The Malta Independent 4 October 2022, Tuesday
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Marking the 25th anniversary of the setting up of the NAO

Leo Brincat Wednesday, 10 August 2022, 09:34 Last update: about 3 months ago

It was indeed a pleasure and an honour to attend the commemoration of the 25th Anniversary from the setting up of the NAO.

Having been the Minister responsible for piloting the legislation that established the Maltese Supreme Audit Institution as an independent body, no longer under the aegis of the Ministry of Finance, by securing bi-partisan support for these institutional changes, it gave me just as much satisfaction to contribute in my dual capacity as Maltese ECA Member and the former legislator to welcome the invitation to contribute a lengthy article for a special publication to mark this historical occasion. I chose as the main theme: Auditing EU funds: The European Court of Auditors’ perspective.

In this special edition I set out in detail the ECA’s role and jurisdiction, its Mission statement, its strategy and work programming, the main thrust of its audit work, the key steps in the ECA’s audit process and how the pandemic has affected ECA’s work.

Particular attention was given to an account of the EU’s Recovery Instrument and its impact on the ECA, while also focusing on the ECA’s liaison with Supreme Audit Institutions and a profiling of my experience as a Member at the ECA – particularly as my term is now nearing its end.

As one of the EU’s seven institutions, established in 1975 and operational since 1977 we are tasked by the treaty of the Functioning of the European Union to:

• Examine whether EU policies and programmes reach their objectives,

• Examine all revenue and expenditure in the accounts of the EU and its agencies and decentralised bodies,

• Deliver opinions at the request of one of the EU institutions and reviews on its own initiative,

• Assess whether financial management has been sound,

• Assist the European Parliament and the Council by providing the audit reports used in the discharge procedure,

• Provide a Statement of Assurance on the reliability of the accounts and the legality and regularity of the transactions underlying them.

Historically our work was limited to compliance audits and financial audits to deliver the Statement of Assurance, but today it compromises of five audit Chambers, each addressing a distinct policy area, within which auditors carry out financial, compliance and performance auditing. Ultimately our audit observations and recommendations are published and presented to the European Parliament, the Council, governments and parliaments and to the general public. The impact of ECA’s work depends largely on how these stakeholders, and auditees, draw and take corrective action from audit observations and recommendations.

While the pandemic brought with it many significant changes, the Russian invasion in Ukraine also brought about considerable challenges. The ECA continuously monitors developments and updates the annual Work Programme as necessary to reflect the European Commission’s actions and channelling of EU funding.

As guardian of the EU finances, while our mandate is to audit all EU revenue and expenditure, we also focus on fraud considerations. This we do by assessing the risk of fraud in the transactions audited, during the course of our audit work.

Through its audits, ERCA can help prevent fraud by examining whether EU financed programmes are affected by weaknesses, making them susceptible to fraud. On an annual basis then, we report any cases of suspected fraud to the EU’s Anti-fraud office, OLAF as well as the European Prosecutor’s office (EPPO) that are specifically mandated to investigate and prosecute fraud cases.  Such cases are identified from our own audit work as well as from third party denunciations.

The pandemic has not only shifted the way the ECA works, but also brought about a Copernican Revolution to EU funds, with the Next Generation EU (NGEU) and particularly the Recovery and Resilience Facility (RRF) bringing an additional 750bn euro on top of the MFF for 20231-2027. This sees an expansion in the European Commission’s role to debt management for raising additional finance over the capital markets.

As the EU’s external auditor, the ECA has a full mandate to audit the NGEU. It has analysed the proposal in much depth and will continue to do so as it monitors developments, and reflects internally on how to co-ordinate its work.

The RRF is destined to be a performance-based instrument, with a significant component of front-loading in a short period of time. This is very different from the Multi-financial framework, which intervenes over the whole 7-year period and in practice, payments are shifted towards the second half of the period and beyond it.

Auditing NGEU remains a moving target for the ECA.

It will continue developing its audit approach accordingly and will use available data and information, to continue providing strong assurance and timely reports, based on the Treaty mandate and in accordance with international public sector audit standards.

The introduction of the RRF, and increased involvement of Member States to implement it, has initiated and will continue to foster increased co=operation among EU SAIs.

As for the Maltese NAO, I am honoured that my personal relations go back many years, having worked closely with all the Auditors General since the early 90s, in my former capacity as a long standing and founding member of the Public Accounts Committee.

Since becoming a Member of the ECA, I have always strived hard to foster the closest co-operation possible with the NAO, in full respect of our respective independence.

On this historical occasion I wish the institution as well as the Auditor General and all his staff the very best for the future.

 

Leo Brincat is Malta’s member on the European Court of Auditors 

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