Jul 04, 2018 (LBO) – Transparency International Sri Lanka (TISL) has released a legislative brief on the National Audit Bill detailing key amendments to be made in committee stage.
The brief is being released ahead of a debate on the Bill in Parliament, Thursday.
It highlights four key areas of concern with the provisions of the existing draft of the National Audit Bill.
These concerns surround the lack of accountability in the surcharging procedure, weaknesses in the appeals process, provisions which curtail the investigative powers of the Auditor General and provisions which are in contravention of the Right to Information Act.
TISL strongly believes that if these amendments are incorporated in the final Act, this will significantly strengthen fiscal accountability in the public sector.
The key concerns mentioned in the brief follows :
1.Surcharging power is exercised by the Chief Accounting Officer when the Audit Service Commission reports the deficiency or loss.
Surcharging power is assigned to Chief Accounting Officers [Section 19 (1) (a) & (2)]. As per the interpretation section of the gazette Bill, Chief Accounting Officers includes the Secretary to a Ministry, officer in charge of a department specified under Article 52 (4) of the Constitution, or an officer in charge of any other department not supervised by a Secretary (Section 55). It is commendable that the Auditor General was not appointed as the surcharging authority since he is the body that conducts the audit, findings of which ultimately become the basis of the Surcharge Certificate. The best option would have been to establish an independent surcharging authority under
the gazetted Bill. However as evident from the gazetted Bill, such a policy has not been recognized as the governing policy.
The current provisions that empower the Chief Accounting Officers to surcharge, highlight a potential
conflict of interest and could be a roadblock in recovering money that has been lost to a state entity.
(b) The Chief Accounting Officer is not expected to specify reasons or the basis for not surcharging or amending, altering or varying the amounts specified by the Audit Service Commission. The provisions in the gazetted Bill makes it mandatory for the Chief Accounting Officer to impose the surcharge specified by the Audit Service Commission [Section 19 (2)]. However he is mandated to offer each person in respect of whom the surcharge is to be imposed, an opportunity to make representations [Section 19 (3) (a)]. The Chief Accounting Officer must consider these representations when making a decision on the surcharge [Section 19 (3) (b)]. When the surcharge is imposed
the Chief Accounting Officer needs to give reasons [Section 19 (3) (e) (i)]. After considering the representations, if the surcharge is not imposed or if the amount is amended, altered or varied, there is no express provision necessitating the Chief Accounting Officer to record reasons and provide a basis to the Audit Service Commission.
Since the decision to surcharge can have a significant impact on the finances of the auditee entity, the Chief Accounting Officer must be expressly required to record reasons and the basis for not surcharging, amending, altering or varying the amount due.
Refer heading 5 (e) below for recommended wording.
(c) When the surcharge is collected, defaulted or when an appeal is pending the Chief Accounting Officer
is not expected to notify the Audit Service Commission. In the event that the surcharge is defaulted, it is the Audit Service Commission that initiates recovery proceedings as per section 23. Therefore, in order for the Audit Service Commission to correctly identify the defaulted surcharges, it is crucial that the Chief Accounting Officer notifies the Audit Service Commission of the status of collections and/or defaults.
The Chief Accounting Officer must notify the Audit Service Commission when the surcharge is
defaulted or when an appeal is pending. Refer heading 5 (f, g) below for recommended wording.
2. Appeal procedure is incomplete
(a) The President imposes the surcharge on a Chief Accounting Officer who is responsible for causing the deficiency or loss. The gazetted Bill is silent on the appeal procedure for the Chief Accounting Officer.
The gazetted Bill has a lacuna with regard to the appeal procedure available to an affected Chief Accounting Officer. Further, empowering the President to impose the surcharge on a Chief Accounting Officer would limit his ability to challenge such decision in the same manner as would any other affected person under the gazetted Bill, because of the unique protections afforded to the decisions of the President.
Where the person responsible for the loss or deficiency is the Chief Accounting Officer, the Audit Service Commission must impose the surcharge. In such instances, the Auditor General (being the Chairman of the Audit Service Commission as per Article 153A (1) of the Constitution) must recuse himself. The appeal process set up under the gazetted Bill must be available to Chief Accounting Officers. The Audit Service Commission must pursue the procedures relating to surcharge and appeal as specified under Part IV of the gazetted Bill. Refer heading 5 (j, k, l) below for recommended wording.
(b) There is no explicit provision for the Audit Service Commission to appeal against a decision of the Chief Accounting Officer to the Surcharge Appeal Committee or thereafter to the Court of Appeal. Whilst “any person” affected by the decision of the Chief Accounting Officer or the Surcharge Appeal Committee can appeal, the gazetted Bill does not expressly specify that the Audit Service Commission is able to initiate an appeal. The phrase “any person” is not defined in the gazetted Bill. This is an important power that the Audit Service Commission must have in light of the Chief Accounting Officers’ discretion to amend, vary, or alter the surcharge. Furthermore, it is essential to provide such an appeal mechanism in the interests of public finance management.
It is recommended that “any person” under section 20 is expressly defined to include the Audit Service Commission.
(c) The Surcharge Appeal Committee can allow, disallow an appeal, or amend, alter or vary the decision
of the Chief Accounting Officer. There is no provision to specify reasons or the basis for the decision. To ensure impartiality it is essential that the Surcharge Appeal Committee record reasons and the basis for their decision.
Refer heading 5 (h) below for recommended wording.
3. Auditor General’s power of investigation is curtailed.
(a) The person called to appear before the Auditor General can nominate another to appear on his behalf. The Auditor General has the authority to call persons for the purpose of obtaining information and documents [Section 7 (1) (b)]. Any person who is requested to appear before the Auditor General may nominate a person to appear on their behalf if unable to comply with the request due to unavoidable circumstances [Section 7 (4)]. This could be misused by persons who would not like to share information and will undermine the Auditor General’s power to collect necessary information.
This provision is contrary to the Lima Principles that recognizes the necessity for a Supreme Audit Institution to have comprehensive investigative powers (Section 10 of the Lima Principles). The summoned person must appear before the Auditor General in person. Therefore, section 7 (4) must be deleted or alternatively if a person is nominated, the Auditor General must concur with thisappointment.
Refer heading 5 (a) below for recommended wording.
(b) Failure to appear before the Auditor General is not an offence.
There is a conflict between the English and Sinhala versions of the Bill. In the Sinhala version it is an offence to refuse to appear before the Auditor General when requested to do so, but it is not an offence if a person fails to respond to such a request. In the English version both failing and refusing to appear are not offences.
These contradictory provisions would lead to unnecessary confusions at interpretations and could undermine the power of the Auditor General to obtain important information related to the audit. Accordingly, failure or refusal to appear before the Auditor General [and failure or refusal to nominate a person conversant on the subject with the concurrence of the Auditor General, depending on whether the provision to nominate is retained or not] when requested to do so must be made offences. Refer heading 5(p) below for recommended wording.
4. The right to information is curtailed
The gazetted Bill proposes to create a separate non-disclosure regime that restricts the Right to Information. The regime created by Article 14A of the Constitution and the RTI Act must not be derogated from, by way of subsequent legislation.
(a) It is an offence for the members of the Audit Service Commission or any person appointed to any office under the Act to disclose any information received by him in the performance of his duties. Section 9 (1) forms a separate bar to the disclosure of information, which is not covered under article 14A of the Constitution or section 5 (1) of the RTI Act that details the instances that disclosure of information can be limited. This violates the right to information and therefore needs to be deleted.
(b) Information cannot be disclosed until consent is obtained by the relevant person and the report or statement containing such information is presented in parliament.
The only permissible exceptions to RTI are listed in Article 14A (2) of the Constitution given effect to by section 5 (1) of the RTI Act. Section 9 (1) (b) imposes an additional condition of not disclosing information until the Auditor General’s report has been presented in Parliament. The RTI law contains no provision to cover such an instance.
Therefore, section 9 (1) needs to be deleted.
(c) Oath of Secrecy in Schedule to section 9 (c) continues the obligation to abide by the secrecy provision
in relation to information relating to the reports which are presented in Parliament.
The Oath states the following:
“The obligations herein set out shall bind me during my term of office in the …………………………….* and shall continue thereafter except in relation to any information that has come into public domain due to no breach of my obligations hereunder.”
Accordingly, the Oath only lapses in relation to ‘the report or statement prepared by the Auditor General relating to such information has been presented in Parliament’. The information relating to the report would be covered by the Oath, because the conditions in section 9 (1) (b) would still have to be met to be a permissible disclosure as per the Oath, to comply with ‘any written law’ (‘c’ in the Oath- “when specified under any written law, subject to section 9 (b) of the National Audit Act, No. of 2018.”), which is the RTI Act in this instant. This in effect means that the information beyond the report or statement remains outside of the ambit of the RTI Act permanantly. Section 9 (2) of the gazetted bill goes so far as to make it an offence to communicate such information.