(News 1^st) – The Asian Development Bank (ADB) is exploring the possibility of hiring independent auditors to audit projects they fund in Sri Lanka to avoid delays at the Auditor General’s Department (AGD), a new report has revealed.

In the report titled “Public Financial Management Systems – Sri Lanka” the ADB says loan agreements carry a deadline for the submission of audited project financial statements to the donor and to meet these deadlines, the AGD sets timelines for the issuance of various audit reports.

“However in practice, there are delays in meeting these deadlines because of resource constraints,” the ADB report said.

The ADB says the Auditor General’s Department does not subcontract project audits to private firms or individuals.

To avoid capacity constraints, the report has recommended the ADB to hold discussions with the Auditor General’s Department to explore the possibility of hiring independent auditors to fast-track the audit process.

“ADB should hold discussions with the borrower and the executing agency to ensure that the AGD has enough resources to audit the project,” the report said.

“If resource capacity is limited, the ADB may discuss with these entities the possibility of hiring an independent external auditor in accordance with ADB’s financial management guidelines, at the same time that improvements are made in audit staff capacity with financial assistance from other development partners,”

The ADB report has also observed that actual transfers made to provincial councils by the central government for capital expenditure are less than the amount allocated in the central budget.

The report warns that this could affect the implementation of donor-funded projects where the provincial council is significantly dependent on budgetary allocations for counterpart funds.

The report has also raised concerns of how resource constraints could increase the risk of malpractice and fraud.

“In particular circumstances, such as where resource limitations exist, an officer may be involved in more than one function, thus increasing the risk associated with malpractice and fraudulent activity. This possibility should be considered during project appraisal,” the report said.

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