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Effectiveness of Government Audit System
in Sri Lanka
1
Effectiveness of Government Audit System
Shakthi S.V. Fernando
BSc. Financial management(Special)-Undergraduate
Sabaragamuwa University of Sri Lanka
Janith Perera
BSc. Financial management(Special)-Undergraduate
Sabaragamuwa University of Sri Lanka
Chandi M. Damayanthi
BSc. Financial management(Special)-Undergraduate
Sabaragamuwa University of Sri Lanka
May 2014
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AbstractThis study is an Evaluation of the effectiveness of Government Audit System in Sri Lanka
with respective to powers of Auditor General and COPA/COPE. Basically it indicates the
effectiveness of Government Audit System in Sri Lanka under powers of Audit General and
impact of Government Audit System to COPE/COPA.
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Content
Introduction 04
Powers of Auditor General 05
Impact of Government Audit System to COPE/COPA 06
References 11
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IntroductionGovernment audit system has been created & formed in order to fulfill the statutory
duty of providing an overall view on the different sector of government. Specially, it’s
regarding the financial management of entities who are the responsible for managing
the public funds in implementing development tasks of the government. The entity
which has been formed with the purpose of providing an overall view on the
performance of public entities Auditor General’s Department.
Auditor General is considered as an independent party. The independent of the
Auditor General is preserved by the constitution itself & the article 153. It states that
Auditor General only can be appointed & removed by Parliament. Same as that the
Auditor General does not come under the supervision of any minister or office of the
government. It is identified as the prime organization responsible for reviewing the
affairs of the public organizations & reporting to Parliament. It is making every
possible effort to rectify the situation by showing & leading the correct path, in order
to have a better financial management & good governance of the public sector with
the intention of contributing to the development of our country.
An efficient government Audit system is considered as an essence in order to manage
finance in public entities. It is taking in to account as a mandatory requirement since
public funds are managed by those entities. Then an efficient government audit
system is identified as a core feature in country’s economy with the step toward its
development. It is one of the reasons that the Auditor General is considered as an
independent party by the constitution itself. The power of Auditor General which is
provided by the constitution assures the effectiveness of the entire government audit
system. Then Auditor General can freely provide an overall view about the
implementation of total government system. On the other hand it ensures the
effectiveness of COPE committee. Auditor General provides the guidance for the task
of preparing COPE report. As well as Auditor General is one of the parties who
involves to the function of performance evaluation of government entities with the
COPE committee.
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Powers of Auditor General
As above stated Auditor General is recognized as an individual party who is free to
provide his overall view about government sector without any hesitation. The
constitution itself has made that happen by giving constitutional powers to Auditor
General has a fully independent party.
Auditor General is appointed by the president. The salary of the Auditor General is
determined by Parliament & it will be charged on the consolidated fund & it is not be
diminished during his term of office. Auditor General only can be removed by the
president due to ill health or physical or mental infirmity or upon an address of
Parliament other than his death or resignation or retirement. Whenever the Auditor
General is unable to discharge the functions of his office, the president may appoint a
person to act in the place of Auditor General.
The Auditor General shall audit the accounts of all government entities vested in the
government under any written law. Auditor General shall also perform & discharge
duties in functions which have been prescribe by Parliament by law. The Auditor
General or any person authorized by him has the power to access to all books,
records, returns & other documents, to access to stores & other properties, & to be
informed with such information & explanations as necessary for the performance of
duties & functions.
All the above stated functions are based upon the power of the Auditor General by the
constitution which has made him a free & autonomous party. That power is provided
to him in order to present & overall view which is independent & significantly fair.
Since the Auditor General is not bound with any public entity, he can freely provide
his independent view without any bias. It has made be government audit system an
effective one. Government audit system has got the ability to implement its auditing
process without any interference of any party, since the Auditor General is an
independent party. As well as all the government entities are legally bound to provide
all the information regarding any matter. It has made the government audit system
more effective.
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Impact of Government Audit System to
COPE/COPA
The need of strengthening and enhancing the capacity of the Auditor General’s
Department and the COPE secretariat is strongly recommended by the Committee
since the efficiency and the effectiveness of the Committee depend on these two
important elements to a greater extent. Giving an opportunity to gain experience and
knowledge on the practices related to oversight committees in other countries may be
instrumental for them to cater a better contribution towards the Committee.
It is the view of the Committee that the aspect of performance audit should be
extended further in addition to the traditional financial auditing in order to assess the
achievement in relation to the economy, efficiency and the effectiveness in the
employment of available resources by the public enterprises. The performance audit
carried out by the Auditor General’s Department in relation to the solid waste
management in urban councils, matters related to the Timber Corporation and the
environmental issues in consequence of the non-closure of the deserted mines could
be noted as commendable initiatives taken by the Auditor General’s Department in
implementing this new type of audit practiced in the country. The following measures
are recommended to adopt in order to increase the effectiveness of the COPE.
As and when it is necessary, the Committee will make On-the-spot inspections into
selected institutions to get a broader understanding on the matters needed to be
investigated. Initiating this practice, the Committee has already made On-the-spot
investigations into the Sri Jayewardenepura Hospital, Institute of Tourism and Hotel
Management and on the directive of the Committee the Auditor General had made a
special investigation into the matter related to the import of contaminated fuel by the
Ceylon Petroleum Corporation of which the report had already been submitted to the
Hon. Speaker.
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The COPE will specify legal, disciplinary, recovery and corrective actions
immediately on completion of the meeting with the institution. Doing commitment on
each action will be tied to a time frame. As well as Secretariat will make
presentations to the COPE on the progress to follow up action at a special meeting
convened each quarter.
As result of those found wanting for further investigation on fraud, cheating and
corruption to Brought before COPE for detailed investigation, Referred to the relevant
Ministry for action and where appropriate, referred to the Anti-Bribery and
Corruption Commission.
As well as increase the comparative understanding of members, immediate steps will
be taken to set up a data bank or outsource the requirements of a data bank so that the
institutions can be evaluated in a comparative landscape for better performance.
Procedure of presenting COPE report
The findings & recommendation of COPE report will be presented to the parliament
every three months. Then an annual debate will be called within a month release of
the COPE annual report. Furthermore the debates will be called as & when required
based on the quarterly report. After that the COPE secretariat will publish the names
of institutions which have been listed for COPE investigation at least one month
before the institution present. Then the COPE will summon institutions which should
appear before the committee at short notice if warranted. Then the subcommittee will
identified institutions which should be investigated with the assistance of the
secretariat. There will be a grading of government institutions by losses, risk
undertaken, loss of reputation & strategic importance to country. After that an agenda
will be proposed to the COPE which includes a time table. The frequency of an
institution being summon will be based on its grading. Then the report will be
finalized.
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Financial results of examined institutions
In the COPE report, the financial statements of government institutions provide a true
& fair view, by executing rules & regulations of Auditor General. According to COPE
report, the government institutions are subdivided by two categories. They are limited
liability companies & strategic business enterprises and non-commercial public
enterprises.
It can be recognized the effectiveness & orderliness of the Auditor General’s
department by analyzing the financial statements of COPE Committee regarding
above stated two subdivided categories. It has been identified the frauds &
corruptions & the amendment which should be executed within government entities in
2010 by COPE report. Same as that the corrective actions have been provided by
government audit system & the COPE committee.
It is enable to acquire the profitability to some organizations which were sinking on
losses & some organizations which were making losses could reduce their losses in
2011 by implementing those necessary actions which were recommended by COPE
committee & the government audit system. It can be observed not only the
government entities which could improve their financial stability by following
guidance, but also some government entities which neglected that guidance have
become more loss earning entities as the COPE report in 2013. In that case, it can be
concluded that Audit General’s department have enclosed a true & fair view about the
financial statement without any biases. Then there is no any controversy that
government audit system which is executed by Audit General’s department & COPE
committee are effectively implemented within the country. Further it can be
concluded by following sources.Based on the nature of incorporation, the institutions
found under each category had been assigned with the following abbreviations.
LLC - Limited Liability Company
SBE - Strategic Business Enterprise
RMI - Regulatory & Monitoring Institution
UTI - Universities, Research and Other Training Institutions
DNP - Other Development & Non - Profit Oriented Institutions
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Institutions which incurred losses in 2010 but turned into profits in 2011 showing better financial performance
Institutions with either profit increased or loss decreased in 2011 as compared with 2010
No. Name of the Entity Type 2011 Rs.’000
2010 Rs.’000
01. Airport & Aviation Services Ltd.
LLC 3,121,000 1,865,000
02 Ayurvedic Drugs Corporation
SBE 63,879 6,016
03 Bank of Ceylon SBE 15,545,765 10,052,569
04 Central Bank of Sri Lanka
SBE 47,431,799 12,635,220
05 Ceylon Fertilizer Co Ltd. LLC 95,407 73,979
06. Development Lotteries Board
SBE 1,318,519 937,913
No. Name of the Entity Type 2011 Rs.’000
2010 Rs.’000
01. Agricultural & Agrarian Insurance Board
SBE 87,675 (147,407)
02 Associated Newspapers of Ceylon Ltd.
LLC 14,036 (359782)
03 B.C.C Lanka Ltd LLC 7,318 (23,184)
04 National Water Supply and Drainage Board
SBE 474,466 (5,849,894)
05 Paddy Marketing Board SBE 264,126 (346,747)
06 Sri Lanka Cashew Corporation
SBE 20,449 (15,055)
07 Sri Lanka Ports Authority SBE 782,231 (1,248,134)
08 Sri Lanka Ports Authority SBE 17,851 (24,502)
09 Urban Development Authority
SBE 242,576 (275,887)
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07. Mihin Lanka (Pvt) Ltd. LLC (940,489) (1,221,378)
08. National Paper Co. Ltd. LLC (73,713) (212,193)
09. Mantai Salt Ltd LLC 3,876 254
10. People’s Bank SBE 15,310,666 8,771,077
11. Regional Development Bank
SBE 1,478,582 809,668
12. National Livestock Development Board
SBE 250,195 178,945
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REFERENCES
Auditor General’s Department (2007). Annual Report 2007.
Parliament of Sri Lanka website. Retrieved from http://www.parliament.lk/en.
COPE committee (2013). COPE report 2013.