Just days after releasing an audit that showed the government spent $33 million on a piece of land in Sydney valued at $3 million, it has been confirmed fewer performance audits were completed last financial year due to funding pressure in the Australian National Audit Office.

The office missed its target of 48 performance audits in 2019-20, completing just 42 reports. According to the office's annual report, the drop in completed reports was due to "budget constraints," as well as a pilot program of assurance audits.

While the COVID-19 pandemic affected the audit office's workload, the budget constraints "will continue to reduce the ANAO's capacity to deliver performance audits into the future," according to Auditor-General Grant Hehir.

"This impact will flow into 2020-21," he said.

The Australian National Audit Office is the principal audit institution in Australia, and one of the most powerful oversight bodies on public spending, with its importance magnified by the continued delays in a federal anti-corruption commission.

Its funding has stagnated in recent years, as the expectation from government and complexity of its workload grows. Between 2018-19 and 2019-20, its revenue from government dropped by $780,000 in real terms, while its costs went up.

Mr Hehir said in the annual report his office's budget was in deficit for the third year in a row, partly due to investments in new ways of working and technologies to improve efficiency.

"The deficit also reflects our transition to a lower funding base," he said.

"Without supplementary appropriations, the number of performance audits tabled in the Parliament will continue to reduce."

Unlike other government departments and agencies, the audit office doesn't answer to a minister, but to the Parliament directly, through the Joint Committee of Public Accounts and Audit.

It means the audit office doesn't have a voice in Cabinet advocating for its funding.

"I have written to the Prime Minister to propose that the ANAO's funding is put on a more sustainable basis to meet both mandated financial statements audits and the suite of performance and other reports which are provided to Parliament to achieve transparency and accountability in the Australian Government sector," Mr Hehir said in the report.

The audit office did not comment on questions put by The Canberra Times about the contents of the letter, which has been received by the Prime Minister.

A government spokesman would only say the government would not speculate on what would be in next week's budget.

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Deputy Chair of the Joint Committee of Public Accounts and Audit Julian Hill wrote to the committee's chair Lucy Wicks in May raising concerns about the office's budget. The Labor MP says the situation has deteriorated since that letter.

"The annual report makes crystal clear that the auditor-general's budget is now in serious trouble. Without new ongoing funding in this budget the level of scrutiny and the number of reports will rapidly decline," Mr Hill said.

"As one of the few powerful watchdogs left with real teeth new funding must be provided."

Mr Hill said scandals like sports rorts and the Sydney airport land payment and Defence budget blowouts could be swept under the rug without the funding.

"Reduction in independent scrutiny might be convenient to Scott Morrison but it does our democracy enormous harm."

The audit office recorded a deficit of $3.1 million in 2019-20, which was smaller than what was originally expected, due to reduced travel and training expenses caused by the pandemic.

According to the annual report the office has explored and implemented efficiency and productivity measures but "they are not keeping pace with reductions to appropriation while the costs of delivering quality audit products continue to increase".