Cyprus is an independent sovereign Republic situated at the south-eastern basin of the Mediterranean Sea. it is the third largest island in the Mediterranean with a population of about 700,000 people. The official languages of the Republic are Greek and Turkish, but English is widely spoken and used regularly in trade and commerce and government.
Cyprus has a presidential system of government with the executive power vested in the elected President who is also the Head of State. The Legislative power lies with the House of Representatives (Parliament).
For the administration of financial matters in the Republic, the Executive has laid the Financial Administration Bill in Parliament. The Proposed legislation covers financial areas including budget preparation, approval and execution; accounting systems and financial reporting; borrowing; granting of gurantees; procurement and issue of stores; duties and responsibilities of Controlling Officers and other general financial provisions.
1.1 FINANCIAL PROCEDURES
According to the Republic of Cyprus Constitution the Minister of Finance is responsible for all financial matters. No taxes can be collected unless the Minister signs and publishes the relevant order in the official Gazette, and no expenditure can be met from the Consolidated Fund or other Public Funds except when authorised by a warrant signed by the Minister of Finance. However, the Minister of Finance shall not refuse to sign any such warrant for an expenditure provided for in the budget.
1.2 THE CONSOLIDATED FUND
The Constitution provides that all revenues and moneys raised or received by the Republic, subject to the provisions of the Constitution and Of the relevant law, be paid into and form one fund to be known as the Consolidated Fund of the Republic.
1.3 PUBLIC LOANS FUND
This Fund was established under the Public Loans Law and is administered by the Loan Commissioners, appointed by the Council of Ministers. The Fund is financed from Government loans, and from interest received on loans advanced. Under the operating regulations and criteria established, the Fund issues low interest loans for development projects in a number of sectors-such as for water use, agriculture, fisheries, education, tourism, rural development etc. A number of Revolving Funds operate under the fund. The Public Loans Fund and the Revolving Funds are subject to public sector audit.
2.1 ANNUAL APPROPRIATIONS
At least three months before the commencement of the financial year, the Government must introduce the annual estimates for approval by the House of Representatives before the commencement of the financial year. The estimates must show separately:
The expenditure charged to the Consolidated Fund are obligatory payments and do not require approval by the House of Representatives. Such expenditures include:-
Once approved by the House of Representatives under budgetary provisions, estimates are incorporated with the sums charged on the Consolidated Fund to form a unified budget for the Republic. For convenience, development expenditure is provided for separately in the Development Budget. Departments and services may only commence spending when the general warrant authorising them to do so is issued by the Minister of Finance. If in an emergency the need arises to spend moneys on any service not provided in the budget, or if during the year additional funds are required for any purpose, supplementary estimates for such sums must be laid' before the House of Representatives for approval. The House of Representatives may approve any expenditure proposed by the Government but it may not vote an increased amount or alter its purpose.
The budget shows the expenditure requirements of Government by Ministry, Department and Independent Service. The officers in control of expenditure votes and the officers responsible for the collection of revenue are listed in separate schedules to the budget.
2.2 BRIDGING FINANCE
If the budget is not passed by the first day of the financial year to which it relates, the House of Representatives may by a resolution authorise any expenditure for a period not exceeding one month at a time but in any event not exceeding two months in the aggregate from the Consolidated Fund or other public funds as it may consider essential for the continuance Of the public services. The expenditure so authorised for any service, however, shall not exceed a proportionate amount voted for that service for such period in the preceding financial year. The expenditure will also not provide for new services or for the filling of new posts. This procedure has been resorted to several times.
2.3 CONTINGENCIES AND EMERGENCY EXPENDITURE
An appropriation for "Contingencies and Reserve" is budgeted for each year under the control of the Ministry of Finance. This facility is used only in exceptional and emergency situations to cover unforeseen expenditure.
3.1 MINISTRY OF FINANCE
Under the Constitution the Minister of Finance is responsible for the preparation of a comprehensive budget for the Republic in respect of every financial year. Control is exercised through all stages of budget preparation, execution and reporting. When the budget is approved by the House, a general warrant is issued by the Minister of Finance to the Accountant General authorising him to incur expenditure.
The Ministry of Finance monitors the execution of the Budget through monthly progress reports submitted by the various Departments and raises relevant questions regarding material budget variances. Applications for additional funds required by Departments are submitted to the Minister of Finance for approval and are laid before the House of Representatives for adoption. Controlling officers must explain to the Ministry of Finance any excess expenditure over budgeted provisions and if their explanations are not satisfactory, the Ministry will hold them pecuniarily responsible. Transfers of funds between subheads of the same Vote can only be authorised by transfer warrants issued by the Ministry of Finance on application by Departments. All transfer warrants are laid before the House of Representatives.
The Accountant General is an officer of the Ministry of Finance and has the sole responsibility for keeping and preparing Government accounts. As financial controller of the Government, he plays a key role in financial accountability and exercises general control over receipts and payments. All revenues collected by departments are accounted to him and all payments charged to the Government's General Account are made by him.
Heads of departments are responsible for reconciling their subsidiary financial departmental records with the main records kept by the Accountant General and for submitting a certificate to this effect. This reconciliation is achieved through abstracts prepared and forwarded to the departments monthly by the Accountant General. Accounting Officers from the Accountant General's Office are posted to almost all Government Departments to facilitate the smooth functioning of the accounting system.
Accountability is further enhanced by the operation of an Internal Audit Section in the Accountant General's Office which primarily pre-audits payment vouchers before the issue of cheques, and conducts stores verifications throughout the year on a continuous basis. The Accountant General is also the President of the Main Tender Board and in this capacity is directly involved in evaluating and awarding all major tenders over a specified monetary limit for all Government departments. His responsibilities also include issuing instructions to all Government departments in connection with the proper and safe custody of Government moneys and property.
3.2 OTHER CENTRAL AGENCIES
There are two separate units monitoring budget execution-one under the Ministry of Finance dealing with the Ordinary Budget and Refugees Fund, and the other under the Planning Bureau for the Development Budget. The follow-up is made through reports submitted to the above agencies by the department concerned.
Heads of departments, by designation, are made responsible for the execution of the budget and have overall responsibility for all financial matters and are accountable to the appropriate ministry to which they submit progress reports on their departments. activities. At the close of each financial year, an Annual Report is also prepared by departments giving an overall picture of their activities which provides useful information to both the executive and the public at large.
The Council of Ministers being the highest executive power is responsible for managing the affairs of the Central Government. Accountability of the various management levels is ultimately to the Council of Ministers through the appropriate Minister. Exception reports are submitted to the Council of Ministers. The Council is then briefed on serious defaults, abuse, and mismanagement of government funds, and may issue instructions to dispose of such matters.
3.3 THE ROLE OF THE CENTRAL BANK
The Constitution provides for the operation of a Central bank-a function undertaken until 1963 by the Accountant General's Office. The main purpose of the Central Bank of Cyprus is to foster monetary stability and such credit and balance of payments conditions as are conducive to the orderly development of the economy of the Republic. The main functions of this Central Bank are:
The Bank is managed by a Board of Directors appointed by the Council ot Ministers. A representative from the Ministry of Finance attends Board meetings and has discretion in proposing subjects for the agenda. He may also exercise the power of veto on issues relating to matters of public interest. Historically, this veto has been exercised only once.
The Central Bank of Cyprus, in its capacity as a financial agent and banker of the Government, performs-among others-the following functions:
The Bank may, with a view to off-setting fluctuations between receipts and payments of Government, make direct advances to the Government of up to 30% of the estimated ordinary revenue for the financial year during which the advance is to be made.
Issue of Treasury Bills by the Central Bank cannot e^ed 30% of the estimated revenue of the Government. The bank itself may purchase such Bills maturing not later than twelve months from the date acquisition. The Bank may sell and buy Government-guaranteed securities which have been publicly offered for sale, provided the total amount of such securities held by the Bank shall not exceed 20% of the sight liabilities of the Bank.
The legal requirements of the Central Bank in its relationship with the Government, together with the independence the Bank enjoys in its operations, foster financial and management accountability. Furthermore, the advisory role of the Central Bank (its Governor participating in the deliberations of the Central Planning Commission) on financial matters indirectly promotes public accountability.
4.1 THE ROLE OF SAI
The Constitution of the Republic of Cyprus provides for the independence of the Auditor General. The Auditor General and his Deputy, as with all other "independent officers" of the Republic, are appointed by the President of the Republic and are not subject to the Public Service Law. All other civil servants are appointed by the Public Services Commission. The functions and duties of the Auditor General are also provided in the Constitution as follows:
In addition to the audit of Government accounts, the Auditor General is responsible, pursuant to the provisions of various laws or by administrative arrangement, for the audit of the accounts of Public Enterprises, Local Authorities and of a number of Special Funds.
The constitutional and statutory provisions require the Auditor General to examine the financial and other activities of Government, Public Enterprises and Local Authorities in order to satisfy himself that:
The Auditor General is constitutionally bound to report on the exercise of his functions and duties to the President of the Republic who in turn shall cause his report to be laid before the House of Representatives.
During the course of his audits, the Auditor General makes constructive suggestions to the executive for improving procedures, systems, and even suggests amendments in legislation. He also takes an active part in various committees as an observer like the Main Tender Board, or other ad hoc committees for the study of various matters.
4.2 RELATIONSHIP WITH THE PUBLIC ACCOUNTS COMMITTEE (PAC)
Constitutionally the Auditor General has no line relationship with the House of Representatives (his report being laid before the House of Representatives by the President to whom he submits his reports), but in practice he has good working relationship, particularly with the Public Accounts Committee.
There is no specific provision in the Constitution regarding the formation and operation of a Public Accounts Committee. However, the Constitution provides that the House of Representatives shall adopt its Standing Orders to regulate any matter of parliamentary procedure and the function of its offices. It also provides for the formation of a Select Committee which shall set up the Standing Committees and any other temporary or special committee. The House of Representatives has duly adopted its Standing Orders setting out the parliamentary procedures, including the operation of the parliamentary committees.
The Standing Orders do not name the Committees to be set up, but following the example and tradition of the developed countries, the Public Accounts Committee has been established as one of the Standing Committees.
The primary role of the Public Accounts Committee is to examine the public accounts prepared by the Accountant General and audited by the Auditor General. The main source of information available to the Committee for its deliberations is the Annual Report of the Auditor General laid before the House of Representatives by the President of the Republic. The Committee is also at liberty to:
The Public Accounts Committee does not concern itself only with the spending of sums appropriated and budget excess, but also deals with any extravagance, waste, abuse and ineffective implementation of government programs that may be reported by the Auditor General as a result of performance audits or technical audits.
There is no specific legal or constitutional provision on the rights and powers of the Public Accounts Committee. Nevertheless, the House of Representatives by its Standing Orders reserves the right of any of its Committees to summon any interested party, authority, organisation, person, or corporate body to give information and evidence, or to express and explain an opinion or view on any subject under consideration.
After its deliberations the Committee prepares a report for distribution to the members of the House of Representatives for discussion in a plenary session. The Public Accounts Committee does not possess any penal powers and therefore the punishment of officials for irregular transactions or financial indiscipline is left to the executive, which often tends to be slow or unwilling to punish or take the proper corrective measures.
The Auditor General submits to the Public Accounts Committee annually a statement showing the most serious issues which in his opinion should be discussed by the Committee. The final selection of the issues is made by the Committee and its Chairman, who in consultation with the Auditor General, prepares a timetable and agenda for the meetings. For its deliberations, the Committee summons the responsible officials concerned. The Committee hearings are now open to the press.
Because of his close ties with the PAC, its members consult him frequently seeking information or advice on individual issues. He is the key player at the hearings and his first hand knowledge of the various issues enable him to advise the Committee and to monitor the progress of deliberations.
Quarterly reports of the Auditor General to Ministers dealing with the most serious issues arising from current audits are, by established practice, copied to the Committee. Through these reports, both the executive and the Public Accounts Committee are briefed in advance about the most serious current issues which will eventually feature in his Annual Report.
4.3 AUDITING STANDARDS
Auditing standards provide the basic guidelines which govern the audit work and serve to improve and maintain the quality of such work. However there is no indigenous standard-setting body. For financial audits of public corporations and Government agencies preparing accounts on an accrual basis, the SAI of Cyprus has adopted the International Auditing Guidelines issued by the International Federation of Accountants. In the case of government accounts which are kept on a cash basis, these guidelines are applied selectively, and are supplemented by instructions developed and issued by the Auditor General to staff dealing with special areas. For performance audits, the general guidelines developed by the U.S. General Accounting Office and the Office of the Auditor General of Canada are adopted.
5.1 COMMITTEE ON FINANCIAL AND BUDGETARY AFFAIRS
After the budget proposals are submitted to the House, they are firstly studied and evaluated by the Committee on Financing and Budgetary Affairs which submits questions on the proposals to the relevant Ministers or Independent Offices. In every case, the appropriate Minister is required to reply. Ministers are not legally bound to appear before any committee of the House, but in practice no Minister has ever declined to do so when requested to appear by the Chairman of a Committee. The whole process is speeded up where Ministries present their answers in writing. The Committee on Financial and Budgetary Affairs then submits a full report to the House, which is then debated during the Plenary session. Almost invariably the suggestions of the Committee are adopted by the House.
5.2 OTHER PARLIAMENTARY COMMITTEES
In addition to the Committee on Financial and Budgetary Affairs there are other Standing Committees of the House generally corresponding to the Ministries of the Government. Brief minutes are kept for the meetings which are not published. The Ministers may follow the proceedings of the House or of any of its Committees and may make a statement to the House or to any committee of the House on any subject within their competence.
6.1 DESCRIPTION OF THE BUDGET SYSTEM
The Minster of Finance is constitutionally bound to prepare in respect of every financial year a comprehensive budget which, when approved by the Council of Ministers, is laid before the House of Representatives for consideration and adoption. This budget has to be introduced to the House of Representatives at least three months before the commencement of the financial year (1st of January).
6.2 BUDGET CLASSIFICATION
For reasons of administrative convenience and for purposes of functional classification there are three Budgets in Cyprus:
The Ordinary Budget provides for the maintenance of the Public Service- the expenditure for the Social and Welfare Sectors, Education and for other services and purposes not of a development nature. Functional in nature, the Ordinary Budget is incremental, being based mainly on the actual expenditure of previous years taking into consideration any variations and additional requirements. In contrast, the Development Budget is prepared according to sectors and projects which are included in the budget based on feasibility studies prepared either by foreign consultants, the departments themselves or by the Planning Bureau.
The Ordinary Budget comprises the following:
7.1 PLANNING
The Ordinary Estimates in respect of each financial year are prepared and considered on the basis of a policy determined in advance by the Minister of Finance and communicated to all Ministries, Departments and Independent Offices by Circular issued normally in February. This policy aims at distributing financial resources according to carefully established needs and priorities. Departments and other agencies are requested in the circular to submit their proposals in respect of the coming financial year beginning on 1st January.
The Development Budget for each financial year is in effect the public investment programme for that year and reflects the projections and objectives set for that particular year. Such investments fall in a more general programme, usually a five year economic plan.
The policy objectives and investment targets in respect of any financial year are determined in advance by the Central Planning Commission, and are communicated to Ministries, Departments and Independent Offices by a Circular issued by the Planning Bureau normally in February. As with the ordinary budget, agencies are requested to make their submissions.
The Central Planning Commission is the central planning agency of the Government. It is headed by the President of the Republic and includes all Ministers. The Governor of the Central Bank is invited to attend and participates in the deliberations. The Director General of the Planning Bureau is the Secretary of the Commission.
The Commission, entirely political in its membership, has overall responsibility for the formulation of the economic and social objectives of the Government. It lays down the goals and targets of the budget, issues and coordinates policy decisions and directives necessary to achieve budgetary targets, and oversees the implementation of the budget ensuring its timely and co-ordinated execution.
The Central Planning Commission is assisted by the Policy and Budget Committee, headed by the Minister of Finance, which advises on the formulation of the long-term plan and on plans and projects prepared by Ministries and the Planning Bureau. The Policy and Budget Committee proposes appropriate investment and growth targets, recommending relevant economic policies and suggesting legislative and other measures aimed at fulfilling the proposed targets. The Committee is also responsible for preparing the Development Budget and for overseeing its implementation.
The Directors General of virtually all Ministries concerned with Development activities are members of the Policy and Budget Committee. This arrangement ensures a close liaison and coordination between the Planning Bureau and the Ministry of Finance and facilitates the financing and implementation of the budget.
The Planning Bureau is the economic and administrative arm of the Central Planning Commission and the Policy and Budget Committee. It is independent and answerable to the Chairman of the Central Planning Commission (President of the Republic). In practice it operates through the Minister of Finance in his capacity as the Chairman of the Policy and Budget Committee.
The Fund for Displaced and Wetted Persons was created in 1974. Proposals for the Fund are evaluated, checked and scrutinised by the Ministry of Finance, to ensure that they are in line with the overall Government policy and objectives regarding refugees.
7.2 ORGANISATION AND ROLE OF THE BUDGET OFFICE
Two central agencies are involved in the budget process. A division of the Ministry of Finance has overall responsibility for the Ordinary and Refugees Budgets, while another agency under the Planning Bureau is responsible for the Development Budget.
The role of the Budget Division either of the Ministry of Finance or of the Planning Bureau is to analyse and examine all proposals for plans and programmes so as to ensure that they are in accordance with prescribed government objectives and that resources are applied in an economic, efficient and effective manner. Profiles of past and future expenditure patterns and trends are also reviewed to enable more reliable forecasting when fixing expenditure targets. The Policy and Budget Committee pays particular attention to the priorities set by Government and reviews the capabilities of departments implementing projects.
7.3 BUDGET STEPS
At the beginning of each year the Ministry of Finance and the Planning Bureau issue a circular to all Ministries, Departments and Independent Offices requesting them to submit their budget proposals on standardised forms for the preparation of the three Government Budgets (Ordinary, Development, Refugees Fund). The Circular also provides the general guidelines which the Ministries and other Independent Offices must observe when submitting their budget proposals.
The proposals for the Ordinary and Refugees Budget are submitted to the Ministry of Finance (Budget Division) for consideration and further discussion at meetings held especially for this purpose. Directors General of Ministries and Heads of Departments are invited to give further details on their proposals at these meetings. Over the last three years, the Auditor General has been invited to these meetings as an observer. In this capacity, comments made by the Auditor General are given serious consideration.
The Estimates Committee considers each proposal and makes its recommendations to the Minister of Finance for consideration and approval. The draft Ordinary Budget is then compiled by the Budget Division which submits it to the Council of Ministers for consideration and approval, usually at the end of September or the beginning of October.
The Policy and Budget Committee follows a similar procedure for processing the Development Budget. As in the case of the Ordinary Budget hearings, the Auditor General or his representative attends such meetings.
Once the budget of the Republic is approved by the Council of Ministers, it is laid in the House by the Minister of Finance who in his Budget Speech refers to the economic situation in general, overall Government financial policies and future prospects.
The Parliamentary Committee on Financial and Budgetary Affairs then undertakes the evaluation of the budget and, after careful study and consideration, directs any questions on the proposals to the relevant Ministries or Independent Offices. Invariably, the Minister concerned is invited to be present to explain where necessary. After the Parliamentary Committee on Financial and Budgetary Affairs completes its work, a full report is submitted to the House.
Following the adoption of the budget, the Minister of Finance issues a General Warrant to the Accountant General authorising him to incur expenditure on the budget. However, in certain cases, no expenditure may be incurred until full details of the programme or project are given to the Ministry of Finance and the Planning Bureau (in the case of the Development Budget). Such expenditure votes are marked with 'daggers' in the Estimates which are only removed on the authority of the Minister of Finance.
Before the restrictions on the use of these funds are lifted, the department concerned through its ministry has to submit full details of the scheme to the Ministry of Finance for consideration. In the case of Development Votes these details are considered both by the Ministry of Finance and the Planning Bureau which refer any major issues or policy questions to the Council of Ministers for decision. While the House of Representatives can either approve or disapprove any expenditure included in the budgets, the House has no authority to increase expenditure or change the purpose for which the expenditure is required.
7.4 THE ROLE OF CENTRAL AGENCIES
The Ministry of Finance has the central role in the overall budget process. The Budget Division of the Ministry of Finance scrutinises and evaluates the Ordinary and Refugees Budget, while the Policy and Budget Committee of the Planning Bureau prepares and implements the Development Budget. In addition, the Central Planning Commission is responsible for preparing and implementing the Government's Economic Plan.
7.5 PUBLIC DEBT
The public debt consists of all public and publicly guaranteed medium and long-term domestic and foreign borrowings. The power to borrow is expressly provided for in the Constitution and accordingly all debt charges are a valid charge on the Consolidated Fund. The government is also empowered by law to guarantee loans raised by public corporations or other corporations in which the State has a vested interest. From 1986 onwards, the powers of the government to borrow from abroad or to guarantee foreign loans for sums exceeding, in each case, Cy L1 million must be sanctioned by the House of Representatives.
External borrowings take the form of long-term loans for development or capital formation projects, and short term facilities to finance current operations. Domestic borrowings consist, mainly, of medium and long-term development stocks and savings certificates, treasury bills and advances from the Central Bank which must not exceed 25% of the estimated ordinary revenue.
The outstanding balances of all loans raised, both external and domestic, and of all guarantees given form the public debt and are disclosed in the Financial Report. The external balances are converted at the rates of exchange applicable at fiscal year end. In practice, short-term borrowings and outstanding guarantees are excluded from the Statement of Public Debt and are shown separately in the Financial Report.
All domestic debts and about 95% of the total external debt come under the audit of the SAI. In addition, the borrowings of public corporations are subject to public sector audit.
8.1 THE ROLE OF DEPARTMENTS IN SPENDING AND CONTROL
Heads of Departments are responsible for the execution of the budget and have overall responsibility for all financial matters. They are accountable to their respective Ministries to whom progress reports are submitted on departmental activities. Heads of Departments must ensure that public funds are properly collected, safeguarded and accounted for; that all payments are duly authorised; that the accounts and other records are correct and promptly updated, and that all Government property and stores are properly maintained.
Accounting Officers from the Accountant General's Office are posted to every Department to exercise financial and accounting controls and to advise heads of Departments on related matters. Also, the Ministry of Finance (Budget Division) monitors the execution of the budget through monthly reports (abstracts) submitted by the Accountant General in order to ensure that all payments are within the budget.
8.2 INTERNAL AUDITING
Financial accountability at departmental levels rests with the controlling officer (Department Head). The Accountant General plays a key role in financial accountability by execising general control over receipts and payments. Through an internal audit section coming under his direct control, he pre-audits all payment vouchers. The functions of the Internal Audit Section currently is limited to the financial and compliance aspects of transactions.
9.1 ROLE OF DEPARTMENTS AND OTHER AGENCIES
The monitoring of the Ordinary Budget is carried out purely for control purposes and for ensuring the proper allocation of the expenditure incurred to the various heads/subheads. Departments are required to record details of all their expenditure incurred daily in vote books. The Accountant General provides monthly abstracts to the respective departments for reconciliation of departmental records with those kept at the Accountant General's Office. As for the Development Budget, the aim is to obtain information on the physical and financial progress of projects.
9.2 OTHER AGENCIES
The monthly abstracts which are status reports on budget execution are prepared by the Accountant General and communicated to the Ministry of Finance and the Planning Bureau (Policy and Budget Committee) for information.
In the case of the Development budget, however, the Departments submit quarterly reports on the progress of all development projects to the Planning Bureau. On the basis of such reports, appropriate action is taken where necessary. The quarterly reports will soon be replaced by four-monthly reports.
The Planning Bureau also prepares an overall report at the end of the year on the execution of the Development Budget for presentation to the Council of Ministers. The report forms the basis for the preparation of the new development Budget and for any corrective action deemed necessary.
For information purposes, the Auditor General's Annual Report provides in summary form variances of expenditure by heads for each department on all three Budgets.
10.1 DESCRIPTION OF THE NATIONAL ACCOUNTING SYSTEM
All collections of revenue by departments are lodged into the Government General Account kept by the Central Bank.
A schedule of collections is prepared by each department (Revenue Officers) showing the allocation according to the various revenue votes. This schedule together with the bank lodgement slips are submitted to the main cashier in the Accountant General's department. The receipt issued serves as the media for incorporating the revenue collected into the centralised system operated by the Accountant General.
Each department keeps its own subsidiary accounts showing total revenue collected by revenue head and subhead. These records are reconciled monthly with Treasury records, on the basis of Treasury abstracts prepared by the Accountant General.
No expenditure can be incurred unless provision is made in the approved budget. Each department has its own expenditure votes to which payments are charged or allocated. For control purposes payments can only be passed by authorising officers. Accordingly each payment is substantiated by a payment voucher properly authorised, providing details of the purpose for the payment and indicating the head and subhead to which the expenditure is to be charged.
Except for small payments, paid out of imprests, cheques are drawn by the Accountant General on the Government General Account kept by Central Bank on the basis of payment vouchers submitted to him by the departments. As in the case of revenue, each department keeps subsidiary records for all expenditure votes which are reconciled monthly with Treasury records on the basis of abstracts forwarded by the Accountant General.
10.2 TYPE OF ACCOUNTING SYSTEM
The Government accounting system operates on a cash basis and is operated centrally by the Accountant General although subsidiary records for control purposes and information are kept by the various departments. Outstanding liabilities and arrears of revenue are shown in specially prepared statements for follow up and for information purposes.
10.3 SPECIFIC LEGISLATION
Although there Is no specific legislation governing the operation of the Government accounting system, some constitutional provisions are relevant. These provide that all revenues and moneys raised or received by the Republic shall be paid into the Consolidated Fund of the Republic. Further, the Constitution provides that the Accountant General assisted by his Deputy shall manage and supervise all accounting operations in respect of all moneys and other assets administered and of liabilities incurred by or under the authority of the Republic and shall receive and make all the disbursements of moneys of the Republic.
A Bill regarding Financial Administration Law is pending before the House of Representatives for adoption. The Bill is based on constitutional provisions and on the various administrative instructions and established procedures now in operation. It provides, inter alia, for the preparation and execution of the budget and for the financial statements and reports, and the administration of Government funds.
10.4 SUPPLEMENTARY REGULATIONS
In the absence of specific regulations governing and regulating financial matters, the Government through the Ministry of Finance issues Financial and Accounting Instructions. These Instructions set out details of the accounting systems and the procedures to be followed for the collection of public revenue and the disbursement of public expenditure. For procurement procedures and the safe custody of stores, detailed instructions are contained in Stores Regulations issued also by the Ministry of Finance. The overall accounting system is enhanced by Circulars issued from time to time by either the Accountant General or the Ministry of Finance.
10.5 ACCOUNTING STANDARDS
There are no formal Government accounting standards as such. Basically, the International Accounting Standards are followed where applicable and the Financial Instructions and Circulars are observed during the preparation of the Government Financial Statements.
11.1 STEPS IN THE ACCOUNTING PROCESS
According to the Constitution the final accounts of the Republic should be laid before the House of Representatives for approval within three months from the end of the financial year.
The responsibility for the preparation of the Financial Report lies with the Accountant General, who manages and supervises all accounting operations in respect of all moneys received or paid, of assets administered, and of liabilities incurred by or under the authority of the Republic and subject to the provisions of the Constitution or any law, receives and makes all disbursements of moneys of the Republic.
All receipts and payments are incorporated in the Accountant General's monthly abstracts, prepared for reconciliation purposes with Departmental records. By the year end the abstracts depict the total revenue and expenditure received and incurred for the three Budgets (Ordinary, Development, Refugees Fund). All information emanating from the final abstracts is incorporated in a report, known as the "Financial Report".
11.2 SCOPE OF THE PUBLIC ACCOUNTS
The Public Accounts show the financial position of the Government in the form of a balance sheet and statements of receipts and payments following the format of the estimates.
Information is also provided for the public debt (foreign and domestic), the deficiency or surplus for the year which is debited or credited to the Consolidated Fund, for loans granted by the Government, and for various funds such as the Development Fund, Social Insurance Funds, and Medical Funds.
11.3 FORMAT OF THE PUBLIC ACCOUNTS
The Public Accounts are presented in the form of statements showing total collections and payments by vote which are analysed in the Financial Report. The Financial Report indicates the Republic's financial position at the end of the year and the various financial transactions that took place during the year. It contains the following statements:
Since the Government accounts are prepared on a cash basis, the balance sheet shows only the cash position and does not include the immovable property and other fixed assets owned by the Government. Further, international reserves are not shown in the financial statements of the Government, as such reserves are included in the Central Bank's balance sheet.
12.1 ROLE OF THE SUPREME AUDIT INSTITUTION (SAI)
The Auditor General in his Annual Report may report on any matter regarding the public financial administration of the Republic. Quarterly reports on major issues raised by the Auditor General as a result of the audit are submitted to Ministers, the President of the Republic and the House of Representatives for briefing purposes. In this way, both the Executive and the House of Representatives are briefed promptly on the most important matters raised during the audit of the accounts of government, local authorities and statutory bodies. Such an audit is in effect a report on budget implementation with the main objective of ensuring that relevant laws and regulations have been followed, the budget is carried out according to applicable financial and other administrative instructions, and that resources have been utilised properly. To that effect, performance audits are undertaken by the Auditor General on major government programs or activities, the results of which are communicated to the ministries concerned for appropriate action. Also, a technical unit consisting of civil engineers assists the Auditor General in examining many of the development projects, such as road constructions, dams, buildings and other public works.
In his work, the Auditor General often receives complaints from the public about alleged financial abuses. All complaints are investigated and the findings are communicated to the ministries concerned.
12.2 PUBLIC ACCOUNTS COMMITTEE
As noted earlier, the Public Accounts Committee examines the Annual Report of the Auditor General and other issues coming under its jurisdiction. The Committee's findings are laid before the plenary session of the House for discussion and the final recommendations are submitted to the Executive for necessary action.
Constitutional requirements laying down the general principles and guidelines to be followed and observed by the legislature, executive, SAI and other public sector agencies and bodies ensure the existence and operation of a public financial accountability system. As Government activities have become numerous and complex, and the public at large begins to take an active interest in such activities, the refining of such a system becomes an on-going process.
Public sector audit-as an independent, objective and ex-post activity-is an effective aid to the administration and planning of the Republic. Audit observations and suggestions not only enable the administration to rectify poorly managed or ill-conceived schemes, but also provide a salutary 'check and balance' in financial management.
Audit should not be viewed only as an instrument of accountability, but also as a powerful tool for improving the planning, programming and implementation of the budgeting process, thus contributing to the success of the social, economic and financial objectives of the Republic's budget. To this end the auditors concerned are competent and confident in making concrete suggestions for improving management information systems, procedures and public financial accountability.