Will the Proceeds of Crime law deter corruption, misuse and theft?
The “Proceeds of Crime,” Act has now been passed by Parliament to address the existing legal loopholes. According to that law, possession of any property obtained from the proceeds of crime or engaging in any type of transaction with it is a punishable offence.
Laws and Regulations
Most laws and judicial procedures are designed to subject facts to post-trial investigation and do not complement the administrative procedures and provisions that build fences to prevent these violations from occurring. It is true that punishment given by laws and regulations can be a response to an offence and a deterrent to not repeat such offenses, but it does not eliminate the scope for offences. Rulers should also pay attention to the changes that need to be made in this regard in order to establish good governance.
Bribery, corruption, and the embezzlement of public funds, especially the misuse of funds allocated for the development of the country, have become more prevalent. This is because the public sector lacks transparent and accountable governance systems and procedural mechanisms for the control, regulation, reporting, and protection of public funds. This has allowed rulers to hide in the shadows and get away with corrupt and criminal activities.
According to the facts revealed by audit reports in the past, in some cases where liabilities were identified in the state financial statements, it was not possible to identify the assets or public services created by them. Liabilities are burden on the nation, and if the country does not receive reported real benefit of it, there is no checks and balances in the control systems. Sometimes, these reports also reveal undisclosed borrowings and liabilities. It is a question of transparency and preventing fraud and corruption is not an easy task if such things are allowed in the public sector.
Procedures
Why is it not possible to disclose information about an identifiable and measurable physical asset or service that is created properly using loans obtained in the name of the government? Did these loans inadvertently flow out of the public purse through misuse? These are questions for the public and their attention should be focused on whether there are no procedures in the government sector that would expose and prevent such irregularities if they occur? If not, are such procedures ignored by the relevant officials? If there are no procedures, there should be provisions in the governance system to create them and, if not, to hold officials who do not follow the procedures accountable.
If there is no mechanism in the financial system that flows information about how that money has been used, it is a shortcoming. This can also be a problem for government officials to achieve transparency and accountability. These are examples of the lack of procedures for checking and balancing the assets and liabilities of the public sector, as well as timely and accurate reporting, in this sector, and such disorganised systems have naturally opened the way for misuse and theft of public resources.
Accounting and audit
Government auditing also focuses more on statutory audits conducted annually. Cash basis accounting does not allow for an audit of assets and liabilities on standard basis. To do so, such standards must also be established and there must be consistent standardised financial reporting system in the public sector for that. Here, all assets arising from expenditures that can be capitalised in the government budget can be included in these standardised financial statements, while expenditures that are not capitalised should be included in the performance statements. Also, all loans obtained should be shown as liabilities. It is the responsibility of the accountants to monitor these periodically for audit.
In particular, the relevant officers are responsible for checking the quality and quantity of assets obtained through the procurement process, and reporting and monitoring of any deficiencies and irregularities that occur should be carried out on a daily basis.
Informality
The issue here is the inefficiencies that arise from handing over work to contractors. However, this can be remedied if the work is properly implemented, with regular physical inspections to ensure that the contractors are paid at the real cost. It is questionable whether the procedures and laws that hold officials who do not follow these things accountable are implemented in the public sector. There is no active use of internal audit and social audit to monitor daily operations. The lack of such systems, especially in the provincial government, is a breeding ground for bribery and misuse of public funds.
Perhaps the fraud was initiated from the top down, right from the decision-making stage. For example, large-scale construction works and projects have been prepared without regard to the situational national economic benefits, unnecessarily using public funds without priority basis and the people ultimately do not benefit from the assets created, and the errors in estimates and calculations may have been made deliberately.
Projects
It is particularly likely that such corrupt practices are committed on a large scale through development projects. Such development projects are often carried out with local or foreign loans and aid. Even after the foreign loans obtained for such projects have been repaid in dollars, they have failed to find proper use of the assets as a benefit to the country’s economy. Accordingly, if we calculate the cost in rupees spent up to the repayment of the loan and compare it with the profitability made, we can see that the amount lost to the country is immense.
It is true that under the current circumstances, funds are approved for projects by following the procurement procedures and preparing feasibility financial and economic reports. However, the assets shown through it and the reports with evaluations of the economic and financial benefits obtained thereon are mostly utilised eagerly for obtaining the necessary funds and loans. There is no continuous monitoring, evaluation and reporting system of proper identification and recognition of the assets and services generated, their subsequent use and whether the economy receives the proper benefits from them .This has led to the failure to disclose what happened. When there is no transparency about the sustainability existence of projects and activities from start to finish and thereafter, hidden incidents remain undetected. These are factors that encourage misuse and theft of funds.
Hidden deals
It is no secret that a certain amount of money, especially from projects funded by foreign aid, is officially remitted to foreign countries for procurement purposes during the implementation phase. In relevant agreements, there may be a policy or implicit belief that a certain amount of goods and services purchased from abroad using loans and aid must be obtained from one’s own country or member countries. Similarly, foreign goods and services may be purchased with domestic loans. Without proper identification, measurement, and disclosure of the results of such transactions, dealings may be hidden, leading to misuse and theft of the funds. This may result in the country not receiving the goods and services of the proper quantity and quality from the money spent on purchases. Consequently, the benefits indicated in the performance evaluations may not ultimately be received by the country and a portion of the indicated costs may also flow out fraudulently. It is a shame that there is not a regular reporting system for interested parties on work in progress.
What we expect from a sustainable development project is to obtain an asset or service that brings financial and economic benefits to the country in a proper and sustainable manner for the money invested. Future reward and benefit from them should also flow into the country within a reasonable period of time within the horizon. It is not difficult to understand what happens to a country that does not have a standardised process for identifying and recognition, continuous measuring, and disclosing of such assets to the rulers in time.
For example, even if the money allocated for a certain project is used as its cost and the ownership of the completed project is transferred, if there is no proper recognition and measurement of the benefits of those assets, it cannot be said that the country has received an asset for the amount of the cost. In this case, a portion of the cost may have gone out without adding value to the asset. This raises the possibility that this money may have been misused, stolen, or destroyed through negligence. If there was a systematic way to determine whether the costs and the assets generated by it would yield the benefits indicated in the feasibility studies, the hidden factors could be indicated.
(The writer is a Financial and Economic Analyst, and Chartered Accountant)
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!