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Auditor General Issues Damning Report On Cash Strapped CPC


 ■COPE calls for explanation from CPC
  Mandana Ismail Abeywickrema
A damning report by the Auditor General’s Department on the position of the Ceylon Petroleum Corporation (CPC) in 2009 has highlighted many irregularities in the cash strapped government institution. The Auditor General’s report has been handed over to the Parliamentary Committee on Public Enterprises (COPE) for further inquiries. COPE is currently probing the observations made by the Auditor General on the CPC for the years 2007, 2008 and 2009.

However, the observations on CPC for 2009 have shocked the members of COPE.

 The report has highlighted financial irregularities and false tax declarations among a long list of misdeeds at the institution.

 A long list of management inefficiencies has also been included among the Auditor General’s observations. (See box)

 According to the report, the CPC has violated several provisions in the Sri Lanka Accounting Standards (SLAS).
 The CPC had failed to include certain taxes, which are not recoverable from tax authorities in determining the cost of purchase.

The Auditor General had observed that the advertising cost of Rs. 2.9 million had been included in the manufacturing cost in violation of SLAS 05-Inventories.

 The Corporation had not adopted appropriate procedures to identify impairment indicators for its assets as required by SLAS.

 Interestingly, the Corporation had not obtained bank guarantees from aviation customers, private customers, dealers and government customers whose outstanding balances amount to millions.
 The CPC has also understated some amounts while overstating some.

The rent income of the Corporation had been understated by Rs. 1.8 million since the rent income had not been recognized according to the rent agreement.
 Goods-in-transit (crude oil) amounting to Rs. 8,700 million had not been disclosed in the financial statements.

 The closing stock of fuel of Lanka Furnace Oil (LFO) 800 had been overstated by Rs. 66.6 million due to erroneous valuations.

The Auditor General had also noted that there has been a lack of evidence for audit.

The CPC has failed to produce the title deeds for the Sapugaskanda mini terminal land valued at Rs. 67 million.

 The existence and recoverability of the investment aggregating to Rs. 55.5 million could not be determined due to lack of evidence.

 Meanwhile, 25 acres of land valued at Rs. 259 million at Muturajawela had been shown as an asset in the balance sheet. However there are no title deeds or documents to establish ownership of the land.

 The CPC had failed to provide sufficient evidence regarding the assets purchased prior to December 31, 2002 reflected under property, plant and equipment.

No evidence had been made available regarding the assets prior to December 31, 2002 reflected under property, plant and equipment. As a result, the ownership, existence and completeness of such assets could not be determined in the audit.

 Sufficient evidence was not made available to determine the recoverability of the Exercise Duty amounting to Rs. 714 million from the General Treasury.

The CPC has also obtained services of private lawyers amounting to Rs. 5 million in the year under review, which is a higher rate, without obtaining prior approval of the Auditor General.

The Auditor General has noted that nine motor vehicles had been released to two government institutions and 18 employees had been released to several government institutions without the approval of appropriate authorities and disregarding the instructions contained in the Public Enterprise Circular No. PED/12 of 02 June 2003.

 A COPE member told The Sunday Leader that the Committee has called on the CPC officials to appear before COPE with all relevant documents since a full probe is being carried out following the Auditor General’s observations.
 COPE has expressed dissatisfaction at the CPC’s functions given the severity of the misappropriation of CPC funds.

 Several attempts by The Sunday Leader to contact officials from the CPC for comment failed.
 When The Sunday Leader telephoned the CPC head office, we were informed that the Chairman was busy and that there was no General Manager.

 Acting Deputy General Manager – Administration, Samanthalal Vithana when contacted said he could not comment and asked us to contact CPC Chairman Harry Jayawardena,
 Jayawardena was not contactable on his direct office telephone line on Thursday and Friday.

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