The Sunday Leader

New National Audit Bill: Boon or Bane?

by Ashanthi Warunasuirya & Amavasya Sirisena

The proposed National Audit Bill has become a widely-discussed topic in both state and private sectors.

The crucial point in this new legislation is the authority it grants the Auditor General to audit the accounts of all institutions in the country, be it state or private.

Last week The Sunday Leader made a comprehensive review of the impacts and the effects of such an Audit Bill. This week we bring you some of the comments made by social activists, intellectuals and members of trade chambers regarding the prospects of the Audit Bill. Following are excerpts of their views.

 

Corrupt cohort fighting the bill

Keerthi Tennakoon, Managing Director, CaFFE

A cohort of corrupt state officials has now rallied to defeat the proposed Audit Bill. At present massive corruption in the energy sector such as purchasing coal have now been unveiled through audit reports. We must formulate strong legislation to fight these acts of corruption. We cannot let the culprits slip away from loopholes in the law all the time. There should be a proper system to address these issues. It starts with bringing in a proper Audit Act and establishing a proper procurement commission. It must be formed according to the 19th amendment.

We can see that a group of corrupt politicians are fighting against this Audit Bill. They are backed by their minions who are working in the state sector. They are hell-bent on preventing any further authority being vested upon the Auditor General.

Anusha Pelpita was accused of large-scale corruption, but today nothing is being done against him. Some retired from their posts when the truth started to come out. Five senior officials have been accused of taking part in the corrupt coal deals. Its value has not even been properly estimated yet. This proves that we still have no way of preventing these evil deeds.

We can see who is trying to block the Audit Bill. When it comes to the Auditor General’s powers, he could be vested with a high authority in case of a fraudulent act in the state sector. At an administrative meeting we queried from these officials as to how many times it has been enforced in Sri Lanka since the initiation of the previous Act.

The answer is none. So it is clear that the law in the books is not being practically enforced. Therefore we have to create an environment where the laws could be properly enforced. The answer is giving the Auditor General’s Department the required power to act strong.

 

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Dire need for an Audit Bill

Saman Rathnapriya, Convener, Union Movement for Social Justice

There is a need for an Audit Bill in this country. It took a long time for the authorities to make it a reality. However there are several opinions and theories on the matter. The most controversial topic is the expansion of the Auditor General’s scope of authority.

Here, he has been vested with the power to probe all financial affairs of both state and private sector institutes as well as the power to take some form of action in case of foul play. Here there is a problem as to whether one single person could be granted such wide  powers.

An audit is basically a search for information. However,  here it is questionable as to whether the action sought upon information received through audits could be used in a wrongful manner. Some may think that there is no harm in granting such wide powers but there should be a higher entity such as a commission to scrutinise the procedure and to monitor whether the due procedure is upheld. For example, independent commissions have now been established but still there is no central entity that could monitor their actions.

Although the constitutional council has been established there is no entity to observe whether the council is working efficiently or working according to the mandate. In the end parliament can look into this matter but that is normally not practised in Sri Lanka. Most of the time, it is engaged in formulating policies. So there is a lapse in this Audit Bill. There are various problems in our administrative service.

However, we are in need of an audit policy that could withstand the rising levels of corruption in this country and is capable of creating entities that could fight back. We had such policies in the past but gradually that has become outdated. The proposed bill must provide solutions to all these issues. That is our opinion on the matter but we are considering other criticisms and opinions on the matter as well.

Next week we intend to discuss the matter with several other interest groups who are engaged in the same dialogue. We hope to seek the opinions of senior officials in the Auditor General’s Department as well as civil society organisations to be forwarded to the President.

 

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Acceptable, even necessary

K.C. Vignarajah, Good Governance Activist

In the context of widespread bribery and corruption by politico-business operations across borders, to tax havens like Panama, Dubai, Cayman Islands, BV and Jersey Islands etc. (the audit bill) is acceptable, may even be necessary,

Public and investor confidence was shattered. We have right throughout emphasised the collapse of professionalism and institutions. To re-establish, we must not be afraid of the light.The Auditor General’s powers must supersede those of the secretary appointed by the ever-changing political scenario of nearly 90 ministers and deputies.

The Constitutional Council, the Public Services Commission (PSC), Judicial Services Commission and other commissions are part of the surveillance framework.Criminal Breach of trust, unjust enrichment of self or a group, impoverishing the trusting public, stakeholder or shareholders must be severely dealt with.

‘Sovereignty of the people’ is an abused term.  To retain it effectively, the powers of the Judiciary, the Legislature and the Executive must be well defined and balanced; men of the highest integrity and independence should be found for these posts. The recent Central Bank Governor stakes fulfilled this dream: a non politicised, eminently suitable Dr. Indrajit Coomaraswamy, was appointed by consensus.

Some politicians funded by the mafia, speak and vote for the will of the mafia, instead of the people’s. Print and electronic media expenses must be provided by the Elections Commissioner. The Auditor General must audit on a current basis instead of months later. In this world of  advanced technology and innovation, transfer of money and resources takes place instantly.  It can be used well by the creative, competitive, caring, enterprise sector to greatly benefit humanity, the country and themselves.  They can also be used by the mafia for self-enrichment at the expense of the economy, the country and thousands of trusting investors and shareholders.

We have extolled the virtues of many good entrepreneurs.  They will not worry about audits as long as the auditors are sincere and honest. We also encouraged others to do so; and publicly congratulated those who did. The managers or the executive must not appoint, control or influence the auditors.

 

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Dealing with the private sector

Chandra Jayaratne, Former Chairman, Ceylon Chamber of Commerce (CCC)

According to my perception, the Auditor General (AG) cannot audit the private sector other than limited liability companies where the majority is owned by the government. Section 4 deals with the government projects. So in this case, the AG is auditing the project which relates to the government.

When it comes to section 21, it says if there is something wrong that has happened in the company, the directors and the officers of that company can be surcharged by the government. Any person who is working for the government is a public servant. They are working for the government either in a government entity or a company set up.

Companies perform its duties by board so that the chairman, the board of directors and the company secretaries could be surcharged if they have done something wrong. It is better to refer to the 19th amendment in the Constitution where the AG’s powers have been defined.

 

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When AG is the ultimate auditor

Reyaz Mihular, Managing Partner, KPMG

According to the last reading of the bill and my understanding, normally the AG has no powers over private sector companies. However, if there are companies incorporated under the Companies’ Act, in which the government has the majority, although they are limited liability companies, the AG has the power to be the auditor. For instance, Sri Lankan Airlines, Sri Lanka Insurance are limited liability companies owned by the government. There are other limited liability companies where the government owns a majority control. So, where the government owns a majority control even if it is a limited liability company, then the AG will be the auditor. According to my understanding, normally what the AG does in those circumstances is that he contracts private auditors to do the audit but they report through the AG and the AG reports to the stakeholders.

Where the government has a majority control, I think there is a rationale where there is a provision for the AG to be the auditor. He might sub-contract the auditor but he will be the ultimate auditor.

 

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Will Broaden AG’s Powers

Audit Superintendent Lalith Ambanwala

The Section 4 of the new National Audit Bill states we have the power to investigate a transaction related to state funds and then report it to the Parliament, if anybody reports us on such a transaction. If a contractor gives funds to construct a building which is owned by the government, then the AG will have the power to inquire into and observe the transactions that the particular contractor has made whilst constructing the building.

This will broaden up the scope of  the AG’s powers to check on the appropriateness and the transparency in managing the public fund. The Private sector does not come under the power of the AG, since the AG has no power to audit the private sector. Section 53 clearly implies the projects of the government funded by the foreign entity or a government.

If we receive money from any foreign entity or a government, we accept that money as Sri Lankan money. The AG also has powers to surcharge directors or the directorial board if their company utilised money violating the rules and regulations. In such a case, the AG has the power to surcharge in order to charge the specific money by the directorial board of the company.

 

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