Spotlight on financial mismanagement:

Wrong to say all state institutions are loss-making - D.E.W.

By Manjula Fernando

Out of 72 public enterprises, fifteen were running at a loss in 2011, the latest COPE report highlighted.

The Chairman of the Committee on Public Enterprises (COPE), Minister D.E.W. Gunasekera told Parliament tabling the final report, there was a notion in the country that all state owned commercial enterprises were running at a loss but their findings were to the contrary.

However, it was disturbing that four institutions accounted for 98 per cent of the total loss incurred by state institutions in 2011, namely the Ceylon Petroleum Corporation, Ceylon Electricity Board, Sri Lankan Airlines and Mihin Lanka Ltd.

Minister Gunasekera told Parliament that the Committee will concentrated more on loss-making enterprises in the future, to turn them into profit-making ventures, that would certainly involve unpopular recommendations.

According to the report nine institutions performed well and recorded profits in 2011 over losses in 2010. They include the Associated Newspapers of Ceylon Ltd., the National Water Supply and Drainage Board, the Sri Lanka Ports Authority, the Paddy Marketing Board, Sri Lanka Tea Board and Urban Development Authority (UDA).

Meanwhile, 12 institutions which recorded profits in 2010 turned to loss-making or increased losses in 2011. These include the Ceylon Fisheries Corporation, MILCO, Lanka Salu Sala, Kantale Sugar Industries, State Plantation Corporation.

The Board of Investment, Co-operative Wholesale Establishment (CWE), Employees Trust Fund Board, Lanka Sathosa Ltd., National Savings Bank, Sri Lanka Insurance Corporation, the SLBC and SPC saw their volume of profits slump in 2011 as against the previous year.

Among the 14 institutions which recorded continuous losses for the years 2009, 2010 and 2011 were CPC, Sri Lankan Airlines, Mihin Lanka, Sri Lanka Transport Board, Lanka Salu Sala and Ceylon Fisheries Corporation.

The COPE completed examination of 244 state institutions, an increase of 15 institutions from the previous year to file the second report to parliament. On October 25 2012, an interim report which recorded 32 institutions was tabled.

In the Chairman's note of the report Senior Minister Gunasekera stated, " I believe that this exercise is an unprecedented and distinguished record in the history of our legislature".

He has drawn the attention of the executive to the need for enhancing the quality of leadership of the public enterprises through the appointment of professional experienced and skilled personnel who are both answerable and accountable to salvage the under performing and loss-making ventures.

It has been emphasised that maximum degree of autonomy and minimum degree of interference was vital for their performance.

It has also been reiterated that, Treasury and the Public Administration Ministry must give strong attention to offer better salaries to Accountants to address the dearth of professionals in this sector while underscoring the need to move to a 'higher level' of accounting and auditing to take the state sector to a higher elevation.

Under general observations and recommendations which has 15 in total, the COPE report underscores the need for the increase in salaries of professionals in the public sector so as to recruit and retain the best. The Treasury and the Public Administration Ministry has been required to take immediate action.

Among other recommendations it has highlighted, appointment of private auditors, do away with improper financial planning which means not to compromise on national interest when in a highly competitive business environment and strengthening internal audit.

The report has directed as a solution to unsatisfactory debt management, to institute a special debt collecting unit in each institution to recover the debts without delay.

As for the institutions like SLTB the committee has recommended a Voluntary Retirement Scheme observing that losses incurred by such institutions were mainly due to excess staff. It has also recommended liquidation of certain redundant institutions like the Lakdiva Engineering Company Ltd., a company engaged in repairing and manufacturing of bodies of buses for SLTB.

The Report has listed a total of eight such institutions that needs to be wound up - Janatha Fertilizer Enterprises Ltd., Kantale and Hingurana Sugar Industries Ltd., Sri Lanka Rubber Manufacturing Export Corporation Ltd., Lanka Salu Sala Ltd., Lanka Fabrics Ltd., Cooperative wholesale Establishment and State Trading Wholesale Company Ltd.

The report criticised the operations of certain subsidiary companies that have gone beyond the control of the parental company reiterating the need to amend the Parliamentary standing orders to empower Auditor General to undertake audit of their accounts and to bring them under the purview of the COPE.

Among other recommendations highlighted were, the need to - address the dearth of qualified Actuaries, shifting to cost accounting system, maintain a cordial rapport with trade union leaders to run the institution smoothly and presentation of annual reports in parliament.

A total of 31 state institutions in 2009 and 48 institutions in 2010 have not tabled their annual reports in parliament as of June 30 this year. The Committee also made recommendations to increase its effectiveness taking on board the opposition concerns.

Among these directives are publication of COPE findings every three months, an annual debate within a month of the publication of the final report, announce the institutions listed for COPE scrutiny one month before. In addition there will be a sub-committee headed by COPE Chairman and representing at least one member from each political party in the House mainly to identify state institutions for scrutiny and grade them by losses incurred, strategic importance to the country.

Other recommendations include on the spot inspections and investigations, and follow up action to monitor if their recommendations have brought in intended results.

The three subcommittees of COPE were headed by Minister Susil Premajayantha, Member of Parliament Karu Jayasuriya and Deputy Minister Lasantha Alagiyawanna.