Expenses to watch out for | Daily News
The COPE Reports - Part 1

Expenses to watch out for

Ravi Ratnasabapathy

The Government is entrusted with billions of rupees of public funds, collected from the people. It has a duty to account for them and use them in accordance with the wishes of Parliament, without excess, extravagance or waste.

Ensuring the money is properly used is the responsibility of Parliament which works through two Committees, the Committee on Public Accounts (COPA) and the Committee on Public Enterprises. COPA scrutinises the Government, its Ministries, Departments, Provincial Councils and Local Authorities while COPE scrutinises public corporations and business undertakings.

Summarised are some findings of the 1st COPE report. The COPE, by its own admission, is under-resourced. It lacks staff particularly for audit and legal support. They also lack IT systems and apparently, even a proper office.

Despite these limitations and the fact that the reports are not comprehensive-they have examined a limited number of issues in a few institutions, they are a devastating critique of the state of governance. This is only the tip of a very large iceberg and underlines the need for a drastic re-think in the role of government.

A few highlights are presented below.

The Committee on Public Enterprises

First Report

(For the period from January 26, 2016 to April 8, 2016)

State Pharmaceuticals Corporation

Purchase and issue of substandard drugs

1. Imported pharmaceuticals not properly tested due to lack of lack of laboratory facilities. Drugs later found to be substandard are issued to patients owing to the delays in testing samples prior to the distribution of the same.

2. Drugs worth Rs250 m had been identified for destruction in 2014 and 20 15 but only Rs.214.6 m were actually destroyed.

3. Substandard drugs worth Rs.199 m purchased between 1996 and 2014 for sale through Osu Sala outlets.

4. Substandard drugs worth Rs.1 bn purchased between 2011 and 2014, the majority (Rs.867 m) for distribution free through the public health system.

Purchasing Cost of Quality Failed Drugs- 2011-2014

Year Purchasing cost of quality failed drugs purchased for the Medical Supplies Division (Rs. million) Purchasing cost of quality failed drugs purchased for marketing by the Corporation.

2011 and earlier         556.5 90.6 647.1

2012                         68.5 22.9 91.4

2013                         103.0 43.1 146.1

2014                         139.1 42.3 181.4

Total                         867.1 198.9 1066.0

Ceylon Electricity Board

Lack of accountability - 20 subsidiaries incorporated under the Companies Act

The CEB holds a 63% stake in Lanka Transformers Ltd, which in turn has stakes ranging from 50%-100% in 15 of other companies. The CEB also has stakes of 50%-100% in 5 other companies.

1. LTL and its subsidiaries refused to submit details of the operation to the COPE, despite the fact that the CEB effectively owns more than 50% of the shares. They claim to be private companies and need not report to parliament. The accounts of 14 were later submitted - 16. 3.2016.

2. The subsidiary companies have paid dividends worth Rs.14 bn to LTL. The CEB should have received 7.1 bn as its share but only Rs.6.9 bn was received.

Author's note: LTL supplies services and products to the CEB. Values and terms of contracts are not known.

Payment of salaries and allowances outside standard procedures

1. A sum of Rs. 849 million had been spent to pay 39 allowances of various types to employees without the approval of the Cabinet of Ministers of the Treasury.

2. Establishing a new salary scale known as “E – scale” for engineers with effect from January 01, 2015 and making payments in accordance with that without the recommendations of the salaries and Cadre Commission.

Janatha Estate Development Board

1. Land leased at low rates

Land belonging to the JEDB in Vauxhall Street had been undervalued and given on long leases of 25, 30 or 50 years upon a Cabinet decision.

2. Unpaid EPF and ETF dues for the period 2011-2015 amounting to Rs.323 m (including surcharges).

3. Operations Loss of the JEDB

2011     2012     2013     2014

Rs. 258m Rs.199m Rs. 501m Rs.169m


Land Reclamation Commission

1. Information with pertinence to the lands belonging to the Commission not been updated.

Action has not been taken to formulate a register of lands and to maintain it updated.

2. Special projects for which lease agreements have not been signed:

I. 280 acres of Monarakelewatta had been leased out to a private company under a 30-year lease in February 2011 without any approval from the subject minister and Rs.1 million has been paid as advances but lease rent had not been recovered for the period from 2011-2016

ii. Out of 12 acres of the Kumbalgoda estate, six acres have been leased out to a private Export Crop Project in an illegitimate manner.

iii. Leasing out a plot of land with an extent of approximately two hectares of Arkediyawatta in Badulla District. The amount in arrears to be recovered is around one million and without the approval of the Council, a loan of Rs.17.5 million has been obtained keeping this land as a security and no action been taken by the Council with pertinence to this matter.

iv. Six acres of Industrial Zone, Leylandwatta, Homagama has been given to Rosell Bathware Ltd company under a 50-year lease and lease rent not been properly recovered.

Elkaduwa Plantation Company LTD

Leasing out the Nellaolla estate

1. Leasing out an extent of 125 hectares of the Nellaolla estate which consist of 358 hectares to Agri Squad company and the balance forcibly acquired by the residents of the area.

2. A person as a sub lessee of the Agri Squad Company possessing the estate in an unauthorized manner.

2. Leasing out a factory owned by the company

Leasing out a factory owned by the company to the institution by the name of Pride Tea, the particular institution has completely defaulted paying lease rent to the company and also defaulting the payment due for tea leaves with a value of Rs.30 million provided by the company.

Board of the Sri Jayewardenepura General Hospital

Payment of consultants’ fees

Note: Although this is a state hospital it also runs a paying ward. These payments of fees appear to be over and above the normal remuneration to staff.

1. 50% of the total income charged from the patients of the paying wards has been paid as professional fees to the doctors and staff of the hospital. PAYE tax has not been deducted from the payment. Unpaid PAYE tax for 2014 and 2015 amounted to Rs.74.7m

Purchase of anaesthetic equipment

1. Four anaesthetic machines had been purchased at a cost of Rs. 29.9m without following a proper procurement process. The purchase of the equipment had apparently gone ahead despite an offer from the Australian Government to provide these free of charge.

2. The purchase of the equipment had been justified on the basis of three existing machines being defective. No technical evaluation is available to support this and no proper procedure was followed for disposal. The Committee was later informed that the disposed of equipment had been given to the Negombo, Kalutara and Monaragala hospitals.

Expired stock

Drugs and other worth Rs.5.1m had been purchased for the Neurosurgical Unit in February 2012.

80% of the stock valued at Rs.4.1m had not been used and expired.


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