Regular, effective auditing of public programs by an independent body is widely recognized as a crucial anticorruption tool. Yet in Sri Lanka, the legal framework that would enable such effective auditing is still not in place. Although Sri Lanka’s Auditor General’s Department (AG) has been in operation for more than 200 years, it derives most of its functions from executive practice and regulations, rather than legislation. For this reason, the office is largely toothless: It cannot take any action to enforce its findings beyond submitting reports to two parliamentary committees, but these have little to no impact, as any follow-up actions are largely dependent on executive discretion. For years, experts and citizens alike have recognized the urgent need for a National Audit Law to govern and empower the Auditor General’s Department.
Yet despite repeated efforts and a constitutional mandate, the government has still not succeeded in enacting such a robust statutory framework to govern public audits. A National Audit Bill has been in the process of “being drafted” since the early 2000s, but an actual draft bill didn’t appear until 2013. No further action was taken on that bill. When President Sirisena took office in January 2015, he declared that the government would pass a National Audit Act by March 2015 as part of his 100-day programme. But although a new Audit Bill was proposed to Cabinet in April 2015, the proposal was deferred by the Cabinet a shocking 24 times, up until October 2017. Eventually, there were encouraging reports that the “impasse” had ended and that the Audit Bill had been approved by the Cabinet. But it was not to be: it turned out that what had been approved were amendments to the proposed bill, and not the bill itself. Subsequently, the government stated that it will not be submitting the Bill to Parliament – back to square one.
Why the seemingly interminable delay? It appears that the main reason for the impasse, at least since 2015, is a contentious section which vests the AG with the power to impose a surcharge—that is, to disallow public expenditure and require monies found to have been used improperly to be refunded by the guilty parties. This has met with resistance, mainly because it would take decisions concerning enforcement out of the hands of politicians. (Opponents of the bill also claim that it would hinder the carrying out of public duties by politicians, such as when urgent funds are required to respond to natural calamities.) Yet many reformers insist that giving the AG the surcharge power is necessary and non-negotiable.
If progress on the Audit Bill is to move forward, something has got to give. In my view, despite all the policy arguments for granting the AG the surcharge power, it’s better to move ahead and enact an Audit Act that lacks this provision, rather than allowing this sticking point to further hold up its passage. This is one of those situations where we can’t let the perfect become the enemy of the good.
Many of those who insist that the Audit Bill must grant the AG surcharge powers (see here and here) assert that such an arrangement is consistent with—indeed, demanded by—internationally recognized best practices, and that non-vesting of such power would render the AG toothless. But neither of these propositions is necessarily true. There is no general consensus that surcharge powers must or should exist in all cases, and even when surcharge powers are in place, institutional practice displays a wide variance. The International Organization of Supreme Audit Institutions’ Lima Declaration of 1977, considered the Magna Carta of public auditing standards, does not mention the word “surcharge.” Instead, it establishes the broader principle that enforceability of the findings of a Supreme Audit Institution (SAI) is a key element of public auditing. In terms of the Declaration, such enforceability would be accomplished by prescribing a time period within which audited institutions are required to take corrective measures necessitated by audit findings. To ensure that audited institutions in fact take such measures, the Declaration states that the SAI should be empowered to “require the accountable party to accept responsibility.” While this could certainly include powers of surcharge, it does not necessarily mean only powers of surcharge, or that such powers of surcharge must be enforced by the SAI (in Sri Lanka’s case, the AG).
In fact, many SAIs do not have powers to sanction or surcharge, but depend on a network of institutions—including Parliament, prosecutors, the judiciary, anticorruption agencies, voters, and civil society—to enforce corrective measures required by audit findings. In some cases, SAIs are endowed with powers to impose sanctions and surcharges, but the manner and method in which this is accomplished varies widely. In countries such a Gambia and Ghana, powers of surcharge are constitutionally guaranteed, while in other countries, such as Latvia and Zimbabwe, they are granted via enabling legislation. In Malta and Japan, auditing institutions do not have the power to enforce surcharges but may recommend surcharges to the Minister, and demand disciplinary action against persons responsible for irregularities, respectively. In still other countries, such as Brazil and France, the SAI takes the institutional form of a court and thus, by judicial decree, government officials may be held personally liable for misdeeds.
While powers of surcharge can provide an efficient administrative method of recovering monies spent improperly and an effective deterrent on officials, the same ends can be achieved through the network of institutions which administer the anticorruption regime, such as the judiciary and the bribery commission. Also, there are many other alternatives that can be considered, such as vesting the AG with the power to recommend surcharges (to be enforced by ministry secretaries or other member of the executive branch), or to impose a legislative obligation on offending institutions to enact correctional measures or take disciplinary action necessitated by the AG’s findings. As long as there exists some form of legal framework governing surcharge, the larger regulatory framework within which such duty exists can work together in a progressive manner to achieve desired objectives.
Surcharge is only one component of the proposed National Audit Bill. That bill also contains many other positive elements which will strengthen public auditing, such as far-reaching investigative powers and budgetary allocations designed to guarantee the financial independence of the AG. If the price of getting the National Audit Bill off the eternal backburner is abandoning the insistence upon vesting surcharge powers in the AG, and settling for an alternative model, it is a price worth paying.