• Treasury to be responsible for funds until gazetted
• Economist, Opposition MPs question constitutionality, transparency, accountability
• Gaps in AG’s Dept. and other structures also flagged 

In the aftermath of Cyclone Ditwah, concerns are mounting over the legality and transparency of Government funds created for disaster relief and reconstruction, particularly the Government Disaster Relief Fund and the Rebuilding Sri Lanka Fund.

Financial experts and Opposition members have raised questions about whether these funds, established outside the usual Consolidated Fund framework, comply with the Public Financial Management Act.

Operational framework 

The Rebuilding Sri Lanka Fund was created to channel both domestic and international contributions towards post-cyclone reconstruction. The fund is managed by a committee chaired by the President and includes a mix of senior Government officials and private sector leaders.

Key members of the committee include Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando, who serves as Chairman; Western Province Governor and President’s Special Envoy for Foreign Investment Hanif Yusoof; Ministry of Finance, Planning, and Economic Development Secretary Dr. Harshana Suriyapperuma; Senior Economic Adviser to the President Duminda Hulangamuwa; and Ministry of Foreign Affairs Europe and North America Division Director General Sugeeshwara Gunaratne, among others, along with many of the top industrialists in Sri Lanka.  

The committee is responsible for approving expenditures, monitoring fund allocation, and ensuring compliance with legal and financial regulations, with a mandate to maintain transparency and proper governance.

While intended for rapid disbursement of aid, questions have been raised about accountability, reporting, and auditing mechanisms, particularly in light of delays in appointing a fully resourced Auditor General.

Both funds, according to some, require statutory recognition by Parliament, clear governance rules, and robust auditing to ensure transparency and maintain public trust in post-disaster financial management. 

Under the Public Financial Management Act No.44 of 2024, the Government is empowered to undertake national rebuilding and reconstruction projects, but only within the framework established by law. All public expenditure must originate from the Consolidated Fund or other authorised Government funds. 

For specialised or large-scale projects, the Treasury, under the direction of the Minister of Finance, may establish separate funds – but only if either Parliament has appropriated money for the project or the fund’s creation is deemed necessary for proper accounting and management of public resources.

Funds created under this framework must have clearly defined rules outlining their purpose, sources of money, permissible expenditures, and governance arrangements. Foreign aid, loans, or grants must also be routed through authorised channels and managed according to these rules. 

The act explicitly prohibits ad hoc or non-statutory funds, which must either be merged into the Consolidated Fund or formally constituted under the law. All funds and expenditures are subject to strict auditing requirements to ensure transparency and legal compliance.

In such a backdrop, on Thursday (18), Parliament noted that the Prime Minister would present a motion for a supplementary appropriation on 6 January 2026. The motion proposed making available an additional sum not exceeding Rs. 500 billion from the Consolidated Fund or any other Government funds, including loans obtained at the Government’s discretion, for the financial year commencing 1 January 2026 and ending 31 December 2026.

The allocation is to be expended under ‘Head 240 – Department of National Budget, Programme 2 – Development Activities,’ with Rs. 150 billion for recurrent expenditure and Rs. 350 billion for capital expenditure. Cabinet approval for this supplementary estimate, presented on 18 December, has been signified, allowing the funds to be utilised according to the provided schedule.

Serious concerns 

Speaking to The Sunday Morning, economist and former Deputy Governor of the Central Bank Dr. W.A. Wijewardena expressed serious concerns about the legality, transparency, and accountability of disaster-related funds. 

“Since the Government has set up this account outside the Consolidated Fund, it is technically not in line with the Constitution. That is why critics have argued that parliamentary approval is required,” he said, emphasising that oversight was crucial to prevent misuse. 

Dr. Wijewardena highlighted that all Government receipts must be credited to the Consolidated Fund, and all payments must be made through it, with parliamentary approval required for both credits and debits. 

“Whatever money is received by the Government, even if initially held by the Treasury, must go through the Consolidated Fund. The Consolidated Fund is provided for in the Constitution, and any debit from it must be made through the Appropriation Act in Parliament, while any credit must also follow the same procedure,” he explained.

He drew parallels with past experiences, noting that special funds, such as those established to support Hambantota, had faced criticism for being managed by a single individual without sufficient transparency. 

“Special funds like the President’s Fund are exceptions only because they have been explicitly authorised by an act of Parliament. Similarly, any new disaster management committees empowered to utilise disaster-related funds must be sanctioned by Parliament, with clear rules governing their use, and the auditor general of the republic must conduct regular audits,” he added. 

Dr. Wijewardena also raised concerns over delays in appointing the Auditor General and the lack of facilities, staff, and technology within the office. “The Auditor General primarily conducts financial audits, but evaluating the value and effectiveness of expenditures, particularly for monetary policy, requires technical expertise, which is lacking in-house. As a result, external specialists have to be hired,” he said. 

He warned that without proper auditing and parliamentary oversight, transparency and accountability in Government financial management were severely undermined.

Technically illegal? 

Meanwhile, former Minister of Finance and Opposition MP Ravi Karunanayake described the Rebuilding Sri Lanka Fund as technically illegal under the Public Financial Management Act. 

“Previously, special funds created outside the consolidated framework led to misuse. The law now requires that any money credited to accounts like the Rebuilding Sri Lanka Fund must go into the Consolidated Fund and be spent through the normal budget process,” he told The Sunday Morning. 

Karunanayake stressed that the fund currently existed “in limbo” because it had not been formally approved through the Budget, making any expenditure technically illegal. He added that while donations or allocations labelled for rebuilding could be utilised once formally appropriated, transparency and accountability remained key concerns. 

“Any money allocated under the Rebuilding Sri Lanka label has to come through the Consolidated Fund via the official budget. Otherwise, it lacks transparency and could be challenged in court,” he warned, drawing parallels to controversies over special funds created during the 2004 tsunami relief period. 

Meanwhile, Committee on Public Finance Chairman MP Dr. Harsha de Silva reiterated that the Rebuilding Sri Lanka Fund must be approved by Parliament as a statutory fund. “We cannot create funds like Helping Hambantota without a proper legal basis. To do something like this, it must be brought to Parliament and approved. That has not been done yet. The Rebuilding Sri Lanka Fund should be established immediately through Parliament,” he said. 

Dr. de Silva added that this must be done with proper transparency. “In my view, the Government alone does not need to do everything. Both the Government and the private sector can contribute. The private sector should be allowed to do what it can, and the Government should handle what cannot be done by the private sector.” 

He further noted that a supplementary estimate of Rs. 500 billion should be presented to Parliament to rebuild the country. 

“We have allocated Rs. 1,400 billion for capital expenditure next year for things like building roads and hospitals. Due to the damage caused by the cyclone, there are funds available to reallocate. I don’t believe that we need to find new money. However, there are day-to-day expenses, such as cleaning houses and related activities, and this will require about Rs. 500 billion in additional spending. That is manageable.” 

“There is an International Monetary Fund (IMF) condition that limits primary expenditure to 13%, but because of this crisis, we have some flexibility to spend beyond that. Another point is that the Government has over Rs. 1 trillion in the banking system,” Dr. de Silva pointed out. 

However, when contacted, Treasury Deputy Secretary A.K. Seneviratne stressed that the funds remained under Treasury oversight, as they had been created as sub-funds of the Treasury. “Until the funds are formally declared through a gazette, the accounts will be managed by the Treasury and remain under its supervision,” he said.