Auditor-General Andrew Richardson, whose department scrutinises state and local government agencies and public spending, submitted in his 2021-22 annual report that his office’s current budget arrangements “need reconsideration to ensure independence is maintained”.

The Malinauskas Government’s first state budget requires the Auditor-General to produce $1,492,000 in savings over the next four financial years, starting with a $300,000 efficiency dividend in 2022-23.

Richardson, who reports directly to parliament rather than the government, wrote that the “budget cut applied to my Department was the first I am aware of ever being imposed”.

“The current budget undermines the Auditor-General’s independence,” he wrote in his annual report published last month.

“The 2022-23 State Budget imposed a budget cut on us, as was applied to many other agencies, as an efficiency dividend to fund the SA Government’s priorities within its fiscal goals.

Our ability to meet Parliament’s requirements is constrained by the resources made available for audit services

“We are advised that we are required to deliver operating efficiencies as best suits the needs of the Department ‘to achieve our share of the across government savings task’.

“This requirement highlights that the independence of the Auditor‐General, set out in section 24(6) of the PFAA (Public Finance and Audit Act 1987), is inherently undermined where our funding is solely decided within the SA Government’s budget priorities and fiscal goals.”

Richardson argued the savings requirement “directly affects” how the Auditor-General’s “functions are carried out or powers are exercised” under the Act, as well as the “priority the Auditor-General gives to a particular matter in carrying out functions under the PFAA”.

“Our ability to meet Parliament’s requirements is constrained by the resources made available for audit services,” he wrote.

“For many years, the budget allocated to my Department has been sufficient for the services we have delivered.

“Now, as circumstances have changed, I consider the budget insufficient.”

Richardson said he wrote to Under Treasurer Rick Persse on June 3 – the day after the 2022 state budget was handed down – to request the efficiency dividend be removed and outline the merits of granting the department $1.5m in additional funding.

“The Treasurer advised me that should I wish to seek additional funding for the purposes set out in my letter, I should submit the request in a future budget process, either the 2022-23 mid-year budget review or 2023-24 State Budget,” Richardson wrote.

“I have submitted a request in the 2022-23 mid-year budget review process.”

Richardson said his department was on average delivering five performance and local government audits each year, whereas audit offices in other jurisdictions delivered “between 8 and 25 reports” in 2020-21.

Performance audits scrutinise the effectiveness of government programs. Recent performance audits from the Auditor-General have highlighted gaps in SA Health’s mental health services and provision of personal protective equipment.

The Auditor-General said his department should be producing 11 performance audits a year.

“This will bring us in line proportionately to what other audit offices are committing to, particularly performance audit activities,” he wrote.

“Our funding request will settle the immediate resourcing need we identified for these audit functions and enable us to operate at the standard we see across other Australian jurisdictions.”

Richardson said he would need eight more auditors and two more “data analytics and communications” staff to achieve this goal.

His department had 123 full-time equivalent employees as of June 30, 2022, according to the budget papers.

The Auditor-General was among several “non-frontline” government departments the Malinauskas Government has asked to find savings amid a record spend on health.

The savings are cumulatively expected to deliver $165m to the budget this financial year.

Opposition leader David Speirs asked Premier Peter Malinauskas in parliament on Tuesday whether he could “guarantee that you will provide the Auditor-General with sufficient resources to undertake his legislative obligations”.

Malinauskas responded that the Auditor-General’s function is “an incredibly important one” and the request would be considered ahead of next year’s budget.

The nature of this report and what the Auditor-General said is worthy of contemplation and of course that will be provided for in the budget to be handed down in June next year.

“In the state budget around saving tasks, whether it be within the Auditor-General’s office or within the Department of Treasury and Finance… that has consequences,” Malinauskas told parliament.

“These are difficult decisions to make, but the Auditor-General is an important independent office.

“Naturally, the Auditor-General’s remarks that are contained within the report regarding their own circumstances in some respects are not unique at all because every government agency, as far as I know, seeks to make additional funding requests.

“That said, the nature of this report and what the Auditor-General said is worthy of contemplation and of course that will be provided for in the budget to be handed down in June next year.”

The Auditor-General’s annual report also calls for a rethink of how the department’s budget is set, despite Richardson saying it has operated “without serious issue for many years”.

“A reasonable change might be designed around periodic independent scrutiny of the services provided and the budget,” Richardson wrote.

“Alternatively, it may be that the budget setting process should be fundamentally changed.

“I would be pleased to relate with Parliament about this.”

The Mid-Year Budget Review is due to be handed down in a few weeks’ time, Treasurer Stephen Mullighan said last week.