1.
The bank did not have an updated Corporate Plan.
2.
The completed Annual Budget for the year 2004 had not been made
available.
3.
The Bank had not been having an approved cadre since its inception
and therefore there had been a practice to change the cadre position
from time to time to accommodate new recruitments without any
control.
4.
Ten posts of Assistants to the Governor had been created contrary
to the provisions in the Monetary Law Act to promote 10 senior
officers of the Bank.
5.
Certain limitations to the scope of audit of the Bank had taken
place in conducting the audit of the Bank as certain Board Minutes
had not been made available to the audit on the grounds that they
are confidential documents and hence are subject to the secrecy
clause of the Monetary Law Act.
6.
The Bank had been maintaining the agreement that as it is governed
by the Monetary Law Act, it is not bound to follow the circulars
issued by the Treasury from time to time as applicable to Public
Corporations.
7.
Decline in total revenue in 2003 compared with the previous year
in view of the reduction of operational income from Rs.20 billion
to the 14.7 billion, income from local financial operation from
Rs. 7.4 billion to Rs. 4.0 billion etc, while the total operational
expenditure of the Bank had been on the increase, resulting in
a substantial decline in the contribution to the Consolidated
Fund in the form of "Profit Transfers."
8.
Substantial unusual increase in the cost of employment while the
number of employees had been on the decrease.
9.
The Bank had been granting loans amounting to Rs.2,723 million
to six private finance companies which were in distress to overcome
their liquidity problems since 1988. Against that, the outstanding
loan balances and accrued interest thereon had been at Rs. 2,551
million and Rs.4,540 respectively at the end of 2004. However,
it was a futile exercise at that stage as the finance companies
concerned had become insolvent.
10.
Decline the remittances of export earnings to the country as the
Bank did not enforce or monitor the remittances of such export
proceeds to the country and the foreign exchange loss to the country.
1I.
The Bank had been making PAYE tax payments on behalf of its employees
since, 2000, having spent Rs. 82.5 million, Rs.44.6 million and
Rs. 67.9 million for 2001, 2002 and 2003 respectively in violation
of the Treasury Circular dated 31 January 2000. 12. The Bank had
been making interest payments to the "CBSL Staff Provident
Fund" in addition to the income earned by the Fund by investing
its funds, involving a substantial additional payment and as a
result Banks employees are given a higher interest rate of their
EPF Account balances then the rate given to other EPF contributors
as a preferential treatment.
13.
The Bank had been continuing to maintain its own "CBSL Staff
Provident Fund" even after 1.2.1996 in violation of the provisions
of the EPF (special provisions) Law No.6 of 1975 and also had
been paying at 12% as employer's contribution against the rate
of 8% as prescribed by the Treasury for bank employees.
14.
The bank had paid a sum of Rs.626 million to the contractor on
the "Extension Building and the Rehabilitation Building Projects"
due to the delay taken place on the part of the Bank in the finalization
of engineer's drawings.
In the meantime the contractor had already made a claim for Rs.400
million as the Bank had retained Rs.90 million as liquidated damages.
15.
The Bank had recruited two foreign consultants on contract basis
in the mid 2003 for the Department of Bank Supervision and Department
of Human Resources at a monthly payment of US $ 22,500 and US
$33,293 respectively. However benefits accrued to the Bank are
not known.
16.
Even though the Finance Companies Act No. 78 of 1998 prohibits
the companies to engage in financial business without obtaining
a license from the Bank, there are approximately 30 such finance
companies operating in Sri Lanka by violating that legal provision.
17.
The audit opinion given on the Accounts of the Bank for the year
2003 had been a qualified opinion in view of the accounting deficiencies,
non-compliances with Laws, Rules, Regulations and Management decisions.
