The ‘Local Loans and Development Fund’ under the Ministry of Public Administration, Home Affairs, Provincial Councils and Local Government was summoned to the Committee on Public Enterprises (COPE) which met on July 20 under the chairmanship of Member of Parliament Prof. Ranjith Bandara.

This institution has been established by Ordinance No. 22 of 1916 with the aim of providing financial facilities at a concessional interest rate to the local government bodies for running public utility services as authorized by law. It has been amended on several occasions and has been named as the Local Loans and Development Fund under Act No. 24 of 1993.

The investigation was done through the following basic facts related to the Auditor General’s reports for the financial years 2020, 2021 and current performance.

Need to amend the Act

Since this is a financial institution similar to a bank, the need to amend the Act was emphasized by taking into consideration the timely matters. According to the Act, it is not appropriate for the Secretary of the Ministry to act as the Chairman of the Fund, so the Auditor General pointed out the importance of making amendments by focusing on all those matters.

It was discussed that, in 2018 ‘Asian Foundation’ had given a report regarding the restructuring of the institution and if it had been acted upon, great progress could have been achieved.

Since the Prime Minister as the Minister in charge of the subject has also held a discussion to amend the Act, the Secretary of the Ministry of Public Administration, Home Affairs, Provincial Councils and Local Government was informed to take steps promptly. 

Need to make the posts of Director General and Internal Auditor full time permanent posts

The committee’s attention was drawn to the fact that the position of Director General has been an acting position for many years. It was also discussed about the absence of a permanent Internal Auditor. Accordingly, the COPE ordered to inform within two weeks about the next steps to be taken to appoint a permanent Director General as well as a full-time permanent Internal Auditor.

Absence of a formal system for disbursement of loans, project evaluation, and loan recovery

It was revealed that the fund has received 9 projects worth 249 million rupees in the year 2023, but the board of directors has not considered them yet.

Thus, it was recommended that a formal system and set of guidelines be set up, focusing on issues such as granting and recovery criteria, loan recovery capabilities, projects using loans and productivity. The committee emphasized the need for the loan committee to operate according to that formal system.

Need to streamline the system of loan distribution to each province

The COPE chairman revealed that 691 million rupees of the total loan amount of 847.7 million rupees has been given to the North-Western Province in 2021. The committee recommended that the loan distribution system to each province be streamlined.

Streamline the Internal Audit 

The committee discussed about the lack of a permanent Internal Auditor to conduct the internal audit properly. It was recommended to recruit a permanent Internal Auditor and to provide the audit reports for the years 2011 and 2012 to the Auditor General within a month. It was also advised to implement the recommendations of the National Audit Commission.

A Corporate plan has been prepared for the period of 2019-2023, but it was revealed that it has not been approved. Accordingly, the committee advised to approve a corporate plan from 2023 to 2028.

Attention was also paid to the non-recovery of a loan amount of 12 million rupees given to the Dambulla Pradeshiya Saba in 1995, under the multi-crop development project, and the loan amount of 60.9 million rupees given to the Kandy Municipal Council. Accordingly, it was advised to take the relevant legal steps immediately.

The COPE Chairman emphasized that the activities of the ‘Local Loans and Development Fund’, which is the only institution that provides financial assistance to development activities through local government bodies, should be more streamlined. It was also decided to summon this institution in another six months.