Below follows a summary of the address to Parliament used by the Cheif Minister regarding the debate on the Motion on the former Principal Auditor’s 2018/2019 Report:

This morning, the Chief Minister Fabian Picardo began his address to the Gibraltar Parliament, starting the debate on the Motion on the former Principal Auditor’s 2018/19 Report. This debate is likely to continue for a number of days. This document summarises part 1 of the Chief Minister’s address. 

Outline 

The Government will not reject the Principal Auditor’s Report in its entirety but will move  amendments to reject only those aspects which, supported by legal advice, are shown to fall short  of the independence, objectivity and competence required. While the Government upholds the  Report’s confirmation that the Government’s accounts for 2018/19 receive a clean bill of health, it cannot accept the material errors and politically biased presentation of the ‘value for money audits’  which undermine the accuracy and reliability of other parts of the Report. 

Why this matters 

The Government welcomes scrutiny but cannot allow inaccurate, unfair, outdated or biased  reporting to go unanswered. While the Principal Auditor’s Report is not binding on Government, its  errors, omissions and politically slanted presentation risk damaging Gibraltar’s reputation abroad  and undermining confidence at home.  

This statement in the House is therefore not only proper but necessary, as it is the Government’s  duty is to correct the record, defend Gibraltar from reputational harm, and ensure that the  community can judge the Report in the light of the facts, the law and proper audit practice.

Opposition Political Opportunism harms Gibraltar 

The Government considers the Opposition's persistent reliance on the ‘value for money audits’ that are legally, factually and procedurally flawed sets a dangerous precedent that such material is fair game in future debates. It harms Gibraltar’s international reputation at a critical time and undermines confidence in good governance. The Chief Minister maintained that these politically motivated parts of this Report are an aberration. However, the Government remains confident in the Constitutional Office of the Principal Auditor and its current post-holders. 

Legal Background 

The Office of the Principal Auditor is a constitutional post created under the GibraltarConstitution Order 2006, appointed independently by the Governor and charged with auditing the public accounts of Gibraltar. While the role is independent of Government, it must be carried out within strict constitutional and statutory limits and in line with recognised standards of impartiality, objectivity and professional conduct. 

The Public Finance (Control and Audit) Act sets out the scope of the Auditor’s work, requiring proper scrutiny of how revenues are collected and funds are spent, but making clear that their remit is financial control and efficiency, not to make political or legal judgments. Established governance standards, such as the Hampel Report, reinforce that auditors may recommend improvements but must remain neutral and avoid straying into policy or partisanship. 

Case Law 

Drawing on case law from Jamaica, Trinidad and Tobago, and the UK, including the landmark Porter v Magill decision,theChief Minister underlined that auditors are not immune from scrutiny and can be challenged where they overstep their functions or create an appearance of bias. 

Against this background, the Government considers that aspects of the 2018/19 Report went outside the Principal Auditor’s constitutional remit, presented accusations as settled conclusions without due process, and echoed political positions taken by the Opposition. On legal advice, the Chief Minister concluded that those sections of the Report were beyond the Principal Auditor’s legal authority, procedurally unfair and failed to meet the standards of independence and impartiality required of a constitutional audit. 

Principles Governing the Role of the Principal Auditor 

The Chief Minister drew comparisons with the UK National Audit Office (NAO), which conducts both financial audits and value-for-money examinations but operates within clear statutory limits. Crucially, section 6(2) of the UK National Audit Act 1983 explicitly states the NAO is not entitled to “question the merits of the policy objectives of any department, authority or body in respect of which an examination is carried out.”. This principle is reinforced in section 7ZA(5), which states that the Auditor may only examine the arrangements for implementing policy, not the policy objectives themselves. 

Although Gibraltar’s legislation does not replicate these provisions word for word, the Chief Minister pointed out that the same principles applied under common law, supported by jurisprudence such as R v Roberts[1908] and Roberts v Hopwood [1925]. These cases confirmed that auditors may challenge administration but cannot interfere with policy choices. 

The NAO’s Code of Audit Practice sets out key professional standards which should also guide the Principal Auditor in Gibraltar. These include: 

• Independence, integrity and objectivity, ensuring the Auditor is (and is seen to be) impartial. • Professionalism and efficiency in carrying out statutory functions. 

• Proportionality and risk-based auditing, with careful consideration of the impact of recommendations. 

• Professional scepticism, requiring sufficient evidence to support conclusions. 

• Respect for boundaries, meaning auditors may scrutinise how policy is implemented and whether value-for-money arrangements are in place, but must not question the policy itself. 

The Chief Minister concluded that these principles, well established in the UK and echoed in Gibraltar’s own legal framework, made clear that the Principal Auditor’s role was to audit the use of resources objectively and impartially, not to act as a political critic or policymaker.

International Audit Standards 

The Chief Minister noted that International Auditing Standards govern the conduct of public auditors and are fully applicable to Gibraltar.ISA 260 requires open and timely communication with those charged with governance, ensuring scope, risks and difficulties are clearly understood. ISA 265 obliges auditors to highlight deficiencies in internal control, especially significant ones, in writing and on a timely basis. ISA 450 requires auditors to evaluate misstatements, request their correction, and document reasons where they remain uncorrected. ISA 700 sets out the obligation to form a fair and transparent opinion on financial statements through a properly structured report. 

Taken together, these standards underscore that the Principal Auditor’s role was to be carried out with independence, objectivity and professionalism, and that findings must be based on evidence and proper process, not on political or partisan commentary.

Key Findings of the Former Principal Auditor’s Report 

The Chief Minister highlighted the central contradiction of the 2018/19 Report. On the one hand, the former Principal Auditor gave Gibraltar’s public accounts a clean bill of health, certifying that revenues and expenditures were properly presented,that appropriated monies were used lawfully, and that expenditure conformed to the authorities governing it. In short, the Report confirmed the highest standards of financial integrity in the Government’s accounts. 

Yet, in the same document, the former Principal Auditor levelled sweeping criticisms: alleging obstacles to audit access, poor budget management, and opaque practices. The former Principal Auditor singled out over £13 million in ex-gratia payments as “excessive and in many cases unwarranted,” referred to ministerial interference in areas such as the Gibraltar Savings Bank and housing allocations, accused the Government of obstructing an AML review of the Savings Bank, and pressed for greater parliamentary oversight through a Public Accounts Committee and new Public Audit Act. 

To test these allegations, the Government commissioned an independent legal opinion from Jonathan Fisher KC, one of the UK’s leading experts in audit law. Mr Fisher concluded unequivocally that the Report was fatally flawed. In his view, the approach taken was “inconsistent with the fundamental norms of international auditing practice,” strayed into matters of policy rather than implementation, contained “material errors that reflect a lack of competence,” and failed to adhere to the principles of independence, objectivity, and professional audit standards expected of a constitutional auditor. 

The Chief Minister stressed that this opinion vindicated the Government’s response. A report cannot both give the accounts of Gibraltar top marks and simultaneously accuse the Government of a lack of transparency and accountability. Both positions cannot logically be true. On the advice of Mr Fisher KC, the Government maintained that the criticisms in the Report exceeded the Principal Auditor’s remit, were unsupported in fact or law, and should be regarded as unreliable. 

The Government’s Response 

Whilst the Government has already rebutted the Report’s criticisms publicly, it is necessary for the Chief Minister to do so formally in Parliament. In the coming days, the Chief Minister will address each of the allegations directed at Ministers and senior officials point by point, analysing each of the nine disputed areas, and setting out the facts to show why the Report was wrong in substance and inconsistent with the legal principles governing an auditor’s role. The Chief Minister will resume his detailed analysis tomorrow, Wednesday, at 10:00am.