Gozo Channel future ‘uncertain’ due to €8 million outstanding dues

The Gozo Channel Company’s faces an ‘uncertain’ going concern status due to the €8 million in outstanding dues that it has incurred, as of the end of 2014.

A National Audit Office report tabled in Parliament also points out that the Gozo Channel registered a marginal profit of €59,000 in 2014.

In December 2013, Finance Minister Edward Scicluna had requested an NAO report on whether due diligence was exercised in the Gozo Channel Company Limited’s (GCCL) bid, made jointly with the Gozo Ferries Company Limited (GFCL), for the provision of maritime transport between Malta and Gozo, awarded to the Joint Venture in 2011. The NAO was also requested to review the GCCL’s operations between 2010 to 2012.

The auditors discovered that the financial results registered by the joint venture were lower than the projected profits in their Public Service Obligation bid, with adverse variances of €0.9 million in 2011 and €2.2 million in 2012. Factors contributing to these variances included the PSO payment, ticketing and other operating revenue, as well as payroll and vessel costs.

Justifications cited by the GCCL were the drawing forward of the effective date of the PSO, the payment of a dividend, as well as roadworks and the construction of the Ċirkewwa Terminal.

Other explanations included lost ticket revenue arising from traffic-related discrepancies, salary increases resulting from new collective agreements and the inability to enter into fuel hedging agreements.

The Gozo Channel spent €9.8 million on fuel between 2010 and 2012, €5.6 million of which was not regulated by any contractual agreement. The NAO warned that they had difficulties establishing the quantity and quality of fuel procured, with instances noted where the GCCL and the contractor’s meter readings were left empty and insufficient laboratory testing ascertaining compliance with specifications.

Payroll costs incurred by the GCCL amounted to €5.9 million, €5.8 million and €6 million between 2010 and 2012 with a staff complement of 249, 237 and 228, respectively. The NAO criticised the Gozo Channel’s lack of a formal system of authorization of overtime, which amounted to €1.8 million over the audit period.

They also discovered instances of excessive overtime, at times exceeding 1,000 hours during the year, with the highest registering over 1,300 hours. Other concerns noted related to the company-wide inclusion of break periods as part of the working week as well as notable errors in the computation of salaries.

The Gozo Channel earned over €30 million through ticketing revenue earned between 2010 and 2012. However, the NAO noted inconsistencies in passenger and vehicle data registered at Ċirkewwa and Mgarr, with potential loss of ticketing revenue estimated at an aggregate of €1.5 million.

Passenger variances were highest in 2012, at 106,000, while that of vehicles stood at 21,000 in 2014.

Another shortcoming related to the delays in the remittance of cash generated through ticket sales to bank. The balances unpaid to the GCCL were most pronounced in the case of a number of ticket sellers, who averaged daily undeposited sales for particular months as high as €27,394, €28,211 and €33,694.