Opposition votes against internal audit bill because of EU link

Opposition finance spokesman Leo Brincat said in parliament yesterday that while the opposition agreed on the need for legislation on an internal audit mechanism for the public service, it would be voting against a bill currently before parliament because it had been moved at the prompting of the EU to protect its own interests.

Mr Brincat was speaking during the second day of debate on the Internal Audit and Financial Investigations Bill. The bill will formally set up an Internal Audit and Investigations Directorate which would carry out internal audit and financial investigations to protect the financial interests of the government, including funds made available under international obligations.

Mr Brincat said the opposition was in favour of internal audit, but this bill was being moved because of EU exigencies after years of indifference. This reflected badly on the Maltese political class.

It was wrong of the government to depend on the EU to do what it was not capable of doing itself. Malta should adopt standards on its own. If Malta had enough self-pride it should realise this. The EU should not serve as the motor to instil a greater sense of discipline in the Maltese.

The bill being debated was aimed at safeguarding EU interests. The EU would have the right to send inspectors to hold investigations on possible financial mismanagement.

The directorate was also to be designated as the anti-fraud coordinating unit of the EU in Malta. It would work hand in hand with the European Anti-Fraud Office (OLAF) which was currently investigating over 100 cases of fraud in EU candidate states. Did any of the cases pertain to Malta?

The EU was not asking for the setting up of the directorate to instil greater discipline in Malta but to better safeguard its own interests. And Maltese taxpayers would pay for this.

The auditor-general and the internal auditor would be controlled by foreigners and would report to Brussels. This was humiliating and Labour would be voting against the bill for this reason.

The bill, Mr Brincat said, did not say anything on the relationship between the external and internal audit office.

He referred to a statement he had made repeatedly and said he was still awaiting a reply from the government over whether the government over the past weeks had directed MITTS to reverse entries or payments so that the budget deficit would not look as large.

This, he said, was a scandal which the internal and external auditors should investigate.

The government should also explain how it appeared that MITTS, the government's IT arm, faced a cashflow crisis.

Several ministries did not have the funds to sustain new projects and MITTS had no alternative than to accept to be paid well in the future for work being carried out now, or to refuse to handle such work.

Mr Brincat said that because of the EU's requirement that member states had to have a fuel storage capacity of 90 days, Enemalta was negotiating a loan of $20 million in order to be able to build up its capacity.

Mr Brincat insisted that in the interests of good governance, the new directorate should be well staffed, that action was taken effectively whenever it was required, and that there was transparency, with the directorate's reports being posted on the internet. The directorate had to abide by international best practice.

Internal audit controls should not be only on financial reporting and accounting but should focus on other high risk areas as well, such as computer audit. And a renewed effort should be made to reduce inefficiency and waste, which were a drain of public funds. The new internal audit mechanism should not only apply to the government and parastatal organisations, but also to local government.

There should also be codes of conduct for all employees and it should be ensured that there were no conflicts of interest, Mr Brincat said.

The bill, he said, should protect whistle blowers so that all abuse could be detected and tackled.

Mr Brincat said the opposition would vote against this bill only because of the EU element within it.

Mr Noel Farrugia (MLP) said that the auditing profession would be hard-pressed to shoulder the costlier bureaucratic workload that EU membership would bring with it. While the administration would be saddled with new taxes imposed by the EU, there would also be the added costs of auditing imports with a view to collecting taxes on non-EU imports.

Labour's proposed "partnership" with the EU would save Malta all these indirect taxes.

Before the referendum, said Mr Farrugia, somebody from the EU should tell the Maltese people the difference in prices between EU and non-EU imports of various products.

While Malta would become an import-auditing border post for the EU, it would hardly benefit from the subsidies that its auditing would raise, because Malta did not produce 90 per cent of the taxed imports. Indeed, Malta would have to pay taxes on those products which it did not pay today.

Dr Josè Herrera (MLP) said that if this bill did not pass, the government would not be able to avail itself of the funds allocated for Malta by the EU.

The bill, he said, sought to create a directorate with special powers that Malta was not used to. The directorate would be subject to direct EU control and would have a strong bearing on the amount of funds actually coming Malta's way from the EU. This amounted to foreign interference, to which Labour strongly objected.

Labour was not against the supervision of EU-allocated funds, but it was concerned about the powers being attributed to the directorate, which included searches, examination and elevation of documents and other powers.

There should be a system of checks and balances to ensure there was no abuse of these powers through vexacious investigations.

Indeed, another objectionable element of this bill was the fact that people or firms being investigated did not have recourse to a forum for self-defence. There was no guarantee of confidentiality of documents taken from a company under investigation.

A directorate with such great powers, appointed by the government of the day, should be fully accountable to a really autonomous mechanism.

Over the past four years Malta had shouldered a huge financial burden in order to update its laws to the acquis communautaire. This bill would exacerbate that financial burden.

Concluding, Dr Herrera said the opposition could not be expected to vote blindly in favour of every bill moved by the government. It had gladly voted in favour of sensible bills. This was one bill which the opposition felt bound to vote against not because the opposition was against seriousness but because the bill catered for the EU's best interests rather than Malta's.

Winding up, Justice Minister Austin Gatt said he had not understood the reasoning why the opposition would vote against the bill. Mr Brincat had underlined the need for an internal audit department so that good governance could be achieved.

His objection was that the directorate would also be tasked with internal audit and financial investigations connected to funds allocated by the EU. Mr Farrugia had spoken mostly on the auditing of imports, which was not within the scope of this bill, while Dr Herrera had said, in a nutshell, that Malta did not need this bill.

Dr Gatt said this bill had been moved solely because the government wanted an effective internal audit directorate which could detect fraud and inefficiency as it happened, while complementing the work of the auditor-general. Every country needed such a mechanism, whether or not it was in the EU.

If the objective of this bill was good, as Mr Brincat had admitted, why was the opposition against? What was wrong in also auditing the use of funds which came from abroad, the EU or otherwise?

Referring to Dr Herrera's remarks, Dr Gatt said people under investigation would have the same protection as laid down in investigations by the auditor-general, the Financial Intelligence Unit, the Inland Revenue Department and the VAT Department. The directorate would not have additional powers.

Dr Gatt said the advantages of EU membership and the disadvantages of staying out had been recognised by everyone except the Labour Party.

The bill was then given a second reading after a division, with 32 in favour and 18 against.