REVIEW REPORT INTERNAL AUDIT DEPARTMENT Departments : Secretariat Department Finance Department Human Resources Department Communications Department AuditName : __ Review of the Procedures Adopted on Foreign Travel and Other Expenses of the Former Governor Period Covered : 01 February 2015-10 July 2016 Date Issued : 01 August 2016TABLE OF CONTENTS Page No. 1. EXECUTIVE SUMMARY a5 1.1 Introduction... 1.2 Objective and Scope... 2. AUDIT PROCEDURES ADOPTED... OBSERVATIONS ....... a 3.1 Deficiencies Relating to Foreign Travel by Former Governor... 3.1.1 Violation of Schedule III of the ‘CBSL Travelling Allowance Rules’ 3.1.2 Multiple Hotel Accommodation during Same Period... 3.1.3 Inconsistencies in Foreign Travel.. 3.14 Non-availability of Audit Evidence on Foreign Travel Cancellation/Acting Arrangements , o 3.1.5 Frequent Cancellation of Foreign Travels. 3.1.6 Reservations for Extra Guests 3.1.7 Excessive Payments Made 3.2 Deficiencies relating to Credit Card Payments 3.2.1 Average Credit Card Expenses per Month........ 3.2.2 Non-availability of Invoices against Settlements eseun ‘Unacceptable Invoices Submitted for the Settlement of Advances... Non-availability of Audit Evidence for Official Expenses... Delay in Settling Personal Expenses.. - ‘Non Refunded Personal Expenses Incurred in Singapore Non Refunded Stamp Duty paid on Personel Expenses. ‘Over Limit Fees on Credit Card Bills. Irrelevant Expenses Considered as Official — Violation of CBSL Standing Orders ~Procurement Procedure. Staying Separate Place closer to Governor's Bungalow vu. Fixed Assets Not Capitalised and Not Physically Available, Different Amounts Reported Inconsistent Information Provided for Settlement... Violation of Excise Ordinance .. ‘Non Compliance with the Circular on Advance Payments wu. Delay in Submitting Settlement Documents Advance Utilization Rate .3.3.4 Advances obtained while holding Final Invoices 3.4 Deficiencies identified in incurring General Office Expenses. 3.4.1 Non Availability of Evidence to Verify Official Purposes... 3.4.2 Non Availability of Valid Invoices 3.4.3. Amount Differences in Settlements.... 3.5 Administrative and Other Weaknesses Identified through the Review... 3.5.1 Not Accounted for the Receivable from General Treasury. 3.5.2 Procedural Deficiencies in Settling Credit Card of the Governor, Outsourcing of Media Activities... Recruiting Consultant to CBSL on Contact Basis... Manually Amended Minutes Raised without Endorsing ‘Matters relating to Maintaining the Documents... IMPLICATIONS. RECOMMENDATIONS.LIST OF TABLES Table 1: Multiple Hotel Accommodation Table 2: Examples for Reservations for Extra Guests... Table 3: Average Credit Card Expenses... Table 4: Invoices Not Available for Settlement and Advances......... 10 Table 5: Invoices/SG's Minute not Available... ret Table 6: Unacceptable/Invalid Invoices submitted. 12 Table 7: Expenses incurred without Evidences indicated as Official... BE) ‘Table 8: Time Taken for Settlement of Personal Expenses... Table 9: Delay in Settling Advances on Credit Card Payments. Table 10: Non Refunded Expenses incurred in Singapore... Table 11: Non Refunded Stamp Duty on Personal Expenses - 2015 Table 12: Non Refunded Stamp Duty on Personal Expenses - 2016 Table 13: Over Limit Fees paid by CBSL. Table 14: Unacceptable Expenses Considered as Official... Table 15: Violations of Procurement Procedures... Table 16: Outside Stay Closer to Governor's Bungalow .. Table 17: Gap between Event Date and Cash Refunded Date.... Table 18: Gap between Event Date and Settlement Document Submission Date .. Table 19: Advance Utilisation Rate... Table 20: Advances obtained while holding Final Invoices... Table 21: Manually Amended Minutes...12 REVIEW OF THE PROCEDURES ADOPTED ON FOREIGN TRAVEL AND OTHER EXPENSES OF THE FORMER GOVERNOR EXECUTIVE SUMMARY Introduction The Internal Audit Department (AD) commenced the above review on 11 July 2016 as per the instructions of the Top Management. IAD has reviewed the procedures followed by Governor's Secretariat and relevant departments with regard to the foreign travel by the former Governor and other expenses incurred by him during the period 01 February 2015 to 30 June 2016. Former Govemnor, Mr. Lakshman Arjuna Mahendran, was appointed to the said position on 26 January 2015. He was also functioned as the Chairman of the Monetary Board of the Central Bank of Sri Lanka. Any prescribed limit on foreign travel and/or other official expenses that could be incurred by a Governor was not evident. Objective and Scope To obtain a reasonable assurance on the adequacy, compliance and effectiveness of the procedures followed on foreign travel and other expenses incurred by former Governor during the period under review. Further, any administrative and other ‘weaknesses identified through the review were also incorporated into this report. AUDIT PROCEDURES ADOPTED IAD has reviewed the Monetary Law Act and amendments thereto, CBSL Manual, all relevant policy documents and circulars applicable to the foreign travel and other expenses incurred by the former Governor. Director of LAD (D/1A) with her team has conducted several discussions with the Directors of the relevant departments including Finance Department and Secretariat Department. Further, IAD has collected all relevant files, registers, documents and other information from the said departments for the review. In addition, ISD has analysed and compiled the information so gathered to achieve the objective of the review as mentioned above.34 3.11 3.1.2 OBSERVATIONS Deficiencies Relating to Foreign Travel by Former Governor ‘Violation of Schedule IIt of the ‘CBSL Travelling Allowance Rules? Aforementioned rules stipulated in CBSL Manual require the other officers (except Governor, Deputy Govemors, Assistant Govemors and Heads and Additional Head of Departments) selected or nominated by the Monetary Boerd for travel on duty abroad to be provided with the passage facility in Economy/Tourist class by air. Further, “officers selected or nominated by the Monetary Board for study or training abroad shall be provided with the passage facility in Economy/Tourist class round trip air passage”. ‘Violating the said rules, which are approved by the Monetary Board, the former Governor has approved some officers to travel in business class on their travel abroad. For instance, Secretary to the Govemor (SG) and other officers who accompanied former Govemor were allowed to travel in Business Class. ‘Multiple Hotel Accommodation during Same Period As per the invitation sent by the Intemational Monetary Fund (IME) dated 02 October 2015, former Governor has attended “High Level Conference hosted by Government of India and IMF” from 11 to 13 March 2016. The invitation by IMF Stated that they would send a mail with more details regarding hotel and other logistic arrangements. However, there is no evidence of such a mail from IMF. It was observed that there were 3 hotel reservations as follows (Table 1). Table 1: Multiple Hotel Accommodation Gredit Gard” Arrival | Departure | Name ofHota | —Amoumtin | Amountay | Novo? Transaction | Date& | Dated |” Foreign perthe | Guests Date Time Time Currency | Statement | Rs. Be Mau | Typ 26,999.00] 59,381.86 furgaon 10.03.16 | 11.03.16 | Suge > | Shrs. | 01:07 ne Ty | 11.03.16 | 225Shr. | OLO7 hrs. | Front Office, USD 314-56 | 46-701.78 | eee (ONR22,141.03) | . T0056 | 13.05.16 | imperial Hore, 13.03.16 | o1.29 ns. |_o7:1thrs,_| New Delhi SD 2.7430) t06 156.23) 2 | Taj Palace FOI, | USD 95.15/ | Bsoa16 | 11.0316 | 14.03.16 | EPR TOD | SO SSIS | ta isz.69| 1 * The IMF Conference was held in Taj Palace, New Delhi3.1.3. Inconsistencies in Foreign Travel i. Former Govemor attended IMF/World Bank Spring Meetings 2016 held in Washington, USA from 15 to 17 April 2016, During his transit, he stayed at Park Hyatt Dubai, Dubai, © As per the Hotel invoice, the date of arrival in Dubai was 11 April 2016 and departure date was 14 April 2016. However, as per the itinerary; > Departed Sri Lanka on 12 April 2016 at 5.50 p.m. > Reached Dubai on 12 April 2016 at 8.40 p.m. Accordingly, CBSL has incured AED13,418 (Rs.542,197.21) on 14 April 2016 for the stay at the hotel from 11 April 2016 to 14 April 2016. © Further, the hotel invoiced for a stay of 3 people. ii, Former Governor has travelled from Washington to New York by a car from 11.29 am. to 3.44 p.m. on 17 April 2016 as per the invoice issued by the transportation agency. However, a flight reservation has been made and paid for the same joumey fom 9,30 a.m. to 10.44 a.m. on 17 April 2016. iii, Former Governor has arrived in New York at 3.44p.m. on 17 April 2016. However, the hotel invoice of JW Marriott Essex House New York charged USD1,726.32 (Rs.257,440.06) for 3 days from 16 April 2016 to 18 April 2016. 3.14 Non-availability of Audit Evidence on Foreign Travel Cancellation i, There was a hotel reservation for Four Seasons Washington on 01 March 2016 for USD1,743.13 (Rs.258,807.03) for which no invoice or 2 memo from SG is available evidencing it as an official visit. Further, the same USD amount was credited against the credit card with a value of Rs.256,611.26 on 04 March 2016 incurring an exchange loss of Rs.2,195.77 to CBSL. However, there are no evidences available on cancelling the hotel reservation. ii, Shangri-La Hotels Resorts, Yangon, Myanmar was reserved on 18 May 2016 incurring a cost of USD331.20 (Rs.49,594.75) for a stay from 04 to 05 June 2016 for which @ booking confirmation is available. However, it was cancelled on-lineand the cancellation policy of the hotel stated thet the non-refundable deposit will be forfeited on cancellation. iii, In addition, an on-line reservation was made in Myanmar National Airlines at the cost of USD394 (Rs.59,217.45) on 24 May 2016. However, no audit evidence is available on cancellation of the airline reservation. 3.15 Frequent Cancellation of Foreign Travels Tt was observed that there were frequent cancelations of foreign travel by the former Governor (Annex I) Further, there are no audit evidences available for the reasons on such cancellations. 3.1.6 Reservations for Extra Guests Instances were observed that there were hotel reservations for extra guests for which audit evidences are not available to ensure whether they were official guests (able 2). Table 2: Examples for Reservations for Extra Guests Transaction Name of Hotel | Amountin | Amountin | No. of Date Foreign Rs. Guests Curreney | 18.09.15 | Park Hyatt, Dubai ‘AEDI2,351.80 | 485,429.61 2 20.01.16 | Hotel Baur AULac, Zurich | CHF 2,468.50] 364,703.03 2 | 24.01.16 | Hotel Baur AU Lac, Zurich | CHF 5,289.70 | 775,613.11 2 3.1.7 Excessive Payments Made Former Governor has applied for US Visa under GTS*Official-ESTA incurring @ cost of USD9S (Rs.14,114.25) using his credit card on 11 April 2016. However, it was noted that if the said Visa is applied through the official US Government web site, it would cost only USD14. Loss to CBSL on this transaction was USD81.32 3.21 Deficiencies relating to Credit Card Payments Average Credit Card Expenses per Month It was noted that the monthly average expenses incurred through credit card by the former Governor was Rs. 2,151,735.75. Further, monthly average official expenses incurred through credit card by the former Governor was Rs.1,508,298.10 (Table 3). Table 3: Average Credit Card Expenses Description ‘Amount (Rs.) ‘Amount (Rs.)/Months | Total credit card expenses incurred during the period (Rs.) 36,142,852.95, Less: Recoverable from treasury ~ for Road Show 1,715,080.91 | 34,427,772.04 No. of months in concem - | 16 | Monthly average expenses through credit card (Rs.) 2,151,735.75 Personal expenses settled/refunded through credit card (Rs.) 10,295,002.44 | | Official expenses through credit card (Rs.) 24,132,769.60 | Monthly average official expenses through credit card (Rs.) 1,508,298.10 3.2.2. Non-availability of Invoices against Settlements ¢ As per the Circular issued by the Finance Department on ‘Ciroular on advance payments’ dated 19 April 2011 requires to provide original invoices in settling advances obtained. There were instances where the original invoices were not presented to CBSL in settling the advances obtained to pay the credit card bill by the former Governor, Instead, SG informed the Secretary of CBSL (Secretary) that the relevant bills were not available. However, such expenses were finally born by CBSL (Table 4). © The minute so raised by SG has not even been initialled/approved by the former Governor to prove his acceptance on those.Table 4: Invoices Not Available for Settlement of Advances With regard to Credit Card Expenses Credit Card | Closing Balance Missing Invoices Date of Missing Statement Period | asper Credit | Amount Confirmed Invoices Card Statement | by St Confirmed by SG reat Rs. 28.02.15 — 31.03.15 1,715,080.91 60,183.02 | 15.05.15 31.03.15 - 30.04.15 108,584.79* : I NA 30.04.15 ~ 31.05.15 159,201.96 : | NIA 31.05.15 ~ 30.06.15 1,284,505.97 | z NA 30.06.15 — 31.07.15 2,837,866.85 29,454.48 19.11.15 31.07.15 - 31.08.15 1,225,770.47 75,731.72 | __ 20.11.15 31.08.15 - 30.09.15 3,728,299.58 53,397.10| 08.12.15 30.09.15 — 31.10.15 1,910,864.61 pelea ee 137,618.68 | _17.02.16 [sit01s-30.1115 | 2,964,876068 | 498,747.97 | __ 28.02.16 30.11.15-31.12.15 | _3,289,266.41 | 530,234.86 | __ 26.04.16 31.12.15 ~ 31.01.16 3,674,458.41 1,704,732.28 | 05.05.16 31.01.16 — 29.02.16 1,542,453.35 4,674.03 29.06.16 29.02.16 - 31.03.16 3,017,645.37 39,691.56 | 30.06.16 31.03.16 - 30.04.16 6,519,740.68 2,313,677.76 | __ 30.06.16 30.04.16 - 31.05.16 1,921,359.57 | 3,513.64 | 22.06.16 31.05.16 - 30.06.16 |} 242,877.34 : NA Total 36,142,852.95 5,816,597.15 Missing Bills as a % of Total Bill Value 16.09 * The closing balance as at 30 April 2015 after adjusting previous month expenses, interest and late payment feesFurther, original invoices were not provided against some credit card expenses by the former Governor for which either it was not mentioned in SG’s memo raised on “bills not available’ (Table 5), However, those expenses were charged to CBSL. Table 5: Acceptable Invoices or SG's Minute not Available Statement Period Closing Balance ‘Amount of | Rs, | unacceptable and | missing Invoices Rs. 28.02.15 31.03.15 1,715,080.91 99,895.67 31.03.15 - 30.04.15 108,584.79 | - 300415-310515 159,201.96 = 31.05.15 = 30.06.15 7,284,505.97 - 30.06.15 — 31.07.15 2,837,866.85 41,516.00 31.07.15 — 31.08.15 1,225,770.47 148,977.52 [—aioeis=300515 | —<3;708,259.58] ——=SC« SATA | 30.09.15 - 31.10.15 1,910,864.61 | 14,191.24 31.10.15 30.11.15 7,964,876.68 188,166.78 [3011.15 -31.12.15 3,289,266.41 - 31.12.15 —31.01.16 3,674,458.41 | 775,613.11 31 016=2902.16 | 1,542,453.35 > 29.02.16 = 31.03.16 3,017,645.37 307,803.98 31.03.16 = 30.04.16 6,519, 740.68 F64,924.84 [30.04.16 31.05.16 1,921,359.57 | - 31.05.16 — 30.06.16 A287. 34 > Total | 36,142,852.95 2,053,430.32 [Other Missing Bills as a % | of Total Bill Value Total Missing Bills as a % of Total Bill Value 5.68 22.05 SS uw3.2.3. Unacceptable Invoices Submitted for the Settlement of Advances ¢ Valid commercial invoices were not presented for the settlement of advances on credit card bill payments (Table 6). However, the CBSL has accepted the invoices for settling the advance. ‘Table 6: Unacceptable/Invalid Invoices submitted Transaction | ‘Merchant ‘Nature of Document | Amountin | Amount in Rs. Date | Foreign | Currency | ‘Online train ticket | 13.02.15) Amtrak.Com USD743.00} 99,895.67 | available - Tanglin Market ; 03.09.15 . Credit card slip 8GD122.99 12,341.18 Place - Singapore |The Taprobane | Nota valid | 25.07.15 . - 41,516.00 Trust Pvt, Galle | commercial invoice The Taprobane | Nota valid 15.08.15 . - 59,540.00 | ‘Trust Pvt, Galle | commercial invoice | | Cold Storage - ; 26.08.15 Credit card slip SGD300.12| 29,833.81 | singapore | 26.08.15 | Cocoa & Company | Credit card slip SGD70.90 7,050.62 Taj Mahal Mumbai | Hotel reservation 29.08.15 . INR24,937.42 52,553.09 ~Indie documents | Hotel reservation | | Hotel Baur Au Lac | 24.01.16 confirmation & CHFS,289.70 | 775,613.11 ~ Zurich information invoice | Lanka Island Booking | 27.02.16 | Resorts Ltd, | - 85,136.00 | confirmation Bentota The Beverly Hills, ; | 23.04.16 Information invoice | USD3,114.49} 464,924.84 | Beverly Hills | | | Total | 1,586,888.32of Audit Evidence for Official Expenses It was observed that some expenses were incurred by former Governor and were got reimbursed from CBSL (Table 7). However, there is no evidence to ensure whether those are official expenses or not. ‘Table 7: Expenses Incurred without Evidences but Indicated as Official ‘Transaction | Merchant | Amount in | Amountin | No. of ‘Remarks Date | Foreign Rs. Guests | |_Curreney 2408.15 |Annabel’s | GBP250 | 54,955.63| - | SG’s memo dated 20 | yom November 2015 mentioned the expense has been made | - and not highlighted whether | an official expense or not | * However, an officer in | General Payment Division of | the Secretariat Department | raising a minute considered | this as an official expense | since former Governor has | incurred this in his official | visit. 17.03.16 | Keema - | 54,500.00 10 Sutra Total { 109,455.63 | * Private members’ club in UK * No audit evidence is available to verify whether the expenses (other than personally settled), which were in the June 2016 credit card bill, were made for official purposes. 3.2.5 Delay in Settling Personal Expenses i, It was observed a delay in settling personal expenses incurred through the credit card by the former Governor (Table 8). CBSL has an opportunity cost on this delay in settling personal expenses. 1BTable 8: Time Taken for Settlement of Personal Expenses [Credit Card [Closing | Payment | Dateof | Date of ] Refunded/ | No. of Statement Period Balance Due Date | Advance Refund/ | Personally Days Rs. Obtained/ | Personally | Settled Delayed Invoice by | Settled | Amount Protocol | Rs, 28.02.15 -31.03.15| 1,715,080.91 | 27.04.15 | 18.05.15 | NA NA NA 31.03.15 — 30.04.15 | 108,584.79 | 25.05.15 | 25.05.15 | 25.05.15 | 31,16603/ 0 06.07.15 | 42,450.00 | 12 30.04.15 -31.05.15 | 159,201.96 | 25.06.15 | 24.06.15 | | 22.09.15 | 25,511.00[ 90 . 11.08.15 38,048.43 15 31.05.15 ~ 30.06.15 | 1,284,505.97 | 27.07.15 | 27.07.15 | 22.08.15 | 194,659.75 | 57 [30.06.15 -31.07.15 | 2,837,866.85 | 28.08.15 | 25.08.15 | 22.09.15 | 775,12413|~ 28 31.07.15 ~ 31.08.15 | 1,225,770.47 | 25.09.15 | 22.09.15 [18.1115 | 517,00691| 87 | | 0812.15 | 635,765.50] 54 31.08.15 - 30.09.15 | 3,728,299.58 | 26.10.15 | 15.10.15 4 | 26.04.16 | 1,801,616.02 | 194 T 18.01.16 | 553,934.50] 55 30.09.15 31.10.15 | 1,910,864.61 | 26.11.15 | 24.11.15 | TOLI6 | 24,192.64 | 64 3110-15 —30-11.15 | 2,964,876.68 | 28.12.15 | 15.12.15 | 29.02.16 | 1,053,992.93| 76 30.1115 —31-12.15 | 3,289,266.41 | 25.01.16 | 19.07.16 | 29.02.16 | 856,099.84] ai 311215310116 | 3,674,458.41 | 25.02.16 | 12.02.16 | 24.08.16 | 1,230,951.04] 4 31.01.16 -29.02.16 | 1,542,453.35 | 28.03.16 | 21.03.16 | 28.06.16 | 1,106,951.32] 100 | | | 29.02.16 - 31.03.16 | 3,017,645.37 | 25.04.15 | 07.04.16 | 29.06.16 | 1,709,180.19] 83 21.05.16 | 49,594.75; 8 ‘| 31.03.16 ~ 30.04.16 | 6,519,740.68 | 25.05.16 | 13.05.16 | 01.07.16 | 730,739.34 [49 | 30.04.16 - 31.05.16 | 1,921,359.57 | 27.06.16 | 1406.16 | 21.05.16 | 518,387.82] NA | 31.05.16-3006.16| 242,877.34] 25.07.16] - T0716 | 200,646.32 |" N/A Total 736,142,852.95 | | 12,096,618.46 Personal expenses | | | refundedisettled 33.47 | as a % of total Lexpenses | ii, It was observed a delay in settling advances obtained to pay the credit card bill of the former Governor (Table 9) on which CBSL may incur an opportunity cost.Table 9: Delay in Settling Advances on Credit Card Payments 30.06.16 ‘Statement ‘Closing Advance | Advance | Date ofreceipt | Date of Advance | No.of | Period Balance Payment | Booking | of documents to | Settlement | Settlement | Days | Rs. Date Form No. | FD for Advance | of Advance | Invoice Delayed Settlement byFD | Booking | Form No | 28.02.15 — | 1,715,080.51 ole TEOS.15 | T8OEIS INV-009- | 31.03.15 | _2587 | 31.03.15—| 108,584.79 “|= [250545] 350515 | INV-005-|— 30.04.15 | 2712 | 30.04.15 —| 159,201.96 > 240615 | 24.05.15 | INV-009- | 31.05.15 i 3321 [305.15 — | 1,284,505.97 meer OFO7IS] 27.075 | INV-005- | 30.06.15 4167 30.06.15 — | 2,837,866.85 | 25.0815 | ADV- 08.1015 | TL.02.16 | INV-009- | 31.07.15 | 009-0822 5464 31.07.15 — | 1,225,77047 | 22.09.15 08.1015) 08.12.15 | INV-005- 31.08.15 6570 7 31.08.15 — | 3,728,299.58 | 15.10.15 TBOLT6) 010116] BNV-009- | | 30.09.15 009-0650 0281 30.09.15— | 1,910,864.61 | 2411.15] ADV- BORIC) OHOEIE | INV-009- 31.10.15 009-0757 1322 31.10.15 | 2,964,876.68| 15.12.15} ADV- 120416 [29.08.16 | INV-009- | — 30.11.15 009-0796 2180 30.115 — | 328926641 | 19.01.16} ADV- 14.06.16) 20.06.16) INV-005- 31.12.15 009-0072 3363 | 153 31.12.15— | 3,67445841 | 12.02.16) ADV- 29.06.16 es ' 31.01.16 009-0135 ee 31.01.16- | 1,542,45335| 21.03.16) _ADV- 04.07.16 _— 29.02.16 009-0207 eo 29.02.16 - | 3,017,645.37 | 07.04.16} ADV- 04.07.16 Sa 31.03.16 009-0242 ae 31.03.16— | 6,519,740.68 | 13.05.16 | ADV- July 2016 i es 7 30.04.16 009-0297 ne 30.04.16 — | 1,921,359.57 | 14.06.16] ADV- 29.06.16 lore 31.05.16 009-0348, we 31.05.16—| 242,877.34 “| ; Sars NE 3.2.6 Non Refunded Personal Expenses Incurred in Singapore Former Governor has spent SGD1,077.29 (Rs.116,360.98), which included the following (Table 10), in Singapore during his personal visit from 05 to 07 March 152016. He has obtained His Excellency the President's approval to stay in Singapore during the said period. Table 10: Non Refunded Personal Expenses Incurred in Singapore ‘Transaction ‘Merchant | Amount | Amount in ‘Remarks ] Date in SGD Rs. { (5.03.16 | Pasta Brava Restaurant PL. 194.79 | 21,029.10 | Refreshments | | Singapore 06.03.16 | Wildfire, Singapore T1240 | 12,143.05 | Refreshments | 06.03.16 | Huber’s Butchery | 36740) 39,691.56 /Bill not available - S@’s| @Dempsey, Singapore minute on 30.06.16 | 07.03.16 | Jade Palace Seafood Resin, | 379.10 | 40,954.69 | Refreshments | Singapore - | 07.03.16 _| So Chocolate, Singapore 11.90 |_1,282.43 | Chocolates | 07.03.16 | The Coffee Bean-Esplanade, | _11.70| 1,260.17 | Retreshments | Singapore | Total | 1,077.29 | 116,360.98 | 3.2.7 Non Refunded Stamp Duty paid on Personal Expenses The proportionate stamp duty in relation to former Governor’s personal expenditure incurred in foreign currency was not recovered except in credit card bill of June 2016. © Stamp duty applicable for the year 2015 was 1.5% on all transactions (LKR and foreign currency) (Table 11). Table 11: Non Refunded Stamp Duty on Personal Expenses - 2015 Statement Period Total Refunded! | Stamp Duty as per | Stamp Duty on] Transaction | Personally ‘the Statement | Personal Expenses | Value | Settled | Rs. Rs. Rs. | Amount @=ayr1s% | @=Qyr*15% | Rs | | Q) I [B10315—300415 | 85,904.00 [31,166.03 | 7,290.00 580.00 | [300415—31.05.15 | 156,846.96] 67,561.00 2,355.00 1,020.00 | 31.05.15 — 30.06.15 | 1,265,515.97 | 232,708.18 18,990.00, 3,495.00 | 30.06.15 —31.07-15 | 2,795,926.85 | 775,124.13, 41,940.00 11,640.00 | 31.07.15 — 31.08.15 | 1,207,822.07| 517,006.91 | 18,120.00 7,770.00 | 31.08.15 — 30.09.15 | 3,708,843.50 | 2,437,381.52 | 35,635.00 36,570.00 | 30.09.15 — 31.10.15 | 3,728,299.58 | 378,127.14 35,935.00 8,685.00 3110.15 30.11.15 | 2,921,046.68 | 1,053,992.93 | 43,830.00 15,810.00 30.1115 — 31.12.15 |3,240,651.41 | 856,699.84 48,615.00 12,855.00 Total | 98,325.00 1 Total transaction velue shouldbe round up to nearest thousand rupees.© Stamp duty applicable for the year 2016 was 2.5% on foreign currency transactions (Table 12). Table 12: Non Refunded Stamp Duty on Personal Expenses - 2016 ‘Statement Period Foreign Refunded’ | Stamp Duty asper | Stamp Duty on ] Currency | Personally | theStatement | Personal Expenses Transaction Settled Rs. Rs. Value Amount @)=CP*25% | G)=@)*25% Rs, Rs. (ay Q) Fi1z15—31.01.16 | 3,074,867.41 | 804,704.86 76,875.00 20,125.00 31.01.16 29.02.16 | 1,832,051.23 | 1,106,701.32 45,825.00 27,675.00 39.02.16 31.03.16 | 2,786,597.00 | 1,475,461.30 | ©,675.00 36,900.00 31.03.16 —30.04.16 | 5,809,091.60 | _ 298,359.09 143,250.00 7,475.00 | {30.04.16 —31.05.16 | 1,964,674.37 | 518,387.82 49,125.00 12,975.00 Total 105,150.00 Total Stamp Duty on 176,445.00 | Personal Expenses | | | 3.2.8 Over Limit Fees on Credit Card Bills Following over limit fees were bor by CBSL on exceeding the credit card limit of Rs.5,000,000 by incurring Rs.6,519,740.68 in April 2016 (Table 13). ‘Table 13: Over Limit Fees paid by CBSL ‘Transaction Date Fee Description ‘Amount Rs. | 18.04.16 ‘Handling fee — Temporary limit 300 28.04.16 ‘Handling fee — Temporary limit 300 30.04.16 (Over limit fee 300 Total 1,100 Lo otal 3.2.9 Irrelevant Expenses Considered as Official Some expenses were settled as the former Governor has mentioned those as official expenses, which are not acceptable (Table 14). ‘Table 14: Unacceptable Expenses Considered as Official ‘Transaction Date | Merchant Items Purchased ‘Amount | Rs. 15.09.15 Canefour—Dubai | Pampers, cart shower, | 22,082.24 | ete | 3 Total transaction value should be round up to nearest thousand rupees. + Refunded/personally settled amount should be round up to neerest thousend rupees. 73.2.10 Violation of CBSL Standing Orders ~ Procurement Procedure There were purchases to Bank House contravening the Standing Orders on procurement procedures stipulated in CBSL Manual (Table 15). Table 15: Violations of Procurement Procedures Transaction | Items ‘Amount in | Amount in Remarks Date Purchased | Foreign Rs. Currency 21.06.15 | Accessories | SGD 129.25 13,340 | For Bank House 21.06.15 | Accessories | SGD 175.80 18,126 | For Bank House | This is also a violation of 20.11.15 | iPad Rae (128031 srt Circular No. ven’? | 09/02/002/0011/2014 16.12.15 | Cutlery 306,835.16 | For Bank House Total 523,122.78 © The i-Pad and accessories purchased on 20 November 2015; > > Relevant invoices are not available. Packing list instead of a valid invoice has been sent by the Secretary to Finance Department with the fixed assets entry form for capitalization. Considering the value of the i-Pad, Chief Accountant decided to capitalize the asset even without a valid invoice. As per the packing list, the i-Pad was shipped to a different person in Singapore. 3.2.11 Staying Separate Place Closer to Governor’s Bungalow It was noted that the former Governor has stayed at a separate place at the cost of CBSL regardless of he has been provided with Governor's Bungalow closer to the said venue (Table 16). Table 16: Outside Stay Closer to Governor's Bungalow Transaction | Venue | Amount Remarks Date | es) 16.01.16 | 96,500 | SG has informed by hier memo dated 05.05.16 that | 1701.16 Gade Be 7,720 | this is an official expense but no billing proofs are available. Total 104,2203.2.12 3.2.13 3.2.14 3.2.15 Fixed Assets Not Capitalized and Not Physically Available ‘A painting purchased at the cost of Rs.150,000 for the Bank House on 18 December 015 was not captured in fixed assets register and hence not capitalized in the books of accounts of CBSL. Further, it was not ensured by the fixed assets custodian whether the painting is physically available at the Bank House even after the exit of the former Governor. Different Amounts Reported Credit card statement of January 2016 shows an amount of CHF 575 paid on 21 January 2016 to ‘restaurant POT-AU-FEU, DAVOS PLATZ’, Switzerland whereas the invoice is for CHF 515. If the difference is deemed to be a ‘tip’, it exceeds maximum the 10% maximum tip of the bill as per CBSL Standing Oder No.5 (entertainment allowances for Central Bank Officers) under Part III (pay, allowances, increments and acquisition of qualifications) stated in CBSL Manual. Inconsistent Information Provided for Settlement © SG’s memo dated 21 August 2015 specified Governor's meetings with several officials in Cinnamon Grand on 22 and 23 August 2015 (Saturday and Sunday). However, hotel bill evident that 2 adults were stayed at the hotel from 22 to 24 August 2016 for 2 nights. ‘The total hotel bill was Rs.56,392.43. « As per the ‘booking confirmation’ issued by the Taj Mahal Palace and Tower hotel bill was INR89,687.99 for which an invoice is not available. As per the cancellation policy of the hotel, penslty charge for late cancellation will be 1 night rate of INR23,220. However, it was charged INR24,937.42 in the credit card statement on 29 August 2015. Violation of Excise Ordinance «Excise Notification No.985 issued on 30 December 2015 under section 4 and 13 of the Excise ordinance (Chapter 52) limit the transportation of foreign liquor to 7.5 liters without a pass issued under the Ordinance with respect to the whole island. The effective date of this is 01 January 2016. © Despite the said limit it was observed that the former Governor has approved the purchase of 48 bottles of liquor on 15 June 2016 to’be served at the future events. 1933 33.1 © Inaddition, there were 2 instances where a) 12 bottles (750ml each) purchased on 28 August 2015 b) 12 bottles (Iltr each) on 16 December 2015 with the approval of the former Governor to be served at the future events. Deficiencies identified in incurring Other Governor’s Entertainment Expenses The analysis of advances obtained and settlements of such advances on Governor’s entertainment expenses incurred by the Governor's Secretariat of the Secretariat Department reveals the following observations. Non Compliance with the Cireular on Advance Payments © As per the said Circular issued by Finance Department on 19 April 2011 requires all other advance (other than advances for foreign travel/training/duty travel) payments should be settled within 7 working days after receiving the particular goods and/or services for which the advance has been obtained, unless there is a specific reason for the delaying of settlement. © Despite the said requirement, delays were observed in refunding the cash borrowed Governor's Secretariat for events of former Governor (Table 17).Table 17: Gap between Event Date and Cash Refunded Date | Advance | Advance Purpose Date of | Date of Cash | Amount Gap) Payment | Amount the Event Refund to Refunded between | Date (Rs) Curreney (Rs) Event | Department | Date and | | Cash Refunded | Date 5.02.15 | 150,000 | O* Visi to Anuradhapura | 59515] 300315 | 33,60601| 50 | and Somawathiya 29.04.15 | 150,000 | G's visit to Kilinochchi 05.05.15 | 12.06.15 | 96,185.00/ 38 | 13.05.15 | 50,000 | G's visit to NEliya 17.05.15 | 12.06.15 | 33,919.00, 26 Gs visit to Matara 28.05.15 | 50,000 | Oe tare 31.05.15 | 26.06.15 | 24,900.00] 26 Sundry Expenses relating to 07.07.15 | 100,000 | visit of the officials of the | 09.07.15 | 17.08.15 | 71,600.00| 39 Emirates NDB 28.08.15 | 300,000 | Purchase of liquor 28.08.15 | 25.09.15 | 82,620.00] 28 18.09.15 | 50,000 | G's visit to Galle 20.09.15 | 13.10.15 | 37,650.00] 23 Outside catering done for 7 06.01.16 | 90.000 | sted by a 04.0116 | NA NA Airfare of G to travel to 5 05.02.16 | 894,789 | SEINE ot 08.02.16 | N/A =| NIA 26.02.16 | 25,000 | G's visit to Beruwala 28.02.16 | 09.03.16 | 18,793.25} 10 75,000 | G's Visitto gall and Jefine | 02.04.16 | 25.04.16 | 60,830.00| 23 30.03.16 | 213.3.2 Delay in Submitting Settlement Documents There were delays in submitting documents to settle the advances (Table 18). Table 18: Gap between Event Date and Settlement Document Submission Date [Advance | Advance Booking | Advance Purpose Dateot | Date of Gap Payment | FormNo. | Amount the | Receipt of | _ between Date | @s) Event | Settlement Event Date Documents by and ¥D Settlement | Document | | Submission i Date | Gis visit to - | 05.02.15 | ADV-046-0084 | 150,000] Anuradhapuraand | 08.02.15} 31.03.15 51 Somawathiya | | T 29.04.15 | ADV-046-0262 | 150,000 | G's visitto Kitinochehi | 05.08.15] 12.06.15 38 13.05.15 | ADV-009-0293 | 50,000 | G's visittoNEliya | 17.05.15) 12.06.15 26 G's visit to Matara 28.05.15 | ADV-009-0330 | 50,000 | 77S Visit to 31.05.15 | 29.06.15 29 Sundry Expenses 5 relating to visit of the 07.07.15 | ADV-009-0438 | 100,000 | rane o | 09.07.15) 17.08.15 39 | Emirates NDB | 28.08.15 | ADV-009-0531 | 300,000 | Purchase ofliquor | 28.08.15| 25.09.15 | 3 j ] T 18.09.15 | ADV-009-0572 | 50,000 | G's visit to Galle 20.09.15; 13.1015 | 23 | Outside catering done | 06.01.16 | ADV-008-0028 | 90,000] rortmncmnened by G | O40LIS) 21.01.16 | / | ‘Airfare of G to travel to 05.02.16 | ADV-009-0132 | 894,789 | THEE 01S 08.0216 | 25.02.16 7 j 1 26.02.16 | ADV-009-0162 | 25,000 | G's visittoBeruwala | 28.02.16) 29.04.16 61 \ | \ 30.03.16 | ADV-006-0225 | 75,000) Cs ¥isittessllené | go 0416) 25.04.16 2B3.3.3 Advance Utilization Rate It was noted that the advance utilization is lesser in most of the cases. However, it took considerably a long time to settle such advances taken (Table 19) ‘Table 19: Advance Utilization Rate ‘Advance | Advance | ‘Purpose Date of ‘Expenses Gap Gap between Sof | Payment | Amount Receipt of | Settled | between | Event Date | Advance Date (Rs) | Settlement (Rs) | Event and Utilization Documents Date and Settlement | by FD Cash Document Refunded Submission Date Date G's visit to | 05.02.15, Anuradhapuraand | 31.03.15 | 16,303.09| 50 51 8 150,000 , 00° | Somawathiya : G's visit to | 29.04.15 | 150,000 | Kilinochchi 12.0615 | 5381500) 38 | 38 36 13.05.15 | 59 g99 | G's visit to N’Bliya | 12.06.15 | 16,081.00 | 26 nn G's visit to Matara | 28.05.15 | 5.000 | Hambantota 29.06.15 | 25,100.00) 26 29 50 | Sundry Expenses relating to visit of 97.07.15 | 90,000 | the officials of the | 17-0815 | 28,400.00) 39 39 28 Emirates NDB 28.08.15 | 590,990 | Purchase of liquor | 25.09.15 | 217,380.00) 28 28 n 18.09.15 | 50,999 | GS visitto Galle] 13.1015 | 12,350.00] 23 23 | Outside catering | 06.01.16 | 99,999 | done for lunch 21.01.16 | 90,000.00] N/A 7 | 100 | 000 | hosted by G | Airfare of G to | | 05.02.16 | goq.qgq | tavelto 25.02.16 | 894,789.00] N/A 7 100 | Trincomali | | Gs visit to 1 7 | 26.02.16 | 95 990 | Beruwala 29.04.16 | 620675] 10 | 61 3 | G's Visit to Gall | | 30.03.16 | 45 99 | and Jafina 25.04.16 | 14,170.00] 23 | 23 wo |3.3.4 Advances obtained while holding Final Invoices Situations were observed that the Governor's Secretariat has obtained advances for the payments for which the invoices were already received and hence obtaining an advance was not necessary (Table 20). Instead it could have been claim the expense without obtaining an advance. Table 20: Advances obtained while holding Final Invoices Dateof | Amount of | Date of Event Date of Final | Amount of Applying for | Advance | Invoice | Final Invoice Advance | (Rs) nt |” 26.01.16 348.000 | 16.01.16-17.01.16 | 18.01.16 348,000 | 19.01.16 90,000 04.01.16 04.01.16 90,000 3.4 Deficiencies identified in incurring General Office Expenses 3.4.1 Non Availability of Evidence to Verify Official Purposes In settling the advance of Rs.75,000 obtained on 22 September 2015 with respect to purchase of sundry items, highway charges/parking fees, laundry charges and purchase of refreshments at the Governor’s Secretariat, relevant invoices were attached with a memo to Secretary. However, there are no evidences to ensure as to whether some expenses (namely highway charges, parking fees and refreshments) were incurred for official purposes. 3.4.2 Non Availability of Valid Invoices Fresh milk amounting to Rs.29,700 was purchased on 28 January 2015 by the Governor's Secretariat to be used for official meetings and Govemor’s Office. Nevertheless, a valid invoice from the distributor was not provided and instead a stock disposal memo from Lanka Milk Foods (CWE) PLC was provided. 3.4.3 Amount Differences in Settlements Governor's Secretariat has paid Rs.87,835 to Sponge Pastry Shop (Pvt) Ltd for the expenses incurred on purchase of refreshments for the official meetings held during 1 February to 31 March 2015. Total amount of the invoices provided against this was only amounted to Rs.77,075.35 3.5.1 3.5.2 3.5.3 Administrative and Other Weaknesses Identified through the Review Not Accounted for the Receivable from General Treasury The Monetary Board at its meeting No.27/2014 held on 16 October 2014 having discussed the International Sovereign Bond Programme — 2015, approved CBSL to meet the cost pertaining to the issuance of proposed International Sovereign Bond Programme of the Government in 2015 and thereafter obtain reimbursement of same from the General Treasury. Accordingly, the expenses in relation to airfare, insurance, accommodation, meals and official entertainment, ground transportation and any other cost pertaining to the above incurred by the CBSL should be reimbursed from the Treasury. However, there are no evidences to ensure that all related costs incurred on the said programme were accounted as receivable from Treasury in the General Ledger in 2015 and 2016. Procedural Deficiencies in Settling Credit Card of the Governor It was observed that several parties were involved in obtaining advances and settling credit card balances of the former Governor. The process was initiated by SG and the documents were circulated within the Protocol Division and General payment Division of the Secretariat Department, Secretary, Chief Accountant and Accounts Payable Division of Finance Department. This long process will expose the Bank to reputation risk as there is a possibility of leakage of information. Outsourcing of Media Activities ‘The audit procedures were limited to the internal correspondences maintained by the Communication Department (CMD) relating to the above. Accordingly, the file ‘No.15/11/005/0001/01 of CMD was reviewed. Further, as per Director of CMD (DICMD), the finalized agreement was not signed and this process was hold till 2 final decision is taken. i. Initiative Taken Based on Proposal Submitted by an Outside Party © Proposals to handle PR and communication for CBSL obtained from 2 experience media personnel were submitted to the Monetary Board at its meeting No.16/2015 held on 09 July 2015 by the former Governor (Chairman of the Monetary Board) without any amendments, 25© The objectives highlighted in the proposel submitted by Mahesh Senanayake have been incorporated to the ‘invitation for expression of interest to handle public relations and social media communication services of CBSL’ in section No¥ of the same. © Further, one replied to said invitation from Facility and Engineering Management Services (Pvt) Ltd (FEMS) providing a brief note on how the company intend to address each of the tasks mentioned in the section No.8 of the invitation, included a parts of the text, which included in the proposal submitted to the Monetary Board on 09 July 2015 © FEMS has submitted the qualifications and experiences of the proposed persons by them for the said project and one of such proposed persons was named as the Head of the Team, ie. Mr. R SM Senanayake. ii, CBSL Exposes to Reputation Risk * D/HR’s memo dated 02 February 2016 to the Chairman of the Technical Evaluation Committee (TEC) forwarding the EOIs mentioned the name of FEMS as Abans Environmental Services (Pvt) (Abans)Ltd. © Tender Board has approved to award the tender to FEMS, which is a related company of Abans end it has been mentioned the same in the profile submitted by FEMS, on 23 March 2016. * According to the profile specified in the web site of Abans shows that they are specialized only to facilities management services such as cleaning and janitorial services, landscaping and gardening services, hygiene management services, rental of mobile toilets, etc. Since these activities are not related to the said purpose of obtaining services of joumalists to handle public relations and social media communication activities of CBSL, it will expose the Bank to the reputation risk. iii, Conflict in Job responsibilities * Acting D/CMD informed the Tender Board at its meeting held on 03 February 2016 that the terms specified in the BOI will create conflict in deciding job tesponsibilities since the disseminating information to the public throughconventional and social media platforms are handled by Outsourced Media Personnel (OMP) while the conventional media is under the purview of CMD. «As suggested by CA at the same Tender Board meeting, D/CMD discussed the matter with former Governor on 08 February 2016 and the Governor clarified ‘that CMD will not be involved with the job responsibilities of the proposed OMe. iv. Requesting Governor’s Preference for Tender Proceedings © D/HR received two (2) EO!Is for the project. EOI closed on 25 January 2016, TEC has decided that only 1 (FEMS) can be evaluated out of the said 2 EOIs as the other has not provided adequate information. © Further, TC has reported that the Team Leader who proposed by FEMS does not possess any qualification or experience in the fields of economies and finance as required by CBSL invitation for EOIs. © The Tender Board instructed D/HR to explore the Governor's preference in selecting either to continue the tender process or to call for a price quotation from FEMS. Accordingly, D/HR’s minute dated 08 April 2016 to Senior Deputy Governor mentioned that the Governor's preference to call for a price quotation and thereby, evaluate the possibility of obtaining the services from FEMS at the quoted price. Non adherences to Legal Concerns © Director of Legal and Compliance Department (D/LCD) in his memo dated 21 March 2016 to D/CMD informed that this arrangement may reveal information pertaining to the functions of CBSL to extemal parties in contravening the provisions of the Sections 45 of the Monetary Law Act, which deals with the duty to maintain secrecy. + Further, he instructed to obtain the Monetary Board approval to authorize officer/s to obtain relevant information needed for the communication purposes. ¢ However, there is no evidence to ensure whether any actions have been taken on D/LCD’s instructions. 27vi. Monitoring of Progress of the Contract * As per the Board decision taken at its meeting No.16/2015 held on 09 July 2015 and finalized agreement to offer the tender implied that the D/CMD is the responsible officer to assess the progress of the contract. * However, as per the D/CMD’s minute dated 08 February 2016, Governor clarified that the recommendation for payment of the OMP will be done by the Governor’s Office and the OMP will report to the Governor directly. © Further, the Tender Board at its meeting held on 15 March 2016 decided to assign Secretary of CBSL to assess the work carried out by the media personnel for processing of monthly payments for the for the services obtained during the period. Vii. Conflict of Interest of the Outsourced Media Personnel * As per the EOI submitted by FEMS, some of the persons will be available on full time basis while some will be available on part time basis as outsourced media personnel, * However, the qualifications and experiences of the proposed personnel shows that current employment of the Head of the Team, Mr. R S M Senanyake is the Head of marketing of the Finance PLC while team member, Ms. A D Soysa is the Assistant Manager in Fund Mobilization, Sofilogic Finance PLC. * Since the said two finance companies are under the supervision of CBSL and the outsourced media personnel have been given the opportunity to work part time, it deem a conflict of interest. 3.5.4 Recruiting Consultants to CBSL on Contact Basis * Mrs. Joan de Zilva Moonasinghe was appointed as a consultant to CBSL on contract basis based on a Monetary Board decision taken at its meeting 'No.22/2015 held on 14 September 2015 to obtain consultancy services on the regulation and supervision of the financial system for one year period with effect from 19 October 2015, The Board Paper was tabled at the Monetary Board by the Director of Humen Resources Department (D/HR). Following deficiencies are identified in the process related to this contract.i, It was evident that the process was initiated by the former Governor as Mrs. Moonasinghe in her e-mail dated 10 September 2015 referred to a discussion had with the former Govemor and attached a draft Terms of Reference (TOR), which was forwarded to D/HR for necessary actions. ii, Tt was evident that the draft TOR submitted by Mrs. Moonasinghe was accepted by the Monetary Board without making any amendments to it. iii, No evidences are available to ensure whether Heads of Departments of Supervision of Non-Bank Financial Institutions (SNBFI), Bank Supervision Department (BSD) and Financial Intelligence Unit (FIU) are involved in laying down the TOR of the consultant as her service is relates to the said departments. iv. Only the Director of SNBFI was informed on this appointment by D/HR from his memo dated 26 October 2015 y. D/HR directly sent a request to Director of Facilities Management Department to allocate suitable office space for Mrs. Moonasinghe. The Board Peper/Board Decision is silent on allocating office space to her. vi. Senior Deputy Governor has approved to reimburse her transport cost to and from office (Kirillapone to Fort) for which any Monetary Board approval is not available. vii. Further, she has been provided with a provisioning for a daily newspaper and assigned a Minor Employee for which proper approval is not available for audit perusal. Professor Anura Surindra Ratnapala (Suri Rathnapela), Professor of Law - The University of Queensland, Autralia, has been appointed as a Consultant to the CBSL on contract basis for a period of six months from 05 October 2015 by the Monetary Board at its Meeting No.24/2015 on 05 October 2015 on the recommendations of the former Governor (memo to the Monetary Board dated 05 October 2015). The objective was to engage the Central Bank of Sri Lanka in the background work preparation to the promulgation of the new Constitution in 2016 with particular focus on ensuring that the provision of Monetary Law Act, Banking Act and other legislations relating to the regulations of the financial sector and the achievements of other objectives of 29i. ii, iti iv. vi. the Central Bank are consistent with the provisions of the new constitution. Following deficiencies are identified in the process related to this contract, It was evident that the process was initiated by the former Govemor by presenting a note to the Monetary Board attaching a scoping paper on the issue of the constitutional choices facing Sri Lanka written by Professor Rethnapala. No TOR was evident ‘Former Governor has proposed to the Monetary Board, the per diem fee of USD200/- and all Professor Rathnapala’s expenses related to accommodation, meals, incidental expenses, secretarial services etc., be amet by the Central Bank. ‘The Board has also approved of return airfare (Business Class) to be met by the Central Bank. In response to the inquiry made by Mr R.A. Jayatissa, Appointed Member, at the Monetary Board meeting No. 15/2016 on 20 May 2016, regarding the services of Professor Rathnapala, former Governor hes informed that Professor Rathnapala has completed the work assigned to him so far and ‘the payments made to him will be reimbursed by the Ministry of Finance (MOF). However, it was observed that the Finance Department has paid the due allowances etc., and any reimbursements have not been made so far by the MOF. 3.5.5 Manually Amended Minutes Raised without Endorsing It was observed that some minutes raised by SG were manually amended and not endorsed by SG (Table 21). ‘Table 21: Manually Amended Minutes Date of Date of Merchant [ Amount in ] ‘Remarks SG’s | Transaction | Be | | Minute | 1 T go.i2.1s | os.10.s | Move/Hotel Los | 916,598.37 | This item was deleted from the minute, Challenger, This em was manually added to the 30.12.15 | 18.1015 | Siearese” | 137,618.68 | Ti | ier This item was manually added to the | 28.02.16 | 05.11.15 | Colombo Hilton | 3,345.16 | Dine3.5.6 Matters relating to Maintaining the Documents ° The box files in which all the credit card bills of the years 2015 and 2016 of the former Governor and supporting documents are attached and maintained at the Governor’s Secretariat of the Secretariat Department were not properly folioed (serially numbered) as required by the Secretariat Circular ‘No.09/02/002/015/2015 dated 20 April 2015. Eyen though the files in which the documents relating to general office expenses of the Governor's Secretariat of the Secretariat Department for the year 2016 are folioed, there are some missing pages/folios in the files. Eg: File Name: Entertainment — Governor 2016: Folio Nos. 9, 48, 51, 75, 80, 156 ~ 169, 211-215, ete General office Expenses 2016: Folio No.353, etc Similarly, the pages since 26 January 2016 onwards, of the said file for general office expenses for the year 2015 are not foliced and out of the pages folioed, some ere not available. Eg: File Name: General Office Expenses 2015: Folio No. 468, etc. Copies of some credit card statements of the former Governor and copies of the related invoices were kept unfastened inside the files maintained for the Governor's foreign travel by the Secretariat Department. 4, IMPLICATIONS i. ii, iti, iv, Vi Non-compliances with rules, standing orders, ete specified in the CBSL Manual ‘will lead to misappropriation of CBSL resources and deem overriding Monetary Board decisions. Deficiencies identified in foreign travel will result in significant costs to CBSL. Claiming expenses without providing adequate evidences may deem to be misappropriation of CBSL funds. Delays in settling personal expenses and advances will incur an opportunity cost to the Bank, Non refunded expenses, over limit fees and unacceptable official expenses, which are not relating to official purposes, are costs/losses to CBSL. ‘Non adherences to the procurement procedure will encourage misusing CBSL resources and procedural disorders. 31vii. Violation of Excise Ordinance will expose the Bank to legal risk. viii. Not properly accounting for the receivables from general Treasury may understate the asset base of CBSL and lead to inaccurate profit distribution of CBSL. ix. Deficiencies identified in obtaining services of consultants to the Bank on contract basis will demonstrate procedural disorders in the Bank. x. Weaknesses highlighted relating to maintaining documents will lead to leakage of Bank information to the outside parties and hence exposes to reputation risk. RECOMMENDATIONS - i, The Governor also needs adhere to the rules, which are approved by the Monetary Board, specified in the CBSL Manual. ii, The CBSL may get reimbursed all the amounts relating to the deficiencies identified in this report by the former Governor. iii, The Governor's Secretariat is advised to prepare a booklet including policies and procedures at CBSL as applicable to the Governor at his appointment for his, easy perusal. iv. The Govemnor may be informed to use his official credit card only for official expenses. v. Any employee, including Govemor, who incurred any expense for official purposes, should liable to provide evidence of its official nature. vi. All official credit cards should not be settled using advances and instead the officer in concern should be asked for the original bills and only the official expenses should be paid by the CBSL vii. Advances should be obtained only when there is a really necessity to do so. Any advances obtained from CBSL should be settled within the stipulated time period without any delay as it incurs an opportunity cost to the Bank. ix, Secretary of CBSL may explore the possibility in amending the CBSL Manual incorporating the controls and procedures to be implemented on the deficiencies identified in this report. x. Purchases to Bank House have to be checked against a stock physical verification as soon as a new Governor is appointed. xi, CBSL should adhere to all relevant Ordinances issued by third parties.xii xiii, xiv. Finance Department should be properly informed by the relevant department on any receivables from General Treasury and based on that the Chief Accountant should account for those timely and accurately. The Intemal Audit Department should include the Govemor’s Secretariat activities into its audit universe in preparing its audit plan and should conduct audits of Govemors Secretariat in future. Considering all administrative weaknesses identified in this report, it is suggested to establish the Governor’s Secretariat as a separate department appointing an officer of the Head of Department level as the Secretary to the Governor. 33