They are charged with ensuring public money is spent properly. But poor record keeping, missing documents, weak financial controlsand a laissez-faire attitude are rife in government departments, Auditor General Charles Deguara and deputy Noel Camilleri tell Kurt Sansone.

Last week in Parliament, you described the attitude to administrative practices in government departments and agencies as “happy-go-lucky”. Why?

Charles Deguara: We were discussing the Department of Contracts during a Public Accounts Committee meeting when I made that comment. If we look at their core business, it is clear that the people there are very efficient and reliable. However, when it comes to the administrative aspect [of running the department], it is sometimes weak. Not enough priority is given to administration, and when this happens, things start slackening, inefficient work practices kick in and some start closing an eye. This is why good administration is important, especially to ensure the most efficient use of human resources. To be fair, we appreciate that recently a very efficient person was appointed as head of administration, and during this PAC meeting, it emerged that he is doing his utmost to address all the issues we raised in our report.

Where does this attitude come from? Is it a question of people at different levels not wanting to shoulder responsibility?

CD: You are right, it is a factor which cannot be ignored. I have now worked in the civil service for more than 40 years, and up to some 20 years ago, the attitude was to put the least efficient people in administration, accounts and human resources. These sections were often the Cinderella of the departments. This has changed gradually, but in my opinion, not enough. What worries me more is the laissez-faire attitude: ‘U iva, mhux xorta’. Among other cases raised in our report, one concerned an employee who went abroad on official duty for two days and extended it by a further two days to go on a private holiday. In this case, our auditors found no records that the individual had applied for vacation leave for the two days spent on holiday.

People who use public services often encounter situations where civil servants wash their hands of decisions by shifting responsibility upward towards their superiors. Do you see this as a problem?

CD: It exists. The civil service is a massive entity employing thousands of people, and generalising may be problematic. Looking at individual departments shows you they are very efficient at carrying out their core business but lack proper administration.

Noel Camilleri: What we find is they devote most of their resources to their core activities, which is good because there is a lot of pressure to conform to European standards. But this happens at the expense of human resource and financial management and proper administration. If the department’s management structures are weak, including the financial controls, good governance starts lacking.

But this is a recipe for abuse, irrespective of whether it is intentional or not.

CD: Yes, there tends to be a laissez-faire attitude. Some assume there is nothing wrong with a public officer missing work without providing justification for his absence. In government departments, we often witness lack of controls on sick and vacation leave. From a financial perspective, the NAO has been pushing to introduce an accrual-based accounting system. There is a political commitment to introduce it, but unless every department is serviced by a qualified accountant, the proposal cannot move forward. Admittedly, an accountant comes with a higher expense, but that is the way forward if we are to change things.

Is that the issue, or has it also been in the politicians’ interest not to have accrual accounting, because as things stand, it allows them to doctor the books towards the end of the year?

We tend to have a very lax attitude towards accountability

CD: Malta is not the only country without accrual accounting, and literature about it always pinpoints political hesitancy as a stumbling block. Accrual accounting gives you a clearer picture of what your income is, what your financial commitments are and what assets you own. God forbid that at home we disregard financial commitments when determining the household budget. The first circular by the finance ministry relating to accrual accounting goes back to 1999. It has been a long journey, but the Maltese Public Service will hopefully get there soon, and the NAO will be training its people on the role it should assume in the process and not be caught unawares.

NC: It has to be noted that financial reporting to the EU is on an accrual basis despite the government internally adopting a cash based approach. The NAO is saying accrual accounting should also be adopted by the departments because it would give managers a clearer, real-time picture of the financial situation and the performance of their departments. This allows them to make better decisions for the benefit of the citizens they serve.

In almost every report the NAO raises concerns about a lack of minutes, documentation, proper record keeping or incomplete paper trails. Is this a convenient way to close an eye to abuse?

CD: It is a nightmare. One of the reasons is the familiarity that results from being such a small country where almost everyone knows everyone else. If I am working on something and I need some information, I just pick up the telephone and speak to the person. In a way, this results in faster decision-making but I completely disagree with this approach. It seems to be part of our Mediterranean culture because when I speak to our Italian counterparts, they tell me it is sometimes the same on their end. We tend not to formalise things and rely on word of mouth. The question we ask ourselves is whether this is being done by chance or by design.

What do you think?

CD: We have had audits/investigations where finding any form of documentation was next to impossible. It is extremely difficult to prove that it is done unwittingly or by design. It is possibly a combination of both. The laissez-faire attitude contributes to this problem.

This is very convenient for those who have bad intentions, because it then boils down to what people can recall.

CD: It is very convenient. There is another issue at stake here: the loss of institutional knowledge when people no longer work in the department. We have carried out six audits of the Government Property Division over the years, and today I worry because institutional knowledge has been practically lost. Unfortunately, I doubt there is anybody working at the GPD who has been there for more than five years at certain management levels.

NC: Without proper record keeping and a loss of institutional knowledge, information relating to the past is completely lost.

The irony is that people using government services complain of the bureaucracy they face, and yet the NAO constantly finds that internal documentation is missing or unclear.

CD: One of my biggest frustrations during audits is that despite the big investment in information technology by successive administrations, we still face situations of information we require which is not available at the auditee. I often ask myself what the state-of-the-art IT systems are being used for.  Why is certain information, so important to good decision making, not being compiled and retained? Some people seem to think that the introduction of IT systems by themselves will solve their work problems, which is surely not the case. Business process reengineering is often  required to ensure such problems are overcome.

NC: I recall from my time in finance we used to keep policy files where every update in policy was filed for reference. Today, it is difficult to find such systems.

What about the NAO?

CD: In the past year, we have introduced a number of  policy documents covering various topics to guide employees on best practices and behaviour. Job specifications are documented, and we also have detailed manuals of procedure that help newcomers to understand what we do and how we do it. This is what government departments should be doing. Unfortunately, departments still tend to rely mostly on word of mouth.

Is there a department in which the word-of-mouth culture has been replaced with proper record keeping?

CD: The departments deliver well on their core functions, but when it comes to the back-end administration, we still have big deficiencies. We go and look for files and do not find them, or they are empty of any documents! In a recent, high-profile GPD case, we did not even find the original request made by the third party to initiate the ground rent redemption process. But I have no evidence to suggest the request was removed intentionally.

This is worrying.

CD: Yes, it is very worrying. The office keeps harping on it, because without a proper audit trail, we will not be able to carry out our work properly. In another GPD case, we found that a decision by this department to drop a court case against third parties was taken by a relatively junior employee. In the file, there was no record of anyone giving this very important instruction. When we asked the employee who instructed her, she could not recall. Nobody else in the department could tell us. This was not a minor decision: it involved a court case for thousands of euros, and yet we could not establish who gave the order.

NC: After all, what we are talking about here is accountability. The individual has to be accountable for all he does, and to determine this we have to know what he did and who took the relevant decisions. If we do not have documentary evidence detailing this, we have to rely on what we are  told. This is not acceptable.

Why is certain information, so important to good decision making, not being compiled and retained?

Do you feel the country as a whole has a problem with its attitude towards accountability?

CD: We tend to have a very lax attitude towards accountability. The NAO’s auditors are often criticised by departmental employees of being fickle. Everything is petty [ċuċata] for them. Two days of undocumented leave today and three days of unrecorded sick leave tomorrow may seem small, but when added all together they gradually become a much bigger problem. Sometimes I feel that we have misplaced notions of kindness and generosity. You can be generous with your money, not with that of others. If I have an employee who constantly, repeatedly reports late for work and I justify this behaviour out of pity because of particular family circumstances, as his boss I am being generous with taxpayer’s money. Supervisory management is somehow reluctant to take disciplinary action. It does not mean the person should be suspended, but drawing his attention that such behaviour cannot be tolerated may be enough. The same applies to performance bonuses. It makes no sense awarding the same performance bonus to someone who has not worked as hard, and yet we come across situations where management is reluctant to go down this road because they do not want to appear unpopular with their subordinates. Awarding a lower bonus is not unkind if it is warranted.

You are fighting a cultural attitude here.

NC: We appear fickle to others, but in truth if the basic reporting standards and policies are not in place things will deteriorate. I reiterate, the departments are good at delivering their core functions but give little importance to internal controls. Take the general attitude towards inventory and asset management, for example. Most departments just consider stock taking of assets an inconvenient yearly exercise. In some instances, the assets can be worth thousands and millions of euros. The government should have an asset replacement policy, but unless it knows what assets it has, the policy cannot be drafted and implemented.

Every politician says the NAO’s recommendations will be taken on board, yet the same problems are flagged year in and year out. Have changes been implemented?

CD: As a first step, last year’s decision by the government to publish a list of NAO recommendations and indicate which were implemented was good. But from this year, the NAO will also be carrying out follow-up reviews of past audits to ensure that our recommendations were taken on board. We started with seven audits and went back to the entities concerned asking them for an update. In this way, we hope to encourage more accountability.

When you entered office, the NAO was under heavy criticism from Labour MP Michael Falzon over the Gaffarena investigation. He accused your lead investigator of political bias. Later a photo emerged of another NAO official beside Opposition MP Jason Azzopardi at a football match abroad, which Dr Falzon said was proof the NAO was politically biased. What do you answer to those accusations?

CD: We have a clean conscience. Believe me, we always do our very utmost to ensure that our reports are objective, fair and without bias. Having said that, the accusations did worry me. We continuously impress on our people the importance of the position they hold and the weight they have to carry. To quote one example, there was the case of an audit officer who hails from the same town as the Opposition MP and who also happens to support the same English team. They were photographed at a Liverpool football match abroad. Incidentally, I was at a Juventus football match some weeks ago and met politicians from both side of the political spectrum. I am not saying our auditors should not speak to politicians, but at the same time, we have to constantly keep in mind that our behaviour has to be above suspicion. Most importantly, we have a clear code of ethics that bars any participation in partisan political activities.  This is strictly enforced without any exception or fail.

So was there an ethics breach?

CD: Rest assured that every allegation made was duly investigated and we took all the steps deemed necessary.