The Evolving Role of the National Audit Office

During the XXII International Congress of Supreme Audit Institutions (INCOSAI) held last December in Abu Dhabi, all participating Supreme Auditing Institutions (SAIs), including Malta’s National Audit Office (NAO), issued a joint declaration which, amongst other things, clearly illustrates their main objectives. In a nutshell, these are essentially ‘to help their respective governments to improve performance, enhance transparency, ensure accountability and fight corruption’.

This preamble to the Abu Dhabi Declaration leaves no doubt as to the critical role of the Maltese NAO in ensuring that public resources are invariably used in the most effective and efficient manner possible and in line with the prevailing financial rules and regulations. Fortunately, the considerable challenge to continuously promote transparency and accountability across all government’s operations, eliminating waste and abuse while simultaneously seeking to promote cases of best practice and good governance, has been well understood by the Maltese legislator. This is clearly evidenced by the fact that the Office’s total autonomy and independence in performing its audit mandate is guaranteed by the Constitution itself as well as by the Auditor General and National Office Audit Act (Chapter 396), as will be discussed in more detail throughout this article. It is indeed undeniable that without such independence, no effective scrutiny of government’s operations by any SAI would be possible.

By way of brief historical background, in 2014 the NAO commemorated the 200th anniversary since the setting up of a state audit institution in Malta. In October 1814, the British Governor General, Sir Thomas Maitland, considered it necessary to set up an audit office to address the various problems and shortcomings clearly manifested within the Maltese public service of the time. The book ‘Guardian of the Public Purse’ (second edition), issued in December 2014 and co-authored by Prof Edward Warrington and Prof Godfrey Pirotta, provides an invaluable historical perspective of all major developments influencing the Office during these two centuries of state auditing in Malta.

This year, the NAO is commemorating one of the most critical milestones of its history. In 1997, exactly twenty years ago, extremely important and far reaching legislative amendments to the Constitution and the enactment of a new law, namely the Auditor General and National Audit Office Act, which set up the NAO in its present format, were unanimously approved by Parliament. In essence, these amendments had as their main objective the enhancement and safeguarding of the full autonomy of the NAO. In practical terms, amongst other things, the amendments:

  1. gave both the Auditor General as well as the Deputy Auditor General their present status as officers of the House of Representatives, chosen by Parliament with not less than a two-thirds vote;
  2. rendered the NAO totally independent from the Public Service, and no longer reported to a Minister but directly to Parliament;
  3. gave the Auditor General the power to recruit staff and determine their salaries and conditions of service in line with the Collective Agreement, as updated from time to time;
  4. provided the Auditor General with a clearer mandate to undertake “Value for Money” audits in addition to the usual financial and compliance audit reports.

As stipulated by law, all reports issued by the NAO are presented to the Hon Speaker of the House, to be circulated to all Members of Parliament at the first scheduled Parliamentary sitting. Most of these reports undergo a further process of extensive scrutiny by the Public Accounts Committee (PAC). Normally, the PAC summons to testify the respective Ministry’s Permanent Secretary, as well as other senior officials as deemed necessary, focusing especially on the areas of concern identified, as well as the implementation of recommendations put forward by the NAO. The Auditor General, the Deputy Auditor General and the respective audit team are present throughout all PAC meetings mainly to offer executive support and to answer any enquiries raised by any PAC member.

It is pertinent to note that three out of the seven members of the PAC may request the Auditor General to inquire into, and consequently report upon, a particular matter related to government finances. In fact, most of the assignments carried out by the Special Audits and Investigations Section within the NAO are directly mandated by the PAC.

The powers of the PAC emanate from Standing Order 120E and the Auditor General and National Audit Office Act.

The role of the PAC is underpinned by general acceptance of the underlying values associated with good governance and public scrutiny: economy and efficiency; effectiveness; accountability; responsibility; less bureaucracy; and transparency. Hence the fundamental importance of this Parliamentary Select Committee which in actual fact provides added value to the work carried out by the NAO.

Two main reasons account for the high level of credibility and trust that the NAO has managed to develop and consolidate throughout the years, particularly since it was set-up in its present format through the legislative amendments referred to above. The first factor stems precisely from the NAO’s operational independence from all political parties and any other pressure group – an autonomy which the NAO feels duty bound to zealously safeguard without any exception or fail.The principle of total autonomy is enshrined in the Constitution itself; however, even more importantly, successive governments have de facto fully respected this sine qua non condition thus ensuring that we have in place an adequately funded, effective and relevant audit institution which could carry out its mandate without any interference or hindrance. This crucial aspect for every SAI is duly emphasised by the Lima (1977) and Mexico (2007) Declarations issued by INTOSAI. The former declaration clearly refers to the independence of SAIs and its members as one of the necessary founding principles of public sector auditing, while the latter deals specifically with a presentation of the core principles of SAI independence, considered as an essential requirement for proper public sector auditing. {As officers of parliament, both the Auditor General and the Deputy Auditor General convey their appreciation to successive Hon Speakers who have always extended their support to this important concept which ultimately enhances the level of democracy in Malta}.

The second equally important factor is the commitment and professionalism shown by past and present NAO management and staff in the carrying out of their duties. Indeed, although no one would deny that within the local context, auditing does, on occasion, present its fair share of problems and constraints, the Office’s staff, through their commendable commitment and resilience, have always managed to carry out their mandate in the best interest of the Maltese taxpayer.

Whilst acknowledging that qualified, competent and dedicated human resources constitute its most important and valuable asset, the Office is committed to extend its full support to staff seeking to further their academic and professional development. This is clearly specified in its Continuous Professional Development Policy which, amongst other initiatives, promotes the participation of its staff at various work-related conferences, courses or training events. Moreover, following internal consultations, a 3 year training programme for all staff has just been launched.

Undoubtedly, one of the major challenges that the NAO faces is to ensure that the Office remains relevant. Unless its audits and assignments remain relevant both to Parliament, to whom it reports, and taxpayers, whose interests it seeks to safeguard, it surely would not be in a position to meet the objectives highlighted in this article’s opening quote. Fundamentally, this necessitates that the topics chosen for scrutiny are indeed those which could improve the operations of government entities in terms of efficiency, effectiveness and economy and which therefore result in an enhanced service delivery to their clients. In the medium term the NAO plans to introduce better audit selection methods to ensure that its audit plans are focused on those areas which ultimately lead to significant value added to the taxpayers. The commitment towards relevance is a critical aspect in ensuring the successful performance of the Office’s mandate.

Quoting from the latest INCOSAI declaration:

“Citizens are the ultimate beneficiaries of public auditing and have expectation for professionalism. It is the SAIs duty to perform the highest quality audits and provide citizens with reports that support transparency, good accountability and trust in government. Only the best work can make a real difference to their lives.”

Abu Dhabi Declaration, December 2016.

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