Sabaragamuwa Provincial Council - 2018

[Pages:24]Sabaragamuwa Provincial Council - 2018 ---------------------------------------------------1. Financial Statements -------------------------1.1 Qualified Opinion ----------------------The audit of the financial statements of the Sabaragamuwa Provincial Council for the year ended 31 December 2018 comprising the statement of financial position as at 31 December 2018 and the statement of financial performance and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information, was carried out under my direction in pursuance of provisions in Article 154 (3) of the Constitution of the Democratic Socialist Republic of Sri Lanka read in conjunction with Section 23(1) of the Provincial Councils Act,No. 42 of 1987 and provisions of the National Audit Act No.19 of 2018. The summary report in terms of section 23(2) of the Provincial Council Act and provisions in Sub-section 11(1) of the National Audit Act No. 19 of 2018 was issued on 31 May 2019 and the Detailed Management Audit Report in terms of Section 11(2) of the National Audit Act was issued on 26 July 2019. This report will be tabled in parliament in pursuance of provisions in Article 154(6) of the Constitution and sub section 10(1) of the National Audit Act.

In my opinion, except for the effects of the matters described in the Paragraph 1.6 of this report, the accompanying financial statements give a true and fair view of the financial position of the Sabaragamuwa Provincial Council as at 31 December 2018, and of its financial performance and its cash flows for the year then ended in accordance with Generally Accepted Accounting Principles.

1.2 Basis for Qualified Opinion ----------------------------------I conduct my audit in accordance with Sri Lanka Auditing Strandards (SLAuSs). My responsibilities, under those standards are further described in Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified opinion.

1.3 Responsibility of Management for the Financial Statements -----------------------------------------------------------------------The Management is responsible for the preparation of financial statements that give a true and fair in accordance with Generally Accepted Accounting Principles and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Those charged with governance of each institution including the Provincial Treasury are responsible for overseeing the Provincial Council's financial reporting process.

As per Sub-section 16(1) of the National Audit Act Number 19 of 2018, the Sabaragamuwa Provincial Council is required to maintain proper books and records of all its income , expenditure, assets and liabilities, to enable annual and periodic financial statements to be prepared.

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1.4 Auditor's Responsibilities for the Audit of the Financial Statements ---------------------------------------------------------------------------My Objective is to obtain, responsible assurance about whether the financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Responsible assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sri Lanka. Auditing Standards will always detect a material misstatement when it exists. Misstatement can arise from fraud or error and are considered material if , individually or in the aggregate , they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Sri Lanka Auditing Standards, I exercise professional judgment and maintain professional scepticism throughout the audit. I also:

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Iidentify and assess the risks of material misstatement of the financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error , as fraud may involve collusion, forgery , intentional omissions ,

misrepresentations, or the override of internal control.

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Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Provincial Council's internal control.

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Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the management.

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Evaluate the overall presentation, structure and content of the financial statements, including

the disclosures, and whether the financial statements represent the underlying transactions

and events in a manner that achieves fair presentation

I communicate with the management regarding , among other matters, significant audit findings , including any significant deficiencies in internal control that I identify during my audit.

1.5 Report on Other Legal And Regulatory Requirements ---------------------------------------------------------------The financial statements presented by the Provincial Council is consistent with the preceding year as per the requirement of section 6 (i) (d) (iii) of the National Audit Act , No.19 of 2018.

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1.6 Comment on Financial Statements

-------------------------------------------

1.6.1 Accounting Deficiencies

------------------------------

Audit observation

Recommendation

---------------------According to the Assets Management System of the Council ,though the value of non-current assets is Rs. 4,434,085,495, the financial statements amounted it as Rs. 2,667,260,162, resulting in noncurrent assets of Rs. 1,766,825,333 has been accounted for less.

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All non-current assets

should be included in

the

financial

statements.

Comment by Chief Accounting Officer -------------------------------Non-current assets are accounted for only asset included in the CIGAS program.

1.6.2 Non-Compliance

------------------

1.6.2.1 Non-compliance with laws, rules, regulations and management decisions

-----------------------------------------------------------------------------------------

Reference to

Non-

Recommendation Comment by Chief

Laws Rules and compliance

Accounting Officer

Regulations

------------------- ----------

-------------

-------------------------

(A) Section 172 (8) The total of Action should be A Surcharger has

and (9) of the two surcharge taken as per the appealed for a

Pradeshiya Sabha certificates

provisions of the surcharge of Rs.

Act No 15 of issued by the Pradeshiya Sabha 1,250,000 belongs to

1987

Auditor

Act.

Mawanella Pradeshiya

General in

Sabha. The case

2006 was

relating to surcharges

Rs.1,272,321

valued at Rs.22,321 of

had not been

Kegalle Pradeshiya

recovered by

Sabha has been

the end of the

dismissed. Steps are

year under

being taken to file that

review.

case again.

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(B) Financial Rules of the Sabaragamuwa Provincial Council

(i) P.F.R.54

No actions had

been taken in

terms

of

financial rules

on the loss

worth

Rs.

10,505,218

caused by 48

vehicle

accidents

related to 3

Ministries and

2 Institution of

the Provincial

Council.

Action should be

taken

in

accordance with

the provincial

financial rules.

Action will be taken

to recover the money

after

immediate

investigation.

(ii) P.F.R. 117.1

The monthly

canteen

revenue

collected in

respect of the 5

hospitals had

been deposited

in a separate

accounts in the

hospitals

without been

credited to the

Provincial

Council

revenue and at

the end of the

year under

review, the

total balance of

those accounts

was

Rs.

7,729,222. The

Embilipitiya

Base Hospital

has spent by

Should with rules.

comply financial

The rental income from the canteen is credited to the canteen revenue account of each hospital, and the money of that fund are currently used only for the development of the hospital and for the purchase of emergency and essential goods.

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that revenue without approval.

(C) Financial

The action had Action should be Several deposits have

Regulation of the not been taken taken

in been credited to the

Democratic

according to accordance with Government Revenue

Socialist

regulations

the

Financial and the balance will be

Republic of Sri regarding 184 Regulations.

credited immediately.

Lanka

deposits worth

F.R.571

of

Rs.

64,929,146

owned by five

entities to the

date of 31

December,

2018.

(D) Public

An officer had Payments made in Those who served as

Administration been recruited contravention of the Director of Internal

Circular No. to the post of the circular shall Audit have been asked

09/2007 dated 11, Internal Audit be refunded.

to transfer the relevant

May,

2007, Director of the

funds

to

the

27/2017 dated 13, Provincial

Government.

October, 2017 Council and

and 03/2018 on contract

dated

20, basis From 2,

February, 2018 May, 2014 to

2, October,

2018, and he

had been paid

Rs. 652,662 as

allowances and

arrears.

(E) Section 3.2 of the Two industries Action should be

Public Finance worth of Rs. taken in

Circular No. 3,795,738 of accordance with

01/2012 dated 05 the Ministry of the circulars.

January 2012

Provincial

Roads has been

awarded to a

non-

community-

based

organization by

Balangoda

I will look into this matter and provide answers.

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Executive Engineer's Office.

2. Revenue Administration

----------------------------

Audit Observation Recommendation

Comment by Chief

----------------------

Accounting Officer

---------------------

-----------------------------

Land Tax Revenue Should be complied with Accounting in respect of

to be recovered by Financial rules.

land tax collection has been

the

Land

done on a cash basis. It is

Commissioner's

planned to account for

Department at the

revenue collection on

end of the year

accrual basis in future. I

under review was

hope to be able to report on

Rs. 13,442,234.

the collection of arrears

revenue.

3. Financial Review -----------------------Financial Results ---------------------According to the financial statements presented, there was a surplus of Rs 1,575,207,635 in the Provincial Council Fund for the year ended 31 December 2018, corresponding to a surplus of Rs 123,644,491 in the preceding year.

4. Statute Accounts, Funds and Commercial Advance Accounts

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4.1 Statute Accounts / Fund Accounts

-------------------------------------------

(A) Sabaragamuwa Road Passenger Transport Authority.

------------------------------------------------------------------

Audit Observation

Recommendation

Opinion of the Chief

------------------------

----------------------

Accountant

----------------------------

(i.) The Road Passenger Action should be taken to There is a trend towards

Transport Authority uncover information monthly fines.

had failed to disclose about buses operating

details of buses without obtaining a

operating

without license.

permission for several

years.

(ii.) Rs.2,312,250 had been Payments should not be Accept. Paid as a paid on three instances made in contravention of precedent.

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in 2016 and contrary to objectives of institution.

2017, the the

the objectives.

(iii.) Though a tender of Action should be taken in Accept. No written

Rs.2,000,000 had been a transparent manner and evidence has been

awarded to a person for route permits should be presented regarding the

issuing a Ratnapura - issued according to a letter of demand

Embilipitiya

road specific procedure.

permit as another

person had made a

letter of demand that

the route had a road

permitmoney had been

obtained for the license

which was awarded the

tender.

(iv.) The Authority has Relevant equipment established security should be used. camera system, which was purchased in 2015 at a cost of Rs. 3,441,110, remained inactive by 6, May , 2019

Accept.

(B) Ancient theme park Authority

--------------------------Audit observation

----------------------During the year under review Rs. 42,722 and Rs. 318,868 had to be surcharged upon non-payment of contributions upon Section 16 of the Employees' Trust Fund Act, No. 46 of 1980, Section 27 of the Amended Act No. 3 of 1982 and

Recommendation

---------------------Shall comply with the provisions of the Act.

Comment by Chief Accounting Officer -------------------------------------Due to the financial crisis, the EPF and ETF contributions unable to pay. Action has been taken to pay the outstanding dues and all surcharges.

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Sections 10 and 16 of the Employees Provident Fund Act, No.15 of 1958.

(C) Emergency Fund

-------------------------

Audit observation

Recommendation

Comment by Chief

Accounting Officer

---------------------

----------------------

-----------------------

In terms of Section 20 The purpose of the establishment Rules relating to the

(3) of the Provincial of the Fund shall be fulfilled and Fund have been

Council Act No. 42 of should act in accordance with the drafted and will be

1987, the Governor Provincial Council Act.

drawn up with the

had not made any rules

directives of the

for the Sabaragamuwa

Governor with the

Provincial Emergency

approval of His

Fund and the Fund had

Excellency Governor.

not been utilized in any

In the event of a

case even though it had

catastrophic situation,

been over 28 years

the expenditure has

since its establishment.

been done with the

provisions for the

welfare programs of

the Hon. Governor by

the Ministry of Social

Services and the

Social Services Fund.

(D) Sabaragamuwa Provincial Social Service Fund

---------------------------------------------------------

Audit Observation

Recommendation

Comment by Chief

-------------------

----------------------

Accounting Officer

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(i.) 400 hearing aids valued Steps need to be taken to Prior to handing over the

at Rs.5,840,000 had been ensure that the equipment hearing aids to the

purchased in year 2018 is available to the beneficiaries, a separate

under the Social Service beneficiaries in the most ear mold should be made

Fund without recognizing convenient

and to suit each individual.

the need and according to affordable manner.

Remaining 85 normal

the inventory the

hearing aids and 23 high-

consignment had been

power hearing aids had

issued to the Department

been planned to distribute

of Social Services on 20

by the end of April 2019.

June 2018. But according

But due to adverse conflict

the physical stock

situation in the country it

inspection carried out on

could not be done.

14 May 2019, it was

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