Home Economics & Policy Public finances reach Court of Audit

Public finances reach Court of Audit

The beginning of the end?

by Nicolas Melki

On April 6, 2018, at CEDRE, donor countries pledged $10.2 billion in loans and $860 million in grants to Lebanon to fund long-awaited infrastructure projects in the country. However, the donor countries and organizations require of Lebanon a long list of fiscal, structural, and sectoral reforms in order to release the funds, of which anti-corruption measures are a part.

Desire to free up CEDRE funding is one of the main reasons behind the recent surge of corruption accusations flying back and forth between political parties. Everyone seems to be pointing fingers at each other to slingshot the blame over the not-so-latent corruption that post-war Lebanon has suffered to date. Ultimately, only one pointed finger will matter in terms of accountability, that of the Court of Audit.

Overseeing public funds

The Court of Audit is an administrative tribunal with financial jurisdiction that oversees the management of public funds; it is the highest financial tribunal in Lebanon. The court is composed of judges, controllers, and account auditors as well as an independent public prosecutor. The Court of Audit exercises both (i) administrative and (ii) judicial controls on the state administration, certain municipalities and public enterprises, and institutions and associations funded by the state.

The Court of Audit’s administrative control is twofold: A prior control to approve the use of public funds in specific projects/transactions and a subsequent control to confirm the proper use of these funds. The Court of Audit prepares annual reports with their findings on public spending.

The Court of Audit’s judicial control enables it to prosecute public officials if the court attributes any misuse of public funds to their actions. Such prosecution can only amount to fines if proceedings are brought forward before the court. That said, the Court of Audit can chose to transfer the proceedings to the applicable criminal tribunal if criminal charges are brought against a public official in relation to their misuse of public funds. The concerned official could then face a prison sentence.

Mission impossible?

The Court of Audit typically audits public accounts and submits an audit report to Parliament that votes to approve the public spending of a given calendar year. This procedure is paramount to ensure a proper control on public finances and to confirm the proper execution of the annual public budget. It also constitutes a condition precedent for the Parliament to vote on the annual budget. Since 1993 the Court of Audit has been publishing its annual reports based on incomplete information and documents provided to it by the government (it was exempted in 1995 from its constitutional duties for the years of the civil war, and then for the years 1991/2 in 2006, due to the impossibility of compiling the relevant documents). Moreover, until the 2017 budget, Parliament had last voted on the budget in 2005.

Pierre Duquesne, the French diplomat monitoring the reform progress after CEDRE, stated in early March that the 2019 budget had to be adopted by Parliament as soon as possible. Arguably this pressure is what led the Ministry of Finance to finally hand over all the statements and documents necessary for the Court of Audit to audit the public accounts starting from 1993 until 2017. The mission assigned to the Court of Audit is twofold: First, it must prepare the statement of accounts for 2017 to enable the Parliament to vote on the statement and discharge the government for the public spending of that year and simultaneously approve the budget for the year 2019 (this audit of 2017 is late, it should have taken place in 2018; likewise the audit of 2018’s spending is due this year.) Second, the court must examine the use of public funds from 1993 up until 2017—a task that will take two months to complete, according to sources in the court. 

In order for the court to function as intended, and not just when it is politically expedient, certain things must change. First and foremost, the court should be sent all the  necessary documents every year without fail and in time for it pursue its review process. In the past, this process has been disrupted, with instances of documents that were either lost, altered or destroyed. To minimize these risks, the Court of Audit should be provided with a fully digitized, comprehensive platform where data transfers and documents submissions can take place. This will result in a faster, more comprehensive, and more transparent audit process.

Fighting corruption starts at the very top of the pyramid. Being one of the few institutions capable of sanctioning corruption, the Court of Audit needs to be fully functional in order to efficiently assist in the fight against corruption. It remains to be seen if this effort is a one-off exclusively aimed at receiving the funds promised at the CEDRE conference or if it signals the beginning of the end of corruption in Lebanon.

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Nicolas Melki

Nicolas Melki, Esq. is an attorney at law admitted to practice in New York and Beirut. He holds a law degree from Saint Joseph University and an L.LM from Duke University School of Law. Nicolas has worked at reputable law firms in Paris and Dubai and is now a partner at Melki & Associates – Law Firm where he specializes in cross-border corporate and transactional law.

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