Economics & Management





Public Finance refers to revenue mobilization and public spending.  The Constitutional provisions relating to governing public finance are embodied from Articles 148 t0 154.  In terms of the Constitution of Sri Lanka, Parliament has complete control of public finance.  Parliament authorizes raising revenue as well as public spending through legislative enactments.  The Public Sector manages public funds within the regulatory framework governing public finance and is accountable to Parliament.

Financial management system in Sri Lanka is governed  by Financial Regulations.  These Financial Regulations, compiled by the Colonial British, are outdated and inadequate to meet the present demands in an evolving public sector in the present era of globalization.

Present Financial Management Systems

Article 148 of the Constitution of Sri Lanka (1978) empowers Parliament with full control over public finance ranging from authorizing public expenditure unto reviewing of annual reports and accounts.  The Members of Parliament as representatives of the people have the freedom to accept or reject public accounts.  While Parliament pass resolutions and legislative enactments to conduct financial affairs in an orderly manner, budget debates and other free discussions that take place in Parliament on various matters and the resolutions thereon, ensure the democratic financial management ensuring proper accountability.

In addition to the ‘Parliament Hansard’ and other published reports, publicity through media provides information to the public on management of public finances.

Since Parliament cannot perform its functions as a entire House, the under lying Select Committees are appointed in terms of Parliamentary Standing Orders to perform numerous functions :

  1. Committee on Public Accounts (COPA) for Central Government and Local

Government Institutions, and

  1. Committee on Public Enterprises (COPE) for Public Corporations.

There are two important Committees involved in examining and reviewing public finance, which report to Parliament.  The annual reports and accounts of public institutions are reviewed by these Committees on the basis of reports of the Auditor General and the Treasury.

The ‘Committee on Public Accounts (COPA)’, established under the Standing Orders of the Parliament, comprises 14 Members of the Parliament from both sides of the House, nominated by the Select Committee.  Its functions and responsibilities are enumerated below.

  1. Examines appropriation accounts and other accounts laid before the Parliament

along with Auditor General’s Reports.

  1. Reports to Parliament on accounts examined, finances, financial procedures,

performances management and any matters arising there from.

  1. Has power to summon and question any person and call for and examine any

paper, book or other documents and have access to stores and property.

  1. Appoints sub-committees where necessary.
  2. The Auditor General assists examination
  3. Examination is assisted by the Auditor General, Secretaries, and Treasury Officials.


The functions and responsibilities of the ‘Committee on Public Enterprises (COPE)’, too, comprising 14 Members of Parliament from both sides of the House nominated by the Select Committee, are ;


  1. Examine the Accounts of Public Corporations and of any business and other

undertakings vested in the Government under any written law laid before the



  1. Reports to Parliament on the accounts examined, budgets and annual estimates and finances.


  1. Has the power to summon and question any person and call for and examine any

paper, book or other documents and have access to stores and property.


  1. Appoints sub-committees where necessary.


  1. Examination is assisted by the Auditor General, Secretariat, and Treasury Officials.


The Auditor General (AG) performs the statutory responsibility of independent assessment and report to Parliament on the performance of Government Institutions.  The AG primarily focuses on economy efficiency and effectiveness of the transactions carried out by the Government Institutions.


The Minister of Finance & Planning or the Treasury, on his behalf, is responsible for the operation of control systems.  The Treasury lays down rules, regulations and procedures for financial and accounting operations.  The subject of Financial Regulations has been assigned to the Minister of Finance & Planning while national planning, budgeting, coordination and control of Budgetary process, monitoring and control of public expenditure, publication of government accounts, follow-up actions on Auditor General’s Reports and Select Committee recommendations, come within the purview of the Treasury.


Financial Regulations provides regulatory framework within which public financial management mandatory for Governments and Ministries are carried out.  The current Financial Regulations (1996) supersedes the 1992 Financial Regulations.  Financial Regulations provide for the Minister of Finance to appoint the respective Secretary of the Ministries to be the Chief Accounting Officer, which delegates the responsibility for supervision of departments and institutions.  Financial Regulations bring all financial transactions under the directions of the Treasury.


It is highlighted that, Financial Regulations are meant for Government Departments and Ministries.  The corporations and Statutory Boards are flexible to make their own rules and regulations.  However, if Corporations have not adopted their own rules and regulations, then, financial regulations would apply.


Financial regulations provide proper guidelines for public sector financial management, and are usually made use in framing their own rules and regulations.  The following areas are dealt within the Financial Regulations ;


  1. Estimates of Expenditure and Revenue
  2. Authorities for Expenditure, Refunds and Write-off
  3. Financial Management and Accountability
  4. Receipts and payments
  5. Custody of Public cash – impress and bank accounts
  6. Accounting
  7. Advance accounts / ‘Kachcheri ‘accounts / Court accounts
  8. Foreign Aid
  9. Printing and Publications
  10. Supplies Works and Services
  11. Miscellaneous

Ministries, Departments and other Public Institutions are the executive agencies performing governmental activities where control – systems really operate.  The Accounting Officers and the Chief Accounting Officers play an important role in the public accountability process, keeping proper books of accounts on what really happened and reporting back.  This is the most essential part of the accountability process.  When the authority is delegated to lower levels within the institutions, these could be internal accountabilities, viz. Divisional Heads accountable to Heads of Departments, Heads of Departments to Secretaries, Secretaries to Ministers while Ministers are responsible to Parliament, which in turn is responsible to the people.


The legal framework relating to financial control in the Public Sector is enshrined in Chapter XVII of the Constitution of the Democratic Socialist Republic of Sri Lanka (1978).  Special expenditures are governed by specific Acts, which have been periodically passed by the Parliament.


Control of Parliament over Public Finance enshrined in Article 148 of the Constitution lays down that;

“Parliament shall have the full control over Public Finance. No tax, rate or other levy shall be imposed by any organization except under the authority of the law passed by Parliament or of any existing law”.


Other Constitutional Provisions relating to Public Finance are enumerated below :


Article 149   :  All such revenue and receipts of the Government not allocated to specific

Purposes shall from the Consolidated Fund.


Article 150   :  No sums shall be withdrawn from the Consolidated Fund except under the

Authority of a warrant under the hands of the Minister in charge of the

subject of Finance.  No such warrant shall be issued unless authority by

the Parliament.



Article 151   :  Notwithstanding any of the provisions of Article 19, Parliament may by

law create a Contingencies Fund for the purpose of providing for urgent

and unforeseen expenditure.  The Minister in charge of Finance, if

satisfied :

  • that there is need for any such expenditure, and
  • that no provision for such expenditure exists,

may with the consent of the President, authorize provision to be made

therefore by an advance from the Contingencies Fund .  As soon as

possible after every such advance, a Supplementary Estimate shall be

presented to Parliament for the purpose of replacing the amount so



Article 152   :  No Bill or motion, authorizing the disposal of, or the imposition of

charges upon, the Consolidated Fund or other funds of the Republic, or the

imposition of any tax or the repeal, augmentation or reduction of any tax

for  the time being in force shall be introduced in Parliament except by a

Minister, and unless such bill or motion has been approved either by the

Cabinet of Ministers or in such a manner as the Cabinet of Ministers may



Article 153 (1) :  There shall be an Auditor General, who shall be appointed by the

President, and who shall hold office during good behavior.


Article 154 (1) : 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.