AUDITOR GENERAL'S DEPARTMENT ueago. VTY/A/SSDP/4/17/04(IDAme 8a. js-'August 2018 My No. orN.Date The Secretary Ministry of Skills Development and Vocational Training Report of the Auditor General on the Consolidated Financial Statements of the Skills Sector Development Programme for the year ended 31 December 2017 The English version of the above mentioned report along with the certified financial statements is sent herewith. H.M Gamini Wijesinghe Auditor General Copies to 01. Secretary, Ministry of Finance and Mass Media L'9W. Project Director, Skills Sector Development Programme 03. Senior Financial Management Specialist, International Development Association-for information (n 306172, 88083 +9d4 -d11- &mZ, 88. 306/72, GurbWa f. itor eao, LGov&. No. 30Ik 2, PolIuwa Road, Battrgnula, Sri Lanka +31 s94-1-2887028-34 +94-11-2887223 a0@auditorgeneral.gov.1k www.auditorgeneral.gov.dk &oRw&&rr6urr6iTh 56os)w) a4$uo pgmmd.4Aimb AUDITOR GENERAL'S DEPARTMENT QMj . VTY/A/SSDP/4/17/04(IDA'u so.'@60- August 2018 Ny No. our No. Date The Secretary Ministry of Skills Development and Vocational Training Report of the Auditor General on the Consolidated Financial Statements of the Skills Sector Development Programme for the year ended 31 December 2017 The audit of consolidated financial statements of the Skills Sector Development Programme for the year ended 31 December 2017 was carried out under my direction in pursuance of provisions in Article 154(1) of the Constitution of the Democratic Socialist Republic of Sri Lanka read in conjunction with provisions in the schedule 2 Section 11.1.3 of the Financing Agreements Nos. 5516 LK and 5517 LK dated 12 September 2014 entered into between the Democratic Socialist Republic of Sri Lanka and International Development Association. This report consisted with the comments only on activities carried out by the Ministry of Skills Development and Vocational Training and other Implementing Agencies based on the Disbursement Link Indicators of the Programme. My reports on financial statements of the individual Implementing Agencies for the year under review are issued separately. 1.2 Implementation, Objectives, Funding and Duration of the Programme According to the Programme Implementation Document, the Ministry of Skills Development and Vocational Training is the Executing Agency of the Programme and other 09 Institutions are the Implementing Agencies of the Programme. However, the Sri Lanka Institute of Printing which was initially identified as an Implementing Agency had been excluded during the year under review. According to the Programme Implementation Document, the objectives of the Programme are building an efficient education system to meet the local and foreign labour market demand by 2020 and improving quality, relevance, access, recognition for vocational training and supportive policies, systems and structures. The estimated total cost of the Programme amounted to US$ 961.2 million equivalent to Rs. 125,916 million and out of that US$ 100 million equivalent to Rs. 13,100 million each expected to be provided by the qan 306/72, Cc!CS o3e, a&zd@ . 0 &UE, .- 30672, guirmbVra aff, uggypmas, far6iaa. - No. 306/72, Polduwa Road, Bataramulla, Sri Lanka +94-11-2887028-34 +94-11-2887223 5fid ag@auditorgeneraL.gov.1k * www.a4ditorgeneral.gov.Ik A indor nl cnons Dcm.inmiu International Development Association and the Asian Development Bank. Further, US$ 41.40 million equivalent to Rs. 5,423 million was agreed to be provided by the Government of Germany and Export and Import Bank of Korea. In addition, US$ 200 million equivalent to Rs. 26,200 million was expected to be financed through other sources. The activities of the Programme commenced in 2014 and scheduled to be completed by 2020. 1.3 Responsibility of the Mana!ement for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Generally Accepted Accounting Principles and for such internal control as the management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error. 1.4 Auditor's Responsibility My responsibility is to express an opinion on these consolidated financial statements based on my audit. I conducted my audit in accordance with Sri Lanka Auditing Standards. Those Standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatements of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Programme's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Programme's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management as well as evaluating the overall presentation of the consolidated financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. The examination also included such tests as deemed necessary to assess the following. 2 Auditoi Ovencn-fls Dummcl (a) Whether the systems and controls were adequate from the point of view of internal control so as to ensure a satisfactory control over the Progamne management and the reliability of books, records etc. relating to the operations of the Programme. (b) Whether the expenditure shown in the Consolidated Statement of Total Expenditure of the Programme had been satisfactorily reconciled with the enhanced financial reports and progress reports maihtained by the Programme. (c) Whether adequate accounting records were maintained on a continuing basis to show the expenditure for the Ministry of. Skills Development and Vocational Training and the Department of Technical Education and Training and seven semi - autonomous institutions from the funds of the Government of Sri Lanka and the Lending Agency, the progress of the Programme in financial and physical terms, the assets and liabilities arising from the operations, the identifications of purchase made out of the Loans, etc. (d) Whether withdrawals under the Loans had been made in accordance with the specifications laid down in the Financing Agreements. (e) Whether the funds, materials and equipment supplied under the Loans had been utilized for the purposes of the 08 institutions of the Vocational Training Sector and the Ministry of Skills Development and Vocational Training. (f) Whether the consolidated financial statements had been prepared on the basis of Generally Accepted Accounting Principles. (g) Whether the satisfactory measures had been taken by the management to rectify the issues highlighted in my previous year audit report, and (h) Whether the financial covenants laid down in the Financing Agreements had been complied with. C 3 Auidiho ( luk'sI)piIIvint 14 Basis for Qualified Audit Opinion My opinion is qualified based on the matters described in paragraph 2.2 of this report. 2. Financial Statements 2.1 Opinion So far as appears from my examination and to the best of information and according to the explanations given to me, except for the effects of the adjustments arising from the matters referred to in paragraph 2.2 of this report, I am of opinion that, (a) the Programme had maintained proper accounting records for the year ended 31 December 2017 and the Consolidated Statement of Total Expenditure give a true and fair view of the Programme as at 31 December 2017 in accordance with Generally Accepted Accounting Principles, (b) the funds provided had been utilized for the purposes for which they were provided, (c) the satisfactory measures had been taken by the management to rectify the issues highlighted in my previous year audit report, and (d) the financial covenants laid down in the Financing Agreements had been complied with. 2.2 Comments on Financial Statements 2.2.1 Lack of Documentary Evidence for Audit The financial statements for the year under review had not been prepared and presented by the Tertiary and Vocational Education Commission even up to 15 July 2018 and therefore, the information shown in the Consolidaled Statement of Total Expenditure could not be reconciled with the figures shown in the financial statements. 4 -