NGOs receiving public funds may be made subject to internal audit

The government is ready to consider whether voluntary organisations that benefit from public funds should be accountable for such funds by undergoing internal audit, Minister for Justice and Home Affairs Tonio Borg said in parliament.

He was winding up the debate on the second reading of a bill on internal audit and financial investigations in government departments, companies and private entities which receive public funds.

Dr Borg insisted in reply to earlier Opposition remarks that the bill would not in any way impinge on, or prejudice, the powers of the Auditor General or the Public Accounts Committee.

Mr Carmelo Abela (MLP), who spoke earlier, said the bill did not present any concrete methods to curb government spending.

In contrast with the Auditor General, who normally investigated matters after they happened, internal auditors monitored ongoing spending. Everything possible should be done to ensure that civil servants did not perceive such work as interference.

It was positive that internal auditors would be reporting to the Cabinet Secretary, but there was a missing link in that auditees would not be seeing the internal auditors' reports on their sectors. Sometimes these reports went missing without a trace.

Mr Abela observed that the internal auditors would be responsible not only for financial auditing but also management auditing. Systems which were proving to be too expensive should be adapted or removed altogether.

Confidentiality was important, but not at the cost of corrective actions not being taken. After all, these audits would be reflecting directly on the spending of tax revenues.

Also missing from the bill was the type of relationship that the internal auditors would be having with the House Public Accounts Committee, which in effect was an extension of Parliament.

Internal auditing was useless if nothing was done about the findings. There should be full ministerial and political accountability for both positive and negative developments, but this accountability must also go down to lower levels, including management.

Past meetings of the PAC had revealed that certain ministries did not even have internal auditors. There had also been instances where one internal auditor had to cope with more than one ministry, or where auditors had barely the office space to work in. One of the least equipped ministries in this sense was, ironically, the ministry of finance.

Concluding, Mr Abela said one of the most important aspects for internal auditing to succeed was the task of persuasion of the auditees. If the task was well done by all quarters it would result in a more seriously administered civil service for the benefit of the whole country.

Parliamentary Secretary Carmelo Mifsud Bonnici said that the bill was setting up a machinery which would continuously and without limitation of time or method carry out financial investigations.

Over the past years, the national audit office had done a lot of useful work and had given direction, but this directorate would be carrying out a continuous process. It was also different from the Public Accounts Committee, which limited itself to a number of issues.

Internal auditing would assist the entity being audited to reach its aims through suggestions and direction.

Financial investigations would be carried out in detail where fraud or irregularities were suspected. The directorate being set up by this bill would also go into cases of corruption by public officials.

These were all measures which indicated that the government was building a serious basis to strengthen the administrative structures.

Labour MP Joe Brincat said that while the Auditor General was elevated to constitutional level, another auditing structure was being set up in line with EU legislation. Parliament also had the Public Accounts Committee whose members had the power to investigate, ask questions, obtain information and be the watchdogs of the public service.

How were the Auditor General and the PAC to be wedged in between this new structure? The minister should amend the bill to define as from now the functions of the different structures.

What was the position of the directorate to be in view of the PAC? One had to be careful to avoid overlapping.

The bill should establish coordination to avoid conflict of competence. And it should be parliament, as the supreme institution chosen by the people, and not the minister that should appoint the director to head the directorate.

Labour MP Joe Abela said one should not stop at setting up a structure to see how money was spent. The government should also look at systems. For example, at the hospital there was nothing to control the amount of medicine taken out of the treatment rooms as the government had not provided pharmacy technicians who could register what was going out. The little money being saved in not employing a pharmacy technician was thus still being wasted.

He said that organisations which were given public funds should be seriously audited for the public to be kept informed about how taxpayers' money was spent.

Referring to the Lm1,000 fine which could be handed down to directorate officials who did not declare conflict of interest, he said this was not much of a deterrent.

Ms Marie Louise Coleiro (MLP) said it was not enough to have a set-up for any function without the necessary backing. A number of social security officials who had been asked to cross-check their department's own records of social beneficiaries with an ETC database had found that the latter was not reliable. This was certainly not the way to do things when the ETC's records were so important.

Value-for-money audits were needed in several sectors. Any study on cost-effectiveness of the millions of liri spent on education in Malta would show that results fell far short of expectations.

Statistics on accidents at work showed that these had increased by three per cent in the first four months of this year. Newly made roads were almost systematically being dug up again after just a few weeks.

Such aspects showed that internal auditing should be backed up by political commitment to see that things were done better, concluded Ms Coleiro.

Winding up, Dr Borg said the role of internal auditors was to bring measures to bear while something was still ongoing to ensure that it was done the right way.

The findings of internal audits were intrinsically confidential and could never, of their own essence, be made public. This confidentiality bound not only the auditor but anyone who assisted him.

Mr Leo Brincat (MLP) interjected that some foreign countries had provisions for internal audit findings to be the subject of public scrutiny, such as by the PAC.

Continuing, Dr Borg said internal auditing would ensure that funds made available by such international organisations as the EU were well spent. A departmental director was already bound to produce an annual report to publicise his department's efforts, but he was also obliged to draw the attention of the Auditor General if he had reason to suspect financial irregularities.

The powers embodied in the present bill would not in any way impinge on, or prejudice, the powers of the Auditor General or the Public Accounts Committee.

Dr Borg said the fine of Lm1,000 was only the maximum pecuniary penalty for a number of crimes: there were also jail terms involved. Dr Borg did not agree the penalties envisaged in the bill were too light.

The bill was then given a second reading.