DEPARTMENT OF ACCOUNTING

UNIVERSITY OF JAFFNA- SRI LANKA

Programme Title : Fourth in Business Administration - 2020/2021
Course Unit : BBAA 4162: Public Sector Accounting
Handout : Role of Different Parties in Public Financial Management
Prepared by : Mr. V. Anojan
Issued on : 16.11.2022
Learning Outcomes:
After completing this lesson, you should be able to:
• discuss the role of different parties in public finance in Sri Lanka
• explain the control system of public finance in Sri Lanka

Introduction
There are different parties deliver different levels of contributions for public financial management in Sri
Lanka. Different institutions and persons in positions can be identified under that. Those are listed below.
• Parliament
• Departments
• Treasury
• Chief Accounting Officers
• Accounting Officers
• Auditor General
• Committee on Public Accounts (COPA)
• Committee on Public Enterprises (COPE)

Role of Parliament in Public Financial Management

The Constitution of the Democratic Socialist Republic of Sri Lanka - Chapter XVII, forms the foundation
of Parliament's powers over all public finances.
Article 148: This article states that any Public Authority or Local Authority, which is considering the
imposition of any tax, rate, or other levies, will do so only under the authority of a law passed by
Parliament. All Public Finances will be under the total control of Parliament.
Article 149: Funds of the Republic which are not already allocated for a particular purpose will be credited
to the Consolidated Fund. Taxes, Imposts, Rates, Duties, and all other revenues and receipts paid to the
State, if they are not already directed to any particular activity, will accrue to the Consolidated Fund.
Parliament may decide the purposes for which funds may be drawn from the Consolidated Fund. It will
generally include the payment of interest on the public debt, sinking fund payments, and expenses in
relation to the Consolidated Fund.
Article 150: The Government may withdraw funds from the Consolidated Fund once Parliament passes a
resolution or a law, granting a specific sum of money for a specified public service to be spent in a
particular financial year. Once the Parliament authorizes, the warrant under his signature Minister of
Finance alone has to be issued, for the withdrawal of the specified amounts to be affected.

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Article 151: Parliament may by law set up a Contingencies Fund for urgent and unforeseen expenditures.
If the Minister of Finance is satisfied that there are no funds already allocated to meet the emergency, he
may with the consent of the President first obtained, authorize an advance payment to be made from this
fund. As soon as possible thereafter, a Supplementary estimate has to be presented in Parliament and its
approval obtained, to replace the amount so advanced.

Departments
All government departments are classified into three groups A, B and C. This classification is solely for
the purpose of granting imprest by the Treasury with no intension of limiting their responsibilities in the
implementation of the government’s policies and programs. The quantum of revenue collected by the
department, the amount of expenditure, the availability of numbers of responsible officers to delegate
financial responsibilities, the number of staff, the extent of activities of the department are matters taken
into consideration in this classification. The powers, responsibilities and other conditions of each of the
classes are as follows.
“A” Class Departments
• The cash requirements of their departments are supplied by the Treasury on a continuous basis.
• It is not necessary to furnish certified payments schedules when applying for cash necessary.
• Income received by the department directly is considered as part of its imprest. Therefore, the
amounts of cash applied for and the amounts of cash received are different.
• The amounts given are credited to Bank Accounts of Departments.
• The excess cash beyond the imprest limit should be remitted to the Treasury.
• The Auditor General arranges for deployment of staff to carry out continuous audits in these
departments.
• The details of revenue collected and other accounts operated should be reported to the Treasury
monthly through the monthly summary of accounts.
• These departments are allowed to function as accepting offices having authority to receive and
account for money on behalf of the government.
• These departments are authorized to pay for vouchers certified by the department.
• Transfer payments by these departments are allowed to be accounted for in the departmental books
of account and incorporated in the monthly summary of accounts to the Treasury.
• Securities accepted by these departments when presented as a deposit in the National Savings Bank
or as a fixed deposit in any other bank should be in the name of the Head of the Department. The
bank pass books and fixed deposit receipts should be securely kept in the departments. The receipt
of security deposits and payments should be incorporated in the monthly summary of accounts.
“B” Class Departments
• Amount of money sufficient to replenish the payments by these departments is directly credited to
each department’s bank account.
• Every month, or if necessary, more often, each department has to send a schedule of vouchers to
the Director General of State Accounts and Payments. The following documents should also be
sent.

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 I. An application on form General 103 for renewal of credit.
II. Certified summaries of debits.
III. Certified bank balances as at that date.
IV. Bank reconciliation statement showing list of uncashed cheques.
V. A certificate to indicate that payment vouchers in support of payments have been
sent to the Auditor General direct.
VI. Statement showing the positions of imprest limits as at the date of application.
• The Treasury will credit an amount equivalent to the amount shown in the schedule, to the
departments bank account. This is called renewal of credit.
• Money collected by these departments should be remitted to the Treasury.
• These departments can make payments for vouchers certified by the departments.
• For transfer payments form General 122 should be prepared and forwarded to the Treasury.
• The Treasury accounts for these departments are kept using the certified schedule of debits.
• Securities received by these departments other than cash, should be received in the name of the
Deputy Secretary to the Treasury. Bank Pass Books or Fixed Deposit Receipts should be kept in
the Department of State Accounts in the Treasury.
“C” Class Departments
• Payments above Rs.100 of these departments are made by the Treasury. Rs.100 limit is varied by
the Treasury under special circumstances.
• Vouchers certified by these departments should be submitted to the specified paying office. Those
will be accounted by that office.
• Money collected should be remitted to the Treasury.
• The Treasury grants a Petty Cash Imprest of these departments and allows payments up to Rs.100
from that imprest. (The limit of Rs.100 would be increased by the Treasury according to
requirements.)
• Renewal of the Petty Cash Imprest should be drawn monthly or more often if necessary from the
specified paying office.
• For such renewal certificated schedules of vouchers and the following documents should be
submitted. I. Certified summaries of debits. II. Vouchers relating to payments. III. An application
of form General 103 for renewal of credit.
• Accounting will be done at the Treasury for transfer payments. Form General 122 should be
prepared and forwarded to the Treasury.
• Securities received by these departments other than in cash, should be in the name of the Deputy
Secretary to the Treasury. Bank Pass Books or Fixed Deposit Receipts will be securely kept in the
Department of State Accounts, Treasury.

Treasury
The treasury acts as the custodian and controller of the government finance and is directly responsible and
accountable to the Minister of Finance and through him to the Parliament. In order to discharge these
functions effectively it has formulated and published the Financial Regulation, which spell out the limits

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of Authority responsibility and accountability of Chief Accounting Officers and Accounting Officer.
Beginning with the procedures relating to the preparation of the Annual Estimates, the various books of
account and records that should be maintained by Departments, it also specifies the different Accounts
and Financial statements that should be rendered monthly, quarterly and annually. The Treasury also
issues instructions through circulars on Finance and Financial procedures.
After the Minister of Finance has signed the appropriate warrants authorizing expenditure in any given
financial year, all Departments should apply for their imprest requirements to the Deputy Secretary to the
Treasury and imprest will be issued monthly, based on the evaluation at 1/12th the annual provision,
expect under special circumstances. The controlling and supervisory functions of the Treasury may be
summed up as follows:
• 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 Officers and Accounting Officers.
• To ensure that Revenue and all other monies due to Government are promptly collected and
accounted for by Govt. Department.
• To ensure that the Financial Regulations are complied with by Govt. Depts.
• To exercise supervision over the Consolidated Fund, other Govt. Funds or Accounts as well as
monies held in Deposit.

Chief Accounting Officer

A Chief Accounting Officer is responsible to the Minister of Finance for the adequacy of the financial
administration of all the 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
• his Accounting Officer
o has planned the financial work of his department so that the business is transacted with
correctness and financial propriety.
o has evolved systems which provide adequate control over expenditure and the collection
of revenue.
• that existing expenditure programmes and new proposals of the Departments under his Ministry
are examined from the point of view of economy and efficiency.
• that all cases of doubts or difficulty are referred to him.
• that Appropriation Accounts are submitted by his Accounting Officers and examined at the
Ministry before he signs them and that abnormal variances are examined and investigated.
• that the collection of Revenue of other Government dues for which the Accounting Officers are
responsible is closely watched and examined by the Ministry.
• The Chief Accounting Officer should appear before the PAC and assist it along with his
Accounting Officers in explaining and justifying the accounts of the departments for which he is
responsible.

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 • Functions as the Accounting Officers of his Ministry Office.
• Coordination of work in the departments under his charge where necessary.

Accounting Officers
Except where other arrangements are made by the Treasury, the Head of each Department is 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 Ministry shall, in addition to his being the Chief Accounting Officer of his Ministry,
and the departments under the Ministry, be the Accounting Officer for the Department of the Ministry
Office.
An Accounting Officer is responsible to the Chief Accounting Officer for the financial administration of
his department and the management of his Votes. In particular it is his duty to take adequate steps to
ensure that:
• the work of his department is planned and carried out with due dispatch, having regard to the policy
laid down by the Government and the intentions of Parliament in granting him financial provision
for the activities authorized, and that an endeavour is made to complete the programme of work
laid down for the year and/or to attain the targets specified;
• the organization for financial control and accounting it his department is effective, and provides
adequately for the correct ascertainment, where necessary, of dues to Government, the systematic,
complete and prompt collection of dues, and bringing to account of monies received, the
authorization of commitments on behalf of the Government, the supervision and examination of
services and supplies rendered, and the prompt and correct payment therefore from public funds;
• the Financial Regulations and other supplementary instructions of the Government are adhered to
in his department, and that they are supplemented by departmental instructions, where necessary;
• an adequate system of internal check for receipts, payments and issues is maintained and tested
from time to time;
• adequate and proper arrangements are made for the safe custody and preservation of money, stores,
equipment and other assets belonging to the Government, or is in its custody, and that these are
verified from time to time; and, where they are disposed of, such disposal is according to prescribed
Regulations and instructions;
• such information, statements and returns as are called for by the Chief Accounting Officer or the
Treasury, are rendered correctly and promptly;
• returns showing the progress of collection of dues to Government are rendered regularly to the
Chief Accounting Officer;
• special arrangements are made to recover outstanding dues and that the officers assigned that task
report to him at least once a quarter or as otherwise directed regarding arrears and action pursued
to expedite their recovery;

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 • the activities of his department are undertaken with due regard to economy, efficiency, propriety
and integrity expected in the transaction of public business; (In this context, economy means not
merely keeping within the Estimate; but also ensuring that the Government receives best value for
money expended.)
• any expenditure or commitment incurred, falls within the scope and limits of his Votes or other
authorized financial provision, and covered by adequate authority;
• transactions of an unusual character or involving abnormal expenditure are brought to his personal
notice;
• a Statement of Committed Expenditure under each Programme of a Head of Expenditure is sent at
the end of every month to the Chief Accounting Officer.

Revenue Accounting Officers

The treasury indicates from time to time the officers who will be responsible for the preparation of the
Estimates of Revenue under the different Heads, Sub-heads, Items and SubItems, and who will ultimately
be accountable for variations between the Estimates and actual collections. Such officers shall, for the
purpose of these Regulations, be referred to as Revenue Accounting Officers. Revenue Accounting
Officers are responsibly to the Chief Accounting Officers for number of activities such as to ensure that,
• the estimates of Revenue are prepared completely, and as accurately as possible, for the Heads,
Sub-heads, Items and sub-Items of Revenue for which he has been appointed Revenue Accounting
Officer;
• at the end of each financial year, a Revenue Account is prepared in terms of F.R.152
• half yearly returns are prepared and forwarded to the Auditor General showing the state of arrears
of Revenue as at 30th June and 31st December of each financial year, under the various Head, Sub
Heads, Items and Sub Items of Revenue for which be is responsibly: These returns should reach
the Auditor – General before the 31st July of the financial year and 31st January of the ensuring
financial year respectively: with copy to the Treasury Department of the Fiscal Policy and
Economic Affairs). In the event of there being no arrears to furnish a “NIL” return:
• he obtains returns from other Departments and Officers in which any portions of the Revenue for
which he is responsibly are collected, and are incorporated in the Estimate of Revenue.
• Special arrangements are made for the expeditious collection of outstanding arrears of Revenue in
consultation with the Accounting Officers and Department concerned in collection:
• he co-ordinates, in consultation with the respective Accounting Officers, the activities in
connection with the collection of Revenues by the concerned Department.
• adequate records are maintained of the amounts collected under the appropriate Heads. Sub Heads.
Items and Sub Items of Revenue, by obtaining such information as is necessary from the various
Departments concerned and that the relevant records are reconciled with the accounts of Revenue
collections maintained in the Treasury, under the respective Heads. Sub Heads, Items and sub
items.
• necessary arrangements are made with the Heads of the appropriate Departments to obtains before
15th July of the Financial Year and 15th January of the following Financial Year respectively, half

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 yearly returns of arrears of collection of Revenue as at 30th June and 31st December of each
Financial Year, in order to enable him to forward his own returns of arrears on or before the due
dates.
• the rates and charges or taxes, fees, etc. are reviewed and due action is taken to revise them from
time to time, where necessary, having regard to changes in economic and other circumstances.

Auditor General
According to article 153 (1) of the Constitution of Sri Lanka, the Auditor General is appointed by the
President and, shall hold office during good behavior. Their salary shall be determined by Parliament,
shall be charged to the Consolidated Fund, and shall not be diminished during their term of office (Article
153 (2)).
The duties of the Auditor General are set out in Article 154 of the constitution of Sri Lanka 1978 and are
as follows:
• The Auditor-General shall audit the accounts of all departments of Government, the Offices of the
Cabinet of Ministers, the Judicial Service Commission, the Public Service Commission, the
Parliamentary Commissioner for Administration, the Secretary-General of Parliament and the
Commissioner of Elections, local authorities, public corporations and business or other
undertakings vested in the Government under any written law.
• The appointment of private Auditors to carry out the audit in Public Enterprises is done by the
Minister in charge of the subject with the concurrence of the Minister in charge of the subject of
Finance and in Consultation with the Auditor General.
• The Auditor-General shall also perform and discharge such duties and functions as may be
prescribed by Parliament by law.
• The Auditor-General may for the purpose of the performance and discharge of his duties and
functions engage the services of a qualified auditor or auditors who shall act under his direction
and control. If the Auditor-General is of opinion that it is necessary to obtain assistance in the
examination of any technical, professional or scientific problem relevant to the audit, he may
engage the services of (i) a person not being an employee of the department, body or authority the
accounts of which are being audited, or (ii) any technical or professional or scientific institution
not being an institution which has any interest in the management of the affairs of such department,
body or authority and such person or institution shall act under his direction and control.
• The Auditor-General shall within ten months after the close of each financial year and as and when
he deems it necessary report to Parliament on the performance and, discharge of his duties and
functions under the Constitution
As per article 153 (3) the office of the Auditor-General shall become vacant:
• upon his death;
• on his resignation in writing addressed to the President;
• on his attaining the age of sixty years;
• on his removal by the President on account of ill health or physical or mental infirmity; or
• on his removal by the President upon an address of Parliament.

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Whenever the Auditor-General is unable to discharge the functions of his office, the President may appoint
a person to act in the place of the Auditor-General.

Committee on Public Accounts (COPA)

The duty of this Committee is to examine the accounts showing the appropriation of the sums granted by
Parliament to meet the public expenditure.
The task of the Committee on Public Accounts is to probe the managerial efficiency and financial
discipline of the Government, its Ministries, Departments, Provincial Councils and Local Authorities. The
Committee is established at the beginning of each Parliamentary Session under Standing Order.
The duty of the Public Accounts Committee is to examine the sums voted by Parliament along with the
report of the Auditor-General, which is in volumes. In the course of its deliberations, the Committee
obtains evidence from the Secretaries to the respective Ministries, who are the Chief Accounting Officers,
Heads of Departments and other responsible Officers. The Committee also regularly summons the
Directors-General of Public Finance, State Accounts and National Budget or their nominated
representatives. It is the duty of the Chief Accounting Officers to personally appear before the Committee
in order to explain and justify the financial activities of the Departments under the purview of their
Ministries. The recommendations of the Committee may contain directives to Government Departments
and Ministries and such directives are deemed to be those of the Parliament. Copies of Committee reports
are distributed among the respective Officers of the Ministries, Departments, Provincial Councils and
Local Authorities.

Committee on Public Enterprises (COPE)

The Committee on Public Enterprises has been established on 21.06.1979 to ensure the observance of
financial discipline in Public Corporations and other Semi Governmental bodies in which the Government
has a financial stake.
The duty of the Committee is to report to Parliament on accounts examined, budgets and estimates,
financial procedures, performance and management of Corporations and other Government Business
Undertakings.
The accounts of these organizations are audited by the Auditor-General and form the basis of the
investigations of the Committee. It has the power to summon the relevant officials and such other people
as it thinks fit to obtain evidence and call for documents. The Committee reports to the Parliament and the
recommendations contained in their reports are deemed to be directives to the respective Corporations or
Statutory Boards for due compliance.