19 September 2007

Auditor’s annual admonitions

The Star

PARKINSON once joked about committee meetings. He said that committees reminded him of his daily visits to the lavatory – “First, the sitting. Then a loud report. Then we drop the matter!”

The annual reports of the Malaysian Auditor-General – conscientious, commendable and courageous though they are – arouse a similar reaction in many people’s mind. One is left wondering whether the A-G's ritualistic good work impacts on how public authorities handle public funds.

One must remember that the office of the A-G performs a significant constitutional role. Under our system of parliamentary democracy, the government must seek Parliament’s approval before it collects and spends money. As a “legislative auditor” one of the roles of the A-G is to review the Federal Government’s compliance with parliamentary authority.

By providing Parliament’s Public Accounts Committee with objective and independent information, the A-G assists Parliament to hold the government accountable for its stewardship of public funds. This is an important democratic role.

Independence is the key to the A-G’s credibility.

To safeguard this independence the office of the A-G is created by Article 105 of the Federal Constitution and invested with many of the safeguards, which are available to superior court judges.

Under the Audit Act 1957, the A-G’s primary function is to audit and report on the accounts of the Federation and the States. Under the Audit (Amendment) Act 1978, the A-G’s powers were extended to cover statutory bodies and companies that have 51% federal or state government equity participation if the Yang di-Pertuan Agong so orders.

As yet, the Government has not found it necessary to advise the Yang di-Pertuan Agong to allow the A-G to scrutinise the books of Non-Financial Public Enterprises (NFPEs), subsidiaries of statutory corporations and government controlled companies like Petronas. These bodies employ their own private auditors and do not submit their accounts to the A-G or the Public Accounts Committee.

In the case of local authorities, their finances are subjected to audit by the A-G or other auditors appointed by the State Authority on the recommendations of the A-G (Section 60, Local Government Act 1976 (Act 171). The Auditor’s reports are laid before the State Assembly and, in the case of the Federal Government and the Federal Territories of Wilayah Persekutuan, Labuan and Putrajaya, before the Dewan Rakyat.

Parliament is able to remain informed on matters of national expenditure because of the Public Accounts Committee. The A-G is an ex-officio member of the committee. The committee’s function is to examine the A-G’s Report and to alert Parliament if money voted by the legislature is not spent in accordance with the allocations authorised.

The committee examines accounting systems practiced by departments, discrepancies in the recording of accounts and reports on possible corruption, embezzlement, misspending, over-spending, and under-spending. It also highlights problems of bureaucratic procedures that cause waste and mismanagement.

The Committee has the power to send for persons and papers by summoning heads of departments and statutory bodies to appear before it as witnesses.

But, like the A-G, the Committee has no power to change any decision or to prosecute anyone for any wrongdoing. It can only recommend corrective action. Its effectiveness in checking wasteful expenditure depends, ultimately, on the willingness of Parliament and the Government to act on its recommendations.

Critics point to several flaws in the working of the Committee.

Firstly, its jurisdiction is limited. It examines the accounts of federal ministries and departments and only certain statutory bodies whose accounts the Government places before the Committee. The most obvious flaw is the lack of control over NFPEs that are outside the jurisdiction of the PAC.

This means that statutory bodies like Petronas that are registered under the Companies Act are immune from the Committee’s scrutiny. So are all subsidiaries of statutory bodies. This should be a matter of great concern because NFPEs have budgets, debts, surpluses and losses that are comparable to that of the Federal Government.

Secondly, the Malaysian Parliament has not accepted the convention in Britain of appointing a member of the opposition as the Public Accounts Committee chairman.

It is arguable that a Committee chaired and numerically dominated by members of the ruling coalition would be loath to embarrass the Government through exposure of scandals and other malpractices.

Thirdly, some public servants are not entirely cooperative with the Committee. Despite the theoretical power of Parliament to punish for contempt any one who defies its summons, it is well known that senior Ministry officials often send their junior officers to face the PAC’s grilling.

There is an obvious need to broaden the jurisdiction of the A-G and the Public Accounts Committee to cover all institutions that generate or spend public funds.

The A-G should conduct value-for-money or performance audits on specific projects and programmes and submit periodic reports to Parliament. In Canada, the A-G produces about 30 reports every year to Parliament on audits and studies of entities and sectoral programmes.

Officers of the A-G should have a continuing, physical presence in the largest government departments and statutory bodies.

The Anti-Corruption Agency should act vigorously to investigate the findings of the A-G. Ministers and heads of departments should initiate surcharge proceedings against all officers whose acts of omission or commission cause a loss or wastage of public funds.

On the legal side, we need a Freedom of Information Act and a Whistleblowers Protection Act. Only then will the message be driven home that public office is a public trust. Parliament, the government and public servants are the guardians of the money entrusted to them to deliver programmes and services to Malaysians.

Dr Shad Saleem Faruqi is Professor of Law at UiTM.

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