Internal audit bill seen as being "cosmetic"

The House of Representatives has started to debate the Internal Audit and Financial Investigations Bill, whose purpose is the creation of machinery for effective independent internal audits and financial investigations within the government and any other public or private entities which receive public funds.

New opposition finance spokesman Charles Mangion yesterday criticised the bill, saying Malta already had a number of bodies whose responsibility was to oversee public spending and this bill was therefore only "cosmetic". What was needed was for a proper account to be given of public spending and for issues repeatedly raised by the auditor-general, among others, to be addressed.

Justice and Home Affairs Minister Tonio Borg said when opening the debate that the bill was proposing the setting up of an Internal Audit and Investigations Directorate and an Internal Audit and Investigations Board.

The directorate would monitor the use of public funds on an on-going basis. An internal audit could be carried out in any government department or entity falling under the supervision of permanent secretaries as well as private entities which received public funds, including funds that the government received under international obligations.

The directorate would also be responsible for any financial investigation where irregularities or fraud were suspected.

The directorate may be assisted by representatives of international organisations when investigations involved funds given to Malta by international organisations.

The director would have the power to enter and inspect any premises of an auditee to conduct an internal audit where he has reason to suspect that irregularities and/or fraud would have occurred.

The board would oversee the work of the directorate, safeguard the continued independence of the director and the officers of the directorate and could require the directorate to carry out specific tasks as provided under the law.

The director also had to inform the attorney general if suspected cases of fraud were proved, or the permanent secretary of the auditee if these abuses were of an administrative nature.

Dr Mangion asked what effect this bill would have on existing structures in the civil service whose duty was also to oversee the use of public funds such as the auditor-general, the accountant-general and internal audit sections.

Was there anything in this bill which would lead to greater accountability or efficiency? He said he did not think so.

Millions of liri had already been spent on the restructuring of the civil service. But the desired level of financial control, checks and efficiency had not been reached.

Indeed this bill was cosmetic and would not bring about greater efficiency. What was needed was a commitment for the existing structures to work better and for recommendations they made to be heeded.

For example, the auditor-general had pointed out that government departments did not have performance indicators or an efficient means for controlling their operations.

He had complained that there was no audit trail regarding income from airport taxes, there was a lack of adherence of travel allowance regulations, large amounts of money were outstanding and there was no clear explanation as to where this money had gone.

Such substantial shortcomings reflected negligence. An explanation should be given as to who the responsible officials were and what account they had to give for their actions.

The government as a whole, Notary Mangion said, also needed to explain how the deficit for 2002 was Lm10 million more than the projected Lm78 million and how the deficit had continued to shoot up further beyond projections in the first three months of this year.

Dr Mangion observed that the board would monitor the country's internal financial control and draw up policies on internal audit and the holding of financial investigations.

Its recommendations would be presented to the permanent secretary, but what guarantee was there that action would be taken?

It was also curious how, unless investigations were of a criminal nature, reports about them would remain confidential even when shortcomings were found. Why should such information remain confidential?

The bill was not complicated, but there was nothing in it about reducing bureaucracy. He was afraid it would only lead to the drawing up of another series of reports about which nothing would be done.

Even the Public Accounts Committee had carried out several investigations and made recommendations but the Auditor General's latest report showed that little was being done about them.

Notary Mangion stressed the need for the country to improve its competitiveness in all sectors. Public entities which were responsible for essential services, particularly those which enjoyed a monopoly, should raise their efficiency not by increasing rates but by controlling waste and theft and by improving operations and maintenance.

The FOI wanted to nibble at rights enjoyed by workers for the past 30 years. But no progress would be achieved by reducing the rights that workers had been given.

Industrial growth could not come through cheap labour and industrial disputes would not help either.

What was needed was increased training and flexibility which would give the country a cutting edge on other countries. Indeed, Malta needed to examine why it was failing to attract foreign investment.

Other speakers will be reported tomorrow. The bill was later given a second reading.