Forty-eight loss-making institutions identified:

Financial accountability vital - COPE

By Manjula FERNANDO

The latest Report of the Committee on Public Enterprises (COPE) of 2010/2011 will be a definite eye-opener if not a ‘shock treatment’ for state sector institutions including the ministries under whose purview they come.

Out of the 229 enterprises which went under the microscope of the 31-member COPE committee, 48 institutions were making losses, it was revealed the Parliament.

Among them were the Sri Lanka Tea Board, State Pharmaceutical Corporation, the Sri Jayawardena General Hospital, Samurdhi Authority, CPC, Sri Lankan airlines, Mihin Air, Sri Lanka ports Authority, RDA and UDA.

Collapse

Senior Minister and COPE Chairman, DEW Gunasekera stressed that poor public sector financial accountability has become a crucial factor and poor attention given to the maintenance of corporate/procurement plans, audit and annual reports was alarming to the level of needing immediate rectifying action.

“This is a must to avoid a complete collapse of the public sector.” he observed presenting the Report in Parliament.

The Report has pointed out the need to strengthen the Department of the Auditor General, giving it more space to function independently and without fear or favour.

It was their unanimous decision that the rulings of the Auditor General should be implemented within the said year, instead of being unduly delayed as was being done at present.

It also emphasised the need to enhance financial accountability giving serious thought to retain professional accountants in the public sector, giving additional payment if necessary.

The Committee which began examining institutions on August 4, 2010, concluded sittings on November 18, 2011.

Transactions

During this time span, heads of the 229 institutions were summoned and questioned about transactions and their performance. Previous COPE committees between 2006 to 2010 had only scrutinised 110 institutions. The findings along with observations and recommendations were tabled in Parliament in a 176-page document on December 1.

The Committee divided into four to expedite findings the Main Committee headed by Minister Gunasekera, Committee I headed by Minister Susil Premajayantha, Committee II headed by UNP MP Karu Jayasuriya and Committee III headed by Deputy Minister Lasantha Alagiyawanna.

They were given responsibilities on the basis of sectors namely - Finance, Agriculture, Media and Health and Education to expedite the process. The main committee took over 92 institutions while the others examined 39, 39 and 59 respectively'.

COPE in its report observed that ‘Audit is an integral part of the concept of transparency and accountability, be it to the share holders, management, administrations or the legislature.

It also noted that Audit acts as an aid to management and administration which are complementary not adversarial. This crucial aspect needs wider appreciation, COPE said observing that audit and management committees of many state institutions were defunct and in some instances had not even been appointed at all.

The above committee of the National Institute of Business Management under the Ministry of Youth Affairs and skills had met only once in 2010.

The members observed that audit has to be used as a tool to enhance the economy, efficiency and effectiveness of enterprises as against a regulating tool.

Responsibility

Among the many findings, it has been noted that the failure to prepare, implement and stick to corporate and action plans and procurement plans has been detrimental and led to the downfall of the companies in question.

Lanka Sathosa, Ceylon Shipping, the Buddhist and Pali University, the State Printing Corporation, NARA and Sri Jayawardenapura University were mentioned by COPE as having faltered in their responsibility. It has been found that some institutions have prepared corporate plans just for the purpose of mere submission.

The Committee has recommended the performance of the corporate plan and has to be reviewed at least quarterly while a procurement plan has to be made soon after allocations are made from the Budget.

It has also found fault with institutions for a failure of tabling of Annual Reports. Many have overlooked this important task and the Agricultural and Agrarian Insurance Board, Institute of Printing and the Sri Lanka Institute of Local Governance had not presented Annual Reports to Parliament after 2005. Sri Lankan Airlines and Mihin Lanka had not tabled annual reports in the Parliament at all.

Breach

COPE has strongly recommended that any organisation with government owned shares must prepare and table Annual Reports as a means of public accountability.

Recovery of debts and others were seen as a serious issue in the public sector. These include recoveries from retired staff, recoveries from officers who had been transferred, amounts to be recovered due to breach of agreements, dues from other institutions for services provided, dues to be recovered from external parties.

The amount to be recovered in institutions in the higher education sector, (due to breach of agreements),

The J’pura University Rs. 69m, Moratuwa University Rs.17m, Open University Rs. 40m, Hector Kobbekaduwa Agrarian Research and Training Institute Rs. 11m, and the University of Peradeniya Rs.105m.

Among other such institutions, Mihin Lanka owed Rs. 10,000,000 to Sri Lanka Rupavahini and interest for a loan of Rs. 500m it obtained from Airport and Aviation Services Pvt. Ltd was pending as of today.

Sri Lanka Shipping Corporation owed Rs.50million to SLPA. Sri Lanka Rubber Manufacturing and Export Corporation had to repay Rs.115m and Rs. 1,385 to the People’s Bank and the Treasury respectively.

Under dues payable from external parties, COPE observed that Sri Lanka Rupavahini Corporation had not taken action to recover Rs. 42.64m from various political parties for the use of airtime.

The Committee categorised institutions summoned as follows: Institutions with a stable financial position;

Running at break-even,

With decreasing revenue,

Running at a loss. The last two categories were given much emphasis.

The Committee sought an amendment to Standing Order 126 to allow organisations such as the CEB subsidiary LECO to be examined in keeping with its mandate of public accountability. It also said the Committee must be empowered to summon ex-board members before COPE as many cases could not be examined since the present members refused to take any responsibility.

They also sought permission to revise outdated procedures such as those governing new recruitments since these have ‘seriously affected the efficiency of public enterprises’.

The Committee also recommended the closure of redundant and duplicate institutions which are a ‘drain on public funds’.

COPE spoke of a number of institutions where PAYE tax of employees has been settled by the institutions itself, on an understating of trade unions and the Treasury.

The Report was critical of this practice since it had a double effect; it will reduce tax payable by the institution since profits are reduced and unfair by the tax payers of other institutions.

Moreover, this runs counter to the concept of Income Tax.

It has also sought giving wider powers to the Land Reclamation and Development Corporation, since provisions to stop illegal filling of land are limited.

Amendment of Acts to enable public enterprises to function in a broader scope was also among the key recommendations.

The Committee strongly criticised the practice of granting loans by profit making enterprises to others.

Institutions with decreasing revenue 2010

State Mortgage and Investment Bank, Sri Lanka Rupavahini Corporation and Sri Lanka Telecom

Institutions running at a loss – 2010

Sri Lanka Tea Board, Tea Small Holdings Development Authority, Tea Shakthi Fund, National Youth Services Council, Human Resource Development Council, National Child Protection Authority, Thurusaviya Fund, Sri Lanka Foundation, Ceylon Ceramic Corporation Sri Lanka Inventors Commission, Janatha Estate Development Board, Sri Lanka State Plantation Corporation, Sri Lanka Cashew Corporation, Industrial Development Board, State Pharmaceutical Corporation, State Pharmaceutical Manufacturing Corporation, Sri Jayawardenapura General Hospital, Vijaya Kumaratunga Memorial Hospital, Samurdhi Authority of Sri Lanka, Ceylon Petroleum Corporation, Atomic Energy Authority, Sri Lanka Mahaweli Authority, Water Resources Board, National Dangerous Drugs Control Board, Sugathadasa National Sports Complex Authority, Sri Lanka Press Council, National Gem and Jewellery Authority, Sri Lankan Airlines, Mihin Air Ltd, Ceylon Shipping Corporation, CWE, Paddy Marketing Board, State Trading (wholesale) Company Ltd., Social Security Board, Sri Lanka Ports Authority, National Disaster Management Centre, Road Development Authority, Sri Lanka Transport Board, National Housing and Development Authority, Urban Development Authority, Water Supply and Drainage Board, National Aquatic Development Authority, Ceylon Fisheries Corporation, Ceylon Fishery Harbour Corporation, National Enterprise Development Authority, Sri Lanka Ayurvedic Drugs Corporation and Sri Lanka Advanced Technological Education.