6t 6iT wC G5(ffT 1&ýO6t 4)Läi MINISTRY OF ROADS AND HIGHWAYS 2_60s GurrJ&ì @Lqur6)il GUTå6Ufjil @6m6oTLI LDOuiL Q&ff RCT C TC&'FA 04 19 146, une 2020 Datc The Secretary. Ministry of Roads and Hichways Report of the Auditor General on the Financial Statements of the Transport Connectivity and Asset Management Project for the year ended 31 December 2019 The English version of the above mentioned report along xxith the copy of the financial statement certified is sent herexith. W.P.C.Wickramaratne Auditor General Copies to 01. Secretary. Ministry of Finance, Economy and Policy Development 02. Project Director, Transport Connectivity and Asset Management Project 03. Senior Financial Management Specialist. International Development Association NATIONAL AUDIT OFFICE 61Z ~Ao. RCT /C TC&AMIP/FA 04 /19 /146wt v June 2020 NI No Your No. J Date The Secretary Ministry of Roads and Highways Report of the Auditor General on the Financial Statements of the Transport Connectivity and Asset Management Project for the year ended 31 December 2019 1. Financial Statements 1.1 Opinion The audit of the financial statements of the Transport Connectivity and Asset Management Project for the year ended 31 December 2019 comprising the statement of financial position as at 31 December 2019 and cash flow statement for the year then ended. and notes to the financial statements, including a summary of significant accounting policies 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 Credit Agreement No. 5788 SRI -LK dated 29 September 2017entered into between the Democratic Socialist Republic of Sri Lanka and the International Development Association. In my opinion, the accompanying financial statements give a true and fair view of the financial position of the Project as at 31 December 2019 and its cash flows for the year then ended in accordance with Sri Lanka Public Sector Accounting Standards. 1.2 Basis for Opinion I conducted my audit in accordance with Sri Lanka Auditing Standards (SLAuSs). My responsibilities, under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of my report. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 1 NATIONAL AUDIT OFFICE NAOSL 1.3 Other information on performance of the Project The other information as stated below does not include in the financial statements and my opinion thereon does not cover the other information. * The Project had planned to spent Rs.376 million during the year to achieve 5 main activities in the action plan 2019. However, the responsible officers of the Project had not taken action to achieve the main objectives given in the action plan and had spent Rs.43.67 million for the tnaintenance and repair of Sri Lanka Road Access Management System (SLRAMS) and Multi-Function Network Survey Vehicle (MFNSV) of the Road Development Authority, Rs.2.14 million to the local and foreign training and Rs.33.39 million on Project Monitoring Unit expenditure. The progress of the Project was very poor and the progress of the activities in the action plan had not been separately recorded by the Project. Further, it was observed that the estimated value of Rs.135.8 million related to 9 items in the procurement plan, only 3 per cent progress had been achieved by the Project as at 31 December 2019. * The General Treasury had allocated a sum Rs.312 million and Rs.60 million to the Project for the utilization of foreign loan and GOSL expenditure for the year 2019. However, the Project had utilized only Rs.52.99 million representing 16.98 per cent of foreign loan allocation and Rs.16.93 million representing 28.22 per cent from the GOSL allocation as at 31 December 2019. Further, it is observed that a sum of Rs.195 million in the Special (Dollar) Account had been remained unspent over 1 year, due to slow progress of the activities of the Project. * Out of the total work-in-progress amounting to Rs.169.78 million, an amounting to Rs. 90.57 million only had been incurred by the Project for the activities such as Conceptual Designs, Topography Survey, Institute for Development Research Consultancy (IDRC), User Satisfaction Survey, Research Development Consultancy - Social Impact Report / Resettlement Action Plan (RDC-SIA/RAP). Land acquisition survey and cost of Project Monitoring Unit etc. However, payment made to above activities had become fruitless, due the construction of the initial road of Ja-Ela to Chilaw 2 NATIONAL AUDIT OFFICE NAOSL town on Peliyagoda - Puttalam Road abounded as a result of restructuring of scope of works of the Project on 15 August 2018 by the decision of the Government. The Project had obtained the cadre approvals from the Department of Management Service onlO April 2015, 16 November 2017, 25 July 2019 to recruit 49 staffs for the Project activities. However, presently 14 staffs were made available in the Project and 35 vacancies including 1 procurement Specialist, 4 Senior Engineers. 2 Engineers, 2 Transport System Analysis, 2 ICT Officers, I Senior ICT Officer, 1 GIT Analyst, 6 Field officers and 9 Image Analyst were remained unfilled as at 31: December 2019 without being taken action to fill the vacancies. 1.4 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Public Sector Accounting Standards and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the Project's financial reporting process. JA6 Auditor's Responsibilities for the Audit of the Financial Statements My objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sri Lanka Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 3 NATIONAL AUDIT OFFICE NAOS As part of an audit in accordance with Sri Lanka Auditing Standards, I exercise professional judgment and maintain professional skepticism throughout the audit. I also: (a) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,. design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery. intentional omissions, misrepresentations, or the override of internal control. (b) Obtain an understanding of internal control relevant to the audit 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 internal control of the project. (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. (d) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other matters, significant audit findings, including any significant deficiencies in internal control that I identify during my audit. 4 d, 4& u I FU 16)] bV&JLj NATIONAL AUDIT OFFICE 2. Report on Other Requirements of the Donor Agency As required by the International Development Association, I state the following: (a) The basis of opinion of the audit is as stated above. (b) In my opinion: - the funds provided had been utilized for the purposes for which they were provided, - the opening and closing balances, withdrawals from and replenishments to the Special (Dollar) Account had been truly and fairly disclosed in the books and records maintained by the Project and the balance as at 31 December 2019 had been satisfactorily reconciled with the accounting records of the Central Bank of Sri Lanka as at that date, - the Statements of Expenditure submitted could be fairly relied upon to support the applications for reimbursement in accordance with the requirements specified in the Credit Agreement, - the satisfactory measures had been taken by the management to rectify the issues highlighted in my previous year audit report, and - the financial covenants laid down in the Credit Agreement had been complied with. W.P.C. Wickramaratne Auditor General 5