SPEECH BY THE HON JOHN DALLI, MINISTER OF FINANCE, AT THE 4TH ANNIVERSARY CONFERENCE OF THE ESTABLISHMENT OF THE NATIONAL AUDIT OFFICE. ELLUL MERCER HALL, MEDITERRANEAN CONFERENCE CENTRE, VALLETTA

National Audit Office’s Role in Financial Control

Background

The document "The Change continues..", however, is probably the main factor that set in motion the changes which were eventually carried out at the National Audit Office.

The document specifically proposed the modernization of the law, which regulated the powers, and functioning of the Government Auditor, with the aim not only of increasing his powers of review but also of strengthening his independence.

Through the document, the Government of the time had proposed that it was time to revise the method by which the Government’s principal Auditor was to be appointed. The functions assigned to him, as well as his relationship with the Government, Parliament and the people, also needed to be revised and updated to the then current needs of the country. It was argued that the Government Auditor must act as the citizen’s trustee by being able to examine and control Government administration and finances effectively, transparently and without any pressure or influence from any body, person or other authority.

Although the auditor’s independence was already guaranteed before 1993 (since the Independence Constitution of 1964) by the relative provisions in the Constitution of Malta, it was felt that his independence and functions needed to be strengthened further, both legislatively as well as functionally. The document therefore proposed:

• The setting up of the office of Auditor General which would have autonomous functions and powers;

• That the Auditor would have full control on the recruitment or removal of office personnel;
• That the Auditor would also report to the Public Accounts Committee of Parliament.

At the same time, a revision of the working methods and of the aim of his work needed to be undertaken. It was held that while the Auditor’s function at the time (which was to ascertain that financial regulations were to be followed) should continue to be carried out, it was considered equally important that the Auditor (who was able to observe the whole machinery of the administration) should comment critically upon the effectiveness, efficiency and economy of government-related operations, programmes and activities.

The state audit institution, together with the Public Accounts Committee, Ombudsman’s Office, Internal Audit and other bodies that have been set up or evolved since 1993, were considered to be important tools for the development of accountability, transparency and value for money in public administration.

Changing legislation is, of course, by itself not sufficient to ensure that things are carried out the way they should be. Legislative measures have to be accompanied by organizational changes and often by changes relating to the mentality of employees. I am aware that the Auditor General had a very difficult task to carry out the changes that were required.

I would like to say something now about the Public Accounts Committee, of which I have had some experience in the past as a member and as its Chairman.

The NAO, together with the Public Accounts Committee, are acting as guardians to Government finances and activities. The PAC, established six years ago, together with NAO, are important tools in accountability and transparency and control of the public sector. The PAC helps to ensure that audit findings are acted upon by the auditees and are brought to the attention of Parliament. Audit report findings have definitely started being given more weight since the establishment of the PAC. I can say this from my own experience as Chairman of the PAC way back in 1996. I can also state that the establishment of the PAC had indirectly also prompted the then Audit Department to improve the quality of its report.

Finally, I would like to make some mention on Chapter 28 on Financial Control of the EU Acquis Communautaire that has been closed a couple of months ago. The report on this Chapter positively noted that the NAO is completely independent of the Government. It noted that its financial and operational independence is established by the Constitution and by the NAO Audit Act, that it has the power to audit all the public finances and obtain all the information required for its audits. It also positively noted that the Auditor General is nominated by the Parliament and submits its audit reports to the Speaker of the House of Representatives and that Hearings on the audit results are held by the PAC. The EU also welcomes that INTOSAI (International Auditing Standards for Supreme Audit Institutions) are used as guidelines for the functions of the NAO. The President of the European Court of Auditors in a recent visit to the NAO also noted with satisfaction that the NAO was well organized and properly performing its role as a State Audit Institution.

It is encouraging to note that following the legislative changes that were carried out in 1997 and the subsequent organizational changes carried by the Auditor General, the NAO is undergoing the necessary changes required for a modern state audit institution. I believe that the NAO is on the right track. There is of course still a lot to be done by the Office to bring it up to scratch with today’s realities and circumstances. For instance, it still needs to be beefed up with more professional staff. However, the positive certificate given by the EU on the NAO as well as the evident improvement in audit reports in these past few years show that the Office is a strong state audit institution that is capable of facing current and future requirements in the state auditing function.

Thank you.