Performance Audit: An evaluation of the regulatory function of the Office of the Commissioner for Voluntary Organisations

The Auditor General, Charles Deguara, today presented to the Speaker of the House of Representatives,
Hon. Angelo Farrugia, the National Audit Office (NAO) report entitled Performance Audit: An evaluation
of the regulatory function of the Office of the Commissioner for Voluntary Organisations.

The Auditor General reported that the regulatory function delegated to the Office of the Commissioner
for Voluntary Organisations (OCVO) is in transition. In recent months, OCVO embarked on strengthening
its internal mechanisms to screen and monitor Voluntary Organisations (VOs) which were given further
substance by the legislative changes of November 2018. These legal amendments extended OCVO’s
remit, streamlined enforcement mechanisms and laid the obligation on all VOs to register. While
acknowledging these important developments, this review highlighted areas to strengthen OCVO’s
regulatory function, which in turn will improve VOs’ governance within this financially material sector.

As at end August 2018, the number of enroled VOs amounted to over 1,300. To date, however, OCVO
does not have adequate information regarding the number of unregistered VOs. This situation raises a
number of risks as VOs’ operations and activities remain beyond the cognizance and consequently,
OCVO’s regulatory function. Moreover, the absence of such crucial management information hinders
the Regulator’s planning capabilities and risk assessments.

Although OCVO’s remit does not extend to VOs’ funding, it remains imperative that the Regulator is kept
informed of such financing. However, many Government Ministries do not inform the Commissioner
when they issue public grants to VOs. Similarly, information gaps exist with respect to VOs fund raising
activities, as obligatory reporting requirements relating to public collections have not been enforced
since 2012. OCVO contends that enforcement of these reporting obligations will commence with VOs’
submission of 2018 Annual Returns.

An environment of significantly high VOs’ non-compliance rates with respect to the timely submission of
Annual Returns prevails. OCVO is strengthening its internal mechanisms related to the vetting and
screening of VOs, particularly at the enrolment stage and in connection with the submission of
obligatory yearly reporting. To this effect, OCVO recently implemented procedural improvements, such
as referring enquiries to national intelligence services and assigning a risk ranking to each VO.
Nonetheless, the opportunity exists for OCVO to build on these initiatives by strengthening further its
risk assessment approaches and the validation of VOs’ financial documentation with third party sources.

OCVO’s recent initiatives and the November 2018 legislative changes aim to strengthen the regulatory
function and governance within the VO Sector. These, however, are only the starting point as the
effectiveness of these initiatives is greatly dependent on the extent to which the Regulator’s resources
are augmented and the organisation’s structure is re-engineered in line with OCVO’s broadened
mandate and the Sector’s risk environment. While acknowledging the importance of maintaining VO’s
compliance costs at a minimum, OCVO is to consistently strive to inform and encourage these
organisations to exploit the support facilities at both OCVO and Malta Council for the Voluntary Sector
so that they would be in a better position to comply with legislative requirements. This will further
nurture a culture of accountability and transparency within the Sector to complement the social benefits
emanating from VOs activities.