Australian Auditor-General Grant Hehir has floated the idea of his office being a parliamentary department, saying being part of the government could pose an "independence risk".
Meanwhile a landmark report says the erosion of funding for the Australian National Audit Office should be an issue of "national concern".
In a submission to a parliamentary inquiry to the Auditor-General Act 1997, Mr Hehir said the Joint Committee of Public Accounts and Audit should consider making the Australian National Audit Office a parliamentary department, like the Parliamentary Budget Office.
Currently the agency sits within the Prime Minister and Cabinet portfolio.
"An issue that the [committee] may wish to consider is that the ANAO currently forms part of the executive government, which means it is subject to the policies and processes of the executive government which it is required to audit," he wrote.
"This could represent an independence risk."
Mr Hehir noted the Parliamentary Budget Office model could be seen as a more developed governance model of an agency supporting an independent officer of the Parliament.
"Having the ANAO as a parliamentary department could reinforce the independence of the ANAO and further underline that its role is to support parliamentary oversight of the executive government, by providing assurance to parliament that government activities are carried out and accounted for consistently with parliament's intentions," Mr Hehir said.
The idea has been backed by the deputy chair of the committee, Labor MP Julian Hill.
"The Auditor-General should not live in the Prime Minister's portfolio," Mr Hill said.
"I think it should become a parliamentary department, because frankly I trust the Speaker of the House of Representatives and the President of the Senate any day to stand up for the ANAO and the Auditor-General over the Prime Minister."
He pointed to analysis from the Parliamentary Library, which shows total budget resourcing for the Australian National Audit Office has fallen in every year except one since the 2013 election.
"Total budget resourcing for the ANAO has fallen from $77.787 million in 2012-13, when Labor was in power, to $72.932 million in 2020-21 - a cut of 4.6 per cent in nominal terms, or 18.3 per cent in real terms, taking account of CPI," Mr Hill said.
"Over the next four years that number will grow to 22.1 per cent.
"At a time when the Commonwealth is racking up $1 trillion in Liberal debt, the Prime Minister is pretending he can't find the $6.7 million the Auditor-General asked for."
However a new report from Griffith University and Transparency International Australia suggests the underfunding has been going on for much longer.
"Along with other Auditors-General, the ANAO's resources as a share of all government expenditure has been steadily eroding over a 30 year period," the report, led by Professor AJ Brown from the Centre for Governance and Public Policy, says.
"The federal level spends, at best, around a quarter of the typical spend of the states on these core functions, resulting in Australia's total public sector spending being a third less than New Zealand's on the same functions.
"This share of funding is under even greater pressure as the federal government spends extra as part of its COVID-19 response, without matching funding for integrity functions.
"Given the federal level expends by far the most of any Australian government, the very low level of comparative resourcing given to the ANAO makes this erosion a serious national concern."
The report suggested the base resourcing of integrity agencies needed to be lifted across the board.
ANAO reports on the sports rorts scandal and the $33 million western Sydney airport land deal have been recurring headaches for the Morrison government this year.
Mr Hehir warned in September the audit office would be forced to conduct fewer investigations if its budget continued to drop. Its budget was again slashed in the October budget.
The Greens teamed up with independent senators Rex Patrick and Jacqui Lambie on Monday to amend a budget appropriations bill to boost funding to the audit office.
Greens Senate leader Larissa Waters accused the government of trying to muzzle one of the most effective transparency agencies in Australia.
"Well hey presto, the Christmas gift they get is now they have to cut their audit capacity by 20 per cent," she said.
"How very convenient for a government that is allergic to transparency, that has been dragging its heels for four years on a federal corruption watchdog."
- with AAP
Sign up for our newsletter to stay up to date.