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MP Harsha de Silva highlights national accounting fraud

13 May 2021 12:00 am - 11     - {{hitsCtrl.values.hits}}

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To evaluate this claim, FactCheck consulted the Annual Reports of the Central Bank of Sri Lanka of 2019 and 2020, and the Annual Report of the Ministry of Finance 2019. 


The Central Bank Annual Report of 2020 states, “Government expenditure and net lending in 2020 were adjusted by the Ministry of Finance by shifting a sum of Rs

. 422.6 billion to 2019 in view of accounting for the payment of arrears spilled over from 2019” (p. 155).
This shift in the presentation of accounts would only be acceptable under an “Accrual Accounting” method where expenditure or revenue is recorded when the transaction occurs as opposed to when cash is paid or received. However: 


(i) The Annual Report of the Ministry of Finance 2019 states that Sri Lanka’s national accounting system uses the “Modified Cash-based Accounting” method (p. 196). Under this method of accounting, expenditure and revenue is only recognised when cash is paid or received, and unspent budget allocations are cancelled at the end of the financial year.

(ii) Even if accrual accounting had been used, it is necessary to apply the same accounting treatment for revenue as well as expenditure in arriving at the budget deficit.  However, revenue for 2019 was unchanged in the 2020 accounts, indicating that accrual accounting was only applied to expenditure, and not applied to revenue.  
Taking (i) and (ii) into consideration, the shift in expenditure of Rs. 422.6 billion made in 2020 to the accounts of 2019 cannot be validated by an accounting standard. Therefore, the resulting misrepresentation fits the definition of accounting fraud, as claimed by the MP in his tweet thread.


FactCheck calculated expenditure for 2020 by adding back the Rs. 422.6 billion that had been improperly shifted to the 2019 accounts. Doing so resulted in a budget deficit of LKR 2,091 billion which amounts to 14% of GDP
in 2020.


Therefore, we classify the MP’s claim as TRUE.

 

FactCheck is a platform run by Verité Research. 
For comments, suggestions and feedback, please visit www.factcheck.lk. 
 

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  Comments - 11

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  • D Jay Thursday, 13 May 2021 12:27 PM

    The accounting convention in consistency states that the same accounting principles must be used consistently in preparing financial statements throughout all periods. Otherwise, any conclusions drawn would be useless.

    roni Thursday, 13 May 2021 05:29 PM

    Are you surprised that we are back to the Mother of all Bonds era. Where were you for the last 9 months or so

    Rohan Friday, 14 May 2021 01:19 AM

    That's OK Harsha 98 pct of the masses are illiterate. You can sell them donkey call in a horse .

    Patriotic citizen Thursday, 20 May 2021 04:06 AM

    We appreciate your knowledge and wisdom

    Sharmini Mahendran Sunday, 23 May 2021 10:32 AM

    Thank you for fact checks

    Kosala Gandara Sunday, 23 May 2021 05:58 PM

    But did nothing with RW! RW is crying now!

    Suwarma Sunday, 30 May 2021 09:17 PM

    Where was the NAF when your boss RW was robbing the CB. Brush your teeth.

    Duminda Tuesday, 01 June 2021 01:22 PM

    We must not say bad things about the government. Are you traitor to the motherland?

    Janawansa Samarajeewa Wednesday, 02 June 2021 04:03 PM

    It is better than the CB fraud!

    All the best Saturday, 05 June 2021 03:05 AM

    Keep up the good work. Can't wait to see you win

    Olu bakko Saturday, 05 June 2021 05:02 AM

    I suggest that you have a series of workshops on the subject of democracy the power of the vote to realise the deceitful way of buying votes,to do this now may be difficult with the pandemic. Zoom email letters may help. We don't want the next generation of deceitful politicians to raise their dirty egg heads


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