Fears audit office budget cuts will mean less scrutiny

The Australian National Audit Office recorded an operating loss of $4.8 million in 2018-19, and Auditor-General Grant Hehir has reported a further deficit is expected in 2019-20, with more in the projected forward estimates.

These losses are likely to result in a reduction of performance audits produced by the office, which is responsible for scrutinising government spending and practices.

It was the audit office that revealed a colour-coded spreadsheet had been used to decide which projects were funded under the community sports infrastructure program, as well as issues with the regional jobs and investment program and regular defence budget blowouts.

The audit office prides itself on its independence, as a trusted integrity body that answers not to a specific minister but to the Joint Parliamentary Committee for Public Accounts and Audit, but there are concerns its ability to continue the same number of reports will be hampered if funding cuts continue.

Committee deputy chair and Labor MP Julian Hill wrote to the Liberal chair Lucy Wicks on Monday, urgently seeking a meeting to ensure the office isn't victim to funding shortfalls.

The audit office has experienced a "triple-whammy," according to Mr Hill - COVID-19, the delay in the budget from May to October and the reduction in funding.

"When you add those three things up alarm bells should be ringing if action isn't taken."

The effect of the three will make it impossible for the current annual target of 48 performance audit reports to be written this year, and the number of audits could decline each year, he wrote.

"Of greater concern is that analysis of publicly available information, including the forward estimates and the average cost of performance audits, suggests that the number of performance audits may further reduce by at least 2 audits each year if additional funding is not provided to the ANAO," Mr Hill wrote.

Government spending decisions have been fast and generous in the response to COVID-19, with billions of dollars walking out the door. The response to the virus has also forced the government to once more delay the introduction of a federal integrity commission, which was first announced in December 2018.

"At such a critical time, it would be completely unacceptable that there be a reduction in the number of audits by the Auditor-General," Mr Hill wrote to Mrs Wicks.

"This would represent an erosion of public scrutiny of government expenditure and performance by one of the few independent institutions that retains a high level of public trust."

Waiting until the October budget to advocate for an increase in funding wasn't appropriate, Mr Hill said and the "the accumulated impact on a small agency is now unsustainable".

"We saw for example in Victoria many years ago that governments can nobble watchdogs by cutting funding or letting their budgets erode, and so laser-like focus and scrutiny is required by the parliament, citizens and the media so that doesn't happen," he told The Canberra Times.

The audit office declined to explain how many performance audit reports it expected to produce this financial year or in future years, or what its projected budget position would be. Thirty-five performance audits have been produced so far, with a month left of the financial year.

In the 2018-19 annual report for the agency, Mr Hehir said he expected to deliver an operating loss this year.

"This is partly due to the ongoing costs of transformation projects, which will again be funded by accessing prior year appropriations, pressures from the increased complexity of audit work and the absence of funding to audit newly created Commonwealth enterprises."

Committee chair Lucy Wicks said the budget for the office as usual.

"One of the many roles of the committee is to consider the draft budget estimates for the Auditor General as part of the typical budget process. We will consider these as per usual practice in the lead up to the October budget," Mrs Wicks said.

"As per general committee practice and procedure, meetings are regularly held and requests for meetings are a matter for the committee to consider in consultation with the chair."

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This is not the first time there has been tension around the office's budget and its independence. In 2018 Mr Hehir was told he could not talk about a cut in funding for the audit office with his committee before the budget was handed down.

Mr Hehir took legal advice on the issue, raising it as an threat to the independence of the office.