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The Role of The National Audit Department of Malaysia (NAD) In
Promoting Government Accountability
By
The Auditor General of Malaysia
The role of the NAD in ensuring public accountability in Malaysia has existed
for 100 years.

Legislated audit was introduced in 1957 when Malaysian

attained her independence and the scope of government auditing as spelt out
in our Audit Act includes Attestation, Compliance and Performance Audit.
Throughout this period, there have been significant development in the audit
approach to suit the changing time, however, the audit objectives as
enshrined in the Malaysian Constitution are strictly preserved. Over the last
decade, the NAD has introduced participative audit approach where good
rapport between auditors and auditees in very much emphasized. By doing
so, the NAD has successfully created greater interactions with the auditees.
This is however done very consciously so as not to be misconstrued as
sacrificing the audit objectivity, independence and integrity. This approach has
also help to shed the image of the NAD as fault-finder. The NAD realized that
in order for the audit to be effective, it must be accepted and recognized by
the auditees so that the fullest co-operation will be given during the audit. The
auditees now recognize that the value-added from the audit process
significantly help them in improving the financial and the overall management
of the organization, hence, enhancing accountability and good governance.
Several programmes/activities have been introduced such as:

Balanced Audit Report

We no longer report by exception.

Our current report includes

explanations and feedbacks from auditees on issues raised. We have

also included in our report innovations, improvement and good
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practices introduced by the auditees.

This is to spur auditees to

improve further as well as to set their achievements as benchmark to

the others.

Management Audit Report

We have also embarked on Management Audit on agencies and this
audit includes aspects on organizational management, budget controls,
expenditure and revenue controls, loan and investments controls, as
well as assets and store controls. The outcome of this audit is reported
directly to the Minister in charge of the respective agencies to give
them first-hand feedback on the overall performance of the agencies.

Consultancy Services on Financial Management On Selected

Ministries/Departments/Agencies
Based

on

the

financial

management

performance

of

Ministries/Department/Agencies, the NAD offers consultancy service to

assist them to establish sound financial management system in the
entities. However, the NAD does not involve itself or influence the
management in making organizational decisions with regard to the
operations of the organisation. Upon completion of the programmes,
the Ministries/ Departments/Agencies will be awarded certificates.

Another dimension of our audit approach in establishing government

accountability is the direct impact of our audit report to third parties
such as the media, NGOs, the parliamentarians, central authorities and

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the public. These groupings lately are becoming more vocal in raising
issues on government financial management and performance. Some
even play the role of whistleblowers by furnishing information to the
NAD for investigation. They are now keeping abreast and better
informed on the issues raised in the Audit Report. The Audit Report is
easily accessible from the NADs website once the Report has been
tabled in the Parliament. The media too have given wide coverage on
the issues raised in the Audit Report. For instance, the 2005 Audit
Report for for the Federal ministries/departments/agencies as well as
State Government have just been tabled on 1 st September 2006 on the
occasion of the 2007 Budget Speech by the Finance Minister. Since
then, a number of issues has been picked up by the media. The PAC
has also been briefed about the report and has decided to call up a few
ministries/agencies for explanation. All these developments will
contribute towards better transparency and accountability of the
government.

How

can

SAIs

contribute

effectively

in

ensuring

better

accountability?

To fulfill the current needs, SAI need to give emphasis and report on
measurement of results achieved against targets set. This is done by
carrying out more rigorously performance audit and in doing so, the
NAD need to enhance its capacity building programme in term of
human capital development, organisational structure and infrastructure.

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The NAD realizing the increasing expectation from all parties has taken
some initiatives to enhance professionalism through its capacity
building program.

We now own a Training Academy to produce

qualified government auditors and to carry out the CPD programmers

for auditors. We hope that one day we are able to share our success
story with other SAIs.

SAIs need to adopt a participative or collaborative approach of auditing

involving close consultation with auditees and thus creating a good
auditor-auditee

rapport.

This

relationship

should

not

however

jeopardize the independence and the objectivity of the audit. The

auditors need to exploit this relationship and harness a higher degree
of insight, oversight and foresight in implementation and developing
their audit findings and conclusions.

The NAD New Roles in Promoting Accountability Beyond

Legislated Audit

Under the 9th Malaysia Plan, launched recently by the Prime Minister of
Malaysia, the Government has not only given attention to infrastructural
development to transform Malaysia into a developed nation by the year
2020, but also holistic development of the Human Capital Development
(HCD) has been given top priority. The HCD is the holistic approach to
develop the human resources of Malaysia with appropriate knowledge,
training, skills and at the same time possessing first class mentality
and adhering to high ethical and moral values. This is a vital step to

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promote Malaysias competitiveness in the global market place as well
as nurture Malaysians with moral values deeply rooted in them.
Aspects

such

accountability,

integrity,

transparency

and

good

governance will be observed naturally for society with high moral

values.

The 9th Malaysia Plan which will see the Government committing RM
220 billion (equivalent to USD 60 billion) in expenditure compared to
RM 170 billion (USD 45 billion) has emphasized on outcomes rather
than output of programmes implemented. This means that it is vital to
define accountability clearly at all levels and the introduction of KPIs for
all

Ministries/Department/Agencies

at

the

both

strategic

and

operational levels. This will also assist in identifying accountabilities at

all level of the organization.

The Government of Malaysia has made it mandatory for government

Ministries/Departments/Agencies to establish norms in their service
delivery by defining clearly the outcomes through KPIs and their client
charters.

This is further strengthened through the signing of

Performance Agreement by all levels of officers in the public sector. To

ensure targets set as prescribed by the client charters are achieved
efficiently, monitoring and performance reviews are conducted
regularly. This will further enhance accountability. This approach also
helps in giving an early detection so that precautions or remedial
actions could be taken to avoid further losses. The Performance

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Agreement is used as a tool to measure periodically performance in an
objective and transparent manner and to hold accountable all those
entrusted with resources and authorities. Through the above practice,
the sense of accountability permeates to all levels of the public service.
The control structure embedded with integrity and accountability
measures will assist the NAD in conducting performance evaluation.

The Government of Malaysia acknowledges the role of the NAD is

ensuring accountability as can be seen from the recent Malaysian
Cabinet directives to all Controlling Officers to take immediate actions
on the issues raised by the NAD and to report on the progress or they
will be liable to be surcharged.

Some innovative and unconventional approaches initiated by the NAD to

establish accountability in the public sector are:

The NAD has been actively engaged in the government efforts to

educate and increase awareness among the politicians, government
officers and other interested parties on issue of accountability, good
governance, transparency and integrity.

The topic on audit and accountability is a mandatory topic in all

government induction courses where senior officers from the NAD will
participate as subject matter expert.

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Issuance of Best Practices Guide or Checklist by the NAD as output

from audits conducted on specific areas serve as useful guides or use
for the purpose of benchmarking.

Issuance of circular letters by central agencies as a result of audit

observations

and

accountability

recommendations

framework.

Through

to

further

these

strengthen

circular

letters

the
new

requirements to strengthen accountability reporting or procedures to

enhance controls are explained.

Since 2002, the NAD has also introduced several programmes which
aim to improve good governance and accountability, such as, Adopted
Agencies, Audit on On-Going Construction Projects and ICT System
Development.
financial

The NAD offers advisory and consultancy role on

management

and

project

management

to

Ministries/Departments/Agencies who are found weak in these areas.

The role of the NAD is to raise awareness on accountability and good
governance as well as to promote the practice of prudence risk
management in their key activities. The NAD assists organization in
risk assessment by identifying potential hazards and its likelihood to
occur and the consequences to the organisation should they occur.
Identifying risks and instituting controls to mitigate potential risks will
identify all parties or individual responsible and accountable for their
actions/inactions. The NADs role here is merely to promote best
practice to achieve better governance and accountability. The

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management

of

organization

concerned

is

responsible

and

accountable for whatever decisions; course of actions taken and

decisions made in relation to organisational affairs. In this regard, we
have received overwhelming support and acknowledgements from
Ministries/Departments/Agencies on the positive impact of these
programmes towards enhancing their organizational reputation.

The setting up of the National Integrity Plan as part of the governance

framework, where the Auditor-General sits in the Board. The Board has
embarked on a project to establish integrity and accountability rating
and index for the public sector in country. This is a positive step
towards effective evaluation of organisations against a standard set of
criteria where they will be ranked and rated explicitly. By doing so, it
means that gap between expectations and achievements could be
measured and the cause and effects diagnosed. This exercise will
promote greater transparency and accountability.

The Government of Malaysia has responded positively to the AuditorGenerals Report and has shown its commitment in improving government
accountability by introducing several mechanisms, such as:

The setting of the Committee for Financial Management and Accounts

at the ministries/department/agencies serves as checks and balance
mechanism and establishes complementary accountability reporting on
the

administration

and

financial

management

affairs

of

the

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organisations. This committee other than carrying out the functions
similar to the Audit Committee is also tasked to ensure that periodic
review of controls, procedures, regulations and systems within the
organisation to improve transparency, integrity and accountability of
their administration and financial management.

This committee is

headed by the Head of Department and is required to submit a

quarterly report to the Treasury.

The

establishment

of

the

Integrity

Committee

at

the

Ministries/Departments/Agencies level and headed by the Head of

Department is to review the existing controls, procedures, regulations
and systems on the overall operations of the organisations to ensure
pertinent check and balance mechanism exist and are operating
economically, efficiently and effectively. Complaints and weakness
received or observed will be thoroughly studied and the committee will
make recommendations to improve the situation, such as, instituting
new form of controls; amending obsolete regulations, procedures and
systems as well as introducing system re-engineering. A quarterly
report is required to be submitted to a high level Committee on Integrity
chaired by the Prime Minister.

The Malaysian Government has issued directives to all members of the

Executive, Legislative Assembly and the civil service to declare their
assets for screening and record. Subsequent acquisition of assets and
the sources of fund must be declared. It is the government intention to

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keep a repository system on declaration of assets by the above groups
to ensure the overall integrity and accountability of the government is
assured.

6.

Conclusion

The NAD believes that better government accountability could

be achieved through adherence to high moral values by all
parties in the accountability chain.

Due attention and compliance must be taken seriously at all

times by all parties with regard to the procedural and legislated
requirements.

The responsibilities entrusted and the accountabilities attached

to them must be clearly defined and understood.

Measurability through effective and efficient system means

greater transparency, integrity and ultimately accountability.

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