Today, the Auditor General presented to the Hon. Speaker of the House of Representatives, the Annual Audit Report on the Public Accounts for 2014.  It comprises 23 reports on the operations of various Ministries, Departments and other Government entities, including an analysis of the Financial Report 2014. 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 should the latter need to make good for the companies’ debts, reached around €1,403 million;

·         substantial excess of expenditure over budgeted figures was once again reported on various Line Items;

·         some of the outstanding advances issued in favour of third parties, totalling approximately €84.1 million, will continue to be repaid out of an annual budgetary provision; and

·         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

An audit of expenditure at the Office of the Prime Minister, revealed instances of lack of adherence to the Public Procurement Regulations.  Shortcomings were also identified in the areas of inventory, general-use vehicles and compliance with fiscal obligations.

Expenditure on the Restoration of Forts, Fortifications and Historical Places, included substantial variations to the original tender, some of which were approved retrospectively, as well as overpayments.

Some payments to employees of the Malta Council for Science and Technology were either unauthorised, not properly supported by evidence or inaccurate.  Other shortcomings, particularly but not limited to attendance records and inventory management, were also noted. 

The main weaknesses identified during the audit of capital expenditure of EcoGozo related to the absence of independent verifications by the Directorate, on the quality of materials supplied for the various projects it undertook, non-compliance with tender requirements, delays in most of the projects, as well as lack of segregation of duties.

An audit on Gaming Taxes collected by the Malta Gaming Authority, on behalf of Government, reported that financial statements presented by the gaming operators did not give sufficient detail of the composition of income for the purpose of tax calculations, thus hindering the necessary verification.

Non-Contributory Social Assistance Benefits paid by the Social Security Department was not being adequately assessed by the Department during the application and evaluation processes, coupled with the fact that beneficiaries failed to report changes in circumstances. 

Weak internal controls were encountered at Aġenzija Sedqa in various areas relating to personal emoluments, mainly leading to overpayment of overtime and unreliable leave records. 

The lack of appropriate internal controls throughout the payroll process within the Ministry for Home Affairs and National Security led to a number of deficiencies, which included remuneration paid to Board Members in excess of the approved amounts, and various inaccuracies relating to salary payment. 

Overtime at Mount Carmel Hospital was being resorted to consistently.  Substantial amounts of allowances were also paid to employees, some of which were either unauthorised, inadequately supported by evidence, or incorrect.

The major cause of concern noted from an expenditure audit on contractual services at the Gozo General Hospital related to the provision of meals in respect of both patients, as well as staff, where significant weaknesses and discrepancies were noted in the ordering process and respective payments.

An analysis of Government’s Capital Programme, from both the planning and financing aspects, is augmented with NAO’s insights and proposals aimed at enhancing the current processes.

Similar to previous years, a review of the Arrears of Revenue Returns for 2014, submitted by Ministries/Departments in terms of Treasury Circular No. 4/2015, revealed several issues related to the collectability of outstanding balances.

Considering the substantial amount of funds allocated by Government to Local Councils, exceeding €31 million, as well as the fact that the five Regional Committees generate around another €10 million, NAO again deemed it appropriate to issue a separate Report dedicated solely to the workings of Local Government.

The following major concerns, mostly prevailing from previous years, have been reported upon: 

a)      Due to the various shortcomings encountered, the Local Government Auditors could not express an opinion on the Financial Statements of Birgu, Ħamrun, Kirkop, Qrendi and Siġġiewi Local Councils respectively.

b)      The Audit Reports of another forty-five Local Councils and all the five Regional Committees, as well as the Local Councils Association, were qualified with an ‘except for’ audit opinion.

c)      Twenty-two Local Councils and a Regional Committee recorded a negative Working Capital in the Statement of Financial Position.

d)     Thirty-one Local Councils registered a Financial Situation Indicator (FSI) below the established 10% benchmark.

e)      Twenty-seven Local Councils, as well as two Regional Committees, registered a deficit in the Statement of Comprehensive Income.

f)       Only thirty-two Local Councils, and two Regional Committees sent their response to the Management Letter within the stipulated deadline as set by Article 8(2) of the Local Councils (Audit) Regulations, 1993.

The nine Joint Committees again failed to submit the respective audited Financial Statements for 2014. Since these entities were entrusted with the collection of public funds, it is felt that such situation is unacceptable.

A copy of both Reports will be available on NAO website through the following link:   http://www.nao.gov.mt.