The 2024 report of the National Audit Office (NAO), titled ‘Special Audit on the Management/Administration of Various Funds in Sri Lanka Customs,’ reveals that billions of rupees designated for the State have instead been disbursed as ‘rewards’ and overtime payments without proper ministerial oversight, alongside significant losses in Government revenue.
One of the most alarming findings in the report highlights the payment of a staggering Rs. 24,225,600,376 in reward money to Customs officials and informants between 2012 and August 2023.
This sum had been disbursed based solely on an internal departmental order, entirely bypassing the mandatory approval of the minister of finance, a requirement stipulated by Section 153(2)(b) of the Customs Ordinance No.17 of 1869.
The audit has noted that payments without ministerial approval had occurred since 1988, disregarding legal provisions.
Internal orders have allowed rewards for officers not directly involved in investigations, including for routine duties, providing additional benefits beyond salaries and overtime.
The audit has also identified substantial State revenue losses from penalty mitigation.
In 17 cases between 2017 and 2023, initial penalties stood at Rs. 7,611,652,834 but have been reduced to Rs. 481,694,078. The value of 30% credited to the Government from the mitigated penalty value stood at Rs. 144,508,224, resulting in a direct loss of Rs. 181,512,488 compared to the attempted evaded tax of Rs. 326,020,712.
Only 30% of net revenue from detected offences (Rs. 14,535,360,226 from 2012 to August 2023) had been credited to the Consolidated Fund, less than potential recovery.
Additionally, the NAO report also notes that Sri Lanka Customs has allegedly violated attendance circulars by using manual registers instead of fingerprint machines, undermining accountability.
Meanwhile, 90% of the Overtime Fund had been paid to officials regardless of extra hours worked, with only 10% credited to Government revenue.
Overtime payments in 2021 and 2022 totalled Rs. 948,323,405 and Rs. 938,872,620, respectively, while Government revenue from this fund had been Rs. 85,739,457 and Rs. 83,667,789, respectively. The accuracy of these payments is unconfirmed due to the lack of precise duty hour records.
The NAO report has concluded with a series of critical recommendations aimed at restoring financial integrity and transparency within the Sri Lanka Customs.
These include strengthening existing legal provisions governing Customs funds, conducting a proper study to redefine what duties qualify for reward money, amending rules related to fund administration, and crucially, increasing the percentages of revenue credited to the Consolidated Fund from various Customs funds.
The report also calls for tighter controls on penalty mitigation, the abolition of redundant sub-funds, and the immediate regularisation of attendance and overtime payment systems.
The audit’s findings have underscored an urgent need for comprehensive reforms to ensure the efficient collection and rightful utilisation of public revenue, signalling potential widespread public concern and demands for decisive Government action.
When The Sunday Morning contacted Customs Media Spokesperson Seevali Arukgoda and Director General of Customs P.B.S.C. Nonis for comment, both requested additional time to study the findings of the report prior to commenting.
Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma did not answer phone calls made seeking his views while Deputy Minister of Economic Development Prof. Anil Jayantha Fernando could not be reached on account of being overseas.