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by R.K.H.M. Fernando (Former Director General, Public Finance, General Treasury)

In view of the vicissitudes the present treasury has undergone over the years since Independence from being the most powerful organ of the Government at the time the British relinquished its hold over the island to being a mere appendage of the Ministry of Finance - that too devalued as the ministry in charge of the subject of finance, it occurred to me that it might interest the readers to assess the role of the Treasury, legal and historical and discuss the prospects of reviewing this vital organ of administration for good governance.

The subject becomes all the more relevant in the context of the present seemingly unstable relationship between the three Cardinal Organs of government namely the Legislature, the Executive and the Judiciary, the former duo being the repositories of the power controlling and initiating public expenditure, the main charge of the Treasury.

The Treasury is one of the oldest institutions of the government tracing its origin to the initial british occupation of the coastal areas. At inception, it handled currency in Rix Dollars - the currency during the Dutch Rule. Since then, it has been the guardian and custodian of central coffers - public funds of the government - in the present context all monetized resources of the Republic.

Before the creation of the Central Bank in 1951, the Treasury appears to have administratively handled all foreign exchange, through a Head of expenditure in the Budget for the purpose.

One will be at a loss to state clearly the legal base of the present Treasury. No enabling Act has set it up as in the case of the Central Bank, no constitutional provision as in the case of the President, Cabinet of Ministers, or the Supreme Court.

There are however, numerous legal enactments referring to the Treasury, the Deputy Secretary to the Treasury, and the Secretary to the Treasury. these are however, aimed at regulating certain functions, duties, and institutions through the holder of the office or the institution and not primarily or necessarily enabling legislation.

For example, the Treasury Bills Ordinance makes provision for the issue of Treasury Bills through the Deputy Secretary to the Treasury. The Annual Appropriation Act provides for the Secretary to the Treasury or the Deputy secretary to the Treasury to authorize transfers of voted provision between certain classifications within the Parliamentary appropriation. This authority being delegated by the parliament, it is obvious that the exercise of this authority is to satisfy the broader interests of public finance as represented by the parliament and not to satisfy the whims and fancies of the Ministry or the Minister of Finance.

The Head of the treasury is the Deputy Secretary to the Treasury as per Finance regulations. The Secretary to the Treasury however, is the overall custodian of the whole institutional set up, conceptual as it is, in his dual role being also the Secretary to the Ministry of Finance. The somewhat complex situation, the writer opines, may be a hangover from the Donoughmore days when the subject of Finance came under one of the non-elected Policemen, the three Secretaries.

Duties

The duties, functions, and powers of the Treasury as well as the Secretary and the Deputy Secretary to the Treasury are discharged, performed and exercised apart from and in addition to any statutory stipulations, under the Financial regulations. It is a historical fact that the Treasury has functioned through its several divisions; Finance, Economic Affairs, Fiscal Policy, and Supply and Cadre and Establishments. The last two divisions were the nursery or the kindergarten of newly recruited cadets of the now defunct Ceylon Civil Service.

With the changing of the role of government from a regulatory organ to one of development in several areas, economic, social, educational, etc, with the dawn of independence and several changes in political regimes, new divisions were created and some divisions and branches left the Treasury with the bifurcation of Finance and Public Administration. The upgrading of divisions into departments, the merger of the Economic Affairs and Fiscal Policy divisions, the duplication and subsequent triplication of the Deputy Secretary's post had a debilitating effect on the independence and resourcefulness of the Treasury.

The present Treasury has undergone the above metamorphosis. The restoration of the former status quo is impossible as much as undesirable. However, a strong mechanism for the formulation and implementation of the Fiscal Policy in keeping with a Monetary Policy tied up with macro economic fundamentals is essential and the Treasury has to fulfil this task. Here, the Treasury needs operational independence similar to that enjoyed by the Central Bank.

Overriding the Treasury should be done at the highest level of the government indicating the policy directions which the Treasury is bound to carry out and change its in-built attitudes accordingly.

The need for a distinct and comparatively independent Treasury arises out of the following factors:

i. The proper management of the tax revenue without leaving it solely in the hands of politicians.

ii. The need for effecting economies and promoting financial order within the government.

iii. The necessity to keep rising obligations in view and to give warnings as revenues are outrun.

iv. The need to check increasing demands for public services and the natural reluctance for taxation and other revenue measures.

v. Application of a uniform standard for the financial sacrifice involved in resource management.

vi. The need to resort at times to underestimation of revenue as a safety valve for politicians and bureaucrats.

vii. The need to ensure objectivity at technical level when exceptions are forced upon by forces claiming to be more equal than others.

The above functions will have to be performed by an experienced and disciplined set of officials running the risk of being called "inverted and unsmiling macabres sitting in the Treasury."

A distinct identity for the Treasury within the Ministry of Finance becomes all the more necessary in view of the devaluation of the Ministry of Finance as a consequence of the 1978 Constitution. In the absence of a mandatory requirement to have a Minister of Finance, the subject of Finance may be assigned by the President to any Minister even without the designation as Minister of Finance.

The right to introduce a money bill has shifted from the Finance Minister or any other minister with the former's permission, to any minister with the approval of the Cabinet. Hence, the need to have a distinct and strong agency to give muscle to any member of the Cabinet charged with the subject of Finance to handle public finance and be responsible and accountable to the Parliament - the Constitutionally empowered organ of government exercising supreme control over the finances of the Republic.

Relationship

At a critical moment, where the relationship between the various organs of the government is strained such as the situation that seems to prevail now, only a strong treasury can ensure constitutionally and legally valid operations in relation to the Consolidated Fund in terms of Resolutions, Warrants, etc.

Apart from the appointment of a total outsider with a political background outside the permanent Public Service or the Central Bank as the Secretary to the Treasury and the Secretary to the Ministry of Finance, the changes made to the top of the Treasury have had the effect of diluting its leadership role.

In 1989, the Head of the Treasury was split into two heads when two officers were appointed as two Deputy Secretaries to the Treasury - resulting in two officers exercising the powers of the statutory post of the Deputy Secretary to the Treasury. This was the first step in the cannibalization of the Treasury. Fortunately, there was no case for any party aggrieved by any purported abuse of authority by one officer as all controversial decisions were conveyed under the signature of the Secretary to the Treasury.

With the present government assuming power towards the end of the year 2001, a third Deputy Secretary to the Treasury was appointed. When a Minister clashed with the Treasury over the allocations out of the Miscellaneous Head, in the operations of which the Treasury has sole discretion, one officer was identified as the officer to be in charge of meeting the requirements of the particular Minister in future - to avoid a possible defection by the latter as he had a historical propensity for defection.

This is an unhealthy precedent as other powerful Ministers might follow suit. Only permanent public servants from the governmental establishment should be appointed to head the Treasury as much as to man its several key departments. They will give the questionable loyalty, the ruling regime expects, while sticking to the tenets of pubic accountability. The writer carries fresh in his mind, an incident where a political appointee brought an informal note from the Secretary to the Treasury, at that time representing the entire government, authorizing a write off not vetted through the proper mechanism, to be filed as approved, which, when referred back, had to be withdrawn and thrown away.

The need for cohabitation between the Executive and the Legislature absolutely necessary at present, when the Head of the Executive and the political Head of the Legislature are from two opposing political parties with rising hostilities demands a clearly and distinctly identified role for the Treasury operated within and located in the Ministry of Finance for the objective and rational performance of the dual roles of financial initiative and financial control, the respective roles of the Executive and the Legislature.

Thus, it is in the national interest to rediscover and strengthen this vital organ of the government, as, with the balance of power in the legislature in delicate condition, the Parliamentary control of Public Finance through this institution should not be left to the vagaries of crisscrossing politicians.

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