School of Postgraduate Studies

Master of Public Management

Assignment

Name with Initials: G.K.M.T.S. Kaviraj

Registration No: 049 (2019/2021)

Subject Code:
Subject Public Financial Management

Assignment: 02
Group  Individual 

Name of the Lecturer: Mr. M. Senaka Anuruddha

Student’s Statement:
I certify that I have not plagiarized the work of others or participated in
unauthorized collusion when preparing this assignment.

30/09/2021
Signature: ……………………... Date: ………………………

Office use only:

Deadline Met  Extension Given  Late Submission 

Signature: ……………………………

Marks Given:
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01. Explain the public financial reporting system in Sri Lanka.

Directing the Expenditure of Government Departments, Advance Accounts, Public

Corporations, Statutory Boards, and Local Government Institutions, and through them
implementing the economic development processes of the country, raising the living
standards of the people and directing public welfare and national security matters. The
government has to spend money to direct the work that needs to be done. The government
also has to find money in various ways to spend on those activities. Accordingly, it is
Parliament that decides the amount of money to be spent and allocates the required amount of
money, as well as the sources of funding and from what amounts. Allocating funds for
government affairs and determining revenue streams is one of the main processes of
Parliament in formulating and controlling government policies.

According to Article 148 of the Constitution, Parliament has full control over public finances.
The proper handling of these funds by the government can be termed as “Public Financial
Management”.

Scope of Public Financial Management

1. constitutional and legal arrangement
2. Institutional framework
3. planning budgeting and performance review
4. public financial reporting

The following regulatory framework is important in the management of public finances

 Statutory provisions
Constitution
Annual Appropriations Act
Ordinances/Enabling Acts of parliament
Cabinet decisions

 Other Provisions
Financial Regulations
Establishment Code
Treasury Circular
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Public Administrations Circulars

Guidelines and Manuals
Ministry Directives

The Constitution, relevant laws and statutes apply to institutions such as Local Governments,
and Public Enterprises

Public financial reporting system

Public financial reporting protects the accountability, openness, and transparency of public
money facilitating effective and efficient decisions which guarantee public trust. Public
financial reporting in Sri Lanka can be explained as follows.

 Submitting revenue estimates

 Submitting expenditure Estimates
 Submission of Annual Appropriation Account and Financial Statements

Expenditure Estimates

The financial year of the Government of the People's Republic of Sri Lanka begins on
January 1 of each year and ends on December 31 of that year.
The Accounting Officer of all Government Departments prepares an estimate of the
expenditure expected to be incurred by his Department for the next year and sends it to the
Department of National Budget by the relevant Accounting Officer. Estimates of the
departments not classified under a Ministry are sent directly to the Director General of
National Budget.
The Department of National Budget submits these estimates to the Ministries and
Departments and the two parties discuss them together. Based on the decisions taken there,
the Treasury prepares one draft estimate for the whole island. Thereafter the Expenditure
Draft Estimates will be submitted to the Cabinet for approval. The draft Expenditure Estimate
approved by the Cabinet of Ministers is printed and presented to Parliament by the Minister
of Finance. The Appropriation Bill, which is passed by Parliament, becomes law after it is
signed by the Speaker. It is then called the Appropriation Act.
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Time frame for preparation of expenditure estimates

Activity Time frame

Preparation of estimates The first two weeks

of August

Handing over to the National Budget Department Week of August 4th

Review of Budget Estimate Requests September

And reaching final conclusions

Submission of Appropriation Bill to the Cabinet of Ministers Late September

Presentation of the Appropriation Bill to Parliament November

Approved by Parliament and signed by the Speaker Mid-December

Revenue estimates

Guidelines on 'Estimating Government Revenue, Collection Monitoring and Reporting' in

Fiscal Policy Circular No. 1 /2015 have been issued.
The accuracy of revenue projections and forecasting is of vital importance to safeguard the
credibility of fiscal out-turn to make correct policy decisions snd to decide the manageable
level of public spending.

Revenue estimate formats have been assigned to each major revenue agency in order to
facilitate revenue projections within macroeconomic frame work and to assist them to make
revenue projections using explicit assumptions and comprehensive date and information and
keeping in line with overall micro economics projections. Revenue Accounting officer of
such agencies are required to use specific format prescribed in items (iii) of schedule (ii) for
each revenue item for the submission of annul budget estimates. All other revenue agencies
should submit estimates using Form 2(Fiscal Policy Circular No. 1 /2015)
Revenue estimates for next year and the succeeding tow year projections. The revenue
estimates should be submitted to Director General of fiscal policy before 31 st July of every
years.
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submission of Annual Appropriation Account and Financial Statements

All institutions that have approved an Expenditure Head under the Annual Appropriation Act
should take the necessary steps to control and report fiscal control in the implementation of
the budget. In preparing these reports, action should be taken in accordance with Public
Finance Circular No. 2/2020.

The reporting on the disbursement of funds approved by the State Institution under the
Appropriation Act can be described as follows

 All Government Ministries, Departments and District Secretariats should submit to

the Chief Accounting Officer prior to December 15 of the current year in which the
Annual Action Plan has been prepared to implement the approved Expenditure
Estimates for each year on behalf of their institutions.

 The Chief Accounting Officers of all Government Ministries, Departments and

District Secretariats should prepare the Annual Planning Plan for the implementation
of recurrent and recapitalization programs for the coming year before 10th December
of the current year and obtain the approval of the Chief Accounting Officer. A copy
should also be sent to the National Procurement Commission, the Auditor General
and the Department of Public Finance.

 All Government Ministries, Departments and District Secretariats should submit the
Monthly Accounts Summary to the Director General of Public Accounts. The
Department of Public Accounts will inform you of the time frame for submitting these
monthly account summaries.

 All Government Ministries, Departments and District Secretariats should compare the
Treasury Books and their Departmental Books and report the comparison reports to
the relevant Departments of the General Treasury on due dates.

 All Government Ministries, Departments District Secretariats should submit the

following reports to the Auditor General at the end of the relevant financial year.
i. Appropriation account
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ii. Income account

iii. Advance B Account
iv. Annual financial statements
v. Annual Performance Report (In terms of Section 16 (2) of the National Audit
Act No. 19 of 2018

 The Auditor General shall audit the financial statements and annual performance
reports of the Ministries, Departments, District Secretariats and submit the Annual
Performance Report in all three languages, including the Audit Reports, in all three
languages. Must be submitted.

 Copies of the reports prepared by all the Provincial Councils in accordance with the
Provincial Council Development Plan included in the National Budget shall be
submitted to the Auditor General and the Director General of the National Budget,
and all Local Government Institutions shall submit their reports to the Auditor
General and the relevant Provincial Councils.

 At the end of the financial year, each Revenue Officer should prepare the relevant
Statement of Accounts and submit it to the Auditor General along with the Statement
of Deficit Revenue. After certification by the Auditor General, it should be submitted
to the Treasury for publication

02.Analyze regulatory arrangements for public financial management to maintain

accountability, openness, and transparency of public money

The following are the regulatory provisions followed in the management of public finances to
maintain accountability, openness and transparency in public finances.

 Provisions of the Constitution

 Existing provisions in monetary regulations
 Existing provisions in statutes and statutes
 Provisions of the Establishments Code
 Circulars and instructions issued by the Ministry of Finance and other government
agencies
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 Provisions mentioned in the Department Manuals

1. Article 148 of the Constitution gives Parliament full control over public finances.
The Constitution also stipulates that all money in the Republic, except money set
aside for a specific purpose, should be credited to the Consolidated Fund. Money
from the Consolidated Fund can only be spent on a license with the permission of the
Minister of Finance. Accordingly, the Constitution clearly defines the accountability,
transparency and openness of public funds.
2. Article 153 of the Constitution appoints an Auditor General. He audits the accounts of
government agencies, local authorities, public corporations and government-owned
enterprises.The Auditor General submits his observations on the Annual Accounts
and Performance Reports to be audited.
3. The Public Accounts Committee and the Committee on Public Enterprises Accounts
have been established by Standing Orders 125 and 126 of Parliament. .This
Committee has the power to summon the Chief Accounting Officer, the Accounting
Officer and other officers to examine the Auditor General's report on the accounts
audited by the Auditor General and when necessary. They then submit their
observations to Parliament
4. A Chief Accounting Officer has been appointed Financial Regulation 124 to oversee
the financial affairs of the departments subject to Treasury provisions. The Secretary
to the Ministry is the Chief Accounting Officer. According to the Financial
Regulations 125, the Heads of Departments are the Accounting Officers. The
Accounting Officer is responsible to the Chief Accounting Officer for maintaining the
financial administration of the Department and for his standard management of
expenses. This protects the accountability of public funds.
5. According to Financial Regulations 135, the Accounting Officer can delegate the
responsibility of financial control of a department to his officers. Accordingly, the
financial powers to authorize, approve, certify and pay for public expenditure have
been delegated to protect the openness and transparency of public funds.
6. Provisions are made in the Financial Regulations on Acceptance, Accounting and
Receipt of Cash to a Government Institution. A receipt should be issued for every
amount accepted in cash. Checks and money orders received by government agencies
should be mentioned in the prescribed format. Also all receipts should be accounted
for. Receipts should be banked as scheduled. Cash should be withdrawn from offices
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that do not maintain an account. This protects accountability, openness and

transparency.
7. Payments made in cash should not be made unless the required voucher is present. It
must be authorized, approved, and certified. Checks must be signed and duly dated by
two authorized officers. All these payments must be properly accounted for. This
protects public money accountability, openness and transparency
8. In dealing with public finances, the Establishments Code, Ordinance, Charter and
Circulars shall be in accordance with the directions of the Department. The above
regulatory provisions will protect the accountability, openness and transparency of
public funds.
3. Describe the role of the Ministry of Finance to maintain accountability, openness,
and transparency of public money.

The main role of the Ministry of Finance is to maintain control and oversight of public
finances. .It is the duty of the Ministry of Finance to establish a system of monetary
control in all areas, especially accounting, security and accountability. This function is
performed in two main ways

 By the provisions and instructions of the regulations generally applicable

 By advising the Chief Accounting Officer and the Accounting Officer on the
special measures to be taken in special cases

Accountability of Public Finance The control and supervision of the Ministry of Finance
to ensure openness, transparency and protection include the following functions.

1. Providing for the appointment of Chief Accounting Officers and Accounting

Officers and determining their duties and responsibilities
2. Informing all Chief Accounting Officers and Accounting Officers of all financial
provisions made by the Minister of Finance and interpreting them.
3. Satisfaction that government revenue and other funds due to the government,
including cash receipts for commercial activities and deposits, are collected and
accounted for promptly by government departments.
4. Satisfaction that monetary regulations are followed by government departments
5. Maintaining monitoring of consolidated funds and other government funds,
accounts as well as funds in deposit accounts