When candidates from across the political spectrum remind us of the promises in their electoral manifesto, one is excused for forgetting to be realistic. The stark reality is that not everything in our garden is rosy. Just remember the misgivings cited in the administration of public funds as reported by the National Audit Office (NAO). Now with the good news that €1.12 million has been secured as funding for the next seven years, it is even more important that the newly elected party will as from next month improve the governance of the central administration and various quangos. Can it turn over new leaf to avoid the scathing remarks disclosed in the annual audits conducted by NAO?

Everyone knows it is important for our young nation to take a reality check and focus on how to start repaying the mountain of debt, which together with government guarantees now exceeds 90 per cent of GDP. There is no more family silver to sell or pawn, as it was sold by the privatisation unit in the past decade. Regrettably, both Air Malta and Enemalta are the last bastions of government-owned assets and their value do not feature high in the auction league. Still, we are constantly reminded (even by the EU) that our rate of growth is the second highest (1.5 per cent) when compared with Mediterranean countries that are either shrinking or showing zero growth. Our worker participation rate is on of the lowest in Europe (only 44 per cent of females work), so it is no wonder that our unemployment rate is comparatively low. All this still rings hollow in the ears of the PN party apologists who are reminding its followers to have faith in election promises and to vote it again into power after an uninterrupted interregnum of almost 25 years. A sleuth of golden pledges fill the glossy leaflets distributed to homes forming part of a carefully worded manifesto .Yes it is no exaggeration to say that all political parties are promising us a pot of gold at the end of the rainbow. Give us the coveted Number One and the lottery prize is yours. But then little do we bother to stop and reflect on the warnings issued over the years in the modified audit reports by the Auditor General.

In my article I wish to give readers a collage of salient recommendations issued to Parliament by the NAO to address the shortcomings in the governance and general administration of public funds. To start with, one cannot omit to mention a scathing report for 2011 issued last December in which NAO cut no corners in presenting an impressive 415-page dossier spiced with instances where mismanagement was observed. Studying the report in an objective manner and keeping in mind that the general service spends millions each year to employ qualified internal control officers to adopt a solid procurement policy, there is still an indictment of bad governance and misadministration, which begs the question whether we have learnt any lessons from Greece. One may well ask if it is one massive “cash and carry “ treasure trove where taxpayers’ monies are spent in a manner that would send shivers down the backs of the party faithful.

It is no exaggeration to state that with the lax controls regularly encountered by NAO officers, one can easily conclude that in some ministries it is unbridled incompetence. In some instances, it reaches alarming levels costing the nation millions. All this is happening at a time that we are assisting Greece, Ireland and Portugal by loaning them monies to help them with their sluggish economies in their days of austerity. Perhaps, we ourselves need to be careful and put the brakes on our money-no-problem attitude unless we want to join them in asking for a bailout. Any prediction of servitude to austerity is anathema to the Prime Minister who has publicly declared “Finanzi fis Sod”

To start with, one can be excused for sympathising with the hapless taxpayer who can be sent to jail for not filing a VAT return when at the same time we read how in the 2011 audit commentary a particular ministry rode roughshod over regulations and issued a staggering €45 million in direct orders. This contrasts with stiff regulations issued by the Contracts Authority in all its public tender documents. It is common knowledge that it prints copious notes and regulations apart from imposing penalties on any infringements ... certainly it is a case of two weights two measures. It is curious to note how no heads rolled when NAO reported that in three cases the Service Agreement between the government entity and the respective service provider was signed before the relative direct order approval was obtained, while in another instance, the entity concerned raised a purchase order, thus committing itself to purchase prior to the same approval being granted. A signed agreement is expected to be drawn up before a service commences.

Again, it is well prescribed that direct contracts valued in excess of €6,000 can, only in exceptional and urgent cases, be placed by any contracting authority after the entity obtains written approval from the Finance Minister. This rule applies across the entire service but the auditor met with exceptions. It goes without saying that if a ministry wants to appease a supplier by issuing a direct order, this can be justified on the pretext that the matter was urgent. Even if the service is really urgent at least three authentic quotations are strongly recommended for the sake of transparency, particularly if EU funds are concerned.

To focus the reader’s mind on such irregularities let me start by extracting details from the 2011 audit report on some of the big spender departments such as Health and WasteServ. The Auditor General raised several points of concern with regard to WasteServ. An audit of capital and recurrent expenditure incurred by WasteServ Malta Ltd revealed “long delays and substantial cost variations on capital projects”. There is another big spender – Mater Dei Hospital – with a budget allocation of €97,206,300 mostly for emoluments and supplies. The NAO pointed out that the excessive and expired stock of medicinal items that the Health Department is many times ending up with, is also a matter of concern. Other areas of concern highlighted by the report include lack of compliance with procurement regulations, expired contracts, as well as inadequate controls over expenditure incurred for specific services rendered to the hospital. But the NAO is also busy preparing investigative reports covering other sectors of government administration.

Last year the Public Accounts Committee asked to carry out an investigation of the contract awarded to Danish company BWSC to build an extension to the Delimara Power Station. This contract, which is around €170 million has created a number of controversies because it was prototype equipment running on highly polluting heavy fuel oil. In the course of its detailed audit, NAO identified many serious irregularities and shortcomings and concluded: “These allegations raise serious doubts and concerns, more so in those cases where insufficient explanations were given during the course of the inquiry which could dispel such concerns. Indeed, it was felt that the evidence given by certain stakeholders, especially Mr Joseph Mizzi (BWSC local agent) who was summoned by the National Audit Office on three separate occasions, tended to be somewhat evasive, sometimes bordering on non-collaboration, very often citing lack of memory when confronted with certain direct questions.” To rub salt in the wound, one reads how certain stakeholders did not collaborate during the investigation. But then one cannot blame BWSC or Enemalta officials who wanted to give evidence but feared for their jobs in the absence of a Whistleblower Act. Informers expect to be protected if they stick their neck out to disclose corrupt practices. A typical case is the whistle blower Philip Rizzo who uncovered the Rita Schembri scandal. Very briefly, the case involved the alleged meeting by Ms Schembri, the IAID director-general, on private business for gaming company Far East Entertainment plc held in her government office in Strait Street, Valletta, to discuss a bid for the acquisition of 60 per cent of Vittoriosa Casinò di Venezia. The Auditor General is investigating the alleged breach of ethics by Ms Schembri and one awaits the conclusion of this process.

Ideally it makes sense that the newly elected party next month will consider giving the Auditor more powers. At present NAO has limited powers and can do with better tools to unearth corruption.

Corrupt businessmen and politicians hide their tracks well and the only way to catch them is either if one of them spills the beans and gives the game away as criminals do when they fall out with each other, or by hacking into their private and confidential emails or by tapping their phones and by having access to their bank accounts around the world. After hearing so much shocking news on the kickbacks paid for a decade in the oil procurement division of Enemalta, it is recommended that the Auditor General be given more teeth. As the country braces itself for a general election, one hopes that electors weigh with caution the consequences of graft and corrupt practices that may go undetected in the future unless we learn from the warnings issued by Auditor General. As always, fraud lurks in situations where there is a motive, a lack of transparency and particularly in the big spender department/ministries where non-compliance with procurement regulations can lead to abuses. As a young nation with responsibility to account for taxpayers’ monies, no effort should be spared by the newly elected government to tighten up on internal controls otherwise it will always be a question of see no evil hear no evil.

In the end, this laissez faire attitude unwittingly leads to fiscal ruination.

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The writer is a partner in PKF, an audit and business advisory firm.