The changing role of the Auditor General in post-colonial Sri Lanka

Enhancement of Auditor General's Powers

Finance: It has been proposed to incorporate an Act to provide for the strengthening and Parliamentary control over Public Finance; to ensure accountability in the use of public resources; to enhance powers and functions of the Auditor General, Audit Council and the National Audit Service Commission; to promote economy, efficiency and effectiveness in the use of public resources and for all matters connected therewith or incidental thereto.

It was recommended by W.P.G. Dissanayake, Chairman P.A.C. in 1985, to have an Audit Act and the Auditor General deemed to be an officer of Parliament outside the meaning of Parliamentary staff act.

After Mayadunne was appointed the Auditor General, he carried out a self assessment scheme and came to the conclusion that the state auditors are performing less than 10% of what should be done. Therefore, there is a wide expectation gap. This assessment report was copied to the World Bank and the Treasury. The World Bank assisted the Auditor General by appointing the Court of Audit, Netherlands.

This body produced a peer review report after lengthy discussions with the Speaker, Chairman, Members of the P.A.C., Cope, the Opposition Leader, treasury representatives, media, N.G.Os (Civil Societies), head of PERC and other major institutions including ministries and government departments. The Auditor General should be an officer accountable to the Parliament but independent of the Executive.

The matter of fundamental importance for an Auditor General is impartiality and independence. Being independent means independent from the entity being audited, which in the Auditor General's purview means from the Government, as it is the government and government owned entities over which the Auditor General's remit runs.

This does not mean insulation from suggestions and persuasions of others. The Auditor General must be sensitive to public and political concerns and it is perfectly legitimate those concerns should be important influences on how the Auditor General distributes their audit resources. An Auditor General in close liaison with the P.A.C. should be used as a means of maintaining Auditor General's independence.

In Australia, the Parliament and the P.A.C. has the responsibility for safeguarding the Auditor General's independence. Independence has several aspects! Method of appointments, tenure, career expectations, method of removal, funding and legal immunities attaching to the office are all important to an overall assessment of the Auditor General's independence.

Appointment

A purely governmental appointment with no outside consultation at all would not be conducive to the independence of the position. Again this does not mean that a Parliamentary - based process for appointment is essential either. In this regard, nominations from a special committee of audit professionals, including the Institute of Chartered Accountants and the chair of the P.A.C. is feasible.

1. Removal from Office

The Auditor General should be removed from office on limited grounds that are specified by law. This protects the independence of the Auditor General. The actual removal decision is usually left to the Parliament.

2. The retirement age of the Auditor General should be extended. In other countries it ranges from 65 years to 75 years. There are opinions expressed stating that the retiring age should be consistent with that of the public service. The Auditor General cannot be compared to other officers by virtue of his office.

As stated earlier, the Auditor General's Department at present is performing less than 10% of what should be done. It is admitted that with the present set up of the Auditor General's Department, that a mere strengthening on human capacity and skills within the existing structure would be wholly ineffective to meet the performance of the department. A structural change becomes obviously necessary.

With increased work in the tsunami affected areas, the Auditor General's work is doubly more and this work which will go on for a considerable period of time and the effects of this is not confined to tsunami effected areas alone but the whole country. The Auditor General with the present setup will not be able to cope with these additional factors which would therefore necessitate a structural change.

In respect of budgetary control, certain forces are against the revamping of budgetary independence to be accorded to the Auditor General. In this regard, they allege that the control exercised by the treasury is acceptable and will create a bad precedent. They feel empowering the Auditor General would weaken the public sector.

Effective performance of the Auditor Generals functions are the budget and resources provided for the office. The increasing complexity of the modern audit functions demands multi-disciplinary audit teams with the need for a range of expertise: legal, economic and environmental. The days when only accountants were employed on public sector audit work are gone. Autonomy of operation depends heavily on adequate resources.

In other countries Parliaments are increasingly developing a pre-budget involvement in fixing the Auditor Generals budget allocation. The P.A.C. may be briefed by the Auditor General and by the treasury or finance ministry before the government's annual budget is drawn up.

This gives the P.A.C. or the Parliament an opportunity to recommend the funding to be provided for the Auditor General's Department before the government estimates are presented in Parliament.

a. The Auditor General has a role in approving internal audit standards. It is also in the proposed act to confer power on the Auditor General to modify the international auditing standards determined by the International Organisation of Supreme Audit Institution to suit local conditions and publish them in the gazette as approved standards of the National Audit Office. This is a very salutary piece of legislation to be in harmony with global Audit practice.

b. The Auditor General should not be prevented from inquiring into anything within the Audit mandate. This conserves the independence of the Auditor General.

It has also been proposed that Auditor General and his staff have appropriate legal protection conferred on them to enable them to carry out their duties.

d. The P.A.C. should keep under review any proposed change to the Auditor General's audit mandate.

e. It is important that Auditor Generals themselves take steps to measure their own performance. Indicators for measuring audit performance that have been identified include action taken on audit recommendations: savings achieved and the frequency of referrals made to audit findings by legislation during their deliberations and references in Parliament.

Attention to such indicators essential, for the effects of a successfully operating public audit system can be dramatic. In Ontario it has been estimated that Canadian $ 500 million of savings have resulted from audit recommendations over a period of eight years, and an unquantifiable contribution to improving the administration and delivery of government services.

The United States experience was even more beneficial:- $44 billion in financial benefits - a return of $ 95 for every dollar spent or $ 13.7 billion per employee. In the U.K. it is equally significant. The tax payer saves at least Sterling pounds 8 for every Sterling pound 1 spent running the National Audit Office. Auditor Generals accountability requires attention to such factors on the part of the Auditor General and Parliamentary committees monitoring his performance.

f. Extent of the Auditor General's Remit.

Over the past few decades there have been considerable changes in the role of the Central Government within each nation's economy. In many instances government has withdrawn from the provision of a number of services that were formerly publicly owned and provided. This has resulted in extensive privatization of enterprises and services.

In other cases, the organizational mode of public service delivery has changed either by converting a publicly owned entity into a business unit that tries to operate on more commercial lines (corporatisation) or contracting service delivery operations to private sector organizations while retaining an ultimate public responsibility of the service.

Privatisation

In the case of privatisation the Auditor General clearly ceases to be the auditor of the organization once it has been fully privatised. But the Auditor General does retain the role in reporting on the process followed in effecting the privatization and whether this complies with the principle of economy, efficiency and effectiveness.

Government Shareholding Interest

As another alternative to privatisation, the government may maintain an equity interest in a company. This could be either majority or minority interest. It is likely that a government equity interest in a company exists because a company is performing some residual public function. It may also be receiving a subsidy in addition to the capital investment.

In these circumstances the Auditor General may have the right to concur in appointments by the company of a private sector auditor and also have independent rights of access to information from the company and from the auditors work. Amendments to empower Auditor General to impose surcharge on public officers

The procedure laid down in the draft act gives the officer and/or the institution a great latitude in making their representation. The question of litigation has been voiced by those in disagreement to this. While a question of litigation may take considerable time and delay it does not follow that this imposition is inequitions.

The officer to be surcharged is given enough room to defend himself. Critics state that this leaves room for discretionary decisions which cannot be expected since these officers are highly trained and skilled in the exercise of these functions.

Audit Commission

1. The commission made vise the Auditor General on

a. All policy matters relating to the National Audit Office.

b. All matters relating to audit including the improvement of the quality of audit reports, audit coverage, timely issue of reports, improvement on quality and adequacy of such reports, institutional development, improvement and strengthening of capacity of the National Audit Office.

c. Any other matter connected with or relating to the National Audit Office.

2. The Auditor General shall have the discretion of accepting or rejecting any advice given by the commission provided that where the Auditor General decide not to accept such advice he shall submit a report to the Audit Council incorporating its reasons.

3. The Audit Council may, where it considered necessary, submit its own report to parliament on any advice rejected by the Auditor General. By having disclosed, the Parliament will be informed of the reasons for such advice giving the advice of any other point of view.

4. The commission may introduce schemes to improve the quality of audit functions which shall be determined with the concordance of the Audit Council.

5. The commission in keeping the remuneration and other terms and conditions of the National Audit Office broadly in line with those applied to persons employed by Parliament.

6. Audit Commission's advisory role is to point out and specify malpractices which may have been overlooked by the Auditor General in discharging his responsibilities.

Times have changed with the new forces emerging in post - colonial Sri lanka, both locally and internationally. Corruption which has spread to every hue of the body politic is threatening to engulf the nation with no hope of redemption. There are forces which contribute to this state of affairs.

Sectors with hidden agendas and corrupt and selfish overtones have made an indelible attack on the socio-economic system rendering it lifeless. The time has come for positive changes and the proposed legislation will become a leading and forthright tool in the pursuit of our country's development.

V.R.K. de Silva - B.A.(Cey) F.C.A.

Consultant