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32 CERTIFIED MANAGEMENT ACCOUNTANT

and decision-making forums in order to includes governance and performance
judge and assess the appropriateness of information of an organization in a
decisions made by the authorities. certain reporting period. Annual reports
The requirements for Transparency “ are abundantly used by private sector
organizations to connect with their
can be divided into three categories as The lack of stakeholders. Hence, it might be vital to
follows: transparency and use annual reporting in order to connect

1. Clear Information – which means with citizens or the stakeholders. The
the citizens should be aware of the accountability in annual report will provide: information
decisions and actions taken by the public sector has regarding the organization’s vision,
Government. mission, values, strategic goals;
statements from the organizational
2. Transparent Partnership – all the led to major risks leaders; profiles of organization
people should have a right to take to the efficiency directors and organizational structure;
clear political decisions personally information of key organizational
or through their representatives. of the capital resources; and, information regarding
3. Clear Answer – when violation of law market, global the organization’s activities during the

has a severe impact on the interest market stability, reporting period with statistics and
of the people, the judicial system performance data. An annual report
and the authorities should clearly be and long-term is a magnificent way to share the
accountable for their performance. sustainability at information with interested parties,
which can be highly recommended to
Accountability exists in a relationship present. public institutes to accommodate.
between two parties where one has 2. Financial reporting
expectations of the other, and the
other is obliged to provide information Preparing financial reports as per the
about how they have achieved the Sri Lanka Financial Reporting Standards
expectations or face the consequences picture of the income and expenses. (SLFRS) is a must, for private institutes.
of failing to do so. There are two Cash basis accounting does not show But, in the Sri Lankan public sector,
components of accountability. They are, the liabilities of a company, which leads it is rare to find a financial report
to the investors or decision-makers prepared in accordance with SLFRS.
1. Answerability – providing thinking there is more money to spend Financial reporting methods differ
information or justification for how when the actual cash flow is less. from one institute to the other. If all
the actions align with expectations.
3. Ineffective mechanism of internal the public institutes follow the SLFRS
2. Enforcement – being subject to auditing in their financial reporting, that will
and accepting the consequences of provide a clear picture of organization
failing to meet the expectations. Internal auditing procedures in the performance and governance to its
Reasons for the Lack of Transparency public sector is much more complicated stakeholders and leaders to make
and Accountability in Public Sector due to the lack of well trained, appropriate, effective, and efficient
experienced and independent audit decisions regarding public resources
1. Lack of proper monitoring and personnel. At the same time, a well and also, will bring the transparency of
supervision explained audit report can be withheld the organization’s performance to the
One of the major reasons for lack of as a result of political influence. general public.
transparency and accountability lies in 3. Disclosing related party transactions
improper monitoring and supervision 4. Politicization
in the public sector. Supervision is Politicization or political influence can It is advisable to disclose any related
narrowed down to certain areas while be identified as the major contributor party transactions which happened in
most of the irregularities and shortfalls to the lack of transparency and the organization to its stakeholders.
are not discovered. This mainly happens accountability in public sector which Related party transactions can be
due to the lack of knowledge and leads to fraudulent activities. defined as the transactions undertaken
education, laziness or not given proper by people who are closely related to the
authority to make decisions. How can we achieve organization. Related party transactions

2. Cash basis accounting Transparency and are not uncommon, but they must be
carefully managed in order to meet
Cash basis accounting is a method of Accountability through any obligations under the law or any
accounting that records a revenue when requirement to disclose them. Related
cash is received, and expenses when Accounting? party transactions are common in
they are paid in cash. Public sector 1. Annual reporting public sector organizations. As a result
institutes mostly maintain cash basis of high political influence in the public
accounting which provides a limited Annual report is a document which sector, all related party transactions are

www.cma-srilanka.org | Volume 06 - No. 2 - September 2021