Innovative accounting

Public Administration and Home Affairs Minister Dr. Sarath Amunugama has called on those directly handling public finances to evolve with the times and adapt innovative methods to obtain high output and above all eliminate fraud and malpractices.

The call made by the Minister for proper accounting practices and transparency on the part of those entrusted with the responsibility of handling public finance is a timely one considering the present upheaval caused by the collapse of finance companies.

However the crash cannot be attributed to obsolete accounting practices since these high profile private sector concerns bore the hallmark of the latest state of the art facilities. The real reason for the crash was sharp practice and sleight of hand methods that even bypassed the best accounting methods ever invented. So it is the case of the calibre of the individuals who are entrusted with the public funds that should come under the microscope.

It goes without saying that had there been this element of transparency in the dealing with depositors money coupled with accountability, this calamitous situation could have been averted and so much heartburn avoided. Transparency has today become a much abused word which is loosely bandied about. It all boils down to the question of integrity.

Addressing public sector accountants and auditors at an international conference on “New Public Financial Management and Public Accountability,” the Minister prevailed on the custodians of public finances to ensure transparency and accountability so that the public would get their money’s worth. He also stressed on the need for proper follow up action after the release of funds for public ventures in order to check malpractices.

Not only private Finance Companies, even certain Government institutions recently came under scrutiny for questionable transactions, the scandal at the Inland Revenue Department being the most serious. Here too had proper supervision been exercised from the outset this massive fraud could have been avoided.

The crux of the matter is no amount of innovative accounting can put a lid on fraud if there is collaboration down the line. With liberalisation and an unbridled commercial ethos all scruples have been thrown to the wind.

Today any person or individual can be bought over for the right price. This is the malady that has today plagued not just the State Sector but the entire socio-economic fabric of the country, which has got rotten to the core.

The Auditor General himself has often pin pointed questionable accounting practices in State concerns and even passed strictures on those at the helm of these institutions. Like the Minister said what is at stake is public funds and it is incumbent that every rupee of these funds is accounted for if the Government is to justify the various taxes imposed on the public.

What is needed therefore is a foolproof system to ensure public funds are not squandered by unscrupulous persons placed at the helm.

Harkening to the theme of the conference, the Minister called on the accountants and auditors to be innovative and employ modern practices in accounting so that loopholes could be plugged while making optimum use of the public funds for the public benefit. He said creating awareness of new public financial management methods was vital to ensure transparency.

It has to be said here that the State Sector too has come a long away from its obsolete methods and practices and now has gone high tech in most of their operations. The best example in this regard is the State Banks which in many ways have even surpassed their private sector counterparts in the adaptation of new technology.

Sometimes even this sophistication allows for sleight of hand methods which were difficult with earlier systems that had more human supervision. Therefore in the end what counts is the individual who is in charge, be it the Accountant or Financial Manager. It is only to persons of unimpeachable integrity and honesty and dedication that public funds should be entrusted.

Innovative methods can have their limits. It can cut both ways. There is therefore a need to strike the right balance in the use of innovation and more personalised supervision of public finances.

True, we have to be up to date with the ever evolving novelties in almost all fields of endeavour. The downside though is these too could be perverted in the hands of the wrong person, as amply demonstrated in the drama of the failed finance companies.