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By Channa Kasturisinghe

Treasury Secretary Charitha Ratwatte has instructed the public sector accounting and auditing officials to ensure that priority is given to national interests in expending public funds and to submit financial reports of pubic entreprises to the Auditor General on time to curb corruption.

Ratwatte pointed out that it was the prime responsibility of public officials to prepare financial statements and annual reports of public entreprises adhering to %Treasury circulars and in compliance with accepted accounting standards.

"Before this Government took office there had not been a proper accounting and auditing procedure in public entreprises. It paved the way for a number of incidents of corruption and malpractices which was a tremendous loss to the economy.

The Government had to even go to the extent of seeking the help of the Police and advertise in the news papers to find out malpractices of certain public entreprises," Ratwatte said.

He was addressing a seminar on Financial Reporting in Public enterprises organised by the Institute of Government Accounts and Finance in Colombo recently.

The Treasury Secretary said that when spending funds obtained by the Government in the form of taxes paid by the public or foreign aid priority should be given to important sectors such as education, power and infrastructure development.

According to Finance Ministry sources financial indiscipline and irregularities, non compliance of rules and regulations, manipulations, lack of a proper management information system, ineffective internal audit and inadequate disclosures in financial reporting have led to large-scale corruption and malpractices in public enterprises in the country.

"There have been delays in tabling annual reports and accounts to parliament by certain public enterprises. Concerns have been raised on the accountability of the directors of these bodies and the public has lost confidence in financial reporting and auditing in these institutions.

Maintaining the required standards in financial reporting is also the concern of the Donor Agencies including the International Monetary Fund (IMF), the World Bank, the Asian Development Bank the Commonwealth

Lack of good governance in public enterprises including statutory bodies, commercial corporations, government owned business undertakings, government owned companies and subsidiary companies is also a main cause of corruption and malpractices," a Finance Ministry official said.

According to V. Kanagasabapathy, Additional Director General Public Finance of the Ministry of Finance, the qualities expected from financial statements are consistency, relevance and reliability, understandability, timeliness and true and fair views.

"According to the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 every specified business enterprise should prepare its financial statements in compliance with the accepted accounting standards.

The Accounting and Auditing Standards Monitoring Board (AASMB) monitors the compliance with Accounting Standards and Auditing Standards.

The AASMB has powers to summon and question any director, officer or auditor and carry out investigations on malpractices. Non compliance with Accounting Standard is punishable which includes fines up to Rs.500,000 or imprisonment of those who are convicted," Kanagasabapathy said.

He said that public enterprises should be encouraged to present , outside the financial statements, a financial review by management, which describes and explains the main features of the enterprise's performance and financial position and the principal uncertainties it faces.

"Such a report may include a review of the main factors and influences determining performance, including changes in the environment in which the enterprise operates, the enterprise's response to those changes and their effects and its policy for investment to maintain and enhance performance including its dividend policy.

The enterprise's sources of funding, the policy on gearing and its risk management policies and the strengths and resources of the enterprise whose value is not reflected in the balance sheet under Sri Lanka Accounting Standards," Kanagasabapathy said.

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