Performance Audit: An analysis of issues concerning the Cooperative Movement in Malta

The Auditor General, Charles Deguara presented to the Speaker of the House of Representatives, Hon. Anglu Farrugia, the National Audit Office (NAO) Report titled `Performance Audit: An Analysis of issues concerning the Cooperative Movement in Malta.’ The audit noted the current impasse in the cooperative movement in Malta arising from a number of disputes between the two cooperative associations. NAO conducted this study to identify the issues giving rise to such disputes.

Cooperatives in Malta are exempt from paying income tax but are required to contribute 5% of their annual surplus into the Central Cooperatives Fund. This ring-fenced public fund, which balance sheet read €5.1 million as at end 2018, is managed by a committee composed of Government and cooperatives representatives. This committee is entrusted to evaluate claims, primarily submitted by cooperative associations, and to disburse funding from this fund for the sole use of cooperative development and in accordance with legal requirements.

The Central Cooperatives Fund has however been at the centre of disputes and issues which prevail within the cooperative movement. A premises related concession financed out of this fund and favourable lease agreement by this Committee to one of the cooperative associations, did not sufficiently safeguard government’s interests. In addition, governance risks prevailed in the Central Cooperatives Fund’s operations for a period of time, as the majority of its members were also heavily involved within one of the cooperative associations. This Office further found that no audit was retrospectively carried out by Government to determine whether this public fund was always appropriately used, particularly when the mentioned governance risks prevailed.

This review also showed that, since the formation of the second cooperative association in 2012, constant disputes characterised this sector. Government attempted several remedial actions throughout this period, amidst claims of discriminatory use of the fund. The most notable of these was the setting up of a Committee of Government appointed experts to bring all parties to agree on a way forward for this movement, and to resolve past premises and legacy issues. This initiative saw all parties agree on a way forward and formalise it into what came to be known as the Excelsior Accord. A subsequent report by a Premises and Legacy Review Committee was also drawn up in an attempt to resolve past issues. Both reports were considered as one single package and one could not come into effect without the other.

Notwithstanding the above agreements, NAO noted that the Premises and Legacy Review Committee report was not accepted by all parties and disputes re-emerged. This also meant that the way forward as set in the Excelsior Accord could not come into effect, casting the Central Cooperatives Fund in a renewed impasse.

NAO made recommendations on way forward and how to address issues mentioned in the Report.