By Chandeepa Wettasinghe
The current regime is working with the Institute of Chartered Accountants Sri Lanka (CA Sri Lanka) to develop a public sector accounting standard for the country, with a transitionary standard already in place.

“We are propagating that public sector accounting standards must be in place. Recommendations have been made by the institute. The Finance Ministry has approved that and has requested the Sri Lanka Accounting and Auditing Standards Monitoring Board to amend their Act,” CA Sri Lanka President Arjuna Herath said.

He said that while most state-owned enterprises do follow standards much like the private sector, the rest of the state departments and agencies operate with only an income and expenditure statement, without a balance sheet.

“If they contract something today, they don’t have to account for it today because they’re on a modified cash basis. So they will account as and when cash is spent. And then does that cash spent account to that asset base? We don’t know. Is there a procurement of assets? No. Because if the accounting standards are applied, when there is a liability, there has to be an asset,” he noted. Herath said that this would foster corruption due to a lack of transparency.
Meanwhile, Herath said if public sector accounting standards are applied, the true net worth and liquidity of a government can be quantified.

“Today we don’t know the net worth of the government, (but) we’re having capital expenditure. Are they a going concern, are they not a going concern?  We don’t know,” Herath added.

He noted that the present government has recognized the shortcoming.

“This is a very significant issue. Government has accepted that. But of course they’re very cautious in approaching it because it’s not easy to go into public sector accounting standards, because you have to collate all the assets in the government. They don’t have a record of this,” he said.

Herath further expressed that the government has put into action a transitionary standard with the consultation of CA Sri Lanka, and that the institute is willing to help the government build capacity in state departments.

He noted that advanced economies such as New Zealand have public accounting practices as sophisticated as those in the private sector, while other countries too are progressing in this regard.

Members of CA Sri Lanka are recognized world over for their technical acumen, with Sri Lanka being a destination of choice for business process outsourcing.
CA Sri Lanka recently introduced the Chartered Public Finance Accountants (CPFA) qualification in partnership with UK’s Chartered Institute of Public Finance and Accountancy to uplift the public sector accounting standards.

Finance Minister Ravi Karunanayake, also a qualified accountant criticized his peers for not blowing the whistle on discrepancies in the infrastructure projects initiated by the past government, during the launch of CPFA.

Herath said that the government was responsible for the procurement processes of public projects.