Public works and projects refer to construction activities of all kinds that are undertaken by the government in the public interest These works and projects result in the creation of tangible assets such as water supply and drainage systems, irrigation and dams, railroads, roads and bridges. Such activities do not include industrial undertaking such as fertiliser, steel, oil and petro-chemical projects.
In this research project, it is proposed to cover the institutional framework for undertaking public works and projects such as project approval, financing and accounting systems and implementation; also the scope, objective, organisation and methodologies of audit among the SAIs of the member countries involved.
3.1. The basic goals of public works and projects in Sri Lanka include the following:
Public works and projects in Sri Lanka are of two major types:
The policy of the Sri Lanka Government in investing in public works and projects is directed towards improving living standards of the people by promoting social welfare and economic development in the following areas:
The feasibility studies relating to small and medium projects are generally undertaken by local consultants or experts in the public sector. In the case of major projects, the services of foreign consultants are generally obtained through foreign funding agencies.
The various levels of authorisation for projects are:
The following steps are involved before public works and projects are included in the annual budget estimates of the government:
Public works and projects are funded by the government mainly through the National Budget. Funding comprises two sources, viz. foreign financing and local funding. Foreign financing includes grants and loans received in the form of equipment, materials, services or in cash.
Government expenditure is divided into two major categories, Capital and Recurrent in the Annual Estimates. This classification facilitates accounting, recording and evaluation of public works and projects through inclusion of the relevant expenditure under the appropriate Heads, Programmes, Objects and Details in the Annual Estimates:
Public works and projects in Sri Lanka are implemented by government ministries, government departments, public enterprises, provincial councils and local authorities. Implementation may be by a single agency or by several agencies jointly co-ordinated through a central authority.
The preparation of detailed designs, bills of quantities , tender documents, calling for tenders and their evaluation and supervision, are carried out by the particular implementing body concerned through trained and qualified employees. Where necessary, advice is available from the technical staff of other bodies.
7.3.1. Funds provided for public works and projects are processed in accordance with budgetary classifications. Public enterprises utilise funds for public works and projects either from their own resources or from government budgetary allocations. Such expenditure is capitalised and depreciated over a period of years. The accounts of public works and projects are included in the respective accounts of the government departments and public enterprises concerned and in the related financial reporting systems.
7.3.2. Government auditors systematically evaluate the nature and operation of internal controls relating to public works or projects to assess the extent to which such controls may be relied upon to:
7.3.3. In evaluating the quality of internal control, the auditors focus on key controls to determine whether such controls are in place and operating properly. Government Financial Regulations and Legislation governing the control of public enterprises provide for Internal Audit Units to be established in all government agencies. These agencies are required to prepare internal audit programmes in consultation with the Auditor-General. Thus all internal audit programmes are subject to review by the Auditor-General. In evaluating the performance of each Internal Audit Unit, the Auditor-General's Department takes into consideration:
Quality control is an on-going process in the construction of public works and projects. Such control by technical experts and supervisors is evident at all stages of contract implementation.
Projects are monitored continuously by the relevant authorities. This ensures that the work is being carried out efficiently within the provisions of the contract and other relevant considerations.
The Financial Regulations, Financial Procedures and Treasury Circulars provide that all works, services and supplies connected with public works be offered for public competition through open tendering. The objectives of this tendering procedure are to:
8.1. In Sri Lanka, management and control of public works implementation are the responsibility of the relevant:
8.2. However, the overall supervision and control of public works and projects is the joint responsibility of the Ministry of Policy Planning and the Ministry of Finance. The funds required for the various works and projects are provided by the relevant ministries and departments through the normal budgetary processes of Parliament. The necessary funds for these undertakings by public enterprises and local authorities are authorised by the legislative and administered through the respective ministries involved.
9.1. As mentioned above, funds required for the construction, operation and maintenance of public works and projects undertaken by government departments are voted by Parliament. Government revenue is also budgeted, with actual receipts credited to the Consolidated Fund.
9.2. Projects constructed and administered by public enterprises are expected to recover the costs involved over a period of years. Therefore, pricing policies in regard to services provided by public enterprises, such as electricity and water, are determined by the enterprises concerned in consultation with the government and major funding agencies.
10.1. Most government departments and public enterprises responsible for implementing public works and projects are not staffed with highly experienced technical personnel to undertake the necessary construction and supervision.
10.2. Therefore, three particular public enterprises (State Development and Construction Corporation, Central Engineering and Consultancy Bureau and State Engineering Corporation) with the required technical skills and expertise contract out their specialist services where required. Accordingly, these three organisations may undertake feasibility studies, invitation for tenders, tender evaluation, selection of contractors and supervision of construction on behalf of government departments and public enterprises responsible for public works and projects.
Since the audit of privatised entities is governed by the relevant provisions in the Companies Act, the Auditor-General is not involved in the audit of such entities.
All foreign aid received for public works and projects are channelled through the normal budgetary process. However, the funding agencies generally stipulate conditions to be complied with by the implementing agencies, in addition to the mandatory rules and regulations of the government.
The various funding agencies exercise general oversight of the relevant public works and projects through:
12.2.1. Government investment programmes for public works and projects are subject to the • normal parliamentary controls of public finance:
12.2.2. As seen above, the implementing agencies responsible for foreign-aided projects are required to submit quarterly and annual physical and financial progress reports and also audited financial statements to the respective lending agencies, apart from fulfilling their statutory responsibilities.
In Sri Lanka, government departments and ministries, public enterprises and local authorities are subject to audit by the Auditor-General in terms of the relevant provisions of the Constitution. Thus all public works and projects are covered by statutory audit.
The audit objectives of public works and projects are to ascertain whether:
The following steps are involved:
Review of preliminary documents based on the investment decision in order to ascertain the accuracy of the underlying information.
Study and review of all available data to understand the design of the proposed public works and projects.
Comparison of estimates with approved or standard rates of work to ascertain the accuracy of the calculations involved.
Physical observations of a sample of activities and comparison with the budget. There is no pre-audit of contracts by the SAI.
Ascertain the need for the proposed public works and projects.
Ascertain whether due regard has been paid to economy, efficiency and effectiveness.
This involves comparisons with the budget and actual input and output.
Accounting-oriented staff alone cannot perform satisfactorily the audit of major projects requiring technical knowledge and expertise. Accordingly, the Constitution empowers the Auditor-General to obtain the services of specialists in the examination of technical, professional or scientific problems relevant to an audit. These specialist services are obtained where necessary during the course of audits of public works and projects.
18.1. The Auditor-General has a statutory responsibility to report annually to Parliament within ten months after the close of the financial year and also when special circumstances make it necessary, on the performance of his duties and functions under the Constitution. Such reporting includes public works and projects.
18.2. To ensure impartiality and fairness in audit reporting from the viewpoints of the auditee, Parliament and the public, the Auditor-General proceeds along the following lines:
18.3. The Auditor -General's reports to Parliament concentrate matters of general financial importance. The detailed consideration of issues arising from the audit of specific public works and projects is more likely to be made by two Select Committees of Parliament, viz. the Select Committee on Public Accounts and the Select Committee on Public Enterprises.
There is insufficient time available for auditing between the date of receiving accounts and the target date for the submission of the audit report.
A major constraint in auditing public works and projects is that the staff in the Auditor-General's Department in Sri Lanka are accounting-oriented and there is no provision to recruit technical personnel at different levels. This problem is overcome to some extent by obtaining the services of non-accounting specialists as required.