State Engineering Corporation gets Rs. 750 m Treasury bailout

Thursday, 28 July 2016 00:00 - - {{hitsCtrl.values.hits}}

Burdened by massive losses, State Engineering Corporation given Treasury bailout of

Rs. 750 m to tide over its operational costs till such time it can recover an estimated Rs. 1.1 b outstanding payments from various Government institutions

A Cabinet paper submitted by Finance Minister Ravi Karunanayake called for the Treasury to release a guarantee for the SEC to obtain a Rs. 750 million loan and sought “advice on future activities” of the institution from the Cabinet of Ministers.

Lapses in contract agreements and changes in funds allocated to projects of various ministers by the Budget that have not been properly documented are two reasons why the SEC continues in a financial mess, according to the Cabinet paper.

The paper also notes that the SEC has continued to keep balances as outstanding even though clients have refused to meet payments.

During meetings with SEC officials and the two Treasury departments it was found that documents on fund allocations for Government projects for the past 10 years could not be found. Most of the expenses on these ministerial projects have also been left outstanding for 10 years.

“There are issues in relation to the outstanding balances of debtors. It appears the SEC has failed in resolving issues relating to its business activities, especially in recovering payments, merely due to management weaknesses including failing to maintain records for internal control mechanisms,” said the Cabinet paper submitted by Karunanayake.

Earlier this year it was believed that the SEC was owed Rs. 2.8 billion from various ministries and Government departments but a debtors report submitted by SEC records the outstanding payments at Rs. 1.1 billion.

However, an attempt earlier this year to push ministries to pay the SEC 25% of the outstanding payments was suspended by the Cabinet on 23 February.

“Cabinet of ministers on 23 February 2016 decided to suspend the release of imprest equivalent to 25% of the total outstanding payments to SEC by relevant ministries, departments, and institutions from capital allocations provided to them in Budget 2016 and remit movies to SEC,” it said.

This refusal resulted in the SEC having to seek an additional loan of Rs.750 million, which was approved by the Cabinet this week. (UJ)