Auditor report highlights irregularities at Malta Enterprise and Transport Malta

The Auditor General's annual report highlighted a number of shortcomings in its review of government's accounts, chiefly a substantial excess of actual over budgeted figures of various items of expenditure.

The NAO said that this excess was once again reported similarly to the excesses reported last year. The report tabled in Parliament this evening, includes explanations for these reoccurrences.

The report said that the procurement of services by the Land Transport Directorate within Transport Malta was not always in line with standing regulations.

"At times, such procurement was made directly from the open market without a public call for quotations or tenders, and on occasions, without the necessary Finance approval."

During 2012, a general lack of internal control procedures, in the area of procurement of goods and services within Malta Enterprise, was identified.

The non-compliance with standing regulations and policies, together with the identification of a number of irregular contracts in relation to various services procured by the Enterprise, were conducive to an inefficient use of public funds.

The NAO report emphasised that letters of Comfort and Bank Guarantees reached €1,242 million, against the €1,142 million in 2011. Noting that these constitute "Contingent Liabilities for Government," the report  includes a detailed statement showing outstanding advances made to various government departments, agencies and organisations, including the ministry's plans to settle such amounts.

In contrast to last year, only the Ministry for Health, the Elderly and Community Care failed to submit the Arrears of Revenue Return for 2012. Moreover, completeness of revenue generated by the Medicines Authority could not be ascertained due to the absence of an integrated IT system.

An audit of Personal Emoluments was conducted on a sample of 14 officers with different designations, working within the Malta Tourism Authority.

"Testing carried out revealed that internal controls in various areas were weak or entirely lacking. It transpired that officers working at the Head Office were not always recording their attendance through the recognition device in place, thus attendance records and overtime claims could not be verified. On the other hand, manual records maintained at certain Tourist Information Offices were incomplete and unreliable. Weak budgetary control on overtime, as well as variances in the basic pay, was also encountered."

From the limited documentation provided during the audit of operative and marketing expenditure incurred by the same Authority, it transpired that direct orders for various goods and services were not covered by the necessary finance approval.

By the time the report was concluded in mid-October 2013, the audited Financial Statements of Kalkara and Xgħajra Local Councils, as well as the Central Regional Committee, were still not forwarded to NAO.

Audit Reports and Management Letters prepared by Local Government Auditors revealed that a number of weaknesses and concerns reported in previous years still prevail, and have been included again in the report.

For the third consecutive year, no audit opinion was expressed on the Financial Statements of Mosta Local Council, due to the various material shortcomings encountered.

The report also noted that the Audit Reports of another 57 Local Councils and four Regional Committees were qualified with an 'except for' audit opinion.

Moreover, 25 Local Councils and a Regional Committee recorded a negative Working Capital in theStatement of Financial Position while 31 councils registered a Financial Situation Indicator below the established benchmark of 10%.

Meanwhile, 32 councils and a Regional Committee registered a deficit in the Statement of Comprehensive Income.

The lack of attendance sheets kept by the Maltese Mission in Brussels hindered audit testing, which, as a result, had to be based on the official vacation and sick leave records. However, a number of shortcomings were noted in the upkeep of these records, including discrepancies when compared with other relevant source records, particularly those related to overtime.

An audit of the expenditure by the Ministry for Resources and Rural Affairs, for Upgrading works at Main Touristic Areas, revealed that the majority of capital projects experienced unplanned changes, as well as additional work after the issue and adjudication of the tenders, thus defining the planning as inadequate. This caused substantial cost variations to the budgeted tendered amounts, which could also trigger lack of transparency and unfair competition for the amounts in question.

Internal controls at the Malta Resources Authority were not sufficient, mostly due to lack of segregation of duties. Various shortcomings were identified during the audit, including salary payments not always substantiated and verification of invoices not corroborated.

Testing carried out on the statement of the Arrears of Revenue for year ending 2012, submitted by the Ministry of Education and Employment revealed that figures featuring therein were unreliable, particularly the compilation of arrears pertaining to the Refunds of Overpaid Students' Maintenance Grants from Junior College, Higher Secondary and University of Malta students.

"The Ministry does not have a reliable system in place to reconcile the actual refunds, against that actually deposited at the Central Bank of Malta. The inadequacy of the overall internal controls and lack of audit trail were a major concern. The main shortcomings included, refunds not deposited at Bank, missing receipt books and official receipts not issued."

Furthermore, shortcomings were noted in purchases effected by academic staff from the Academic Resources Fund, and the reporting of such expenditure. Formal approval for overtime was invariably sought retrospectively. Moreover, no inventory records pertaining to the College were made available for audit purposes.

The audit at the Employment and Training Corporation revealed that the contract covering the provision of staff transport was not valid, whilst the rent of the Head Office was also not covered by an agreement.

An audit on the Overpayments of Social Security Benefits, generated by the Social Security Department within the Ministry for the Family and Social Solidarity, revealed practices and procedures which created unnecessary overpayments, and limited the recoverability of such amounts. It was noted that considerable overpayments were created due to lack of co-operation between a number of Government entities.

The Malta Statistics Authority lacked a formal system for authorising its procurement activities, whilst cleaning services from a particular supplier could not be validated with a contract for service. The audit also revealed that the rates charged by the National Statistics Office for customised requests, were not transcribed by law in accordance with pertinent legislation.

From an overview of Government grants disbursed by the Ministry of Finance, the Economy and Investment, through Schemes operated by various entities, it transpired that there were cases where grant applications were not processed by order of receipt. In addition, in certain instances, relating to the grant on acquisition of more environment-friendly cars, applications received at Transport Malta were not supported by a valid fiscal receipt, as required by the relevant Government Notice.

An audit of accrued rent on Government property revealed distorted figures in relation to rents due to the Government Property Department from other Government Entities. Credit balances recorded in the Department's system were also erroneously offsetting the total amount of rent in arrears.

The audit, which also verified rent collectable from commercial tenements, revealed other weaknesses, such as expired lease contracts that were not renewed, and reminders for overdue rent that were overlooked.

Various shortcomings in the procurement, administration and payment of a number of services were revealed during an audit at the Department of Correctional Services within the Ministry for Justice and Home Affairs.

Several internal control issues, particularly relating to stores, were identified. Amongst others, these comprised lack of transparency in the procurement process, material discrepancies between the balance as per bin cards when compared to those recorded in the computerised system, as well as lack of control on food provisions. Inventory records were also not available for Government-owned assets.

Moreover, the completeness of the audit was hindered as Management failed to present the requested information in a number of instances.