Report by the Auditor General on the Public Accounts for the year 2015

Today, the Auditor General presented to the Hon. Speaker of the House of Representatives, the Annual Audit Report on the Public Accounts for 2015. It comprises 21 reports on the operations of various Ministries, Departments and other Government entities, including an analysis of the Financial Report 2015. Some of the main observations are reported hereunder.

Following a detailed analysis of the Financial Report, the National Audit Office (NAO) noted that:

• Letters of Comfort and Bank Guarantees, being potential dues by Government, reached almost €1.5 billion;
• substantial excess of expenditure over budgeted figures was once again reported;
• some of the outstanding advances issued in favour of third parties, totalling approximately €69.4 million, will continue to be repaid out of an annual budgetary provision;
• following the enactment of the Government Borrowing and Public Debt Management Act, a number of measures will be implemented thereby introducing a risk management framework with supporting Information Technology systems, together with a code-of-conduct and conflict-of-interest rules; and
• to date, six Draft International Public Sector Auditing Standards (IPSAS), as adopted by the Maltese Government, have been published, being part of Government’s strategy to prepare for the full implementation in Central Government of accrual accounting.

An audit on the Free Childcare Scheme, recently introduced by the Ministry for Education and Employment, revealed lack of control over the service providers. The implementation of a fully automated attendance recording system beginning 2016 only translated into a new set of risks, which still resulted in significant undue payments.

Attendance records maintained by the Foundation for Educational Services were considered unreliable. No evidence was obtained to confirm that payroll is adequately verified prior to processing and that overtime was approved before it is performed.

The method of calculating fruit and vegetables subsidies falling under the Agriculture Support Scheme was inconsistent and not in line with information obtained by NAO during the audit. Documentation forming the basis of subsidy payments was not retained by the Pitkali Markets, hindering audit testing.

The main weaknesses identified during an expenditure audit at the Ministry for Transport and Infrastructure, consisted of lack of adherence to the Public Procurement Regulations with respect to Direct Orders obtained retroactively for a number of services.

The contract price, as well as period of engagement of a service provider to the Ministry for the Economy, Investment and Small Business, was substantially exceeded. Lack of supporting documentation and approvals were also identified while testing expenditure incurred following Malta’s participation in the Expo Milan 2015. Concerns relating to travel abroad were also noted.

An audit on revenue from trade license fees collected by the Commerce Department, revealed that insufficient departmental verification was carried out on information submitted during the application stage. Other shortcomings were identified in the area of collection of arrears, mostly due to delayed action by the Department.

Procurement not always in line with the applicable regulations, as well as insufficient controls on reimbursements of medical expenses to various members of the Force, were the main issues emerging from an audit of the Armed Forces of Malta.

Corradino Correctional Facility was undergoing substantial changes in the management set-up when the audit on Correctional Services was in progress, with the result that a number of queries remained pending. NAO identified a number of shortcomings, amongst other issues, relating to procurement and stock management.

The lack of internal controls within the Human Resources and Payroll function of the VAT Department led to numerous deficiencies. Amongst others, non-compliance with Procurement Regulations in the provision of legal services was also reported upon.

The shortcomings identified during an audit of expenditure at the Department of Contracts related mainly to personal emoluments, inventory and travel.

An audit of the expenditure on Contractual and Professional Services at Sir Anthony Mamo Oncology Centre revealed a lack of internal control synonymous to management by crisis.

Invalidity Pensions paid by the Department of Social Security were not being periodically re-assessed. In the case of female applicants, the Invalidity Pension is paid at ‘single rate’, irrespective of their marital status.

Whilst auditing personal emoluments of the Elderly and Community Care Department, it transpired that two General Practitioners were overpaid around €27,000 in total.

An audit on the Judicial Expenditure revealed that the procedure for the nomination of Court Experts was still not formalised and official standard rates were not yet established. The tariffs actually applied are taxed by the Court after negotiating the fee with the respective Court Expert.

Control over attendance records and related payments was insufficient at the Institute of Tourism Studies.

Similar to previous years, a review of the Arrears of Revenue Return for 2015, submitted by Ministries/Departments revealed several issues in the collectability of outstanding balances. In reply to a Public Accounts Committee specific request, the year-end balances were further analysed as amounts statute-barred, pending Court action, recoverable by departmental action and amounts which are recoverable.

Notwithstanding the legal obligation for the accounts of the Malta Police General Fund to be submitted to NAO for audit, the first time these were submitted was for the year under review. It transpired that at year-end the Fund was in a net deficit position and the current level of expenditure is considered unsustainable. The quarterly members’ contributions were still being paid in cash and adequate records were not being maintained.

A clean audit opinion on the Ex-Gratia Grant Scheme managed by Transport Malta, and on the Financial Statements of the Co-operatives Board were issued.