Absence of accrual accounting led to rampant corruption in SL: Herath

Tuesday, 17 September 2019 00:43 - - {{hitsCtrl.values.hits}}

Claims SL not in a position to prepare a balance sheet
Lack of accrual accounting has taken away people’s power to hold accountable those responsible for managing country’s wealth
Says bribery and corruption represent serious threats to economic growth, individual livelihoods and civil society

By Charumini de Silva

A top financial expert recently highlighted the importance of the public sector adopting accrual accounting, noting that its absence had led to rampant corruption and bribery within the country.

“Accrual accounting and public sector accounting standards are two important factors with which we have not succeeded in our country. Sri Lanka is not in a position to prepare a balance sheet and does not have one. As a result, we do not know the total assets of the country and we do not know the total liabilities of the country. Therefore, we do not know whether the net worth of the country is growing or eroding,” International Federation of Accountants (IFAC) Professional Accountancy Organisation Development Committee Chairman Arjuna Herath said at the 17th AAT Annual Conference recently.

He said this meant that Sri Lankans did not have the opportunity to hold the Government responsible and accountable for managing the wealth of the country for the public’s benefit.

“This is one of the most significant reasons why this country is not in a position to leverage on the great potential it has,” he added.

“International rating agency Moody’s in its latest report issued on the credit rating of Sri Lanka stated that GDP growth potential, incomes and institutions are stronger in Sri Lanka than in many similarly rated sovereigns and went on to state however, very weak public finances and large refinancing needs remain a credit weakness,” he pointed out.

Herath emphasised the fact that in order to properly manage public finances, including working capital and refinance needs, a strong balance sheet was a prerequisite for the country.

“We must immediately adopt accrual accounting in the public sector. The absence of accrual accounting is also the cause of rampant corruption and bribery as the transactions performed are not transparent as the Government does not prepare accounts on an accrual basis. Is this not something that we have to put right immediately? We as a profession and as citizens must demand this,” he stressed. Herath said bribery and corruption represented serious threats to economic growth, individual livelihoods and civil society.

“I am aware that for many years CA Sri Lanka and AAT as professional bodies in this country have worked alongside governments, regulators, law enforcement and international bodies, and supported our members to combat bribery, corruption, tax-evasion, money laundering and the financing of international terrorism. For this effort to have the required impact, we must immediately go through the journey of the Government adopting Sri Lanka public sector accounting standards and get into accrual accounting,” he declared.

Pic by Upul Abayasekara