How the budget proposals are executed

The Treasury holds periodic meetings specially with the Secretaries of development ministries to ensure budget execution.

Execution

The budget execution process spans over the financial year:

Signing of the Warrant by the Minister of Finance, gives the mandate to operationalize the budget.

Cash-flow is prepared by the Treasury Operations Department in consultation with the Budget Department, the Revenue Departments and Public Debt Department of Central Bank, towards translating the budget into the action.

An Imprest is released by the Treasury Operations Department to each spending agency enabling them to incur expenditure

Spending agencies commence incurring expenditure and the procurement process is conformity with the approved budget

Follow-up action:

Revenue - Enactment of laws, regulations etc. to give effect to budget proposals

Expenditure - Monthly Expenditure Reports are submitted by Spending Agencies to the State Accounts Department to ensure checks and balances

Monthly cash-flow review meetings are held at the Treasury, chaired by the Secretary to the Treasury and attended by all Revenue Departments and Treasury Departments.

Execution framework Financial regulations

A synopsis of financial regulations that are of direct relevance to the budget execution process are noted hereunder. It is pertinent to note that some of the financial regulations reflect provisions in the Constitution.

Financial year of the government (FR 1)

The financial year of the government is from January 1 to December 31 of the same year.

Payments into and withdrawal from the Consolidated Fund (FR 2 (1))

The provisions in the constitution are reiterated;

Control of Parliament over public finance

What forms the Consolidated Fund

Withdrawal of sums from the Consolidated Fund

Contingencies Fund

Special Provisions as to Bills affecting public revenue

Monies in the Consolidated Fund (FR 2 (2))

The Consolidated Fund comprises of all monies, belong to the Republic which are not separately allocated to other specific funds.

The Fund also comprises of monies, (including money in bank accounts) of the various departments and funds of the Republic with crown agents and other approved overseas agents of the Republic and also includes investments.

Expenditure from the Consolidated Fund (FR 2 (3))

This forms two main categories;

Supply services are services for which appropriations are made by an Appropriation Act or by a Resolution in Parliament or by authority issued in terms of Article 150 (3) and Article 150 (4) of the Constitution.

Special law services, for which provision is made by specific provisions of the Constitution or by any other law than those referred to above.

The programming of expenditure (FR 4)

It is the responsibility of each Chief Accounting officer to ensure that the funds to be authorized by Parliament in the annual estimates are restricted to the programme of work that can be achieved during the financial year and they should exercise general supervision over such expenditure.

Miscellaneous services (FR 13)

Financial provision for services of a special character, which cannot appropriately be provided for as direct expenses under a particular department is made under Head 'Miscellaneous services', controlled and operated by the Treasury, Director General of National Budget Department.

Transfer of financial provisions - virement procedure (FR 66)

When the financial provisions appropriated in the estimates to any programme, project, object class or item of a Head of expenditure is found to be inadequate for expenditure during the financial year and is likely to be exceeded, and if the relevant Accounting officer and the Chief Accounting officer are satisfied with regard to the necessity for additional financial provision, savings which are likely to be available during the financial year under any other programme, project, object class or item of the same Head of expenditure, may subject to variation of estimates as provided for in FR 65, be transferred to cover such anticipated excess expenditure as provided in FR 66, subject to approval by the Secretary to the Treasury or any other officer authorized in that regard.

Supplementary estimates (FR 74)

An application for a supplementary provision can be requested only in unforeseen circumstances or on a direction of the Cabinet of Ministers, when it becomes necessary for a Head of Department to incur expenditure - if such expenditure is on a service which does not fall within the ambit of any programme or project under his control or such expenditure, though it falls within the ambit of the programme or project, it will cause an excess thereon which cannot be appropriately and fully covered by virement procedure.

Such Head of Department should submit to the Secretary to the relevant line ministry a report indicating the nature and extent of the service, the total cost, and the amount of additional financial provision required. The Secretary submits that Report with his comments to his minister and if such minister considers that a supplementary estimate should be presented, he should obtain the approval of the Cabinet of Ministers and thereafter direct the Secretary to prepare a Resolution to be submitted to Parliament. If approved, a Special Warrant under FR 90 should be issued to incur expenditure.

Contingencies fund (FR 78)

If the Minister of Finance is satisfied that there is a need for certain expenditure and that no provision for such expenditure exists, may with the consent of the President, authorize provision to be made therefore by an advance from the Contingencies Fund. An application for an advance from the Contingencies Fund is appropriate only when;

The money is required for urgent and unforeseen expenditure for which no provision exists.

The money cannot be found by virement procedure, either because it is inappropriate or savings are not available. There is not sufficient time to apply for a supplementary provision.

The contingencies fund is a continuing one and does not lapse at the end of the financial year.

However, as soon as possible after every such advance, a supplementary estimate should be presented to the Parliament for the purpose of replacing such sum advances. In such supplementary estimate presented to Parliament, provision should be made for the full amount of the advance already made and any amount necessary for future expenditure on the same service during the rest of the financial year.

Warrant to be issued under the hand of the Minister of Finance (FR 90)

It is necessary that a Warrant under the hand of the Minister of Finance should be issued before any charge is made on the Consolidated Fund. For the purpose of complying with this requirement, Warrants are issued under the hand of the Minister of Finance and one expenditure can be incurred prior to these Warrants being issued.

The Warrants so issued take the following forms to cater to different situations;
General Warrant
Requisition
Special Warrant
Special Law Warrants
Supplementary Special law Warrant

Advance Warrant

Further Contingencies Fund Advance Warrants are issued by the Minister of Finance for the release of funds from the Contingencies Fund.

All Warrants are addressed to the Secretary to the Treasury, or the Deputy Secretary to the Treasury, who will communicate the authorities contained in such Warrants to the departments concerned through the Chief Accounting officers. Any expenditure not in conformity with the authority contained in the above Warrants will be disallowed by the Secretary to the Treasury and may be surcharged on the officers responsible. The authorities conveyed by these Warrants, except the Contingencies Fund Advance Warrants, lapse at the end of the finance year to which they relate.

Imprest authority (FR 91)

The effect of a warrant is that money can be legally withdrawn from the Consolidated Fund. The actual amount of money that each Department would require for its payments is determined by the Treasury, on the basis of particulars furnished by the Department.

A letter is issued by the Treasury to each Department, stipulating the total amount of money that will be released by way of Imprest for expenditure by the Department during the financial year. This is known as the Imprest Authority and the limits specified therein is known as the Limit of Imprest.

This limit cannot be exceeded unless a Supplementary Imprest Authority has been obtained. Further, as stated in FR 365, the term Imprest, indicates the sum of money placed by the Treasury at the disposal of a Department, or an individual public officer to be utilized for making authorized payments during the financial year for which it is issued. As per FR 366, the Treasury, has also the right to recall at any time, any sum of money from any Imprest granted and FR 373 sets out the manner in which the Imprest could be surrendered to the State Accounts Department of the Treasury on December 31, each year and other related aspects.

Power of Accounting officers to incur expenditure (FR 93)

Subject to the general control of the Chief Accounting officer, and financial and other regulations and instructions of the government, Accounting officers are empowered to incur, on their own responsibility, expenditure authorized by Warrants and Requisitions, however subject to additional authorities indicated in FR 93.

Supervision of financial matters/Supervision by the Secretary to the Ministry as Chief Accounting officer (FR 124)

The Minister of Finance is charged with the raising of revenue and collection of other government monies as well as with the general oversight of all the financial operations of government. He (or the Treasury on his behalf) therefore, lays down the broad framework within which departmental financial transactions of all kinds may be undertaken.

It is the duty of the Minister of Finance to account to Parliament for all receipts and payments. It is necessary for him to nominate officers for the collection and disbursement of public funds on his behalf.

Therefore, the Minister of Finance appoints each Secretary to a Ministry to be the Chief Accounting officer of his ministry and delegates to such officer, as the Chief Accounting officer, the responsibility for supervising departmental financial transactions, subject to the directions of the Treasury.

In addition to Secretaries to Ministries, the officers-in-charge of Departments specified in Article 52 (7) (such as the office of the Secretary General of Parliament, Department of the Auditor General) of the Constitution and other Departments not supervised by Secretaries to Ministries, are also treated as Chief Accounting officers. This arrangement secures that, while the Treasury retains general control over government financial matters, a Secretary/Chief Accounting officer is enabled to discharge his constitutional responsibility of supervision over the Departments concerned in respect of their financial transactions.

Accounting officers and Revenue Accounting officers (FR 125)

Accounting officers;

Except where other arrangements are made by the Treasury, the Head of each Department will be the Accounting officer, in respect of all the financial transactions of his Department. As such, he is immediately responsible to his Chief Accounting officer in the manner laid down in the financial regulations. Each Secretary to a Ministry, in addition to him being the Chief Accounting officer of his Ministry, and the departments under the Ministry, is the Accounting officer of the Ministry office.

Revenue Accounting officers;

The Treasury will indicate from time to time who will be responsible for the preparation of the estimates of revenue under the different Heads, Sub-heads, Items and Sub-items and who will ultimately be accountable for the variations between the estimates and the actual collections. Such officers are for the purpose of the financial regulations are referred to as Revenue Accounting officers.

Treasury supervision and control (FR 126)

The chief function of the Treasury is to maintain control and supervision over government finance. It is therefore the duty of the Treasury, to setup a system of financial administration that is satisfactory in all respects especially with regard to accounting, security and responsibility, which is done in two ways;

- by regulations, directives and instructions that are generally applicable, and

- by instructing or advising Chief Accounting officers and Accounting officers of any special measures necessary in particular circumstances. The responsibility of the Treasury under the above is not curtailed by the statutory assignment of any financial function to a particular officer. The controlling and supervisory functions of the Treasury include the following.

- To provide for the appointment of Chief Accounting officers and Accounting officers and to determine their duties and responsibilities

- To communicate and to interpret all financial directions of the Minister of Finance to all Chief Accounting and Accounting officers

- To maintain control over departmental cadres, scales of salaries, rates of wages etc.

- To satisfy itself that revenues and other monies due to the government, including those to commercial activities and deposits, are promptly collected and brought to account by government departments.

- To satisfy itself that the Financial Regulations are complied with by government departments

- To exercise supervision of the Consolidated Fund and other government funds or accounts as well as over monies held in deposit.

General responsibilities of Chief Accounting officers (FR 127)

A Chief Accounting officer is responsible to the Minister of Finance for the adequacy of the financial administration of all Departments within the Ministry. His duties are mainly supervisory. A Chief Accounting officer will be regarded as having discharged his responsibilities if he has taken measures to ensure, that each of his Accounting officers has planned the financial work of his department so that business is transacted with correctness and financial propriety and has evolved a system which provides adequate controls over expenditure and collection of revenues etc., as provided for in the FRs.

General responsibilities of Accounting officers (FR 128)

An Accounting officer is responsible to the Chief Accounting officer for the financial administration of his Department and the management of his vote.

Executive function of the Treasury as a Department (FR 131)

In addition to duties in FR 126 the Treasury carried out the normal executive functions of a department of the Ministry of Finance. The Secretary to the Treasury in his capacity as the Secretary to the Minister of Finance is also the Chief Accounting officer. The Deputy Secretary to the Treasury, is the Accounting officer of the votes directly administered by the Treasury. The Treasury's executive functions include the following.

- To bring to account promptly and correctly in its books all monies received in its capacity as an Accepting officer (FR 182) and to provide for their security

- To bring to account promptly and correctly in its books all payments made in its capacity as an Office of Payment (FR 255)

- To arrange for making payments outside Sri Lanka

- To make payments on behalf of other governments or institutions

- To plan and prepare the annual estimates

To maintain classified records relating to accounts received from government departments, approved Overseas Agents and other governments which are incorporated in its books so as to enable departments to reconcile their accounts.

- To operate on the Consolidated Fund and other funds, or accounts controlled by the Treasury, in particular to arrange for the Imprests and Advances, to maintain records of all such issues, to obtain proper acquittance from Accounting officers for Imprests and Advances, to arrange for the location of government balances, in such a way as to secure the minimum of idle government monies at any time, to maintain accounts of the various government funds under its control and to publish annual accounts and to take action on the reports of the Committee on Public Accounts.

Financial Organization in Departments (FR 132)

Chief Accounting officers and Accounting officers may seek clarifications from the Treasury on any matters of financial responsibilities.

Delegation of functions for financial control (FR 135)

An Accounting officer may delegate his functions either generally or with regard to an individual transaction, in a reasonable way inter alia ensuring the adequacy of internal checks in the system of delegation. An officer to whom such functions have been delegated will have full discretion to perform his duties delegated to him and will be held accountable for his acts.

He is required to keep the Accounting officer acquainted to the extent required in the FRs. Delegation of authority is possible subject to the provisions contained in the FRs.

It is important that the scope of delegation should be set down in writing so as to avoid doubt on the nature of responsibilities. Delegation should be periodically reviewed and the stages or functions relating to expenditure and income may be distinguished (FR 135).

Such stages or functions relating to expenditure and income should be carried out as provided for in the relevant FRs.

Appropriation Accounts (FR 150)

At the earliest, after the end of each financial year, Accounting officers will ensure the preparation of Appropriation Accounts for each programme of expenditure under their control - one for projects classified under recurrent expenditure and one for projects classified under capital expenditure in the manner set out in FR 150.

The Chief Accounting officer after having satisfied that the same is properly prepared will sign the Account and forward it to the Auditor General at the earliest.

The Auditor General after examination and certification will forward the Account to the Director General, Department of State Accounts, for publication.

Revenue Accounts (FR 151)

At the earliest, after the end of each financial year, every Revenue Accounting officer will prepare annually for publication a classified statement of revenue for which he is responsible in the manner set out in FR 151. This Account will be signed by the Revenue Accounting officer and forwarded to the Auditor General for examination and certification. The Auditor General after examination and certification will forwarded the Account to the State Accounts Department of the Treasury for publication.

Treasury authority to utilize bank services (FR 380)

The Deputy Secretary to the Treasury may avail himself of the services of the Central Bank or any other bank in the island for custody of public money either on current account or deposit and he may inter alia authorize heads of Departments and other government officers to open official accounts in any bank approved by him and limit the amount of public money that should be kept in such banks.

Incorporation of all accounts in Treasury Books (FR 410)

The Treasury incorporates in its books, not only its own receipts and payments but also all the transactions of other government departments effected either in Sri Lanka or abroad, except those specifically excluded by the Deputy Secretary to the Treasury as provided for in the FRs.

Foreign Aid (FR 610)

All negotiations for Foreign Aid should be conducted by the Director General of the External Resources Department of the Treasury. All enquiries with regard to availability of Foreign Aid should also be made from him. Classification of Foreign Aid, utilization of Foreign Aid etc., should be done in terms of the related FRs.

Accounting of Foreign Aid expenditure in the Treasury Books (FR 625)

As the Treasury Expenditure ledger provides for the Consolidated Fund expenditure and various components of Foreign Aid expenditure of an Object Class to be brought to account separately, Accounting officers should keep accounts relating to expenditures on foreign aided projects as set out in the related FRs.

Monthly summaries and transfer orders rendered to the Treasury should clearly indicate the Standardized financing details of the relevant Object Class under which such expenditure is being brought to account.