The National Audit Office: a pillar of integrity

Building strong institutions is a central challenge of development and is key to controlling corruption. Among public institutions, the National Audit Office (NAO) plays a critical role, as it helps promote sound financial management and, thus, accountable and transparent government.

The Auditor General and National Audit Office were established through the Auditor General and National Audit Office Act of 1997, along with pertinent amendments to the Constitution of Malta.

The NAO today has become a public oversight institution that audits the government’s use of public funds. It is a critical link in the country’s accountability chain.

Accountability for the use of public funds is of fundamental importance to democratic government, usually involving the executive government accounting to elected representatives in parliament for its oversight of taxpayers’ money.

By scrutinising public financial management and reporting, it assures that resources are used as prescribed. It periodically reviews the legality of transactions made by the audited departments and entities. It also conducts performance audits to scrutinise the efficiency, effectiveness or economy of the government’s undertakings.

The Auditor General has an essential contribution to make to the accountability process through the provision of independent and objective information, assurance and advice to parliament about the accounts presented by the executive.

He is an officer of parliament and is independent of executive government and parliament in discharging the functions of the statutory office but answerable to parliament for his stewardship of the public resources entrusted to him.

However, I think that the full potential of the NAO to address corruption has not been fully exploited, in part because of the lack of understanding of the overall capacity of the Auditor General.

It is well situated to contribute. It is widely viewed as the independent watchdog of the public interest and has been putting a greater focus on accountability for ethics in the public service in the scoping of its audit work and also undertaking value-for-money audits.

Corruption has long been a problem that our country has to confront. Solutions, however, can only be homegrown. The auditor general is in a position to take a stronger stand than he ever has to date. Civil society plays a key role as well.

The NAO cannot intervene in the political affairs of our country. But it can give advice, encouragement and support to a government that wishes to fight corruption, and it is such a government that will, over time, attract a larger volume of investment.

In 2020, for example, the NAO flagged a long list of shortcomings at several government entities, as well as arrears of €5.1 billion. An audit at the Malta Financial Services Authority revealed procurement issues; weak internal controls in various areas were noted at Mount Carmel Hospital; the audit of personal emoluments at MCAST disclosed various shortcomings; and an absence of enforcement action was noted at the Capital Transfer Duty Department and in respect of unpaid Class Two Social Security Contributions.

That same year, the NAO cast doubts on the “regularity” of the tender for the disposal of the ITS site to the DB Group issued by Projects Malta five years before.

It concluded that in terms of governance, the origin of the decision to dispose of the site remained unclear, which was of grave concern given the nature of the land that was to be disposed of. No information supporting this decision or who was involved was provided, with the Office of the Prime Minister and the Ministry of Tourism each assigning responsibility to the other.

Last year, then, the Annual Audit Report on the Public Accounts for 2023 carried over 260 relevant recommendations that were meant to address the shortcomings identified during the reviews in question and thus promote good governance and best practices in the government’s operations.

Some of the key findings identified were the bypassing of procurement regulations, including services rendered under expired contracts and the absence of the necessary approvals; limited internal controls and standard operating procedures; lack of substantiating documentation supporting the payment of allowances and overtime; and inadequate project management, leading to delays and overspending.

Just some time ago, the NAO raised some very serious questions about junior minister Rebecca Buttigieg’s handling of the Europride event, revealing overspending and mismanagement at every turn.

Such well-performed and reported audits serve as essential instruments for development, promoting good governance by improving public sector management. The NAO has over the years been providing high-quality audit services that clearly have the potential to assist the legislature and other governing bodies in holding the government accountable for the good administration of public resources.

Indeed, the NAO has moved towards more proactive involvement in better accountability and more effective operations of government. The Auditor General has moved from a role as an ‘observer’ to a more proactive role as an ‘improver’.

Ideally, the government should take some risk in allowing an informed critic to make comments about its operations and financial statements. However, if the government is not willing to allow such exposure, the lack of commitment to audit will weaken the auditing process considerably.

The government must fully respect the strong mandate given to the Auditor General by the Constitution and provide the financial and human resources to fulfil the mandate. Likewise, there needs to be unrestricted access to information.

Strong linkages between the NAO and other pillars of integrity, notably the Ombudsman, the judiciary and the media, need to continue to be strengthened.