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State loses billions as financial shenanigans continue unabated
View(s):Latest COPE report on 15 state institutions
By Chandani Kirinde
The Committee On Public Enterprises (COPE), in its latest report submitted to Parliament this week, revealed that investigations into large scale financial irregularities that took place under the previous regime are continuing at snail’s pace, while bad financial practices continue under this regime, costing State coffers also in billions of rupees.
Observations and recommendations with regard to 15 institutions which the oversight committee probed between May and August, 2016, including the Road Development Authority (RDA), the Telecommunications Regulatory Commission (TRC), Sri Lanka Ports Authority (SLPA) and the Employee Trust Fund (ETF), were presented to Parliament on Wednesday by Committee Chairman JVP MP Sunil Handunnetti.
The total losses incurred by these institutions and uncovered by COPE were over Rs 110 billion, COPE Chairman informed the House.
Highlights of the Report:
RDA
The RDA had selected local contractors to rehabilitate 64 roads totalling 1,434 km. A total of Rs 151.77 billion had been obtained from seven local commercial banks for this purpose, but the Committee found that government procurement guidelines had not been complied with when selecting contractors for this project, with only one contractor bidding for the Road Rehabilitation project.
COPE also found that the 54 ‘Advisors’ and 94 ‘Public Relations Officers (PRO)’ had been appointed to the RDA in 2015, which cost the institution Rs 5.86 million. These appointments had been made without the approval of the Management Services Dept, and the required approval for the financial allocations. The RDA’s Chief Accounting Officer had informed COPE that, though these were not permanent appointments, they were essential for the projects. However, COPE members, not satisfied with the explanation, had asked for a comprehensive report relating to these appointments. The RDA’s Director General later informed COPE that the services of 70 of the ‘PROs’ and ‘Advisors’ had been terminated, as they were temporary appointments.
4 Maga Neguma institutions under the RDA
The COPE examined these 4 institutions, namely Maga Neguma Emulsion Production Co. (Pvt) Ltd, Maga Neguma Consultancy & Project Management Services Co. (Pvt) Ltd, Maga Neguma Road Construction Equipment Co. (Pvt) Ltd and Expressway Transport (Pvt) Co. It was found that neither the Ministry nor the RDA had any information regarding the methodology adopted in establishing these Companies as per Cabinet decision. It was also discovered there were no records of Share certificates, records of minutes or proof of Annual General Meetings by these Companies.
The COPE recommended that, the matter with regard to the establishment of these Companies be handed over to the CID, to conduct an investigation into the disappearance of the documents pertaining to them, as well as to seek the Attorney General’s opinion regarding legal action to recover the losses incurred by the government.
Sri Lanka Insurance Corporation (SLIC)
Despite a circular that all government institutions should insure with the SLIC, it was found only 5% had done so. Even those insured with the SLIC had not done so to the full value, while most State sector institutions had insured with private insurers. The Committee was of the view that all government institutions must insure with the SLIC.
The Committee also found that the SLIC is yet to conduct an internal inquiry into the allegations of financial misappropriation against its former Chief Executive Officer and Former Managing Director who had obtained Rs 165 million and Rs 55 million respectively as their salaries during the period 2010-2015.
TRC
Even though the construction of the Lotus Tower commenced on November 12, 2012, and was to be completed on May 12, 2015, in 912 days, as per the contract agreement dated January 2012, only the concrete structure had been completed by the last date. Also, of the total value of the contract of US$ 104.3 million, around US$ 38.28 million had been spent for this work.
While work on the project is almost at a standstill now, COPE found that no internal audit had been done and there was insufficient information on the Company selected for the purpose and the BOQ pertaining to the project.
The Committee also found that an amount of Rs 1,145 million had been paid to an insurance company for insuring a loan of US$ 88.655 million, taken for the Lotus Tower construction, without an agreement.
ETF
The ETF had bought Treasury Bonds (TB) for Rs 200 million from the Secondary Market. Instead, COPE recommended that the ETF be registered as a Primary Dealer with the Central Bank, so it can trade directly in governments securities .
It was also found that ETF had hired a private advertising company without proper tender procedure, for its advertising. An investigation into this is under way, after COPE came out with the matter.
It was also found that the ETF had incurred a loss of Rs 478 million in the accounting year 2012/2013, by investing in Shares of a computer company in 2010.
The other institutions which COPE looked into, included the Cooperative Wholesale Establishment, Sri Lanka Cricket, Sri Lanka Rupavahini Corporation, National Lotteries Board, Ceylon Electricity Board & Sustainable Energy Authority of Sri Lanka, Football Federation, Sri Lanka Ayurveda Medicine Corporation, SLPA and Kurunegala Plantations.