Kesbewa Urban Council ------------------------------------ Colombo District ------------------- 1. Financial Statements --------------------------- 1.1 Presentation of Financial Statements ------------------------------------------------- The financial statements for the year 2018 had been presented for audit on 01 April 2019 and the summary report of the Auditor General on the financial statements and the detailed management report had been forwarded to the Chairman on 31 May 2019 and on 05 August 2019. 1.2 Qualified Opinion ------------------------ In my opinion, except for the effects of the matters shown under the basis for qualified opinion of this report, the financial statements of the Kesbewa Urban Council give a true and fair view of the financial position as at 31 December 2018 and its financial performance for the year then ended in accordance with Generally Accepted Accounting Principles. 1.3 Basis for Qualified Opinion ------------------------------------ (a) Accounting Deficiencies ------------------------------- Audit Observation Recommendation Comments of the Accounting Officer ------------------------- ----------------------- ------------------------------- (i) Rate received for in advance Should be accounted Accept. Action will be taken at the end of the year under correctly. to correct in future. review valued at Rs.3,512,864 has been shown to creditors without accounting as pre-payment.. (ii) Fuel deposits of Rs.1,045,000 Should be accounted Accept. Action will be taken and deposits of Rs.115,920 to correctly. to correct in the future. the Water Supply and Drainage Board, had been accounted under investments without being accounting under pre-payment accounts. (iii) Arrears of receivable income Should be accounted Accept. Action will be taken valued at Rs.1,442,851, has correctly. to correct in future. been accounted under 1 miscellaneous creditors in the financial statements, without being accounting under income of debtors. (iv) Sum of Payables of Should be accounted Accept. Action will be taken Rs.1,529,380 for the month of correctly. to correct in future. November 2018 to the Waste Management Authority, had not been accounted. (v) Compactor received valued at Should be accounted Accept. Action will be taken Rs.27,714,000 on payment correctly. to correct in future. basis, had been accounted under income debtors. (b) Contingent Liability ---------------------------- Audit Observation Recommendation Comments of the Accounting Officer ------------------------- ----------------------- ------------------------------- Financial Statements eleven Contingent liabilities should Cases filed by the Council cases filed by outside parties be disclosed in financial and against the Council have against the Council, and a statements. been incorporated in the case filed by the Council financial statement, as against outsiders had not shown by the audit, been disclosed in the financial statements. (c) Unreconciled Accounts ------------------------------- Audit Observation Recommendation Comments of the Accounting Officer ------------------------- ----------------------- ------------------------------- An excess of Rs.1,331,734 and Accounts balances should be Accept. Action will be taken to shortage of Rs.1,178,956 had corrected after reconciling correct in the future. observed, when comparing the the differenses. balances of five accounts with the related subsidiary registers/ schedules in the financial statements. 2 (d) Accounts Receivable and Payable ------------------------------------------------ Audit Observation Recommendation Comments of the Accounting Officer ------------------------- ----------------------- ------------------------------- (i) The account balance of Action should be taken to Action will be taken to garbage charges receivable recover garbage dues. remove the outstanding was Rs. 2,655,916 at the end of balances before 2015 and year under review, and that 2016, because those includes outstanding balances outstanding arrived due to of Rs.191,688 due before incorrect billing. 2015, and Rs.235,703 due for the year 2016. (ii) The Street lamp lighting aid of Action should be taken to Approval has been sought to Rs.481,578 from 2009 to 2014, recover outstanding balance write-off street lamp lighting and electricity charges of of street lamp lighting aid aid amounted Rs.254,748 Rs.110,054 from the and the electricity bill. out the of the amount of Piliyandala Sports Club for the Rs.481,578. The remaining years 2014 and 2015, had not balance of Rs.226,830 has been recovered by the end of been accounted due to the year under review. incorrect billing, so it will be written off from the registers with the approval of Council. Piliyandala Sports Club has agreed to pay electricity charges of Rs.110,054. (iii) Action had not been taken to Action should be taken to Case has been filed to recover Rs.68,790 from the collect entertainment tax recover Rs.44,865 and Common Amenities Center and other income. Rs.23,925 will be forwarded and Rs.281,047 from the to get approval of the entertainment tax as at the end Ministers in charge to write of the year under review. -off. Entertainment tax of Rs.281,047 has been forwarded to get approval for write -off. (iv) The Council had been failed to Rent income should be Forwarded to the Minister recover 74 per cent of car park collect at once. for the approval to write- off rent income amounting Rs.206,260, and Rs.86,500 Rs.229,457 out of total income has been recovered. 3 of Rs.310,957. Remaining balance Rs.18,197 will be recovered monthly. (v) The outstanding advance Action should be taken to Action will be taken to write balance of Rs.181,203 coming settle the advances with in off the outstanding balances from 2007 to 2018, had not due period. of advance, because been settled even at the year outstanding balances are due under review form 12 years, and relevant files were misplaced, and officers who handled the files at that time, are not in the service. (vi) The arrears of stamp duty Action should be taken to No comments. included income debtor recover arrears of the stamp balance amounting to duty. Rs.435,994,817 and the Council had not recovered the arrears of Rs.274,824,817 due for the years 2015 and 2016. (vii) The outstanding balance of the Action should be taken to The money had been loan receivables has been recover the arrears of reimbursed to the Rs.1,681,553 of which interest property loan interest. Commissioner of Local not recovered for the years Government. 2016 and 2017 amounted Rs.869,688. (e) Lack of Necessary Documentary Evidence for Audit ------------------------------------------------------------------- Audit Observation Recommendation Comments of the Accounting Officer ------------------------- ----------------------- ------------------------------- Twelve accounts aggregating Schedule or necessary Action will be taken to Rs.684,952,402 could not be information should be correct in financial satisfactorily vouched in audit due to submitted to confirm the statements of 2019. non-rendition of necessary balances. information. 4 1.4 Non compliance --------------------- 1.4.1 Non-compliance with Laws, Rules, Regulations and Management Decisions ------------------------------------------------------------------------------------------------- Instances of non-compliance with laws, rules, regulations and management decisions appear below. Reference to Laws, Rules Non-compliance Recommendation Comments of the Regulations and Accounting Officer Management Decisions --------------------------- --------------------- ---------------------- ------------------ (a) Financial Regulations . of the Democratic Socialist Republic of Sri Lanka --------------------------- (i) FR 570 and 571 Action had not been Should be act in Accept. Action will be taken to recover deposit accordance with taken to settled. lapse over two years the FR 570 and amounting to 571(2) Rs.15,773,446. (ii) FR 1653 Milo- meters belonging Should be act in No comments. to the Council of three accordance with tractors were not the FR 1653 working . (b) Public Administration Circulars -------------------------- Paragraph 3.1 of the Fuel consumption test Should be act in The fuel consumption Circular No. 30/2016 had not been carried out accordance with test of 4 vehicles had dated 29 December on vehicles belonging to paragraph 3.1 of the been carried out by an 2016. the Council. Circular No. independent official, 30/2016 dated 29 and dates have been December 2016. fixed to check fuel consumption in relation to other vehicles. 5 (c) Treasury Circulars -------------------- Circular No. IAI / Separate register had Should be act in The Storekeeper has 2002/2 dated 28 not been maintained for accordance with the been advised to November 2002 computer accessories circular No. IAI/ maintain a separate and software. 2002/2 dated 28 register for computer November 2002. accessories and software. (d) Employees' Provident Fund Act No.15 of 1958 -------------------------- Section 16 A sum of Rs. 2,857,034 Should be act in Contributions to the had to be paid from the accordance with the Employees Provident Council Fund with a Article No16 of the Fund had not been paid surcharge, due to non- Employees on time, due to lack of payment of Provident Fund Act proper instructions. The contributions to the No. 15 of 1958. Department of Local Employees Provident Action should be Government has Fund in due period. taken accordance commenced with FR 156 to investigations on 03 recover from the officers who had been person