Auditor General’s special report reveals: Rs. 673 m losses to Mahapola Trust Fund

Massive financial losses in the Mahapola Online Lottery Scheme amounting to millions of rupees have been revealed in a recent special audit report by the Auditor General’s Department on the management of investments of the Mahapola Higher Education Scholarship Trust Fund. 

The total losses incurred as a result of the financial irregularities and the mismanagement of the fund are said to be Rs. 673 million. The report stated that the Trust Fund had been deprived of the said amount due to its deviation from the procurement procedure in selecting an institution to maintain the online lottery. 

The investigations concluded that the procurement committee that selected the institution for maintaining the lottery and the evaluation committee, as well as the institution that maintained the lottery, should be held accountable for the losses. 

It is further stated in the report that the Trust Fund had not taken action in accordance with the terms and conditions of the agreement entered into between the Trust Fund and the institution maintaining the lottery in 2013, to recover the installment of Rs. 375 million receivable for the period from 5 May 2015 to 7 February 2016, along with the penalty for the delay amounting to Rs. 14.564 million from the institution maintaining the lottery, and that those values had not been brought to account.  

Furthermore, the installment receivable to the fund from 8 February 2016 to 15 September 2016 – the date of the agreement’s termination – amounted to Rs. 298,913,043. 

The online lottery had been reintroduced on 30 July 2013 on the approval of the Cabinet of Ministers (number 13/0773/540/008 dated 13 June 2013), with the objective of raising necessary funds for the accomplishment of the objectives of the fund in terms of Section 6(2)(d) of the Mahapola Higher Education Scholarship Trust Fund Act, No. 66 of 1981.

In terms of Section 7.1(b) of the contract agreement, the contractor should pay the premium to the Trust Fund on or before the first date of the quarter. In the event of failing to do so, the contractor should be informed in that connection in writing within a period of 90 days.

However, it is revealed in the report that payments had been defaulted from 31 January 2014 up to 15 November 2016, but that the Trust Fund had not informed the contractor in writing.

Moreover, the agreement should have been terminated within a period of 14 days from that date, on 17 August 2015, though the agreement had in reality been terminated only on 15 September 2016. As such, a private company had been allowed to earn excessive profits for a period of over one year by using the concept of “Mahapola”, it is revealed. 

The Mahapola Higher Education Scholarship Fund was initiated with the objective of assisting the higher educational requirements of students with financial difficulties. This fund, initiated about 35 years ago, is controlled by a board of trustees. 

However, the Mahapola Higher Education Scholarship Fund has been subjected to criticism due to reasons such as the improper management of the investment of monies of the fund, and allowing the ownership of the Mahapola Campus in Malabe, initiated under the trusteeship of the fund, to fall out of the hands of the fund, by the Board of Trustees during the said period. 

Meanwhile, the Committee on Public Enterprises (COPE) also conducted a special probe into the fund recently, and COPE Chairman Prof. Charitha Herath instructed the Secretary to the Ministry of Trade J.M. Bhadrani Jayawardena to inform the Attorney General (AG) of the losses and irregularities, and to lodge a complaint in this regard with the Criminal Investigation Department (CID). 

The COPE investigation, conducted at the parliamentary complex last week, was attended by State Ministers Susil Premajayantha and Dr. Nalaka Godahewa, and MPs Eran Wickramaratne, Nalin Bandara Jayamaha, Premnath C. Dolawatta, and S.M. Marikkar. 

The Committee also recommended a proper study on the irregularities with regard to the National Wealth Corporation and the National Wealth Securities Corporation under the Mahapola Trust Fund, and summoned the heads of the said institutions before COPE forthwith. 

The officials who attended the investigation told the Committee that Cabinet had approved the liquidation of those institutions, as they were running at a loss. Commenting on this, Prof. Herath said that although it would not be a problem to liquidate these institutions after punishing the culprits, it would not be appropriate to do so without a proper investigation into the frauds. Therefore, he said, this liquidation should be delayed until the irregularities are properly investigated.