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Surcharge Power of SAI- Sri Lanka

Background

The Auditor General of Sri Lanka is a Constitutional functionary appointed by the President of Sri Lanka, and his independence is enshrined in the Constitution. His duties, functions and responsibilities, covering audit of accounts of

• all departments of Government;
• the office of the Cabinet of Ministers;
• the Judicial Service Commission;
• the Parliamentary Commissioner for Administration;
• the Secretary General of Parliament and the Commissioner of Elections; and
• Local Authorities, Public Corporations and Business or other Undertakings vested in the Government under any written law

are defined under Article 154 of the Constitution. This article also requires the Auditor General to carry out any other duties, which any law passed by Parliament may require.

There are certain laws which require the Auditor General to perform duties and functions that will hold good in so far as they are not inconsistent with the provisions of the Constitution. The statutes relating to Local Authorities and Universities are two such important statutes which confer the power of surcharge on the Auditor General in his capacity as auditor of such institutions.

Powers of Surcharge

Audit surcharge can be described as a statutory remedy available to safeguard the property of the institution subjected to audit. In practice, it serves to recover the loss sustained by the Local Authority or University from the person(s) responsible for such loss.

In regard to local authorities, the Auditor General has the power to :-

1. disallow any item of account contrary to law, and surcharge the same on the persons responsible for making or authorising the making of the illegal payment;
2. charge against persons responsible for any sum which has not been duly brought to account; and
3. charge against members, officers or servants of a local authority, any loss which has arisen from their negligence and misconduct.

However, the law relating to Universities provides for surcharge only under categories (a) and (b) above.

The Auditor General of Sri Lanka does not possess power of surcharge in respect of Government Departments, Ministries, Public Corporations and Provincial Councils.

• "Item of account contrary to law" means any payment which clearly does not fall within the ambit of the statute, rule, regulation, order or by-law, unless such expenditure has been sanctioned by the Minister for Local Government.
• For the purpose of surcharge, "negligence" is construed, according to the normal meaning of the word and does not involve any element of moral culpability.
• Losses arising from fraud are a direct outcome of misconduct. However, the term misconduct could encompass imprudent management, e.g. when the Chairman of a Local Authority refuses to accept legal, scientific or technical advice tendered to him by experts and acts in an arbitrary manner, which results in a loss to the Authority, or hides the true facts in a particular situation and misdirects the Council so as to cause a loss.

Procedure for Surcharge

In any democratic system of Government, before making any disallowance or surcharge, the auditor is obliged to afford an opportunity to the person(s) concerned to be heard or to be allowed to make any representations that they may desire. In the event of eventually deciding to disallow or surcharge, the auditor should furnish the reasons for his decision to the affected party.

An auditor wielding surcharge powers is thus required to apply the rules of natural justice, before taking a final decision to impose a surcharge. Consequently, the Auditor General has evolved the following procedure :-

1. Only those officers of the Auditor General's Department, who have been authorised by the Auditor General to audit Local Authorities / Universities are permitted to initiate action regarding surcharge.
2. Action initiated by such officers is scrutinised by their immediate supervising officer and a higher grade executive such as the Assistant Auditor General or the Deputy Auditor General.
3. The matter, if endorsed by the levels of officers indicated above, is placed before the Auditor General for his decision.
4. If the Auditor General decides to impose a surcharge, a formal "Notice of Surcharge" is issued, specifying the charge(s) preferred against the proposed surchargee. The notice also indicates that the party should answer the charge or charges within 30 days, either through oral representations or in writing, and specifies that the party forfeits his right to an appeal against the surcharge, if a reply is not sent within the stipulated time limit. All correspondence is to be personally addressed to the Auditor General.
5. Documents pertaining to the proposed surcharge are made available for scrutiny to the surchargee, who is also permitted to avail of legal assistance in making his representation.

Certificate of Surcharge

If the representations furnished by the party are not found acceptable by the Auditor General or submissions are not received within the stipulated period, the Auditor General issues a "Certificate of Surcharge". This certificate, which is signed personally by the Auditor General, indicates the names of the proposed surchargees and the posts held by them, the amount surcharged and the reasons for surcharge. Where the amount surcharged is due from more than one person, the certificate stipulates that the surcharge is imposed jointly or jointly and severally. The surcharged amount is to recovered and credited to the Fund of the concerned Local Authority or University.

Appeal against Surcharge

On receipt of a surcharge certificate, the surchargee should either make payment of the surcharged amount or prefer an appeal within 14 days against the imposition of surcharge. The officials responsible for recovery and the appellate authorities for surcharge in respect of various Local Authorities and Universities have been clearly spelt out as under:-