/ Institutions with the intention of sources of water, heat, coal and wind making a Nation self- Rural electricity sufficient with energy by increasing the The management of the demand in a power generation by renewable power manner that creates energy efficiency sources. and the development of renewable power
The compilation, carrying out follow The development of renewable energy
up action and evaluation of policies, programmes and projects relating to The summary of audit observations subject of power and renewable energy revealed in executing the functions The compilation of a suitable power mentioned above by the Ministry and the policy for the control, regulation and Statutory Institutions, is given below. the utilization of power sources
Construction of the Moragolla Hydro Power Project of MW 31
It had been planned to commence the Development Bank. The physical progress construction of the Moragolla Hydro thereof had been 17 per cent by the end of Power Project in the year 2014 with the the year 2018. The awarding of the objective of obtaining a capacity of 31MW contract on consultancy services of the to the National Grid. However, this project project had delayed and as a result, the was commenced in the year 2017 after a project could not be commenced as delay of 3 years. The project had been scheduled. As such, a sum of Rs.28 estimated at a value of Rs.16,780 million million or US$ 177,931 had to be paid as and a sum of Rs.14,851million of that had Commitment Charges for loans obtained. been received from the Asian
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National Transmission and Distribution Network Development and Energy Efficiency Improvement Project
A sum of Rs.23,720 million had been Japan International Cooperation Agency received for this project and it had been JICA Institute relating to the scope of scheduled to be commenced in January consultancy, delay in obtaining approval 2015 and completed in January 2018. of JICA for the pre- qualifications (PQ) of
Renewable Energy Renewable Accordingly, the project had been contractors and for procurement commenced in January 2015 and it could documents. Moreover, the progress of the not be completed by January 2018 due to completion thereof had been only 84 per reasons such as delay in coming to an cent even by December 2018. agreement by holding discussions with the
Power and and Power Delay in Completion of Projects It had been planned to commence the A sum of Rs.4,149 million had been Broadlands Hydro Power Project with a received for constructing infrastructure capacity of 35 MW in August facilities of the Mannar Transmission 2013 and to complete it in August 2017. A Line, to develop Lot A Vavuniya Grid sum of Rs.9,424 million had been received Substation and to construct the Mannar for the project. Out of that, a sum of Grid Substation. The project was Rs.6,426 million had been spent by the end scheduled to be commenced in the year of the year under review and the physical 2015 and completed in the year 2017. The progress thereof had been 58 per cent. completion of the project had delayed due However, the said project had not been to the change in the scope of package for completed even by 31 May 2019. constructing the Mannar Network Substation, within the duration of the project.
Non-presentation of Accurate Information on Import of Coal
Lanka Coal Company (Pvt) Ltd had not September 2016 to 09 April 2018. As stated the accurate transaction value of such, the Sri Lanka Customs had levied a import of coal during the period from 19 penalty of Rs.205 million.
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Power and RenewablePowerEnergy and
Non-vesting of Assets A sum of Rs.7.36 million had been absence of a business partner. Even though invested by Sri Lanka Energies (Pvt) the Board of Directors of the Company Limited Company and Group together had made a decision to hand over the with a private company as a joint venture assets to the Ceylon Electricity Board and for constructing a factory for sale of a had communicated it to the General product related to cement by using Fly Ash Manager on 10 November 2016, the and Bottom Slag. However, the joint Ceylon Electricity Board had not vested venture agreement had been withheld and the said asset even by 15 July 2019. the asset had remained inoperative due to
Shortage in Supply of Coal
The Lanka Coal Company (Pvt) Ltd had an additional commission of Rs.2.93 not recovered an outstanding balance of million had been payable by the Lanka Rs.539.19 million even by the end of the Coal Company (Pvt) Ltd for five opened year under review from a coal supplying Letters of Credit which exceeded the company from a period of six years under validity period of 90 days. an agreed method of settlement. Moreover,
Pay As You Earn Tax In terms of the Cabinet Decision dated 13 such recovery. Accordingly, an additional December 2007, the Pay As You Earn Tax expenditure of Rs.4,210 million had been recoverable from employees by the salary incurred by the Ceylon Electricity Board revision of the year 2009, had been paid by during the period from the year 2010 to the the Ceylon Electricity Board itself without year 2018.
Payment of Allowances to the Staff Contrary to the Cabinet Decision dated 14 Rs.1,873 million had been paid in the year November 2007 and the provisions of the under review to the staff on the approval Management Services Circular No.39 of of the Board of Directors. 26 May 2009, various allowances of
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Accounts Receivable The Board had not taken action to recover million outstanding over a period of 05 trade debtors‟ balances and other years. receivable balances amounting to Rs.5,235 Risk of Investment Recovery The sum of Rs.404 million invested in therefor together with the said amount, had bonds by the Pension Fund of the Ceylon been at a risk. The adjustments or Electricity Board had not remained as a provisions required therefor had not been financial tool. As such, receiving interest made in the financial statements in the amounting to Rs.16 million year under review.
Power and Renewable Energy and Renewable Power Payment of Interest on Consumers‟ Deposits The interest payable in the year under Rs.1,562 million in terms of Sub section review on deposits of consumers of the 28(3) of the Ceylon Electricity Act, No.20 Ceylon Electricity Board had been of 2009.
Purchases contrary to the Electricity Act Urgent purchases of 1,398 GW hours during the period from April 2016 to amounting to Rs.34,326 million had been December 2018 contrary to Sub section 4c made by the Ceylon Electricity Board (ii) of Sri Lanka Electricity (Amendment) without following the procurement process Act, No.31 of 2013.
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Delay in the Amendment of Ceylon Petroleum Corporation Acts
Failure to finalize the Formulation of a National Policy on Natural Gas
Methodologies for the accomplishment of sustainable developmental goals had not been introduced.
Pending Case on Forward Securities Transactions (Hedging)
Network of Pipelines Transporting Petroleum Products Petroleum Resources Development Resources Petroleum
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382 National Audit Office | Annual Report - 2018
Petroleum Resources Petroleum Petroleum Resources Development
Making Sri Lanka an energy self-sufficient Activities related to production and nation with local petroleum and natural refining of petroleum. gas production was the main objective of Exploration of petroleum and activities the Ministry. For the purpose of achieving related thereto that objective, the Ministry of Petroleum Production of gas from petroleum Resources Development and the 04 producing sources and distribution of Statutory Boards / Institutions should gas. perform the following functions. Development of infrastructure facilities related to the supply and distribution of Formulation, follow-up and evaluation fuel. of policies, programmes and projects
Supervision of institutions. on the subjects related to the petroleum resources development. Audit observations revealed in the audit Import, refining, storage, distribution test checks conducted on the and sale of products related to accomplishment of the aforementioned petroleum. role are summarized and mentioned below.
Amendment of Ceylon Petroleum Corporation Acts
A proposal had been passed in the Products (Special Provisions) Act, No. 33 Parliament in the year 2006 to include the of 2002 and Ceylon Petroleum Petroleum Industry in to the industries Corporation Act, No. 28 of 1961 had been regulated under the commenced in the year 2006 for the Public Utilities Commission of Sri Lanka provision of instruments required to Act, No. 35 of 2002 as there is no regulate the industry to the regulatory authority in relation to the Public Utilities Commission of Sri Lanka petroleum industry since the year 2004. It had not been finalized by 31 December Accordingly, the fundamental activities 2018. related to the amendment of the Petroleum
Formulation of a National Policy on Natural Gas
Power had been entrusted upon the Extraordinary of 21 September 2015. The Ministry of Petroleum Resources National Gas Policy scheduled to be Development for the preparation of a formulated and finalized by June 2018 had national policy on natural gas by a not been finalized even by the end of the notification published in the Gazette year under review.
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Development and Rehabilitation of the Oil Tank Farm in Trincomalee The Oil Tank Farm in Trincomalee had the lower part of the tank system out of the been established in the year 1930 at the total tanks of 99, are utilized by the Indian harbour of Trincomalee and it is the Oil Company. Even though the activities second deepest harbour of the world of taking fundamental decisions for the according to its geographic location and modification of the rest of the tanks that therefore, it has become the focus of had been abandoned had been initiated on attention of the entire world. The Oil Tank 29 April 2015, modernization project System is comprised of 102 tanks with the could not be implemented the even by 31 capacity of 12,500 cubic meters together December 2018 as a final decision had not with other facilities. Fourteen (14) tanks in been taken on that.
Petroleum Resources Petroleum Accomplishment of Sustainable Developmental Goals
Every government institution should have The Ministry had not established a functioned in terms of the “2030 Agenda methodology for collecting data on the for Sustainable Development adopted by accomplishment of the sustainable the United Nations”. The Ministry had not developmental goals and an officer had not made arrangements to identify sustainable been attached for that purpose. developmental goals and targets related to the functions which come under the The Ministry of Petroleum Resources purview of the Ministry and the milestones Development had not identified financial for reaching those targets and indexes for provisions required for the measuring the approaches to targets. accomplishment of the sustainable developmental goals. Further, the Ministry The Ministry had not issued any internal had not identified a methodology for circular or guidance even by 31 December deploying the physical resources available 2018 on the operation of the staff of the and the present staff of the Ministry for Ministry for the accomplishment of the that purpose and a methodology for the sustainable developmental goals and even regulation of the relevant functions for the an awareness programme had not been accomplishment of the sustainable implemented for the interested parties. developmental goals. Local Petroleum Market
The Ceylon Petroleum Corporation had petroleum market, the average price of a supplied 87 per cent of the local petroleum barrel of crude oil had increased by 31.9 market in the year 2018. A sum of USD per cent from USD 57.79 existed in the 4,152 million had been incurred for the previous year up to USD 76.25 in the year importation of the entire petroleum under review. The average price per metric requirement in the year under review. As a ton of refined petroleum products imported result of the changes in the overall had been increased by 25.3 per cent from
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Petroleum Resources Petroleum USD 518.9 recorded in the year 2017 up to USD 650.02 recorded in the year 2018.
Financial Results and Net Assets Position of the Ceylon Petroleum Corporation According to the financial statements amounting to Rs.77,120.1 million and presented to the audit, the Corporation had private sector debtors amounting to Rs. recorded a net loss before taxation 9,531.9 million.. The arrears to be amounting to Rs. 105,028.6 million during recovered from the Ceylon Electricity the year under review. A Profit of Rs. Board and Sri Lankan Air lines to the 2,815.2 had been earned in the previous Corporation were Rs. 46,813.1 million and year. According to the Central Bank Rs.29,005.3 million respectively.
Report for the year 2018, increase in crude oil prices, depreciation of the rupee The minus value of net assets of the compared with the US dollar (a loss of Rs. Corporation in the preceding year 82,717.3 million had been recorded by the amounting to RS.176,991.9 million had depreciation of rupee) and the delay in the increased up to Rs.281,761.5 million at the revision of local retail price level of end of the year under review and thereby, petroleum products until May 2018 had the minus value had further increased by been the major reasons for the loss Rs. 104,769.60 million. Minus variation in incurred by the Corporation in the year the currency ratio and short term and loan 2018. term credits obtained from foreign currency were the major reasons for this According to the financial statements of accumulated loss. Therefore, the the year under review presented to audit, Company's ability to make enough money the value of total trade debtors as at 31 to stay afloat or avoid bankruptcy without December 2018 was Rs.86,652.1 million obtaining the financial assistance of the and it was an increase of 12.60 per cent Government had become controversial. compared with the value of trade debtors in the previous year amounting to The financial result of the Corporation in the year under review and 05 preceding Rs.77,005.4 million This debtors balance years is shown in Diagram 50. was comprised of public sector debtors
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80,000.00 60,000.00
40,000.00 20,000.00 - (20,000.00) 2013 2014 2015 2016 2017 2018 Net Profit/(Loss) of the CPC (40,000.00) (60,000.00)
Net Profit/(Loss)Rs.Million (80,000.00) (100,000.00) (120,000.00) Year
Petroleum Resources Petroleum
Diagram 50 : Net Profit / (Loss) of the Ceylon Petroleum Corporation Source: Audited financial statements of the Corporation
Forward Securities Transactions (Hedging)
The Ceylon Petroleum Corporation had million as legal expenses on the Hedging been summoned as a party in the transaction of the Corporation. A sum of arbitration process relating to the Hedging Rs. 370.6 million therefrom had been agreements entered into between the incurred by the Central Bank of Sri Lanka Ceylon Petroleum Corporation and several whilst a sum of Rs. 567 million had not commercial banks. A sum of US $ 60 been reimbursed by the Corporation to the million (Rs.7,613 million ) had been paid Central Bank of Sri Lanka during the to the Standard Chartered Bank (SCB) on period 2011-2014. Nevertheless, a sum of 03 June 2013 under the arbitration Rs. 3.1 million had not been reimbursed by instruments between the relevant parties the Corporation even up to the end of the whilst US $ 27 million ( Rs. 3,881 million year under review. The Commercial Bank ) had been paid to the Deutsche Bank on had filed a case at the Commercial High 04 August 2016. According to the Court against the Ceylon Petroleum information received, the Corporation had Corporation for a right worth US $ 8.6 sustained a loss of Rs. 13,641 million as at million, and the case remained pending 31 August 2018. The Central Bank of Sri even by the end of the year 2018. Lanka had spent a sum of Rs. 941.2
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Petroleum Financial Management
Long term debt and short term debts based 7,732.9 million. Accordingly, the on US dollars had increased by Rs. 1,311.6 Corporation had obtained short term and million or 493 per cent and Rs.115,021.1 long term debts based on foreign currency
or 64 per cent at the end of the year under during the year 2018 as depicted in
review when compared with the preceding financial statements and they had been Resources year. As a result, a cost totaling Rs. reinvested in short term basis. 94,770.60 million had been incurred as Accordingly, the Corporation had been Rs.12,053.30 million as the interest failed to minimize the disadvantage of expenditure in the year under review and severe debt interest cost incurred by the Rs. 82,717.3 million as currency loss Corporation and the variation in foreign occurred on the variation in foreign currency through the settlement of debt currency. Likely, value of total investment based on foreign currency using the funds at the end of the year under review had available in the Corporation. It had made increased by Rs. 83,180.3 or 176 per cent severe impact on the financial result of the and the total interest income earned from Corporation. that in the year under review was only Rs.
Network of Pipelines Transporting Petroleum Products
Petroleum products are transported The pipe in diameter of 12 inches laid through pipelines laid decades ago from before 05 decades to transport fuel from Colombo harbour to the Terminal in Colombo Harbour (south jetty) to Kolonnawa, and the said pipelines needed Kolonnawa remained non-functional for repairs. Several of the pipelines were about a decade. A length of 300 meters of unrepairable, and hence, abandoned that pipe had been renovated in the year already. Leakages were reported in fuel 2011at the area of Mahawatta, but it had pipes of the sizes 10 inches and 14 inches not become fully functional. Provision that are being utilized. Therefore, it amounting to Rs. 260 million had been became an urgent requirement either to made through a Paper of the Board of renovate or modernize the pipelines. Directors of the Ceylon Petroleum Storage Terminals Limited (CPSTL) bearing No. Meanwhile, no link whatsoever existed 09/137 on 13 February 2015 to renovate between the Terminals in Muthurajawela the pipeline. Accordingly, a length of and Kolonnawa hindering the optimal 2,171 meters had been renovated in the utilization of those terminals. Further, even year 2015 incurring a sum of Rs. 120 though the approval of the Cabinet of million and 2,573 meters had been Ministers had been granted on 13 renovated in the year 2016 at an September 2012 for the implementation of expenditure of Rs. 153 million. Even “Cross Country Pipeline Project”, it had though the rest of the length of the pipeline not been implemented. to be renovated in order to make it fully
National Audit Office| Annual Report - 2018 387
functional had been less than 1000 meters, prevent the risk of a crippled fuel supply to no action had been taken promptly to the country. complete the renovation process so as to
Establishment of a New Bulk Depot in Northern Province
The bulk depot of fuel being maintained The bulk depot is being conducted in the by the Ceylon Petroleum Storage same premises of the Cement Corporation Terminals Limited provides for the after being renovated and expanded. growing demand for fuel of the masses and According to the decision of the Cabinet of security forces in the North that had grown Ministers dated 19 October 2016, it had rapidly in the wake of the end of the war. been decided to conduct this bulk store
Petroleum Resources Petroleum That depot was maintained at the premises after entering in to a formal lease of the Cement Corporation in agreement after clearing the title of the Kankasanturai. The Ceylon Petroleum land and if there is any arrears in the lease Storage Terminals Limited had been amount, it should be paid to the Cement informed by the Cement Corporation in Corporation. Nevertheless, action had not the year 2011 that the said bulk depot been taken in accordance with that should be shifted from that location. decision even by 30 May 2019. Intercompany Transaction Balances and Agreements
Systematic supervision and guidance of systematically informed of the decisions the functions of Subsidiary Companies taken by the Board of Directors of the said established for a certain definite objective Company. As an example, the Corporation by a certain State Corporation had become had not been made aware of the provision a highly essential task. However, Ceylon of fuel to ships, which is the major Petroleum Corporation had not business activity of the Corporation systematically reviewed the functions of implemented as per the decision of the the Ceylon Petroleum Storage Terminals Board of Directors of the Subsidiary Limited, which is the Subsidiary Company Company. Likely, there were considerable of it. According to the Section 4.2.3 (b) of differences between current accounts of the Public Enterprises Circular, No. the two parties for a longer period of time PED/12, dated 02 June 2003, the Board of due to non-availability of systematic Directors of the parent company should coordination on intercompany review the performance of the subsidiary transactions. It had become a difference of companies half-yearly and should prepare Rs. 2,475.80 million at the end of the year a performance report. Even though the under review. performance report prepared so should be submitted to the Department of Public Further, systematic procedures required to Enterprises, it had not been done so. update and maintain the said agreements Further, the Corporation had not been with the consent of the all the parties had not been taken even by 30 May 2019 388 National Audit Office | Annual Report - 2018 though the validity period of the Corporation (LIOC) and Ceylon Indian Oil shareholders‟ agreement and Share Company and Ceylon Petroleum Storage purchase agreements for Common User Terminals Limited had been expired on 31 Facility among the Ceylon Petroleum December 2008. Corporation, Lanka Indian Oil
National Audit Office| Annual Report - 2018 389
390 National Audit Office | Annual Report - 2018
Import of Dairy Cattle
Import of Animals insecurely to the Country
Failure to Achieve Sustainable Development Goals
Higher Expenditure on Animal Foods
Renovation of Ambewela
Factory Rural Economic Affairs Economic Rural
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Rural Economic Affairs RuralEconomic Rural Economic Affairs
For the amelioration of economic standard Formulation of policies, programmes of the rural community who plays and projects, and implementation, significant role of the Sri Lankan monitoring and evaluation in relation economy, the Ministry of Rural Economic to the subject of Rural Economy. Affairs functioned under that title from Provision of financial assistance for the January 2018 to 11 May 2018 and as the rural economic affairs. Ministry of Fisheries and Aquatic Expansion of livestock related research Resources Development and Rural sector with the use of state-of-the-art Economy (Rural Economy Sector) from 12 technology and taking all necessary May 2018 to 27 December 2018 and steps to bring about qualitative and subsequently, as the Ministry of quantitative development in the field of Agriculture, Rural Economic Affairs, production upon its outcome. Livestock Development, Irrigation and Fisheries and Aquatic Resources The Audit observations revealed at the Development (Economic Affairs and audit test checks conducted on the Livestock Development Sector) from 28 discharge of the above functions by the December 2018 and the following Ministry and the institutions functioning functions should have been discharged by thereunder are analyzed below. the Ministry, a Department, 05 statutory institutions and 13 Special Economic Centres functioning under the Ministry.
Import of Dairy Cattle
Under an agreement entered into by the Sri Livestock Development Board had paid Lanka Government with the Australia and only an interest of Rs.28.26 million to the Netherland Governments, 4,500 dairy Treasury during the period from the year cattle had been imported. The above 4,500 2012 up to 31 December 2018. imported dairy cattle had been handed over to the Livestock Development The Chairman of the Board had informed Department under a Countervailing Credit the Audit on 22 December 2017 that the Agreement. The Livestock Development above installment could not be paid since a Department was required to pay to the colossal amount of money had to be spent Treasury the amount to be paid to two for the animals imported under first and foreign companies under the second stages. Countervailing Credit Agreement and the relevant interest. The amount payable by the Livestock Development Board and the According to the information made outstanding interest as at 31 December available by the National Livestock 2017 had been Rs.5,374.17 million. The Development Board, out of 2,143 animals
National Audit Office| Annual Report - 2018 393
brought to the Farm under the first phase, Under the first phase, the reproductive only 883 animals or 41 per cent of the capacity of these animals stood at 45 per imported animals could be observed by the cent during an average of 7 years and it year 2018, after lapse of 05 years. Seventy had been 52.4 per cent during 4 years two per cent or 1,796 animals out of 2,489 under the second phase. The reproducing animals imported in the year 2015 capacity of the second generation had been remained after lapse of 3 years, in 2018. at a minimum level as 21.4 per cent and 7.17 per cent under the first and second phases respectively.
Import of 20,000 Dairy Cattle
Without being conduct an phase depending on its 2017 had been imported. in-depth study or success while amending A sum of US$ 16.74 Rural Economic Rural Affairs feasibility study on the Sections 3.01 and 3.02 of million had been spent proposal for the import of the above agreement. In for vaccinations, testing 20,000 dairy cattle to the order to obtain approval charges and Customs Ministry of Rural for the methodology Duty relating to those Economy, an agreement adopted in the 5,000 imported dairy worth US$.73.95 million implementation of this cattle. A sum of US$ had been entered into project, a Cabinet 868,518.52 or Rs.135.01 between the Ministry and Memorandum had been million had been spent for a private company on 14 presented and relevant technical management October 2014 without Cabinet approval had and capacity development following the been granted on 04 April of those cattle. Procurement Procedure to 2017. Nevertheless, it was award the contract to the observed according to the same contractor who had Before taking decision on following matters that been selected by calling the import of these 20,000 output of those animal for tenders in the year dairy cattle, a proper remained at a minimum 2007. feasibility study had not level. been conducted by Despite being identified studying farms of the that the project was Board in which imported Out of the above dairy unsuccessful, it had been dairy cattle had been cattle, 803 out of 858 agreed in November 2016 retained, through the cows imported under to import 20,000 dairy persons who had the second stage had cattle under a revised expertise knowledge given birth to calves agreement and to import thereon. A number of for the first instance 5,000 of such animals 5,011 dairy cattle and 242 or 53 per cent under the first phase and comprising 1,994 animals of the above calves the remaining 15,000 in May 2017 and 3024 were male. Further, animals under the second animals in December, out of the above 803
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Rural Economic Affairs RuralEconomic
calves, 361 or 45 per second phase, a cattle as 2,500 cent had died. The sample of 858 animals animals, 7,500 number of imported was selected and it animals and 5,000 cows remained by 28 had been reported that animals during the February 2019 had 12 farmers were years 2018,2019 and been 533 and the sustaining losses 2020 respectively. number of pregnant ranging from Advance aggregating cows stood at 210 or Rs.25,240 to Rs.1,749.67 million 39 per cent. It was Rs.5,200,000 monthly had been paid on 08 observed that number from 858 animals. May 2018 comprising of calves reproduced Rs.291.61 million, at the second instance The committee Rs.874.83 million and was 116. appointed to evaluate Rs.5,83.22 million Accordingly, only 13 the performance of respectively. It was
per cent of the project of the import observed that the Sri imported 858 cows of dairy cattle had Lanka Government had given birth to stated that the had to bear the calves in the second expected output of the interest relevant to instance. cattle imported on 20 this import and the March 2018 under the foreign exchange Out of the sample of first phase of the depreciation loss 902 animals selected import of 20,000 before the import of from the cattle dairy cattle was those cattle to the imported on 14 May successful. While country. Since the 2017 and 02 August stating that the first project was 2017, only 656 phase was successful, unsuccessful, at least mother cows had been it had been 2,500 animals due to alive by 28 February recommended that the be imported in the 2019 and it was import of remaining year 2018 had not established that out of 15,000 dairy cattle been imported even 902 animals was suitable. by September 2019. purchased, only 190 Provisions had not Accordingly, the animals were living in been made in the advance paid in that the farm after giving annual budget 2018 respect had been births to calves. for the import of these ineffective. dairy cattle. It had Out of 3034 animals been expected to imported under the import 15,000 dairy
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Import of Animals Insecurely to the Country
In terms of Section 38 of the Animal local cattle and the people as well. Further, Diseases Act No.59 of 1992, every animal according to that report the measures to be imported into Sri Lanka shall be subject to immediately taken had been determined quarantine. Nevertheless, only a sample of and a risk in destructing certain animals cattle imported into this country under the too had been revealed. Nevertheless, first phase had been examined and without being retained the animals accordingly the Quarantine Officer and the imported under the second phase in Director- Veterinary Research had isolated areas under the supervision of presented a quarantine report. Veterinarians for 30 days, such animals Accordingly, having examined a sample of had been directly provided for the farms. such animals, the Director General of According to the post-mortems done in Department of Animal Product and Health respect of the death of imported animals, it Rural Economic Rural Affairs had informed the Secretary to the Ministry was observed that those animals had of Rural Economic on 28 February 2018 in afflicted with BVD virus and it had not writing that there would be a risk in been detected by way of quarantining in infecting diseases of such animals to the the importation.
Failure to Achieve Sustainable Development Goals
With the objective of decreasing the Livestock Development Board and among import of milk powder by increasing milk the privet farmers under the Ministry. production and thereby, increasing the However, the quantity of imported milk fresh milk consumption, foreign loan of powder during the year 2011 had been Rs.6,435 million had been obtained for the 84.02 metric tons and it had increased up dairy cattle import project from the year to 99.03 metric tons in the year 2018. 2012 to 2018 and 9,500 cows had been Accordingly, the milk powder importation imported thereunder. Those imported dairy had not decreased as desired and the cattle had been distributed to the National sustainable goals had not been achieved.
Higher Expenditure on Animal Foods
The main operating process of the not been drawn on growing sorghum, National Livestock Development Board, maize as an under cultivation on large Mahaweli Livestock Enterprises Ltd. and areas of lands that remained idle in animal Sri Lanka Poultry Development Company production farms and to produce foods by (Private) Limited. had been the production using food production machines that and marketing of animal products. These remained idle and thereby decrease the institutions had sustained continuous animal food production expenditure. The losses owing to higher expenditure aforementioned institutions had purchased incurred on animal foods. Attention had foods by calling for limited quotations
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Rural Economic Affairs RuralEconomic deviating from the open competitive poultry food had been purchased for 03 method.. farms of the National Livestock Development Board and 02 farms A sample of 04 farms in which belonging to the Mahaweli Livestock imported cows were rearing from Enterprises Ltd. and Sri Lanka Poultry among the cattle farms of the National Development Company (Private) Livestock Development Board were Limited and Rs.225.22 million had examined. Accordingly, 14,385.21 tons been spent thereon. The above of animal food had been purchased expenditure had been 64 per cent, 54 from 3 institutions at a cost of percent and 36 per cent of the poultry Rs.735.99 million during the year income of the farms belonging to Sri 2018. That expenditure had ranged Lanka Poultry Development Company between a higher percentage from 63 (Private) Limited, Mahaweli Livestock per cent to 89 per cent of the income of Enterprises Ltd, and 03 farms of the
each farm. The total loss of those 04 National Livestock Development farms in the year 2018 had been Board respectively. Hence, 2 of the Rs.411.53 million. Nevertheless, 4 above 05 farms had suffered losses food production machines capable of during the year 2018. Nevertheless, 06 producing total of 3.75 tons of food per grinding and mixing machines capable hour viz, 10,950 tons per year (3.75 of producing total of 9 tons of food per tons @ 8 hours per 365 days) remained hour viz, 26,280 tons per year (9 tons idle in the 4 farms of the National @ 8 hours per 365 days) remained idle Livestock Development Board. in 5 farms belonging to the above three For the purpose of implementing institutions Poultry project, 4,553.33 tons of
Renovation of Ambewela Factory
The Milco Private Ltd. had spent Euro production had been 7,087 tons during the 26.69 million or Rs.4,625.35 million for year 2018 and it had dropped up to 6,719 the renovation of Highland Milk Factory, tons in the year 2018. Accordingly, Ambewela and production had been expected increase in the production commenced in August 2017 by installing through the installation of new machines new machines. According to the progress had not been achieved during the year reports of the Factory, the milk powder under review.
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398 National Audit Office | Annual Report - 2018
Coverage of Facilities for Pipe borne Water and Pipe borne Sewers
Delay in Completion of Projects
Suspension of Ambathale Energy Saving Project
Jaffna Kilinochchi Water Supply Project
Colombo District East Water Supply Project
Eastern Provincial Water
Supply Development Projects City Planning and Planning City Supply Water
National Audit Office| Annual Report - 2018 399
400 National Audit Office | Annual Report - 2018
City Planning City Water and Supply
City Planning and Water Supply
Providing people with favourable living National Physical Plans for the conditions through sustainable city performance of urban development planning, safe drinking water supply and activities improved sanitation facilities had been the Taking necessary action to ensure the objective expected by the Ministry of City supply of safe drinking water to every Planning and Water Supply and the citizen institutions under its purview. The Investigation, planning, designing, following functions should have been construction, direction and performed by the Ministry and the maintenance of water supply services, Department of National Community Water drainage systems and sanitation Supply and the National Water Supply and facilities Drainage Board under its purview in Taking necessary steps for the achieving those objectives. efficient and proper execution of the Community Water Supply and Formulating of policies, programmes Sanitation Projects. and projects on the subject of city
planning and water supply and The Audit observations revealed during monitoring and evaluation of the the Audit test checks carried out relating to matters coming under the scope of the the performance of these functions by the relevant Departments and Statutory Ministry and the above two institutions Institutions. under its purview, are summarized and Planning and development of special shown below. cities Direction and implementation of all construction works based on the
Coverage of Facilities for Pipe borne Water and Pipe borne Sewers The Water Supply Board had implemented According to the Annual Action Plan of 26 large scale foreign aid projects on water the Water Supply Board, it had been supply, 07 large scale foreign aid projects expected to achieve 54.9 per cent and 2.7 on sewerage, 14 domestic funded water per cent relating to pipe borne water and supply projects, 13 small and large scale piped sewerage facilities respectively by projects and 09 schemes for water sectorial the end of the year 2018. However, the community facilities in the year under progress achieved by the end of the year review under the supervision of the under review had been only 50.5 per cent Ministry, with the objective of water and 2.06 per cent respectively. Moreover, supply and sanitation. the number of new water connections supplied in the year under review stood at 109,462 and as compared with the number National Audit Office| Annual Report - 2018 401
of water connections of 126,701 supplied Details on the coverage of water supplies in the preceding year, it had decreased by of the National Water Supply and 14 per cent. As such, the total number of Drainage Board for the period of 5 water connections supplied by the end of preceding years are given in figures 51 and the year under review had been 2,328,634. 52
70.00 2,500,000
60.00 50.00 2,000,000 40.00
30.00 1,500,000 Number of
20.00
10.00 Expected New Progress 0.00 Progress 1,000,000 connections
Actual Number of
2015 2017 2013 500,000
Progress Connections
NumberofConnections Percentage of Expected/ Actual Expected/ Actual of Percentage
0
2013 2015 2017 By the end of 2018… By of theend Year Year
City Planning and Water Supply Supply Water and Planning City
Figure 51- Total number of pipe borne Figure 52- Increase in water connections Source:- Performance Report 2018 Source:- Performance Report 2018
Production and Consumption of Water
Data on purified water production, Board for the period of 5 preceding years consumption and non-revenue water of the are given in figure 53 below. National Water Supply and Drainage
800.00
700.00 600.00 500.00 Water Production - Cubic metre millions 400.00 Water Consumption - Cubic metre
300.00 Cubic metre Cubicmetre millions millions – 200.00 Non-revenue Water - Cubic metre 100.00
Water millions 0.00 2014 2015 2016 2017 2018 Year
Figure 53 Purified Pipe borne Water Production, Consumption and Non-revenue Water Source:- Performance Report 2018
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City Planning City Water and Supply
The Board had succeeded in reducing the non-revenue water in the city of Colombo, ratio of entire non-revenue water, island being at a very weak level, failure in wide from 25.24 per cent in the preceding completing those projects within the year to 24.93 per cent, by 1.05 per cent in expected period had mainly attributed to the year under review. The non-revenue this situation. Moreover, the ratio of non- ratio of water in the city of Colombo revenue water in the Southern, Uva and which was 43.14 per cent in the preceding Sabaragamuwa regions had exceeded even year, had taken a very high value of 41.65 25 per cent in the year under review. If the per cent in the year under review as well. Board had the capability of reducing the Matters such as the progress of the 2 entire non-revenue water by 1 per cent, the projects under the Greater Colombo Water approximate cost of Rs.270 million could and Sewerage Management Investment have been minimized in the year under Programme, targeting the minimization of review.
Delay in Completion of Projects
Activities of 07 large scale foreign funded settlements, environmental and projects implemented in the year under resettlement issues, delay in awarding of review had been delayed from 349 days to contracts and supply of low standard pipes 2009 days due to reasons such as weak by contractors. performance of contractors, delay in land
Ambathale Energy Saving Project
Even though the works of the Ambathale value) equivalent to US$ 1.5 million by 31 Energy Saving Project should have been March 2019. completed in 63 months, by 31 December 2018, out of that period, 52 months or 83 The contract (ICB 04) of supply of water per cent of the said period had lapsed. pipes and accessories including laying of However, the total physical and financial pipes of 1,200 mm in diameter for a performance of the project had been 10.84 distance of 9 km from the Ambathale per cent and 11.67 per cent respectively. Water Purification Centre to the Elihouse Moreover, the utilization of the loan had water store was due to be commenced in taken a minimum value of 15.5 per cent July 2016 and completed on 04 May 2018. and out of 05 components of the project However, the distance of laying water which should have been implemented, 03 pipes had achieved only a low progress of components had not achieved any progress 1,316 metres (14.62 per cent) out of 9,000 whatsoever. Accordingly, the Government metres due to the weak performance of the had to pay commitment charges of contractor. Rs.227.89 million (2.1 per cent of the loan
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Even though the payment of money had account is opened, the contractor had been suspended for a period of 06 months discontinued constructions of the project by the French Agency until a new bank from July 2018 up to 31 July 2019.
Jaffna Kilinochchi Water Supply Project
The loan amounting to Rs.5,363 million commitment charges had to be incurred by granted for the purpose of supply of water the Government on behalf of the lending from Iranamadu Wewa to Jaffna, which is agency due to cancellation of the said loan. one of the components of the Jaffna Kilinochchi Water Supply Project had The contract of constructing 18 water been cancelled due to public protest. A towers in Jaffna awarded for Rs.1,139 sum of Rs.124.64 million representing 2.3 million and the contract of laying of per cent of the estimated value of the said purified water transmission pipes awarded project had been spent by then. Moreover, for Rs.5,536 million under the aforesaid
City Planning and Water Supply Supply Water and Planning City an additional expenditure of Rs.84.95 project had been completed by 31 million comprising an indemnity of December 2018. However, all Rs.11.95 million, evaluation fees of constructions had remained idle by the end Rs.15.17 million and Rs.57.83 million of of the year under review due to the non- existence of a water source for the project. Colombo District East Water Supply Project
The contract relating to package No.1 of However, the amount spent for purchase of the Colombo District East Water Supply pipes and accessories for the said project Project funded by a Government had been an overpayment of Rs.531 commercial bank had been awarded to a million as compared with the rates of the bid value of Rs.4,700 million on 23 July Water Supply and Drainage Board. Even 2014 to a private institution. The main though the distance expected in laying of objective of this project had been indicated pipes under the project had been 32,550 as supply of a distribution water system metres, pipes had been imported for laying with a distance of 176 km to cover the for a distance of 131,000 metres and an areas of authority of the Divisional overpayment of Rs.77.7 million had been Secretariats of Padukka, Seethawaka, paid to the contractor therefor. Moreover, Horana and Homagama and laying of in comparison of the amount spent for transmission lines with a distance of 4 km purchase of 4,900 water metres with the and supply of service connections. normal market value, an overpayment of Rs.8.9 million had been made.
404 National Audit Office | Annual Report - 2018
Eastern Provincial Water Supply Development Project
A water tower, a pump house and a there was no suitable water source transmission and distribution system had available therefor, the said project had been constructed by spending a sum of remained idle from 30 September 2016 by Rs.253.83 million by the Panama Water the end of the year under review. Supply Scheme under this project. As Note
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406 National Audit Office | Annual Report - 2018
Retention of Employees‟ Provident Fund Contribution
Failure to obtain desired output from the rehabilitated tanks
Human Resources Management
Assets not properly acquired
Uneconomic Expenditure Irrigation and Water and Irrigation Resource
National Audit Office| Annual Report - 2018 407
408 National Audit Office | Annual Report - 2018
Irrigation and Irrigation Resource Water
Irrigation and Water Resource
The expected outcome of this sector was Management, Kotmale for the years 2017 ensuring the availability of irrigation water and 2018 amounted to Rs . 927,580 had for agricultural purposes. The Ministry, a been retained in the Deposit Account Department and one statutory institutions without remittance. had to perform the following functions to achieve this outcome. Not obtaining desired output from the rehabilitated tanks. Preparation and Implementation of Policy Programmes and Projects Incurring a sum of 54.83 million made pertaining to the every subject of available by the Ministry to rehabilitate Irrigation, Reservoirs, Water major and medium irrigation schemes Resources Management and the from the year 2015 to 2018, three tanks Department under the Ministry and belonging to the Department of Agrarian Public Enterprises and the scope Development had been rehabilitated.
thereon. Nevertheless, out of that, 15 acres of
Promotion, construction, paddy lands in extent which were being implementation, maintenance, cultivated from the Mudiyannegama Tank redevelopment and management of the rehabilitated incurring a sum of Rs. 3.71 Irrigation Schemes, Water Transport million , 14 acres had been reclaimed. A and Flood Protection Schemes, sum of 6.19 million had been spent by the Saltwater Disposal Schemes. Ministry in the years 2016, 2017 and 2018 Prevent pollution of river canals and to repair the Kudagale Tank which other water sources. belonging to the Department of Agrarian Rainwater harvesting. Development. Since the lake sluice was Engineering consulting services and broken, the water collected in the tank constructions. could not be used for cultivation. Since Implementation of the Water non- cultivation of 95 acres of paddy Resources Board Act. fields which are fed by the lake , the expenditure made for the rehabilitation of The following shortcomings were revealed the tank amounted to Rs. 6.19 million had at the audit test checks carried out in been unproductive. respect of the achieving of the above functions by the Ministry and the Human Resources Management institutions under its‟ purview. Six designations had been approved for Retention of Employees‟ the International Training Institute for Irrigation and Water Management in Provident Fund Contribution Kotmale. Fifteen had been recruited Employees‟ Provident Fund Contribution beyond the approved number of posts which was deducted from the salaries of thereof . Without recruiting for 04 the Employees of the International approved labourer posts , 28 persons Training Institute on Irrigation and Water were recruited on contract basis and a sum
National Audit Office| Annual Report - 2018 409
of Rs. 19.58 million had been paid as Although the 07 lecturer posts had been salaries and allowances for the year under approved for the International Training review. The institute had recruited 06 Institute for Irrigation and Water persons for 05 designations without having Management Kotmale, external lecturers the approval of the Department of had been occupied to do so without Management Services. Although the recruiting those lecturers. A total of Rs. position of Management Assistant had 1.80 million had been paid as Rs. 1.1 been approved, 10 employees for that and million and 0.70 million to 25 and 11 25 workers on casual basis had been external lecturers respectively for the years recruited. 2017 and 2018 . Assets Management Departments, Ministries and Water Resources Board, actions had not been Arrangements had not been made to take taken to transfer ownership to these over the assets valued at Rs. 640,354 institutions. The value of those vehicles provided to the former Minister in the was calculated and included in the year 2017 . Allowances totalled to Rs. statement of non-financial assets.
Irrigation and Water Resource Water Irrigationand 3.12 million, Rs. 2.20 million and Rs. 0.92 million respectively had been paid to Assets not properly acquired the Minister's personal security officers, from the provisions of the Ministry and the Eighty nine vehicles valued at Rs. 332.95 Department in contrary to Paragraph 2.1 million and 27 motorcycles valued at of the Presidential Secretary's Circular No. Rs.0.27 million had been used without CA / 1/17/1 of 10 May 2010 . taken over to the Department of irrigation from 07 public institutions Even though 129 vehicles belonging to the Ministry had been provided to Other Uneconomic Transactions When construction of the feeder canal Subsequently, it had been entered in to from Siyabalangamuwa Tank to Usagala agreements with the same suppliers of Tank, the agreement entered in to with these machines at higher prices. Due to the machinery suppliers had been this, the Irrigation Department had cancelled before the expiry of the contract incurred an uneconomic expenditure of with the suppliers of machinery. Rs. 1.16 million.
410 National Audit Office | Annual Report - 2018
Improvement of the Production of Organic Fertilizer
Over-valuation of the Insurance Liability
Research Expenditure
Abandonment of Projects
Fruitless Expenditure
Agriculture Fishermen's Pension and Social Security Benefit Scheme
Farmers‟ Pension and Social Security Benefit Scheme
Farmers Trust Fund
National Audit Office| Annual Report - 2018 411
412 National Audit Office | Annual Report - 2018
Agriculture
A vibrant and dynamic agricultural sector anicuts and canals in dilapidated to increase the food production for food condition and asweddumaization of security and national prosperity in the fallow fields. country is the vision of this Sector. The following functions should have been The audit observations revealed at audit performed for achievement of the said test checks carried out with regard to the objective. performance of those functions by the Ministry of Agriculture, 2 Departments, 10
Formulation, direction, facilitation and Statutory Bodies and Institutions, a Agriculture implementation of policies, programs, Foreign Funded Project and 2 Funds are projects for the development of summarized below. Agriculture Sector. Establishment of food security through Improvement of the the proper management of domestic Production of Organic food items and additional food reserves Fertilizer Providing the public with environmental friendly, hygienic and Provisions totalling Rs.400,000 granted to poison free agricultural products the District Offices in Kalutara and Matara through the waste management by by the Ministry of Agriculture and loans minimizing the use of chemicals and amounting to Rs.900,000 granted to three pesticides in food production, farmers by 03 Agrarian Services Centres streamline the use of chemical for improvement of the production of fertilizers organic fertilizer had not been utilized for Enhancement of the productivity of the said purpose. crops and minimization of the production cost by mechanization, Non-completion of Research innovation, efficient water Projects management, diversification of crops and introduction of the methodologies Even though the Hector Kobbekaduwa of soil conservation Agrarian Research and Training Institute Self-production of high quality seeds, had spent a total sum of Rs.9.6 million promotion of value added production including Rs.6.2 million for 09 Research methods among the farmers, encourage Projects in the years 2015 and 2016 and the manufacturers towards high quality Rs.3.4 million for research activities of 04 agricultural products in local and projects in the year 2017, the said foreign market by introducing Good researches had not been completed even Agricultural Practices(GAP) and good by the end of the year under review. As production practices such, there was no progress despite the Contribute to the increase of paddy expenditure incurred since the year 201 cultivation by the renovation of tanks, 5.
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Over-valuation of the According to the Agreement pertaining to the re-insurance mentioned above, it could
Insurance Liability be claimed a re-insurance after paying the
The Agricultural and Agrarian Insurance compensation up to Rs.2,185.00 million Board had decided to grant a free by the Board and a compensation of insurance liability with a maximum value Rs.1,500.00 million by the National of Rs.7,500.00 million in respect of 6 Insurance Trust Fund. However, the value compulsory crops from 01 April 2018 to of re-insurance premium amounting to 31 March 2019. Even though the re- Rs.675.76 million had been paid by the insurance of an insurance liability Board. Compensations totalling Rs.412.62
Agriculture amounting to Rs.5,000.00 million as per million had been paid for Yala season previous records had been Rs.3,500.00 2018 and Maha season 2018/19 as at 30 million , the Board had entered into a re- April 2019. The foreign re-insurance insurance liability of Rs.5,315.00 million. premiums amounting to Rs.473.03 million Accordingly, a sum of Rs.1,815.00 had been fruitless. million had been overvalued and re- insured. Research Expenditure of Rs.1.15 million as administration and field research expenditure of the project. A sum of Rs.1.96 million had been spent Therefore, the expenditure incurred for the in the year 2017 to test whether 04 heavy project had been fruitless. metals were mixed with 07 food items imported under the National Food Fruitless Expenditure Production Programme of the National Institute of Post-Harvest Management. A A sum of Rs.28.64 million had been sample of 500 had been tested for the spent in the year 2018 on printing research and it was confirmed that certain Training Manuals and Work Books food items were contaminated with heavy prepared by the Instructors for farmers metals exceeding the maximum security training and capacity building of the level. However, necessary information had project for the renovation of not been presented to take proper course of agriculture sector. However, training action in this connection. As such, the programme for farmers had not been expenditure incurred for researches had commenced even by 13 May 2019 and been fruitles as such, benefits from the money spent was not possible to be reaped. Abandonment of Projects A sum of Rs.2.76 million had been spent from August 2017 to July 2018 Provisions amounting to Rs.17 million for scanning and computerization of had been made in the year under review 281,250 applications of farmers in 05 for a project of using biological pest Districts by the Agricultural and control for pests in vegetables of the Agrarian Insurance Board. However, Department of Agriculture. The project the said data had not been used for the had been abandoned after spending a sum process of payment of compensation.
414 National Audit Office | Annual Report - 2018
A sum of Rs.1.34 million had been Pensions had been computed and paid spent on construction of the to 95 fishermen from January 2017.
Observation Deck of the Seethawaka Further, pensions amounting to
Botanical Garden and kumbuk timber Rs.2.79 million should have been had been used for those constructions. payable to pensioners relating to the The physical verification carried out period from January 2011 to December regarding the said constructions on 06 2016. However, the said pensions in February 2019 had revealed that a arrears were not possible to be settled large quantity of kumbuk timber used even by 30 September 2019. for the constructions had cracked and
dilapidated although only 03 years had Farmers‟ Pension and Social Agriculture lapsed since the completion of Security Benefit Scheme contract. Even though kumbuk timber were water-resistant and suitable for The scheme had been established by the long term use, kumbuk timber of a Farmers‟ Pension and Social Security high quality had not been used for the Benefit Scheme Act, No.12 of 1987. The said contract. following weaknesses were revealed in connection with this scheme. Fishermen's Pension and The actuarial valuation for the pension Social liabilities of active contributors and Security Benefit Scheme farmer pensioners should have been done in a timely manner. However, an This scheme had been established by the actuarial valuation had not been carried Fishermen's Pension and Social Security out in respect of pension liabilities Benefit Scheme Act, No. 23 of 1990. The totalling Rs.66,508.21 million shown following weaknesses were revealed this in the financial statements. connection. According to the Farmers‟ Pension and Social Security Benefit Scheme The pension liabilities as at the end of published in the Gazette Extraordinary the year under review amounted to No.1853/49 of 14 March 2014, Rs.3,590.89 million and it had contributions of pension should be increased by 8.9 per cent as compared recovered and paid. Contributions of with the preceding year. The pension amounting to Rs.24.55 million Accumulated Fund had been at a had been recovered and pensions negative value of Rs.2,947.93 million totalling Rs.3,059.37 million had been as at 31 December 2018. This situation paid in the year under review. A sum had adversely affected the going of Rs.2,725.00 million had to be concern of the Scheme. The institute obtained from the Treasury due to the had not taken action even by 30 decrease in contributions of pension September 2019 to restructure and and increase in the payment of implement the Scheme with a financial pensions. Action had not been taken to viability. recover the contributions of pension in terms of provisions in the notification
National Audit Office| Annual Report - 2018 415
published in the Gazette Extraordinary, Cabinet Memorandum in the year 2002, thus contribution of the Treasury had providing agricultural credit facilities and to be obtained further in respect of the market credit facilities to small farmers,
payment of pensions. supply of agricultural inputs, Pensions totalling Rs.3,484.65 million implementation of awareness programmes including the pensions of Rs. 451.32 and special agricultural programmes and million entitled to 19,283 farmers assisting the manufacturing process of retired during the period from April crop and animal products and also the 2017 to 31 December 2018 and processing of products. Even though the pensions amounting to Rs.3,033.33 Fund had been established for the achievement of objectives stated in the Agriculture million entitled to 90,573 farmers relating to the period from the year Deed of Trust, the monies therein were not 2012 to 2013 had not been paid even adequately utilized for the said purposes by 30 September 2019. and instead, sums amounting to Rs.835.00 million and Rs.93.04 million had been Farmers Trust Fund invested in fixed deposits and treasury bills respectively. Attention had not been The Fund had been established and paid by the Fund to utilize the sum of maintained with a view to achieving the Rs.3,542.06 million out of the income of objectives of improving the agricultural Govisetha Lottery receivable to the development and welfare of farmer Farmers Trust Fund from the Treasury, for community which was expanded by a the programmes beneficial to the farmers.
416 National Audit Office | Annual Report - 2018
Establishment of Cultural Centres
Non-recovery of Value Added Tax
Overpayment for Contracts of
Constructions Cultural Affairs Cultural
National Audit Office| Annual Report - 2018 417
418 National Audit Office | Annual Report - 2018
Cultural Affairs
The result expected from this Sector was Ministry had failed to establish Cultural to ensure the sustainable socio economic Centres in 110 Divisional Secretariats as development through the enhancement of at 31 December 2018. cultural values of the country. The A sum of Rs.93.8 million had been spent Ministry of Internal Affairs, Wayamba on the establishment of 09 Cultural Development and Cultural Affairs and Centres as at 31 December 2018 while two Departments should have performed the relevant construction work had not the following functions in order to been completed even by February 2019 achieve the said result. despite a lapse of 05 years since the Affairs Cultural Adoption of necessary measures for commencement of such work. the advancement of all aspects of Sri The construction work of 03 centres Lanka‟s national culture commenced had been abandoned Maintenance of cultural relations halfway due to the reasons such as with foreign countries landslides and war situations occurred Extension of corporation for the during the construction of Cultural improvement of culture-based Centres. A sum of Rs.4.26 million had tourism programmes that will not be been spent on those constructions as at detrimental to cultural and 31 December 2018 and it was a fruitless archaeological heritages expenditure. Adoption of measures for the continuous compilation of Sinhala Non-recovery of Value Added Tax Encyclopedia, Sinhala Dictionary and Mahawansa The Department of National Museums Identify trends in employing cultural had not separately disclosed the Value contributions to create harmony Added Tax (VAT) pertaining to the among communities and take actions contracts of purchases and constructions to implement them in the relevant payment vouchers. Further, action had not been taken for a The audit observations revealed in long period to present Monthly Reports respect of performing the said functions on the payment of Value Added Tax by the Ministry and Departments (VAT) to the Commissioner General of thereunder are summarized below. Inland Revenue. A sum of Rs.5.35 million had been paid as Value Added Establishment of Cultural Centres Tax in the year under review. However, Even though the programme for attention had not been paid to take action establishment of one Cultural Centre in to credit the said tax to the Revenue every Divisional Secretariat had been accurately. implemented in the year 2011, the
National Audit Office| Annual Report - 2018 419
Overpayment for Contracts of estimated value in the years 2017 and
Constructions 2018. A sum of Rs. 2.2 million had been overpaid in respect of the functions The contracts of 06 construction projects performed by the State Engineering pertaining to the Department of National Corporation. The amount so overpaid Museums had been awarded to the State had not been recovered even by the end Engineering Corporation on the of the year under review.
Cultural Affairs Cultural
420 National Audit Office | Annual Report - 2018
Failure to implement the Information Management
System throughout the entire prison system
Uneconomic Expenditure
Lack of training for many officers in the staff
Failure to Recover the Fines Prison Reforms Prison
Control over Motor Vehicles
National Audit Office| Annual Report - 2018 421
422 National Audit Office | Annual Report - 2018
Prison Reforms, Rehabilitation Rehabilitation Reforms, Prison
Prison Reforms, Rehabilitation and Resettlement Resettlement and
It is the expected objective of the Ministry and Non Governmental Organizations of Prison Reforms, Rehabilitation, and and the civil society with respect to Resettlement to foster a contented resettlement activities. community through protection and Coordination of activities relating to productive correction. In order to achieve the supply of essential services to the the said objective, the Ministry along with displaced persons. 02 Departments and an Authority had been Implementation of strategies for the entrusted with the following functions. social integration of properties and persons affected by conflicts. To be involved in projects relating to Formulation of policy programmes and community based corrections. projects to promote religious values Resettlement of persons, displaced or among people in view of an ethical physically and mentally affected due to society. conflicts. Implementation of programmes and projects relating to The following deficiencies were observed rehabilitation. in the audit test check conducted on the Coordination between the Ministry, Departments, and the Authority Government and the funding agencies, discharging the aforesaid functions. Implementation of the Prison Information Management System
A period of 07 years had elapsed as at 31 957,978 had been spent thereon. The December 2018 from the date of contract to link 12 prison institutions had commencing the development of a Prison been awarded to a private institution in the Information Management System, and an year 2018 at a value of Rs. 30.51 million. expenditure approximately amounting to Sixteen more institutions were scheduled Rs. 101 million had been incurred thereon. to be linked in due course. Nevertheless, In the year 2016, the Sri Lanka Telecom the said Information Management System had been entrusted to link the Welikada could not be implemented throughout the prison to the Prison Information entire prison system even by the end of the Management System, and a sum of Rs. year under review Uneconomic Transactions
The existence of 2138 vacancies in the planned to recruit Jailors by interviewing staff had hampered the smooth functioning in accordance with instructions of the Line of the Department. As for the recruitment Ministry, a sum of Rs. 4.23 million had of 1,184 Jailors , action had not been taken been spent in that connection. As the to include a competitive examination Minister in charge had presented a Cabinet under the method of recruitment in the Memorandum and cancelled those Scheme of Recruitment as agreed by the recruitments, the amount spent had officers of the Public Service Commission, become uneconomic. the Ministry, and the prison. Having National Audit Office| Annual Report - 2018 423
Training of the Staff
A sum of Rs. 3.04 million had been officers of 23 prison institutions had not utilized in the year under review on been provided with any other training providing training for the staff. However, opportunity whilst many officers had not no training whatsoever had been provided been provided with training opportunities for 1831 officers of 25 prison institutions. at least within the 05 years immediately Apart from the orientation programme, preceding. Failure Recover the Fines
Fines totalling Rs. 2.67 million receivable entitled to such a facility due to being from 13 officers who had still occupied the transferred or lapse of lease period, had Government quarters without being not been recovered. Control of Vehicle
Twenty one vehicles running without with respect to 53 vehicles, those vehicles being registered under the Department, had not been taken over and registered and 32 vehicles not in running condition, under the Department. Eight of those had remained at the premises of the vehicles had not been registered with the Department. Action had not been taken Department of Motor Traffic. even by the end of the year under review in terms of Public Finance Circular, No. By the end of the year under review, 02/2015, dated 10 July 2015 either to vehicles belonging to the Department of repair and use or dispose of 43 vehicles Prisons had met with accidents in 180 that had remained non-functional for instances during the preceding years. The periods ranging from 03 months to 09 value of the damages caused by those years by January 2019. Having been accidents, amounted to Rs. 43.26 million. exposed to the elements, those vehicles Furthermore, losses and damages totalling remained decaying. Action had not been Rs. 2.54 million had been sustained taken even up to the end of the year under following accidents taken place in 27 review to dispose of 16 vehicles that had instances during the year under review. been decided to be suitable for disposal The Department of Prisons had failed within a period of 01 – 03 years. Due to either to recover the damages or write non-availability of registration certificate, them off from the books in terms of insurance certificate, and revenue license, Financial Regulations.
424 National Audit Office | Annual Report - 2018
Impact of Expenditure of Pensions on the Economy
Administration of Funds
Overpayment of Pensions
Transactions in the Nature of Financial Irregularities
Management Inefficiencies
Informing the Death of Pensioners
Retention of Deposits Pension Benefits for Public Service Public for Benefits Pension
National Audit Office| Annual Report - 2018 425
426 National Audit Office | Annual Report - 2018
Pension Benefits Public for Benefits Pension
Pension Benefits for Public Service
The vision and mission of the Department The main responsibility of the Department of Pensions are to make the pensioners‟ of Pensions is to make payment of Services community highly satisfied in economic pensions under the Pensions Minute and social aspects by offering legal established on 05 February 1934, payment benefits to pensioners of public services of pensions for widows, widowers and and their beneficiaries, ensuring orphans under the Widows‟ and Orphans‟ satisfaction of both recipients as well as Pensions Fund Ordinance No.01 of 1898 service providers at an excellent level and Widowers‟ and Orphans‟ Pensions intertwining public sector with private Act, No.24 of 1983 and administration of sector through applications of modern Public Services Provident Fund and technology and sustainable management regulation of paying process in terms of techniques. Ordinance No.18 of 1942. Impact of the Pension Expenditure on the Economy
The Department of Pensions had offered in the public service, new Provisions for benefits for 619,176 active pensioners by retirement, payment of cost of living 31 December 2018 and the expenditure on allowances to the pensioners as well, pensions in the year 2018 amounted to increase in salaries of the public service Rs.224,853 million. It represented 10.75 and computation of the pensions on the per cent of the total recurrent expenditure basis of the increased salary, rectification of the Government and it constituted 11.4 of the pension anomalies and increase in per cent of the total Public Revenue. life expectancy. It is anticipated that the expenditure on pensions will increase The number of Pensioners had increased continuously in the future as well and from 514,584 in the year 2012 up to therefore, expenditure on pensions will 619,176 in the year 2018 by 104,792 have a considerable impact on the public persons or by 20 per cent and expenditure expenditure in the future. on pensions had increased from Rs. 126,461 million up to Rs.224,853 million The growth in the total expenditure on by RS 98,392 million or by 78 per cent. pensions in the year under review and 6 previous years is depicted in Diagram 53 Expenditure on pensions had been increased continuously due to the growth
National Audit Office| Annual Report - 2018 427
-
Expenditure on Pension
Rs.Miliom Rs.Millions
ExpenditureonPemsion Services 2012 2013 2014 2015 2016 2017 2018 Year
Diagram 53- Expenditure on Pensions Source – Pensions Data System, Statement of Financial Position 2018
Pension Benefits for Public forBenefits Pension Public Several audit observations disclosed at the under review are summarized and given audit test checks carried out in the year below. Administration of Funds
The Department of Pensions administers Meanwhile, in terms of Order No. 04 of 05 funds in addition to the payment of the School Teachers Pension Act, No. 44 pensions for the public service and only of 1953, a Fund should be established by the Public Service Provident Fund out of using contributions of the Teachers‟ those 5 Funds was in an active level. With Widows‟ and Orphans‟ Pension Fund and the establishment of the Provincial Public the Teachers‟ Widows‟ and Orphans‟ Service in the year 1993, The Provincial Pensions should be paid from the Fund. Public Servants were entitled to get the However, a bank account had not been benefits of Pensions and Widows‟ and maintained for the Fund to collect Orphans‟ Pensions that were entitled by contributions and to incur expenditure and the Public servants. Therefore, new the objectives of establishing this Fund members were not added to the Local had not been accomplished as Government Service Pension Fund, Local contributions to the Fund had been Government Widows‟ and Orphans‟ collected to Widows‟ Orphans‟ Pension Fund and Local Government Contributions Bank Account of the Widowers‟ and Orphans‟ Pension Fund. Department of Pensions and due to Likely, the Department of Pensions had incurring of the aforesaid expenditure from incurred expenditure for Funds using the the budget provisions under the budget provisions under the Expenditure Expenditure Head of the Department of Head of the Department of Pensions since Pensions. there is no enough money in Funds as new membership fees are not received to Funds.
428 National Audit Office | Annual Report - 2018
Pension Benefits Public for Benefits Pension
Over Payment of Pensions
The pensions which had been overpaid but from a period ranged between 5 years to had not been recovered even by the end of 10 years and a sum of Rs.8 million from the year under review totalled Rs.591 more than a period of 10 years had been Services million. A sum of Rs.546 million brought unrecovered at the end of the year under forward from the period less than 5 years, review. a sum of Rs.37 million brought forward
Transactions in the Nature of Financial Irregularities
The pension received by a deceased retired Divisional Secretariat had over paid an female officer who had been receiving two amount of Rs. 1.87 million. Even though pensions as the civil pension and widow payment of pensions had been stopped pension until her death had been debited to from 10 February 2016, action had not the bank account for 55 months after her been taken to recover the amount paid in death. The son of the deceased officer had excess. removed Rs. 2.70 million out of the amount debited so using the ATM card. A daughter had wrongfully obtained a sum An amount of Rs. 308,052 out of the of Rs. 1.56 as the pension of the deceased amount had been later paid by the Son to mother even for a period of 86 months the Department. However, the outstanding after the death of the pensioner using the balance of Rs. 2.39 million had not been Identity Card Number of the daughter in recovered even by 30 June 2019. the Pensions Data System instead of including the Identity Card Number of the Two Divisional Secretariats had paid two pensioner in the Data System. Action had pensions as temporary and permanent to not been taken to recover the sum paid in an officer for a period of 20 years from excess. January 1991 up to February 2016. One Management Inefficiencies
There were 669 files in Negombo, Negombo, Meerigama, Gampaha, Meerigama, Gampaha, Alawwa, Alawwa, Warakapola and Wattala Warakapola and Wattala Divisional Divisional Secretariats were not fully Secretariats in which pensions had not disabled at birth had not been referred to been revised in terms of the Public the Medical Board any day. Administration Circular No.6/2006 of 25 April 2006. Even though a pensions file has to be maintained for every pensioner who is Even though persons who were not fully paid a pension, pensions were being paid disabled at birth have to be referred to a to 512 pensioners without maintaining Medical Board once in every 05 years as files at 6 Divisional Secretariats, namely, stated in the notification published in the Negombo, Meerigama, Gampaha, Gazette Extra ordinary No. 1719/3 of 15 Alawwa, Warakapola and Wattala. August 2011, any of the persons in
National Audit Office| Annual Report - 2018 429
Informing the Death of Pensioners
Pensions had been paid to deceased Rs. 336,378 by the Gampaha Divisional
pensioners as the Divisional Secretariat Secretariat. The full amount of Rs.750,390
had not been made aware of the death of to be recovered from 07 pensioners pensioners and 10 pensioners deceased in deceased in the year 2017 had to be the year 2016 had been paid an excess of recovered even by September 2018. Deposits
Services An amount of Rs. 696,500 recovered for from the month of October 2018 without motor bicycles provided to the sending the amount to the Department of Development Officers‟ Service and National Budgets as 05 field based officers Document Assistants‟ Service had been employed in the Department had moved to retained in the general deposit account another service.
Pension Benefits for Public forBenefits Pension Public
430 National Audit Office | Annual Report - 2018
Introduction of Provincial Councils
Consolidated Statement of Financial Performance for Provincial Councils
Consolidated Statement of Financial Position for Provincial Councils
Revenue of Provincial Councils
Provincial Councils Provincial Expenditure of Provincial Councils
Assets of Provincial Councils Consolidated Financial Statements of of Statements Financial Consolidated
National Audit Office| Annual Report - 2018 431
432 National Audit Office | Annual Report - 2018
Description of Provincial Council Provincial of Description
Description of Provincial Councils
Nine Provincial Councils are presently government grant, tax income and other being operated as Provincial Council sources; and expenditure has to be born within nine provinces of the island in from the fund in the form of recurrent and terms of Provincial Council Act No.42 of capital. Provincial Council Institutions, 1987 read in conjunction with thirteenth Provincial Council Ministries not coming amendment of the Constitution of under the purview of a Ministry and all Democratic Socialist Republic of Sri Departments coming under the purview of Lanka. Objectives mentioned in Ministries are prepared financial simultaneous list included in thirteenth statements including Appropriation Constitution should be implemented by Account. Councils. Accordingly, powers in Other than that, financial statements so as provincially level in many sectors the country account of the central including agriculture, education, health, government are prepared for every Council housing, local government and social showing that the all income, expenses, services were vested to these Councils. assets, liabilities.
Controlling of Provincial Councils are coming under the Governor appointed by Powers of auditing accounts of provincial the President and the chief minister is act council funds had been received to Auditor as the head of its legislature. Cabinet of General in terms of article 154 (1) of the Ministers of the Provincial Council led by Constitution and Section 23 (1) of the executive is consisted with 4 members Provincial Council Act No.42 of. including the chief minister. A chief Accordingly, actions were taken to present secretary is act as administrative authority an analysis in this chapter with relating to and he is appointed by the President. the financial statements audited in the year Every Council is consisted with Council 2018 and its related financial statements of Fund and Emergency Fund. This Council the year 2017 of 9 Councils such as Fund, which is almost equal to Eastern, North Central, Sabaragamuwa, Consolidated Fund of Central North East, Central, Northern, Eastern, Government, is realized through Southern and Uva.
National Audit Office| Annual Report - 2018 433
Financial Performance Statement of Provincial Councils for the year ended 31 December 2018
Description 1028 1027 Rs.000 Rs.000 Revenue Government Revenue Government Grand 203,820,936 201,289,575 Tax Revenue 6,287,894 5,858,351 Provincial Revenue Tax Revenue 75,096,438 71,193,811 Non- tax Revenue 10,127,500 9,481,133 Other Revenue 5,949,267 2,866,628 Total Revenue 302,181,035 290,689,498
Description of Provincial Council Provincial of Description Expenditure Personal Emolument 198,203,699 187,724,905 Other Goods and Services 17,165,910 14,545,706 Transfer and Grand and Other 50,231,703 Recurrent Expenditure 49,406,673 Total Recurrent Expenditure 265,601,312 251,677,284 Development Expenditure 34,848,622 34,373,399 Total Expenditure 300,449,934 286,050,683 Excess of Revenue over 4,638,816 Expenditure 832,101
Statement of Financial Position of Provincial Councils as at 31 December 2018
Discription 1028 1027 Rs.000 Rs.000 Assets Non-Current Assets Property, Plant & Equipment 172,688,283 85,191,431 Gurantar‟s deposit investment 28,906 24,951 Investment 6,665,533 7,689,392 Working Progress 95,874 - Intangible Assets 8,715 - Total Non-Current Assets 179,487,311 92,905,774 Current Assets
434 National Audit Office | Annual Report - 2018
DescriptionProvincial of Council
Stock 51,065 58,774 Provincial Public Offices Loan 16,102,576 14,757,383 Impest Account Balance on Provincial 1,081,887 1,199,250 Ministry and Department Authorized Advance Account Activities 497,884 496,057 Fixed Deposits and Short term Investment 3,075,655 2,234,018 Other Finance Assets 1,914,208 1,737,818 Deposit on Provincial Treasury & 26,887 514,340 Emergency Fund Advance to Provincial Ministry and 2,465,894 2,770,141 Department Advance to Provincial Emergency Fund 3,582 3,581 Commercial Advance 94,735 80,482 Prepayments 106,073 22,417 Capital Contribution in Provincial owned 249 2,969 Enterprises Receivable Accounts from Provincial 43,896 350,079 Ministry and Department Other Receivable 1,912,999 1,192,006 Cash and Cash Equivalent 15,425,105 18,662,063 Total Current Assets 42,802,695 44,081,378 Total Assets 222,290,006 136,987,152
Accumulated Funds and Reserves Contributed Capital 195,894,215 107,553,674 Surplus/ Deficit Reserves (474,065) 108,520 Emergency Fund 24,139 21,683 Depreciation on Reserve 141,785 108,520 Investment on 839,554 - Reserve 10,455,659 5,994,077 Grant Received for acquitition of Capital 1,458,266 - Assets 195,586,074 117,205,741 Long-Term Liabilities Financial Leasing – Vehicle 21,844 104,841 Gurantars Deposits 20,250 18,551 Interest on Gurantars Deposits 8,656 6,401 Other Payable 44 227 Current Liabilities - - Financial Leasing - Vehicle 93,609 78,310 Deposits Accounts 6,760,477 5,938,918 Payable/Accrued Expenditure 7,045,573 7,640,086 Total Liabilities 13,950,453 13,787,334 Total Funds and Liabilities 222,290,006 136,987,152
National Audit Office| Annual Report - 2018 435
Provincial Council Revenu percentage i.e. 15 per cent of government grant had been given to Central Province Revenue of the Provincial Council is in the year 2018 and that as rs.30 billion. consisting with income sources such as Further the lowest had been given to government grant, taxes and non-taxes. Western Province and that was Rs.17 billion or 8 per cent from the grant. Government Grant Accordingly, out of the entire expenditure of the government amounting to Rs.2,734 Government grant given for 09 Councils in billion, a sum of Rs.204 billion or 7.4 per the year 2018 was Rs.204 billion and that cent had been given to Provincial Councils was an increase of Rs.2 billion as as government grant. Details are shown in compared with the year 2017. The highest the diagram 54
Description of Provincial Council Provincial of Description
35,000,000
000 30,000,000 25,000,000 20,000,000 15,000,000
10,000,000 2018 5,000,000 2017 GovernmentGrandRs. -
Provincial Council
Diagram 54 – given to Provincial Councils as government grant 2017 and 2018 Source - Financial Statement of Provincial Councils
Tax Revenue Tax revenue of all Councils for the year Councils in the year 2018. However, as 2018 was Rs.75 billion and it was about 5 compared with the entire tax revenue of per cent increase as compared with the the government in the year2018, tax year 2017. A sum of Rs.43 billion or 57 amount collected by the Councils was 4 per cent had been collected by Western per cent. Details of collected revenue for Provincial Council as compared with the the years 2017 and 2018 by each Council entire tax revenue collected by all are shown in diagram 55. 436 National Audit Office | Annual Report - 2018
DescriptionProvincial of Council
50,000,000
45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 2018 10,000,000 Tax Revenue Tax Rupees 5,000,000 2017 -
Provincial Council
Diagram 55 –Tax Revenue for the years 2017 and 2018 Collected by Source – Financial Statements Presented by Provincial Councils
Non-tax and Other Revenue Government Grant and A sum of Rs.22 billion had been generated Generated Revenue of Provincial by Councils in the year 2018 from non-tax Councils and other sources. Revenue of Rs.6 billion Grant of Rs.203 billion had been given to received from Department of Inland Councils by the government in the year Revenue is included in this revenue. Non- 2018 and compared to that, revenue of tax revenue of Rs.4 billion had been Rs.97 billion had only been generated by generated by estern Province in the year Councils. Accordingly, government had to 2018. However, the entire non-tax revenue contribute 47 per cent of entire council of Councils had only been 4 per cent of revenue to maintain Provincial Councils. entire non-tax revenue of the government. Details are shown in diagram 56
National Audit Office| Annual Report - 2018 437
annually by every Council. Accordingly, entire expenditure incurred by Councils for the year 2018 was Rs.300 billion. It is 10 per cent of the entire expenditure of the country. Provincial Council Recurrent Expenditure Revenue - Rs.million 97,460 A sum of Rs.265 billion had been incurred for recurrent expenditure in the year under Governm review by the Councils and income of ent Rs.97 billion had been collected. Therefore Grand Rs.Million the recurrent expenditure had been made 203,821 by exceeding the revenue collected by the Councils by Rs.168 billion or 273 per cent. Recurrent expenditure of Rs.273 billion had been incurred in the year 2017. Recurrent expenditure made by the Description of Provincial Council Provincial of Description Councils had been 21 per cent of the recurrent expenditure made by the Diagram 56– Revenue Structure in Provincial Councils government in the year 2018.the revenue Source - Provincial Council Financial collected by each Council had not been Statement sufficient to meet its recurrent expenditure and that was ranging from 659 percent to Expenditure 100 percent. Further, the grant of Rs.203 billion provided by the government was Recurrent expenditure including personal even not sufficient to meet its recurrent emoluments, other goods and services, expenditure. That had been ranging from maintenance expenses and development Rs.63 billion to Rs.266 billion. Details expenditure in capital nature are incurred are shown in Diagram 57
60,000,000 50,000,000
40,000,000
30,000,000
000 20,000,000 Rs. 10,000,000 Revenue Total Revenue -
Total Recurrent Expenditure RecurrentExpenditure/
Prcvincial Council
Diagram 57-Provincial Councials Collective Revenue and Recurrent Expenditure – 2018 Source – Provincial Councils Fnancial Statements
438 National Audit Office | Annual Report - 2018
Description of Provincial Council Provincial of Description
Personal Emoluments been spent for this in the year 2017. Every A sum of Rs.198 billion had been spent by council had spent more in the year under Councils as personal emoluments in the review than the previous year. Details are year 2018 and a sum of Rs.188 billion had shown in the diagram 58
40,000,000
000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 2017 5,000,000 2018
PersonalEmolument Rs. -
Provincial Council
Diagram 58 – Provincial Councils Personal Emoluments in 2018 Source – Provincial Councils Financial Statement
Development Expenditure A sum of Rs.34.8 billion had been spent as Rs.0.5 billion had been incurred by development expenditure in the year under Eastern Provincial Council. As compared review by all 09 Councils. That with the development expenditure and expenditure had been Rs.34.3 billion in the recurrent expenditure incurred by 9 previous year. Government investments Provincial Councils in the year 2018, total had been Rs.625 billion as compared with recurrent expenditure had only been 13 per Provincial Council Development cent from the development expenditure. Expenditure. The highest development The comparison of development expenditure of Rs.12.6 billion had been expenditure and recurrent expenditure incurred by western Provincial Council incurred by Councils are shown in diagram and the lowest development expenditure of 59
National Audit Office| Annual Report - 2018 439
60,000,000 000
50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 Recurrent Expenditure
- Development Expenditure
RecurrentExpenditure/ Development ExpenditureRs.
Provincial Councils
Diagram 59 – Provincial Councils Development Expenditure . Source – Provincial Councils Financial Statements
Assets in the year 2018 had been Rs.2,133 billion. Total assets of Councils recognized in the Therefore total assets remained with the Description of Provincial Council Provincial of Description year 2017 as Rs.136 billion had been government and Provincial Councils in the recognized in the year 2018 as Rs.222 year 2018 had been Rs.2,355 billion. billion. Accordingly it was an increase of 63 per cent as compared with the previous Non-current Assets year. According to the government financial statements, total assets remained Total non-current assets remained with Rs.7.7 billion had been included in these Provincial Councils in the year 2017 had non-current assets of 8 Councils. Total been Rs.93 billion. That had been non-current assets of the government and increased up to Rs.179 billion as at the end Provincial Councils in the year 2018 had of the year under review by increasing been Rs.1,266 billion with the non-current Rs.86 billion. Valuation amounts of asset of Rs.1,087 included in the financial property plant and equipment amounting statements of the government for the year to Rs.172.6 and investments amounting to under review.
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Western Provincial Council Western
Western Provincial Council
A total revenue of Rs.76,984 million The significant audit observations revealed including a sum of Rs.25,218 million by in the audit test check carried out in this Government Grants and a sum of connection are summarized below. Rs.51,766 million through internal sources had been estimated for the year 2018 by Activities deviated from the Western Provincial Council. It had Objectives been estimated to utilize a total sum of A total revenue of Rs.3.25 million Rs.76,984 million including a sum of including a sum of Rs.1.87 million from Rs.61,119 million as Recurrent the Market Project -2015 and a sum of Rs. Expenditure and a sum of Rs.15,865 1.43 million from the Market Project - million as Capital Expenditure. As such, a 2016 of the WP/Jaya/ Sri Rahula Balika total revenue of Rs.68,132 million Maha Vidyalaya - Malabe, had been including a sum of Rs.21,023 million by collected for the construction of indoor Government Grants and a sum of stadium. However, the construction work Rs.47,109 million by internal sources had of indoor stadium had not been carried out been collected in the year 2018. Further, a from the said money and the details of total expenditure of Rs.69,454 million expenditure amounting to Rs.3.30 million including a Recurrent Expenditure which was earned by the Market Project amounting to Rs.56,805 million and had not been presented to Audit. Capital Expenditure amounting to Rs.12,649 million had been incurred.
Asset Management which the packing was not opened, has expired without being used. Further, three Four Dialysis Machines, 01 Ro Plant and medical officers, two male nurses and one 02 Dialysis beds had been received for the officer of the Junior staff had been trained Dialysis Unit by the Office of the to work in the Unit. Provincial Director of Health Services on 27 June 2017. Although relevant As the other facilities required for the Base infrastructure facilities should be provided Hospital, Minuwangoda were not installed, before obtaining those equipment, it had one 3 Part Hamatology, one Semi- not been so done even by 14 September Automated Biochemistry Analyzer and 2018. The boxes containing the said one 1000 VA Isolation Transformer which equipment which have been received has been received to the laboratory in the without a request from the Hospital , were year 2015 were kept with packings without kept in the corridor of 6th floor of the new being used and the warranty period thereof building in an unsafe manner. The had also expired. warranty period of these equipment of Idle and Underutilized Assets
A sum of Rs.1.32 million had been spent Agriculture Instructors of a project on 45 tab computers provided to implemented with a view to enhancing the
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quality of technical knowledge of the after deducting the value of work done public under the Province Specific amounting to Rs.2.67 million, the balance Development Grants in the year 2016. of Rs.3.92 million was not possible to be Further, a sum of Rs.156,078 had been recovered. spent to obtain the relevant data connection even by October 2017. Management Inefficiencies However, all tab computers had been Extra buildings had been constructed vested by the letter No.WP/AG/PD/3/1/2- without considering the necessity of class 2018 of 02 October 2018. As such, all tab room buildings of schools. Government computers had been taken back as at 30
Provincial Council Provincial quarters of Principals and teachers and January 2019 and the battery has run cafeterias valued at Rs.42.38 million had down. been constructed in the Yatiyana Junior Deficiencies in the Contract School and Baduraliya Maha Vidyalaya while its students were studying in the Administration class rooms temporally constructed.
Western An advance of Rs.6.59 million had been Surcharge paid as 30 per cent of the contractual value on 14 July 2017 to assign the construction House rent for Government quarters work of the building of mortuary of the totalling Rs.5.34 million had been paid to District Hospital, Gampaha to a 11 officers in Executive Grade at construction company. However, only the Rs.30,000 each on the approval obtained foundation was laid and the construction from the Governor from November 2017 work had been stopped halfway despite a to April 2019. Out of them, 10 officers lapse of nearly one year since the due date were residing in the Western Province of completion of the constructions of while 08 officers were residing at their building. The security bond dated 16 permanent addresses. December 2016 could not be encashed and Procurement procedure. Thirty five lawn mowers valued at Rs.596,625 were included in the Out of the provisions totalling Rs.7.50 said purchase. Further, 85 lawn mowers million approved by the Secretary of the had been purchased again at a cost of Ministry of Agriculture on 15 August 2018 Rs.1.71 million on 11 January 2019 under the “ Shrama Saviya” programme, a contrary to the procurement procedure and sum of Rs.7.44 million had been paid to 100 lawn mowers purchased had been purchase agricultural goods which were distributed among the persons selected by not included in the Budget Proposals of the the Chairman under the “Sithamu” year 2018, contrary to the procurement Project.
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Central Provincial Council
Central Provincial Council has estimated by the Provincial Council by 31 December an aggregate income of Rs. 17,183 2018. Even though the Government has million, of which Rs. 8,741 million and granted Rs. 4,663 million to the Provincial Rs. 8,442 million as income from the Council obtaining overdraft facilities on an grants of the Government and internal interest rate of 27%, the Provincial sources respectively in 2018. In the Council has invested Rs. 1,782.40 million meantime it has estimated to utilize an in fixed deposits. Therefore the aggregate of Rs. 42,917 million, of Government has to bear an additional which Rs. 34,176 million and Rs. 8,741 financial cost of Rs. 318.03 during the year million as recurrent and capital under review. expenditure respectively in 2018. Further Rs. 4,663 million has been earned from Unauthorized payments the grants of the Government and Rs. Council CentralProvincial 7,967 has been earned from internal When the compensation and interests were sources and accordingly the total income paid in relation to the acquisition of lands has amounted to Rs. 12,630 million. In for Seethadevi Balika Vidyalaya, Kandy, it the meantime Rs. 36,941 million has has been informed that compensation and been utilized , of which Rs. 32,278 interest should strictly be paid to the million has been utilized as recurrent person mentioned in the decision 17, the expenditure and Rs. 4,663 million has order of the Ministry of Lands and been utilized as capital expenditure. Department of Attorney General. However the Divisional Secretariat , Important audit observations, which have Kandy has paid without any authority an been made in the audit conducted amount of Rs. 1.47 million as relevant to Central Provincial Council compensation and Rs. 1.13 million as during the year 2018, are given in brief interest to a party not mentioned in the in the following manner . aforesaid decision and the aggregate of the amounts paid was Rs. 2.60 million. Investing funds without utilization Water conversion tax
Even though the Central Provincial The amount of power generated by two Council should have utilized Rs. 1,782.40 small scale powerhouses in 2016 million by the end of year 2018 for the established at Delta Estate and Stelarnburg development of the province, it has Estate within the Divisional Secretary's invested that amount in fixed deposits. Division, Doluwa by a private institution Further it has earned Rs. 163.21 million as was 5,222,056 kilowatts and 2,931,126 the income on interest during the year kilowatts respectively. However the water under review. In the meantime it has conversion tax, which has to be paid at a retained a total balance of Rs. 413.38 rate of Rs. 100 per killowatt per year has million in two current accounts maintained not been paid in terms of the Circular of National Audit Office| Annual Report - 2018 443
the Commissioner General of Lands No the aforesaid construction has become 2010/2 dated 11 March 2010 fruitless.
Inactive resources Since the new clinic building constructed in year 2004 at Divisional The Maternity and children's clinic of hospital Pallepola spending Rs. 5 the regional hospital, Gonaganthenna, million is now sinking, it has become Hanguranketha has been constructed in impossible to open it for the benefit of three phases from year 2004 up to people. 2017. However it has been in
dilapidated condition by August 2019 without utilizing. Even though the Discontinuing the ground floor, of which the space was constructions of school 200 sqft , has been constructed buildings spending Rs. 2 million in 2003 and opened on 15 February 2004, no clinic Rs. 45.58 million, Rs. 31.11 million and Central Provincial Council Provincial Central has been conducted at the aforesaid Rs. 37.71 million, which were made from premises. Later the first floor was year 2016 to 2018 for the construction of constructed and the roof was also 07 school buildings under specific completed spending Rs. 6.92 million in provincial development grants, have year 2016 and 2017‟ become discontinued. It has become impossible to transfer these allocations to The plans were prepared in 2005 for another tasks due to discontinuing the the construction of new two storied projects. building for Ayurveda Hospital in Hanguranketha town and accordingly Closing of the clinic only the ground floor was constructed There are nearly 1200 patients, who are laying concrete with 1500 sqft suffering from chronic kidney failures in spending Rs. 2.5 million. However the the Divisional Secretary's Division, building was remaining idle by the end Wilgamuwa. With a view to avoid such of the year under review without situation, the Ministry of Health and completing the remaining works. Indigenous Medicine has constructed a clinic with modern facilities providing an Uneconomical transactions allocation of Rs. 41.46 and it was opened An accident unit has been constructed for the benefit of General Public on 13 spending Rs. 2.74 million in year 2016 March 2017. Even though that medical at the regional hospital Kongahawela, unit has been handed over to the Central which was identified as an institution Provincial Council, it has been closed affected by Kaluganga development down on 30 June 2019 without taking any project , Moragahakanda. Since this advantage due to the lack of medical hospital was submerged by Kaluganga officers. deevelopment project, Moragahakanda, the amount spent for
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Damages and losses surplus of any transaction should be remitted to the fund of the provincial According to the annual financial council. However provincial Department statements of the Provincial Department of of Animal Productions and Health has not Education, there were losses and damages remitted the accumulated surplus of Rs. to the value of Rs. 18.51 relevant to 181 13.99 ,which is the aggregate of year under cases connecting to 03 programmes. review and previous years, to the revenue Damages and losses to the value of Rs. head of provincial councils. 6.08 million relevant to 68 cases out of the above, were being brought forward for a Non recovery of lease rent period from 5 up to 10 years. Damages and losses to the value of Rs. 3.57 million Equipments for freezing milk to the value relevant to 53 cases out of the above, were of Rs. 1.23 million, out of the allocations being brought forward for a period over made by Department of Divineguma 10 years. However no action has been Development in year 2015 have been provided to the provincial Department of
taken either to recover or write off these Council CentralProvincial damages and losses as per financial Animal Production and Health. However regulations , which is brought forward for the Department has alienated the building more than 10 years. belonged to Veterinary Office, Ududumbara, and equipment for freezing Granting loans improperly milk, to a welfare society on 25 March 2015 by an agreement but without Since loans have been issued improperly obtaining a security deposit. The said from the cooperative fund of the society has provided the same property to Department of Cooperatives in Central another external party on a monthly rental Province, there were loans balances to the of Rs. 6,000 by an agreement for two value of Rs. 17.12 million for a period years. When the Veterinary Office came from one year up to 27 years by 15 to know about the lease, it has taken nearly December 2018 and it has not been 31/2 years. Evidences were not recovered even by the end of the year submitted to prove that efforts have been under review. Out of the above, loan made to take over the property by the balances to the value of Rs. 2.27 million welfare society and further action has not granted at 09 occasions have not been fully been taken to recover Rs. 264,000 ,which recovered. Non remittance of net is the amount owed to the Government for the period from the date of alienation of Surplus to the fund of property up to 06 December 2018, which provincial councils. is the date of audit. .
In terms of the financial regulation No 378 (22) of the provincial council, the net
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Southern Provincial Council
The Southern Provincial Council had had been collected in the year 2018. The estimated revenue totalling Rs.33,911 utilization of the revenue comprising million comprising Rs.25,653 million from recurrent expenditure of Rs.30,147 the Government Grants and Rs.8,258 million and capital expenditure of million through internal sources for the Rs.5,328 million aggregated to Rs.35,475 year 2018. It had been estimated to utilize million during the year 2018. Accordingly,
sums totalling Rs.33,711 million the revenue over expenditure had been ProvincialCouncil comprising Rs.28,950 million as recurrent Rs.586 million. expenditure and Rs.4,761 million as capital expenditure from the above The significant observations revealed revenue. Accordingly, revenue aggregating during the course of audit test check Rs.36,061 million comprising Rs.26,889 carried out on the Southern Provincial million from the Government Grants and Council in the year 2018 are summarized Rs.9,172 million through internal sources below. Southern
Provision of Electricity Facilities
It had been certified that the auctioned Animal Products and Development, land called Natural Park at Middeniya in Environment Affairs, Rural Industries, Hambantotta district had been provided Powers and Rural Infrastructure Facilities with electricity facilities in accordance Development had paid Rs.1.67 million to with Subdivision Permit Application dated the Ceylon Electricity Board to obtain 20 October 2015. Nevertheless, the electricity facilities to the aforesaid land. Southern Provincial Ministry of Fisheries,
Overpayments
The Southern Provincial Chief Minister implementation of special national and Ministry of Finance and Planning, programmes. The Procurement Law and Order, Local Government, Committee had made the relevant purchase Transport, Health and Indigenous irrespective of the recommendations made Medicine, Tourism and Engineering by the Technical Evaluation Committee Services had purchased 04 water bowsers and therefore, a sum of Rs.9.63 million to distribute among the Local Authorities had been overpaid. under the poverty minimization and
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Non-compliance with the Procurement Guidelines
The Southern Provincial Ministry of Guideline 3.4 of the Government Education, Land and Land Development, Procurement Guidelines had not been Highways and Media had spent Rs.3.00 abided by in making the above purchase, a million for the purchase of sports financial loss of Rs.1.06 million had been equipment for 659 schools. Since the incurred.
Failure to Recover Losses
A vehicle belonging to the Southern Secretary to the Provincial Ministry had, Provincial Ministry of Education, Land by the Letter dated 22 March 2019, and Land Development, Highways and informed that the above loss should be Media had met with an accident in the year recovered from the responsible parties. under review and the total damage caused Nevertheless, steps had not been taken to Southern Provincial Council Provincial Southern to the vehicle due to the accident had been recover the relevant loss even by 31 May estimated to be Rs.1.63 million. The 2019.
Irregular Utilization of Funds of a School Development Society
The officers of the Provincial Education irregularly utilized sums totalling Rs.2.96 Department had credited Rs.846,000 in million existed in the account of the excess to the amount to be credited to an School Development Society including the account of a School Development Society above amount and Rs.1 million granted to of a school belonging to the Galle the school by the Southern Provincial Education Zone of the Southern Provincial Ministry of Education under the Project of Education Department for the the Transforming School Education into development of sanitary facilities of the Knowledge Hub. school. The principal of the School had
Irregular Payments
A female officers who had served in the obtained salaries of Rs.760,368 and personal staff of the former Governor of Rs.733,267 from the Southern Provincial the Southern Province with effect from 01 Governor‟s Secretariat and the National November 2006 had received an Museum Department respectively in appointment as a Museum Assistant in the respect of serving in both the institutions National Museum Department from 24 during a same period from 24 April 2012 April 2012 and performed duties in the up to January 2015. post as a Museum Assistant. She had
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Northern Provincial Council
Northern Provincial Council had estimated employees in ten categories of staff an income amounting to Rs. 26,669 had been appointed in the Office of million for the year 2018 which consisting the Regional Director of Health Service Rs. 23,169 million from the Government in Jaffna. Grant and Rs. 3,500 million from other Even though, seven staffs including a internal sources of income, and out of the cook, a lift operator, a labour, an estimated income it was expected to attendant and three Health Service spend a total sum of Rs. 28,289 million Assistants had been assigned for the consisting Rs. 23,323 million for recurrent duties of driving and vaccinating in expenditure and Rs. 4,966 million for contrary with their duty lists. capital expenditure. However, total An engineer and a veterinary surgeon expenditure aggregating Rs. 25,572 had been appointed in 2014 to the
million consisting Rs. 22,109 for recurrent Municipal Council without obtaining Provincial Northern Council expenditure and Rs. 3,463 million for proper approval and an aggregating capital expenditure had been incurred amount of salary and travelling during the year 2018 out of income expenses of Rs. 1,135,309 had been aggregating Rs. 26,744 million received for paid during the years of 2014 and the year 2018 consisting Rs. 21,788 2015. million from the Government Grant and The secretary to the Provincial Rs. 4,956 million from the other internal Ministry of Education had given an source of income. irregular appointment to a teacher who had been terminated from the The important and material observations previous service on 31 July 2007 by revealed in Provincial Council are the Secretary to the Line Ministry of summarized below. Education and the payment of Rs. Irregular Appointments 428,482 had been made as salary in year 2014. A Lift operator had been appointed in At the Public Accounts Committee year 2015 without obtaining approval held on 07 September 2017, it was of the Department of Management directed to the CAO / AO to appoint a Services and a sum of Rs. 3.1 million Committee to study this issue and to had been paid as salary for the period given recommendation on validity of from 31 December 2005 to 31 this appointment. That nominated December 2018. However, there were committee had recommended that no any lifts constructed in that the said appointment was not regular. building in the particular period. As a result the salary and other Without approval of the Department allowances paid were observed as a of Management Services sixteen financial loss to the Government.
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Further, the appointed Committee Apparent Irregularities had recommended conducting a disciplinary inquiry against the former 02 School Principals, 151 Teachers and 17 Secretary to the Provincial Public Office Employees of Mannar Zonal Service Commission of Northern Education Office had been assigned to six Province as he was solely responsible schools in North Western Province for that appointment in the Provincial (Puttalam District) and the Provincial Service. Department of Education of Northern The appointed committee had also Province had paid a sum of Rs. 160.09 recommended having further inquiries million as salaries and other allowances through an appropriate commission during the years of 2017 & 2018. exclusive of public officers against the However, any action had not been taken Secretary to the Ministry of Education to reimburse that money from the North due to manipulation and submission Western Provincial Council even up to the of documents to the Governor. date of 28 June 2019. Accordingly, it was Northern Provincial Council Provincial Northern observed that a value for money spent by Fraudulent Transactions the Mannar Zonal Education Office had not been received to the Northern A cash fraud amounted to Rs. 2,934,429 Provincial Council. had been occurred in the year 2015 and it was revealed that a management Unutilized Assets assistants had involved in that fraud. However, only a sum of Rs. 320,000 had Eighteen development works such as been recovered from that person and an shopping complex, weekly markets, inquiry had been conducted over two children parks, principal quarters and years continued without being taken tourism buildings, etc. constructed at cost remedial actions to finalize the case and of Rs. 259.18 million using the funds from to recover the balance amount of fraud the Projects of NELSIP, ENREP and PSDG amounted to Rs. 2,614,429 from that had not been utilized for intended accused Management Assistant. purposes.
According to an audit test check, carried Revenue Management out on 30 May 2019 it was observed a loss Unrecovered revenue amounting to Rs. of Rs. 592,750 due to cash fraud 1,352.08 million due from arrears of conducted by a Development Officer income in stamp duty of Rs. 774.02 during the period from January 2018 to million, court fine amounted to Rs. 220.98 May 2019. The opportunity to do such a million, Rates amounted to Rs. 238.78 cash fraud had created due to lack of million and other revenue arrears proper internal control over the collection amounted to Rs. 118.3 million had been of revenue. ie. all the activities of cash remained unsettled from 01 Municipal collection and deposit in the bank had Council, 05 Urban Councils and 28 been performed by one person. 450 National Audit Office | Annual Report - 2018
Pradeshiya Sabhas as at 31 December Abandoned Projects 2018. Three Nearest School Best School project Contract Administration works (NSBS) amounted to Rs. 31.7 million had been completely abandoned In terms of the Section 6.4 of the Contract without being initiated by Ministry of Agreement, 54 numbers of Nearest School Education. Best School Project works (NSBS) had not been completed within the specified Personnel Administration period. Accordingly, the period of delays In terms of the Provincial Public
was ranging from 30 to 559 days as at the Administration Circular No. rn Provincial rn Council date of audit of 21 June 2018. However, NP/02/2009(7) dated 25 March 2009, the estimated Liquidity Damages of maximum period of service of an officer in amounting to Rs. 53.13 million had not one institution had been limited to 05 been claimed. years. Nevertheless, it was observed that 27 employees at the Office of the Regional Northe Weaknesses in Director of Health Services in Jaffna had been working in the same institution for a Implementation of Project period ranging from 07 years to 34 years.
The construction of Kabadi Court work had been commenced in Vavuniya District Out of the 864 approved cadre for at an estimated cost of Rs. 5 million medical officers, only 644 medical officers without being conducted a survey on were working at that time. As a result requirements of that area before several peripheral hospitals were commencement of a project, and 03 functioning without consultation of cheques valued at Rs. 3,014,206 had been medical officers. issued to Pradeshiya Sabha by the
Provincial Department of Sports. However, works had not been completed Out of 97 approved cadre for Dental within the agreed period. A cheque Surgeons in Northern Province only 90 amounting to Rs. 1,786,341 had been dental surgeons were working as at the credited to the revenue account of the end of the year 2018. Accordingly, 07 Department on 14 September 2016 and vacancies of Dental Surgeons in the 02 other cheques amounting to Rs. Province were not filled. 1,984,824 had been credited to the General Deposit Account of this Several shortages of nursing officers Department. were observed in major hospitals and accordingly, it was observed that out of 1,119 approved cadre, only 889 nursing officers were working in the Province.
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North Western Provincial Council North Western Provincial Council has Releasing teachers for other
estimated an aggregate income of Rs. services
40,227.3 million, of which Rs. 30,937.3 million and Rs. 9,290 million as income Even though an officer holding a post in from the grants of the Government and the public service should not be released internal sources respectively. In the for another service for more than 2 years meantime it has estimated an aggregate of under section 2.5.1. of Chapter V of the Rs. 40,227.3 million, of which Rs. Establishments Code, 24 teachers Council 32,058.5 million and Rs. 8,168.8 million belonging to 04 educational zones in North as recurrent and capital expenditure Western Province have been released for respectively. Further Rs. 24,077.3 million the active service in volunteer divisions of has been earned from the grants of the three armed forces and it has lapsed two
Government and Rs. 8,591.9 has been years after such release. However they North Western Provincial Provincial Western North earned from internal sources and have not reported again for teachers accordingly the total income has amounted service. Further the total of Rs. 61.14 to Rs. 32,669.3 million. In the meantime million has been paid by the Department Rs. 32,943.7 million has been utilized , of of Education of North Western Province to which Rs. 30,710.2 million has been these 24 teachers for the period from 1993 utilized as recurrent expenditure and Rs. up to 2019. 2,233.5 million has been utilized as capital expenditure. Stamp fee and fines imposed by Important audit observations, which have been made in the sample audit the Court investigations on the role played by North Western Provincial Council during the The stamp fees and fines imposed by year under review, are given in brief in the courts ,which were collected for 31 following manner. Local Government Institutions by the end of the year under review for the Investing money in fixed deposits performance of development activities and other community services, were Rs. Rs. 196.99 million out of the allocations 323.23 million and Rs. 150.90 million made by Provincial Council to the respectively. However the office of the institutions established by charters under Chief Secretary has not taken action to the main Ministry and collected income provide that money to Local Government has been invested in fixed deposits at institutions. banks without performing the tasks to be performed for the benefit of the General Income and crop tax in arrears Public. Action has not been taken to recover the crop tax and land tax to the total value of Rs. 65.49 million, which were to be National Audit Office| Annual Report - 2018 453
recovered by 31 December 2018 from 14 by year 2018. However cattle pens have Divisional Secretariats and Rs. 236.21 not been made as per the plans by the end million for 07 revenue codes as at 31 of the year under review and no animal December 2018 by the Office of the Chief was ready for the sale.
Secretary, Department of Provincial Revenue and Department of Land Expired drugs and drugs, which Commissioner . were not up to the standards
Inactive assets There were 439 units of drugs to the value Council of Rs. 9.69 million ,which were not up to The Tourist Information and Facilities the standards and 124 expired drug units to Center at Madurankuliya, which has been the value of Rs. 2.60 million at 48 constructed spending Rs. 12.62 million institutions belonging to the Director of without making a proper feasibility study Health Services of Kurunegala District.
North Western Provincial Provincial Western North and planning, has remained idle without utilizing for any purpose. Management inefficiencies
There were unutilized stocks of thread to Rs. 18.69 million has been spent for the the value of Rs. 1.14 in different categories construction of Ranawiru monument of at Janasalu centers of the Department of North Western Province , which has been Textile Industries. commenced in year 2017, and further Rs. 7.09 million has been spent under Unsuccessful projects Criterion Based Development Grants for the opening ceremony held on 11 May 2018. The amount spent for the opening Rs. 7.6 millions has been granted to the of Ranawiru Monument has held 38% project for increasing pregnant cows under from the total amount spent for the specific provincial development grants and construction of the same. Rs. 6.61 out of the above has been spent
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North Central Provincial Council
The North Central Provincial Council remained unsettled over 4 years had estimated a total revenue of Rs. relating to 4 provincial Ministries and 22,439.92 million for the year 2018 Departments, had not been made comprising a sum of Rs. 18,199.92 available to the Audit. million from the Government grants along with a sum of Rs. 4,240 from the Revenue to be Settled to the Local internal sources. Of that revenue, it was Governments estimated to utilize a total of Rs. Although the Provincial Council had 22,236.22 million including a sum of Rs. collected court fines totalling Rs. 288.06 18,314.91 million spent on recurrent million in the year 2018, a sum of Rs. expenditure and a sum of Rs. 3,921.31 190.02 million therefrom had been million spent on capital expenses. As settled to the Local Governments. such, revenue totalling Rs. 22,974.44 Accordingly, a sum of Rs. 98.04 million million had been collected in the year form the revenue collected had not been
2018 comprising sums of Rs. 14,013.10 settled to 26 Local Governments even Council Provincial Central North million and Rs. 3,961.30 million through by the end of the year under review. the Government grants and the internal sources respectively. A sum totalling Rs. Furthermore, the Provincial Council had 28,400.70 million had been spent in the collected a revenue of Rs. 149.74 same year comprising sums of Rs. million in the year 2018 through stamp 18,635.37 million and Rs. 9,764.70 fees, and a sum of Rs. 114.51 million had million spent on recurrent expenditure been settled therefrom to the Local and capital expenses respectively. Governments. As such, a sum of Rs. 35.23 million had not been settled to the A summary of material audit Local Governments as stamp fees even observations made in the audit carried by the end of the year under review. out in the year 2018 on the North Central Provincial Council, is given Fund of the Provincial Chief below. Minister Lack of Evidence for Audit The management and administration of the Fund had been entrusted to the The total of the imprest debit balances Board of Control thereof in terms of not settled by 05 provincial Ministries Section 3(1) of the Statute No. 05 of and Departments amounted to Rs. 29.03 1992 on Chief Minister's Funds. The million as at 31 December 2018. The Board of Control comprised 06 imprest credit balance not settled by the members including Chief Minister and Provincial Department of Health 02 members of the opposition party. As amounted to Rs. 3.33 million. Evidence the methodology to be followed in adequate for verifying the accuracy of maintaining the Fund once the balances totalling Rs. 27.86 million Provincial Council is dissolved, is not
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stated in the Statute, the Fund remains such as, failure to mention the dormant since the date of dissolving the completion date of the project, and the Provincial Council. relevant parties had not signed under the conditions of the agreement, legal Outstanding Stamp Fees action could not be taken against the supplier as well. In terms of Section 40(2) of Chapter XII of the Financial Statute No. 13 of 1990 Dialyzers Remaining Idle of the North Central Province, the stamp fees payable on an instrument relating A sum of Rs. 1.37 million had been to the sale or transfer of an immovable incurred by the Provincial Department property should be paid at the time of of Health Services in the year 2016 for signing the instrument. Stamp fees the construction of a blood dialysis unit totalling Rs. 728,250 had remained due at the Base Hospital, Kebithigollewa with respect to 32 instruments signed whilst a sum of over Rs. 10 million had by 2 notaries in the year 2018. Action been spent by the Ministry of Health, had not been taken even up to the end Nutrition, and Indigenous Medicine on of April 2019 to recover the said stamp the equipment for that unit including North Central Provincial Council Provincial Central North fees. 04 blood dialysis machines, 04 beds, and a RO water filter system. Furthermore, a Projects not Completed high power electric generator too had been provided for the continuous The Chief Secretary had entered into an functioning of the said unit and agreement with a supplier on 23 March protection of the blood dialysis 2016 to the value of Rs. 15.80 million for machines. Nevertheless, the blood the production of a documentary video dialysis unit had remained idle due to programme, printing a book containing lack of staff including a consultant attractive images, and developing a doctor. The possibility of performing website with accurate information with dialysis 11,680 times on kidney patients a view to promoting tourism in the had been deprived of as the said unit, North Central Province. A sum of Rs. capable of performing dialysis on 16 12.14 million equivalent to 77 per cent kidney patients daily, had remained idle of the agreed price had been paid by 26 for a period of 02 years. December 2016 though the project had not been completed or handed over to Uneconomic Transactions the Provincial Council even by 10 September 2019. As for the With the objective of enhancing development of an attractive website, a efficiency of the health service so as to main feature of the project, the supplier ensure benefits such as, had been selected without calling for computerization of patients’ data, open bids and obtaining details on the minimizing the deficiencies in supplier’s qualifications and the dispensing drugs, increasing the websites he had developed earlier. Due productivity and efficiency, and to various deficiencies in the agreement facilitating the patients to receive
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treatments within a short time, the Abandoned Projects project had been implemented to link the outpatient departments of 3 A sum of Rs. 1,777 million had been hospitals selected in Anuradhapura spent on preliminary activities relating district. Accordingly, computer software to engineering consultancy services and accessories valued at Rs. 12.35 including the preparation of project million had been provided in the years plans and engineering estimates in the 2012 and 2017 in order to implement year under review for 473 projects in the said project without conducting a regard to engineering works of the feasibility study and training the staff. Provincial Departments and Ministries However, the project had not been in the North Central Province. implemented. Of the computer software Nevertheless, 192 projects worth Rs. and accessories purchased, Rs. 9.68 977 million had been abandoned million worth items had become whereas only 281 projects valued at Rs. technically obsolete. Thus, the 800 million had been implemented in expenditure had become futile as the the year under review. expected objectives could not be achieved. Council Central North Provincial
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Uva Provincial Council
A total revenue of Rs.23,887 million Operating Inefficiencies including a sum of Rs.19,567 million by Government Grants and a sum of Rs.4,320 Five development projects proposed by the million through internal sources had been Members of Provincial Councils had been estimated for the year 2018 by the Uva implemented by utilizing criteria based Provincial Council. It had been estimated provisions. In the utilization of provisions to utilize a sum of Rs.20,031 million as for the said projects, 46 per cent of Recurrent Expenditure and a sum of provision had been utilized exceeding the Rs.3,855 million as Capital Expenditure. limit of a project which could have utilized As such, a sum of Rs.19,053 million by 30 per cent of the criteria based provisions Government Grants and a sum of Rs.3,708 granted in terms of the Circular
million by internal sources had been No.2016/01 of 30 December 2015 of the Uva Provincial Uva Council collected in the year under review. Further, Finance Commission. Even though the Recurrent Expenditure amounting to limit of expenditure of another project was Rs.20,307 million and Capital Expenditure 10 per cent of the total criteria based amounting to Rs.2,937 million had been provisions, 19 per cent had been spent incurred. exceeding the said limit. Accordingly, provisions had been utilized exceeding the The significant audit observations revealed expenditure limit for the said two projects in the audit test check carried out in the by Rs.41.77 million and the excess had year under review relating to the Uva been covered from the savings of Provincial Council are summarized below. provision made for other 03 projects.
Revenue Management Management Inefficiencies
Statutes relating to 13 Revenue Codes of In terms of the Statute, No.1 of 2001 on duties assigned to provincial councils by Passenger Transport Services Authority of the Thirteenth Amendment to the Uva Province, the passenger transport Constitution of the Democratic Socialist services within the Uva Province and also Republic of Sri Lanka, had not been the inter provincial passenger transport passed by the Uva Provincial Council. services connected to the Uva Province should have been streamlined relating to Revenue totalling Rs.147.88 million the Uva Province. Action had not been pertaining to 05 Revenue Codes remained taken even by 28 February 2018 to in arrears as per the Financial Statutes formulate regulations for the Passenger passed by the Provincial Council. Even Transport Services Authority Statute of the though the said revenue in arrears Uva Province to streamline the other remained over a period ranging from 01 activities related to the function mentioned year to 22 years, the Provincial Council above. had failed to recover those loan balances by the end of the year under review. The Uva Provincial Ministry of Youth Affairs , Tourism, Transport, Cultural and
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Textile and Small Industries had spent a Non-completion of Projects sum of Rs.700,200 for landscaping the plot of land in the upper part of the tunnel Development of Udumulla Canal at Ella town and beautifying it by growing The contract of construction work of the flower plants under the Province Specific development of Udumulla canal at Development Grants in the year 2017. Koslanda under Province Specific Nevertheless, most of the flower plants Development Grants in the year 2018, had grown were destroyed even by 13 been awarded to a Farmers Organization at November 2018 due to lack of proper Rs.1.10 million by the Provincial Director maintenance. of Irrigation on 03 October 2018 . No Death of Milch Cows development activity of the said work had been commenced even by January 2019 The Ministry of Rural Economic Affairs while it had been stated in the Progress
had provided 100 pregnant milch cows at Report as at 31 December 2018 that the Uva Provincial Council Provincial Uva Rs.48.00 million to the Boralanda Farm on relevant works were being carried out and 24 December 2017. Eight milch cows the physical progress was 15 per cent. purchased at a cost of Rs.3.84 million have died due to non-availability of a suitable Reconstruction of the cattle shed in the farm to rear them Buththalagas Ara Wewa hygienically. The contract of the reconstruction of Further, calves were not taken care of in Buththalagas Ara Wewa planned to be hygienic conditions and as such, 45 calves constructed by the Department of out of 89 calves given birth by imported Irrigation in the year 2018 under milch cows had fallen sick and died as at Province Specific Development Grants, 30 November 2018. had been awarded to a private company at Rs.4.23 million on 24 July 2018. Even Idle and Underutilized Assets though the said construction work should The Bio gas Unit of the District Hospital, have been completed by 24 October 2018 Bandarawela which was completed at a as per the Contract Agreement, no cost of Rs.264,548 in the year 2016 had reconstruction activity of the said work remained idle without being used even by had been commenced even by January 11 October 2018. Fifty computers in 2 2019. Computer Training Units of the Mo/ Construction of Spring Valley Kowularagama Vidyalaya were Hospital inoperative while 04 teachers‟ quarters had remained underutilized without being The contract of 06 construction items repaired. valued at Rs.16.99 million of the Spring Valley Hospital under the project of developing Estate hospitals of the Ministry of Health, had been awarded to a private construction company on 17 March 2017. Nevertheless, 04 activities out of the above
460 National Audit Office | Annual Report - 2018
had been abandoned and even though 02 Failure to reap expected Benefits activities of which the construction work was commenced should have been The Uva Provincial Ministry of completed by 08 July 2017, the said Agriculture, Irrigation, Animal Products contract had not been completed even by and Fresh Water Fisheries had carried out 04 October 2018. development works in the agricultural road of Rambukpotha canal under the Projects Abandoned Agricultural Road Development Programme in the year 2017. The value of Construction work of 02 irrigation projects finished work of those development of which the agreements were entered into activities amounted to Rs.1.82 million and by the Department of Irrigation with 02 a sum of Rs.1.17 million had been paid to Farmers Organizations, had not been the contractor on the said value of finished carried out and action had not been taken work. However, the side wall mentioned against those Farmers Organizations and
in the estimate had slanted and supported Provincial Uva Council also to assign those construction work to with props while the Committee headed by other Farmers Organizations. As a result, the Regional Irrigation Engineer of financial provision of Rs.3.89 million had Badulla had recommended that the said not been utilized, thus the objectives road was not suitable for transportation. expected by the said projects were not Further, 03 lamp posts erected in the possible to be achieved. centre of road had not been removed even by 05 September 2018.
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462 National Audit Office | Annual Report - 2018
Sabaragamuwa Provincial Council
A revenue totalling Rs.29,636 million, Provincial Department of Sports
comprising a sum of Rs.24,641 million Development by the Secretary to the from Government grants and a sum of Ministry on 24 October 2014, made Rs.4,995 million from internal sources had them permanent in the service and paid been estimated by the Sabaragamuwa salaries totalling Rs.3.1 million from Provincial Council for the year 2018. A that day up to 31 December 2018 for sum totaling Rs.29,636 million comprising the relevant officers. of Rs.26,436 million as recurrent Council expenditure and a sum of Rs.3,200 million An officer of Accountant Special as capital expenditure had been estimated Grade had been recruited on contract to be utilized in the year 2018. basis for the post of Director Internal Accordingly, the revenue totalling Audit of the Sabaragamuwa Provincial
Rs.27,774 million, comprising a sum of Council from 02 May 2014 up to 02 Sabaragamuwa Provincial Sabaragamuwa Rs.23,772 million from Government October 2018 contrary to Public grants and a sum of Rs.4,002 million from Administration Circular Nos.09/2007 internal sources had been collected in the of 11 May 2007, 27/2017 of 13 year 2018. A total sum of Rs.26,062 October 2017 and 03/2018 of 20 million comprising a sum of Rs.24,098 February 2018 and paid professional million as recurrent expenditure and allowances, interim allowances and Rs.1,964 million as capital expenditure salary arrears totalling Rs.652,662. had been utilized in the year 2018. Revenue from Hospital Canteens Significant Audit observations revealed during the Audit of the Sabaragamuwa Monthly revenue from canteens collected Provincial Council relating to the year relating to 05 provincial hospitals had been 2018 are summarized and shown below. deposited in a separate account of hospitals without taking action to credit to Payment of Salaries and Allowances the Provincial Council revenue. The contrary to Circular Provisions balances of those accounts had totalled In terms of paragraph 02 of the service Rs.7.7 million by the end of the year under minute for the Primary Level unskilled review. Out of the said revenue, service category of the Sabaragamuwa Rs.840,605 had been spent without Provincial Public Service, the approval by the Embilipitiya Base Hospital appointing authority for the aforesaid for leisure trips, entertainment, purchase of service category is the Secretary to the telephones and travelling expenses. Sabaragamuwa Provincial Public Service Commission. However, Non-formulation of a Set of Rules appointments had been given for 02 for Funds established by posts in the Labourer Grade II of the Ordinances Primary Level unskilled service category of the Sabaragamuwa The Co-operative Fund established under the Department of Co-operative National Audit Office| Annual Report - 2018 463
Development according to Section 42 verification of stocks carried out on 14 (b) of the Co-operative Societies May 2019, twenty three high power Ordinance No.03 of 2007, should make hearing aid equipment valued at provisions by rules for control of Rs.411,700 and 85 medium power hearing
liquidation and arbitrator funds. aid equipment valued at Rs.1.1 million had However, such a set of rules had not remained in the store of the office and the been formulated and obtained supplying institute respectively. Those approval. equipment had been distributed after being pointed out by the Audit while 43
Council According to Section 20 (3) of the equipment had been distributed after the Provincial Councils Act, No.42 of warranty period thereof had already 1987, the Governor may make rules for expired. regulating all matters connected with, or ancillary to, the custody of the Idle and Underutilized Assets payment of moneys into, and the
Sabaragamuwa Provincial Provincial Sabaragamuwa withdrawal of moneys from, the The Provincial Department of Industrial Emergency Fund of the office of the Development had failed to take necessary Governor. Nevertheless, action had not action relating to lands and buildings been taken accordingly valued at Rs.5.3 million remaining idle over a period of 5 years belonging to 5 Arrears of Revenue textile centres, lands and buildings valued at Rs.0.55 million remaining idle over a The tax on lands recoverable by the Land period of 12 years owned by the Athsalu Commissioner General‟s Department by Institute and machinery and equipment the end of the year under review had been valued at Rs.2.7 million remaining over a Rs.13.4 million. However, the Provincial period of 10 years, owned by the Department had failed to recover the said Department of Industrial Development arrears. Three dental X Ray machines valued at Purchase and Distribution of Rs.1.4 million, 2 Auto Clave machines Hearing Aid valued at Rs.19.4 million, 2 laboratory medical equipment valued at Rs.12.1 Four hundred equipment of hearing aid million and a generator valued at Rs.4.8 had been purchased by the Ministry of million owned by 5 hospitals in the Social Welfare by spending Rs.5.8 million province had remained idle from a period to be distributed to hearing disabled ranging from 4 months to 2 years. persons under the Social Services Fund without entering into an agreement and Expenditure contrary to Objective without identifying the requirement. It was confirmed according to stock records that The Sarana Sevana Housing Development the equipment had been issued to the Programme had been implemented by the Ministry of Social Welfare on the day main Ministry with the motive of itself of receipt of the equipment to stores. supplying financial aid for constructing a However, according to the physical house for low income earners. Contrary to
464 National Audit Office | Annual Report - 2018 the said objective, financial aid had been the Ruwanwella Agricultural provided to persons who are not low Director‟s Office commenced in the income earners, for purchase of a land, to year under review for an estimated renovate the verandah of a fully completed value of Rs.37.7 million had delayed house, to construct a house of two storeys due to failure in taking proper action. and to plaster a half constructed house and to fix doors and windows. Two projects of landscaping and Non-implementation of Projects as improving roads for an estimated planned expenditure of Rs.34.6 million of the Council A contract agreement for Rs.105.6 Ministry of Provincial Roads planned million had been entered into on 16 to be implemented in the year under October 2015 on condition that the review had not been commenced due construction of the five storeyed to difficulty in selecting bidders. building of the Karawanella Base Hospital is completed within 18 Phase 1 project of constructing the Provincial Sabaragamuwa months. The said building had not been proposed hostel building of the completed and handed over even by 31 Karapincha Agri Training Centre at an December 2018. estimated cost of Rs.35.9 million by the Provincial Department of An agreement had been entered into on Agriculture had been commenced on 01 August 2018 with the 07 June 2017. A sum of Rs.22.2 Sabaragamuwa Provincial Council million had been paid to a contractor Development Creations and Machinery therefor by the end of the year under Authority for a value of Rs.4.1 million review. A work estimate of Rs.74.3 for modernization of the drug store of million had been prepared for the the Embilipitiya District Hospital. In works of phase 2 of this building and terms of the agreement, the works sent to the Development Creations should be completed by 30 January Machinery Authority on 01 October 2019. However, the Ministry of 2018. However, the agreement had Health, Nutrition and Indigenous been cancelled due to failure in proper Medicine had not made payments of constructions by contractors. Rs.1.78 million which is the first bill. Moreover, the part constructed under As such, the contractor had phase 1 thereof had not been made use discontinued with the constructions. of even by 31 May 2019. As such, the amount spent had been fruitless. The constructions of the soil laboratory Accordingly, objectives expected to be of the Karapincha Agri Training achieved by the project could not be Centre owned by the Department of achieved even by 31 May 2019. Agriculture, constructions of the bathroom, dining room and the upper The Kuruwita Pradeshiya Sabha had floor of the Provincial Agricultural awarded a direct contract valued at Director‟s Office and constructions of Rs.1.7 million to a Samurdhi Society
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contrary to provisions of the physical examination relating to Government Procurement Guidelines construction of the five storeyed for the Project on Supply of Drinking building of the Balangoda Base Water to Samagi Mawatha at Halpe in Hospital implemented by the Main
Kuruwita. Even though constructions Ministry under the supervision of the had been completed on 05 October Balangoda Executive Engineer‟s 2017, the project could not be Office, a sum of Rs.3.6 million had implemented due to unavailability of been overpaid for 09 Items of Work. adequate capacity of electricity in the
Council area, required for operating the water Out of entire provisions of Rs.1,535.42 motor installed for obtaining water. million of the Sabaragamuwa Ministry of Provincial Roads for the year 2017, Overpayments provisions of Rs.566.34 million representing 37 per cent had been An overpayment totalling Rs.1.1 provided to the Embilipitiya
Sabaragamuwa Provincial Provincial Sabaragamuwa million had been made for 08 Pradeshiya Sabha for implementing development projects of playgrounds 380 industries. The said provisions had and roads implemented by the Ministry been made without specific of Provincial Roads, of which works identification of the areas which should were not carried out. Moreover, an be developed within the area of Item of Work, that had been covered authority of the Sabha. Out of 57 by an Item of Work for which projects to an estimated value of payments of 21 playground Rs.112.09 million, a payment of development projects implemented Rs.17.92 million had been made under the Kolonna Pradeshiya Sabha without carrying out estimated Items of had been made, had been included in Works of 30 projects. A sum of the bill as an additional Item of Work Rs.4.16 million spent for 03 projects and made an overpayment totalling had become fruitless. Rs.5.9 million for 38,872 cubic metres of soil. Non-recovery of Liquidated A sum of Rs.1.3 million had been paid Damages on 02 April 2018 for the Project on Provisions of Rs.5.7 million had been Development of the Parakaduwa made by the Provincial Ministry of Watappitiya Arunalu Volleyball Education for purchase of 3,000 large Playground cancelled on 31 December children‟s chairs. An agreement had been 2016 after implementing by the entered into with a private institution for Ministry of Provincial Roads under the supply of 3,000 large children‟s chairs for supervision of the Kuruwita Rs.5.7 million in the year 2016. Even Pradeshiya Sabha. though the last date of handing over of
goods had not been included in the
agreement, the said goods should have In the comparison of payment bills been handed over before 15 February 2017 with measurements obtained at the 466 National Audit Office | Annual Report - 2018 according to the Goods Specification year 2018. The Provincial Main Ministry Register included in the Bidding had not taken action to provide sanitation Documents. Handing over of goods had facilities for them. As compared with the been commenced on 14 July 2017 after a preceding year, this number had increased delay of 27 weeks and action had not been by 139 per cent, 50 per cent and by 14 per taken to recover the relevant liquidated cent respectively in the year under review. damages of Rs.1.1 million due to delay in supply of goods. Non-achievement of Sustainable Development Goals
Non-performance of Council Provisions of Rs.2,746 million had been Environmental and Social made for provincial purpose specific Responsibilities development grants in the year 2018 under According to the monthly reports of the the Annual Development Plan of the Public Health Inspector of the office of the Sabaragamuwa Provincial Council. Even Kiriella Medical Health Officer, 1,972 though the said provision had been made houses that use unprotected wells and 07 to achieve sustainable development goals, Provincial Sabaragamuwa houses without sanitary toilets existed by the Provincial Council had not identified October 2018. However, the Provincial the goal relating to expedite Main Ministry had not taken action to implementation against climatic changes provide sanitation facilities for them. and its effects, which is one of the said goals. Moreover, attention had not been In the examination of monthly reports of paid towards important targets of 16 Public Health Inspectors of 02 Public identified goals. According to progress Health Inspector Divisions in Elapatha, 55 reports of the year 2018, sustainable houses without toilet facilities, 48 houses development targets had not been achieved using toilets without sanitation facilities under the Annual Development Plan of the and 364 houses using unprotected wells year 2018. had existed by the second quarter of the
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468 National Audit Office | Annual Report - 2018
Eastern Provincial Council
Revenue totalling Rs. 29,022 million the activities relating to the collection and comprising a sum of Rs. 24,752 million administration of provincial revenue of the from Government Grants and a sum of Rs. Eastern Province as stipulated in the 4,270 million from internal sources had Finance Statute had been affected to a been estimated for the year 2018 by the large extent. Eastern Provincial Council. A total of Rs. 28,355 million comprising Rs. 24,752 Weak Revenue Collection million for recurrent expenditure and Rs. 3,603 million for capital expenditure had Even though the Department of Provincial been estimated to be utilized in the year Revenue had been established on 18 2018. Accordingly, revenue totalling Rs. November 2008 with the cadre of 54 as a 24,320 million comprising Rs. 20,482 separate Department, the Provincial million from Government Grants and Rs. Council had abolished the Department 3,838 million from internal sources had abruptly in 2013 and reduced the key cadre been collected in the year 2018. A sum of posts from 54 to 23 in the Provincial Rs. 27,143 million comprising Rs. 24,586 Revenue Service by reducing 01 Deputy million for recurrent expenditure and Rs. Commissioner, 07 Tax Assessor and 19 2,557 million for capital expenditure had Tax Officers from the approved cadre. As been utilized in the year 2018. a result, the revenue collection and tax administration in the Province had been Material and important audit observations hampered considerably. In this regard, made during the sample audit carried out actions had not been taken even up to date in the year 2018 relating to the activities of to increase the cadre in order to improve the Eastern Provincial Council are given the efficiency of the Department. below.
Non - appointment of Provincial Failure to Enact Statute to Collect Commissioner of Revenue Revenue According to Section 2 of the Finance Statute No. 01 of 2008, a Provincial Even though it has been 10 years after the Commissioner of Revenue shall be establishment of the Department of appointed. Even though the post of Provincial Revenue, a Statute had not been Provincial Commissioner of Revenue was enacted in order to register the pawning vacant from 18 December 2011, the centers operating in the Eastern Province Provincial Council had not taken actions to and issue annual license in this respect. As fill this post in terms of Section 3.2 of an a result, a considerable amount of revenue approved Service Minute and Scheme of had been lost to the Provincial Council. Recruitment of the Provincial Department of Revenue of the Eastern Province. As a result of non- appointing a Provincial Commissioner of Revenue for 07 years, National Audit Office| Annual Report - 2018 469
Collection of Stamp Duty Fruitless Expenditure According to the mobile service conducted during the year 2017 and 2018 by the The Eastern Province Road Passengers Provincial Department of Revenue relating Transport Authority had constructed a to the collection of stamp duty from the building in a land allocated by the registration of lands at the Land Registry Kalmunai Municipal Council for bus stand in the Eastern Province, it was revealed in Kalmunai at a cost of Rs. 2.4 million that 794 land owners had declared less during the year 2011 from the Fund of the value for their lands in order to pay less Authority in order to accommodate the amount as stamp duty. Therefore, office of the Authority. However, the additional stamp duty aggregating Rs. 14 Kalmunai Municipal Council had claimed million had been imposed for those the ownership of the building and rented undervalued properties. However, the out it to a private bank. As a result, the Provincial Department of Revenue had not Authority had not made use of this taken actions even up to 31 December building. 2018 to recover the outstanding back duty of Rs. 4.8 million from the land owners to Construction of Houses According whom they were imposed. to Housing Development Plan
Failure in Assessment of Deeds According to the Housing Development Seven thousand six hundred and sixteen Plan (2015-2019) prepared by the Eastern (7,616) deeds registered in the Eastern Provincial Housing Authority, it was Province during the period from 2012 to expected to construct 6,600 houses for 2018 had not been subjected to assessment houseless families at the total estimated by the Department of Provincial Revenue cost of Rs. 3,225 million during the year in order to verify and impose additional under review. However, no houses had stamp duty due to under-valuation of been constructed during the year except lands. providing housing assistance of Rs. 10.6 million to fifty beneficiaries under the Arrears of Lease Income from the Criteria Based Grant and providing Land financial assistance of Rs. 7.5 million during the year under review for
constructing 300 toilets. Lease income for Government lands relating to 09 Divisional Secretariats totalling Rs.208 million had remained as Failure to Generate its Own arrears since the year 1991. However, Funds prompt actions had not been taken to recover those arrears of income up to 30 According to the letter No. April 2019. G/EPC/B/14/R/H dated 20 June 2014 issued by the Secretary to the Governor of the Eastern Province, the funds had been made available during the year 2014 for
470 National Audit Office | Annual Report - 2018 salaries and other expenditure subject to Canal had been clogged and stagnated to condition that the Provincial Housing become a breeding place for mosquitos. Authority must generate its own funds without depending on the Consolidated Funds. However, the Authority had failed Pre - School Education to start any business activities in order to generate its own funds to meet expenditure Goods such as furniture and sports items even after the lapse of 04 years from the purchased for Rs. 608,000 under Criteria establishment of the Authority. Based Grants (CBG) in the year 2017 for the supply of 21 Pre-schools in the Eastern Deployment of Teachers for Province had not been supplied to the respective Pre-schools even up to 31 Special Education March 2019. However, the payments for the above goods had been made in the year According to the Ministry of Education 2017 to the supplier by the Pre-school Circular No.42/2012 and Circular Letter Education Bureau without obtaining the No. ED/9/18/8/2/6 dated 17 December goods. As a result of this, the Government 2015, teachers who are specialized in the funds had been misappropriated. teaching of special education subject should be engaged only in their special Idle Assets education subjects teaching. However, forty-five (45) teachers who had obtained There were no Dialysis Units at Base training for teaching special education Hospitals of Nintavur and Valaichenai due subjects in 13 Educational Zones in the to the lack of reported Chronic Kidney Eastern Province had been deployed in Disease (CKD) patients. However, the non-special education subjects without Provincial Department of Health had deploying them for the teaching of special procured equipment for dialysis treatment education subjects even up to 31 at a cost of Rs. 18.6 million and the December 2018. medical drugs amounting to Rs. 6.15 million for those hospitals without Construction of a School Building considering the needs. As a result, such Across a Canal equipment was remained idle from 22 March 2017 up to date. A two storeyed building had been constructed at a cost of Rs. 11 million A total sum of Rs. 12.32 million had been across the Canal in one of Kattankudy spent in the year 2017 under Digital Health Schools of Batticaloa Central Zone to Project to the five selected Base Hospitals accommodate 459 primary education in the Eastern Province. However, students without considering the equipment such as Laptops, Printers, HD environmental impacts of blocking of Cameras, Barcode Readers and Servers water in the Canal and without obtaining valued at Rs. 12.32 million had not been prior approval from Urban Development used for the intended purposes up to 30 Authority and Central Environmental November 2018. Authority. As a result, water flow in the National Audit Office| Annual Report - 2018 471
Establishment of Model Organic Project proposal envisaged to establish 06 Garden mini industrial clusters in all three districts in the Eastern Province. In this regard, the The Department of Agriculture in the following observations are made. Eastern Province had decided to establish model organic garden at selected 23 According to the section 1.4 of the schools in Ampara and Trincomalee agreement, the fee would be Rs.3.00 Districts at a cost of Rs. 4.2 million in per unit of production during the order to promote the Agriculture period of this agreement. However, a Knowledge of school children in 2017. private garment factory had paid However, equipment and machineries Rs.2.00 per unit. As a result, the valued at Rs. 1.99 million were remaining Provincial Council had lost idle without being used for the intended considerable revenue. purpose even up to 31 March 2019. According to the section 1.6 of the agreement, the Provincial Council has Establishment of Mini Industrial to pay a sum equivalent to 0.25 per Park Clusters cent on the fee received from a private garment factory at the end of each A project proposal on “Establishment of quarter to contribute to the community Mini Industrial Park Clusters” had been fund established by the Community envisaged in 2014 and the Project was Based Organization (CBO) through the implemented by the Department of Rural Provincial Department of Industries. Industries in the Eastern Province in However, no arrangements had been collaboration with the private partners made to contribute to Community under the Public Private Partnership. The Based Organization (CBO).
472 National Audit Office | Annual Report - 2018