Jun 05, 2017

Finance Ministry fumbles!

The track record of the country’s Ministry of Finance in terms of proper bookkeeping of Government funds as well as compliance has worsened over the past four years, with successive annual reports given qualified opinion by the Auditor General’s Department.

An assessment of the Finance Ministry’s annual reports and accounts for the past decade by the Daily FT has revealed that those from 2013 (which includes the period when President Mahinda Rajapaksa was the Finance Ministry with veteran Dr. P.B. Jayasundera as Treasury Secretary) to 2016 had suffered qualified opinion from the Auditor General. Annual reports between 2006 and 2012 have been cleared as reflecting unqualified true and fair view by successive auditor generals.

Qualified opinion in the 2016 Annual Report appears more exhaustive whilst the 2015 Report had 12 broader items or areas of concern. The previous two years had only five items of concern as per the Daily FT survey.

Among the observations made are understatements of expenditure or revenue, non-recognition of liabilities, omissions in financial statements, failure to comply with targets set in the Fiscal Management (Responsibility) Act and revenue earned by the Provincial Councils and the expenditure incurred not included in Finance Ministry accounts.

In 2015 the borrowing limit authorised by Parliament was exceeded by Rs. 1,569,805 million whilst in 2014 it had been exceeded by Rs. 1,164,775 million. The qualified opinion during the past two years is seen by some analysts as an indictment, especially since

Sri Lanka had produced the Best Finance Minister in Asia as per the influential The Banker magazine.

See Page 8 article "Faulty Government Finance" for the qualified opinions of Auditor General’s Department on Finance Ministry Annual Report and Accounts for the years 2016, 2015, 2014 and 2013.

AG puts Govt. debt at 83% as against CB’s 79%

The country’s public debt has been stated as 83% of GDP by the Auditor General’s Department as against the 79.3% figure announced by the Central Bank’s 2016 Annual Report, reflecting a four percentage point difference.

In his qualified opinion on the Finance Ministry’s 2016 Annual Report, the Auditor General H.M. Gamini Wijesinghe has said according to the financial statements for 2016 the total liabilities as at 31 December 2016 amounted to Rs. 9,864,512 million and that as compared with the estimated Gross Domestic Product of 2016 amounting to Rs. 11,839,000 million represented 83.3%.

In its 2016 Annual Report, the Central Bank said as at the end of 2016, the Government debt to GDP ratio increased to 79.3% from 77.6% recorded at the end of 2015. The provisional figure of Government debt was stated as Rs. 9,387,303.

Rs. 400 m loss to State from vehicles for Commonwealth Summit

The State has suffered a loss of Rs. 400 million from the sale of 82 motor vehicles purchased for the Commonwealth Heads of IN-3.1Government Summit in 2014 under the administration of President Mahinda Rajapaksa.

The loss has been revealed in the Auditor General’s observations in the 2016 Annual Report and Accounts of the Finance Ministry.

Auditor General H.M. Gamini Wijesinghe has said that the Finance Ministry has no action for the “write off of the loss of Rs. 400 million in the year 2014 in the sale of 82 motor vehicles purchased for the Commonwealth Heads of Government Conference and that amount had been further included in the Suspense Account of the financial statements.”

Rs. 297 b Govt. revenue in arrears

The Auditor General has revealed that Rs. 297 billion in revenue is in arrears and was not reflected in the Finance Ministry’s accounts for 2016.

In his observation, the Auditor General H.M. Gamini Wijesinghe has said the total arrears of Revenue of the Department of Inland Revenue as at 31 December 2016 consisted of Rs. 182,078 million being the amount of defaulted taxes recoverable as at 31 December 2016 and Rs. 113,219 million the penalty thereon, both totally Rs. 295,297 million.

Similarly, the arrears of revenue as at 31 December 2016 of the Department of Excise amounted to Rs. 2,545 million. As such, the total arrears of revenue of the two institutions as at 31 December 2016, amounting to Rs. 297,842 million, had not been disclosed in financial statements.