Performance Audit: Ensuring fair Non-Contributory Social Benefits and safeguarding against related fraud

Auditor General Mr. Charles Deguara today presented the performance audit report in caption to the Speaker of the House of Representatives Dr. Anglu Farrugia. This performance audit seeks to determine whether non-contributory social benefits (NCSB) are achieving their intended purpose, and whether their award is being adequately regulated and monitored.

According to information published by NSO, NCSBs distributed to individuals who, for one reason or another, are not engaged in employment (and therefore resort to this safety net to secure an income), amounted to Eur201m in 2021. This audit however found that more effort needs to be undertaken for the delicate balancing act in the NCSB system to be achieved between ensuring that deserving individuals are provided with sufficient income to secure a minimum decent standard of living, while ascertaining that the availability of these benefits is not extended to individuals who can either engage in gainful employment or who are in possession of significant wealth. Specifically, the Office concludes that a four-member family (consisting of two adults and two children) who have no choice but to depend on NCSBs, are not securing sufficient income to meet a minimum decent standard of living. On the other hand, while this Office acknowledges that NCSB beneficiaries have been on the decline over the past years, it is of the opinion that current eligibility thresholds leave room for individuals who cannot be considered to be financially vulnerable to tap into them.

The Benefits Compliance Unit (BCU) was reviewed in its capacity as the monitoring and enforcement body insofar as NCSBs are concerned. This review showed that, though its inspectors carry out their duties diligently during inspections in investigated beneficiaries’ places of residence, inspection efforts on work related allegations need to be strengthened. In addition, the number of inspectors deployed at BCU are deemed too few and inefficiently deployed on the ground.

This review also found that investigations on the ground are largely reactive, mainly carried out if reports of alleged irregularities are received by third parties. While the Department does proactively launch periodic desk-based initiatives to monitor targeted NCSBs, these are not supported by “on-the-ground” inspections unless a red flag is raised. Similarly, BCU does not have systematic periodic sampling for proactive inspections. This Office however contends that desk-based initiatives, while commendable, can never give a comprehensive picture to the inspectorate unless these are substantiated with “on-the ground” inspections, with the latter being the better suited tool to identify indications that the investigated beneficiary would be living beyond one’s means or would be living in different circumstances than what is officially declared.

While this Office acknowledges the agreements that BCU has with local banks that provide the former with monthly information on the beneficiaries’ financial situation (in view of the capital means tests applicable to the eligibility of NCSBs), it questions why similar arrangements are not in place with other stakeholders, particularly Transport Malta and the Tax Compliance Unit. As the situation stands, the Department needs to actively ask for information from such stakeholders. Furthermore, such information is not periodically received.

Finally, this review also found that although the Department does have Standard Operating Procedures in place, those relating to BCU operations need to be more comprehensively drafted, particularly with respect to the manner in which inspectors are expected to carry out “on-the-ground inspections”.
These issues, along with others, are comprehensively presented in the audit report together with this Office’s recommendations.