The National Audit Office - 10 years on

At the end of last year the Auditor General published his report for 2005 as required by the Auditor General and the National Audit Office Act of 1997. In fact this year represents the 10th anniversary since the restructuring of the National Audit Office, a reform that was expected to safeguard further the independence of the National Audit Office and on which there was agreement by both sides of the House of Representatives.

This reform placed the NAO at par with other independent institutions such as the Office of the Ombudsman and the Malta Broadcasting Authority. These institutions are totally independent of the government and report to Parliament directly, thereby ensuring transparency in the reporting process.

This reform was part of an evolutionary process that was at times filled with pitfalls. There was a time some 30 years ago when, if a civil servant fell out of favour and needed to have his or her career channelled into a blind alley, the Audit Office was very often where this civil servant would have ended up. The processes were very archaic and the level of academic background of the staff was not so high.

This is not a reflection of the capabilities or the willingness of the staff to do a good job, but rather a reflection of how the powers that be treated the Office.

Thus the reform that was effected in 1997 could not just be a simple change in the law or in the reporting process or in nomenclature. It could not be reduced to a change in form but no change in substance.

There was the need of a change in both substance and form and the public profile of the National Audit Office as well as the profile of its human resources has improved significantly over the last 10 years. The recruitment of professional accountants from outside the public service became possible and soon became a reality, blending well with a number of public servants who moved to this Office.

The vision and mission of the National Audit Office reflect fully the country's expectation of having a modern public service, where accountability, propriety and best practices are promoted and where change and responsiveness to present-day requirements are seen as positive aspects.

So, 10 years on, the National Audit Office has delivered on what it was expected to do, even if, like all private audit firms, it may not be as popular as they may wish to be with their auditees.

I would dare say that the fact that Public Service departments view the National Audit Office very much like private firms view external auditors is a good indicator of the effectiveness of the NAO.

Another important consideration to make is that over these 10 years the government has taken strong initiatives aimed at introducing better control of spending and better systems of governance. Two of these initiatives are the setting up of the Internal Audit and Investigations Directorate and the Financial Monitoring and Management Unit.

This has helped to put in place internal systems of control and provide guidance to the senior management of the Public Service and its accounting officers.

These developments have also enabled the National Audit Office to keep up with the times and change its audit processes by moving from what audit professionals call substantive testing to what they refer to as systems auditing.

Focusing specifically on the 2005 report, one notes a number of issues that are no different from what one would find in a number of very large private enterprises - let us not forget that the Public Service employs 30,000 persons. These issues include the lack of proper documentation in some departments, inconsistent application of policies and procedures, incomplete records, non-recoverability of debts.

The quality of the reporting is very similar to the quality of the reporting made by private audit firms. It is evident from the report that a cadre of public sector audit professionals is being developed.

The recent conference of the Malta Institute of Accountants discussed the role of the accountant and the auditor in serving the public interest. In my contribution at that conference I had expressed my opinion that the public sector should provide a helping hand to the accounting profession if we truly expect this profession to serve the public interest.

The track record of the NAO has definitely been one way of showing how this helping hand is being provided. This certainly does not mean there are no improvements to be made in the workings of the NAO.

However, I do believe that the bottle is half full and not half empty, and I would dare say that it is very close to being full. So the NAO 10 years on has deservedly become one of the most respected institutions within the public sector.