Golden passport fund has no policies and rules on what it spends cash on

Malta’s posterity fund, which invests and spends millions collected from the sale of so-called golden passports, has no established policies for the selection of projects that get funding from this multi-million kitty.

Recently having acquired a majority stake in Lombard Bank, the National Development and Social Fund was found having no formal documented policy or standard operating procedure on which projects get funding.

Neither is there a formal register for declined projects, the National Audit Office said in its annual report.

The NDSF finances major projects and initiatives of national importance and public interest, through millions in euros from the sale of passports to global elites for over €1 million, as well as other residency schemes.

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In 2022, the agency received €30 million from such subventions, apart from also investing €55 million of its accumulated wealth in shares in local banks, government stocks, and 15 projects valued at €14 million.

The NAO’s audit tested six sample projects: a €10 million renovation of primary healthcare clinics; €5 million towards the MFA’s national football centre; €4.5 million in urban greening projects – Ħamrun, Mosta, Qormi and Żabbar – managed by WasteServ; €5 million for the development of 30 apartments in the UK to house Maltese patients, as part of the PuttinuCares Foundation; €1 million towards the Mdina illumination project and €53,000 towards the restoration of the St Paul’s Anglican Pro-Cathedral’s roof rooftop restoration.

The NAO said that the Fund should engage a specialised technical company to validate invoices: in the case of the football centre and primary health clinics, 90% of the cash had been advanced before any audit; the grants had been allocated solely on the basis of invoices provided by the beneficiaries.

“NAO is concerned about the practicality of the procedure adopted by NDSF, on how projects that commenced more than three years earlier could be certified retrospectively,” the NAO said.

The NDSF countered that it was the only government agency to appoint a project monitor on its funds, having engaged external consultants in 2019 when it found no available examples of public procurement in this highly specialised area. And a tender issued in 2020 was cancelled two years later when the bidders were deemed not to be administratively compliant.

The NDSF’s management conceded that the withrawals from the Fund had to date been governed by its investment policy, “but the evolution of the Fund now requires a separate policy on withdrawals, planned to be introduced by year-end and which will include the obligation to maintain a formal register for declined projects.”

The NAO also said NDSF’s €15,000 in donations to two beneficiaries in 2022, had not been regulated with a documented policy – these were €10,000 to a charity organisation telethon on 15 April 2022, and a €5,000 request from the Maltese Ambassador to the Vatican, to finance part of the costs to bring over from the Holy City and exhibit the vestment of St. Pope Pius V in Valletta, for a whole month from 10 October 2022.

Investment policy

The NDSF’s monies are collected in two discretionary portfolios that are invested solely in high quality foreign financial instruments that give long-term return. The second portfolio is run with Bank of Valletta Assets Management and invests only in collective investment schemes, ETFs, quoted equities and bank deposits. These amount to around 30% of all funds received from Community Malta Agency.

The other 70% go to the directed portfolio, to fund social and economic initiatives which may or may not have a direct financial return.

An “unallocated portfolio” holds the unallocated €152 million cash balance the NDSF holds at the Central Bank, which since 2023 has been invested in local Treasury bills and short-dated government stocks.