The National Audit Office has flagged limited internal controls and inadequate project management, in a report it submitted to the Speaker of the House on Wednesday.

Auditor General Charles Deguara, presented the Annual Audit Report on the Public Accounts for 2023 to Speaker Anglu Farrugiua.

"It comprises 32 audit reports on the operations of several public sector entities. This publication also includes an analysis of the Financial Report 2023, as well as an overview of the Statements of Arrears of Revenue for the same year, as submitted to Treasury by the respective Ministries, Departments and Entities," the statement by the NAO read.

"The National Audit Office has judiciously analysed the level of compliance of various expenditure items with prevailing rules and regulations. The Report gives over 260 relevant recommendations which are meant to address the shortcomings identified during these reviews and thus promote good governance and best practice in Government's operations."

Some of the key findings identified were the following: Bypassing of procurement regulations, including services rendered under expired contracts and the absence of the necessary approvals; Limited internal controls and Standard Operating Procedures; Lack of substantiating documentation supporting the payment of allowances and overtime; Inadequate project management leading to delays and overspending, the NAO said.

Revenue

The financial accounts part of the report noted that during 2023, total revenue increased by 15%, whilst aggregate expenditure also rose by 6%. "This led to a surplus of over €249 million throughout this period. As a result, the negative closing balance of the Consolidated Fund as at 31 December 2023 improved to nearly €790 million, when compared to prior year (2022: €1.04 billion)."

The most significant increase in expenditure incurred during 2023 over the previous year pertained to capital expenditure; the rise was nearly €236 million, i.e., 31% increase when compared to prior year.

Discrepancies

An exercise was carried out by NAO, whereby 2022 figures as reported in the related year's Financial Report were compared to the respective figures as reported in the Financial Report of the subsequent year (2023).

"The balance as at 1 January 2022, as reported in the 2022 Financial Report, amounting to €713,328,693, differed from the balance as reported in the 2023 Financial Report, totalling €676,672,722. This difference arose due to a retrospective correction, going back to the year 2020, which was carried out by Treasury to show the correct figures in the 2023 Financial Report, given that the figures for both years were duly reconciled."

In a separate issue, it was also revealed that there was a discrepancy between the aggregate income that was transferred by Residency Malta Agency to Treasury, and the revenue reported on CFMS account; it transpired that one of the monthly transfers of €537,000 was not deposited into the Consolidated Fund. Consequently, the revenue generated by the Agency as reported in the Financial Report 2023 was also understated by the same amount. The NAO said that on a regular basis, Treasury must reconcile the revenue transferred to the Consolidated Fund by each revenue generating entity during the year, and that any discrepancies are to be investigated in order to ascertain accuracy and completeness of revenue.

Identita agency's central visa unit

The Identita agency's central visa unit was one of the 32 public sector entities that came under the spotlight.

"the NAO noted the need for improvement in compliance and procedural practices. Areas highlighted include enhancing formal approvals for open market service procurement, aligning salary practices more closely with the collective agreement and refining the process for the payment of allowances. The procedures in place for the collection of revenue provided adequate control; however, the legal framework for chargeable visa fees requires updating to ensure full regularity alignment."

One of the key issues the NAO found was that as from April 2023, visa fees were revised upward and additional services with the applicable rates were introduced. "However, the pertinent legislation, namely Long-stay Visa Fees Regulations, 2020 (L.N. 287 of 2020) was still not updated. Consequently, the application of these fees is considered ultra vires."

In response to NAO recommendations, the ministry said it is going to present the amendments for regulations for approval by Cabinet. The date for implementation is dependent on the latter's approval.

The NAO also noted that certain correspondence, supporting documents and the related approvals, requested for audit purposes were not always retrievable, resulting in a lack of audit trail. It noted that the terms of the collective agreement governing Identità officers differed from those of the Public Service, at least in the case of overtime. The collective agreement was only endorsed by the Agency and the respective union, and there was no evidence of IRU's involvement in the process. In addition, the grading structure for the years 2020 to 2024 in view of the respective directive issued from the Office of the Prime Minister was still in draft format and thus not approved by IRU. Furthermore, the HR Recruitment Plan submitted for 2023 was not scrutinised by the respective Coordinating Committee and duly authorised, the NAO said.

"For transparency, accountability, as well as business continuity, source documentation is to be duly filed. Full audit trail is also necessary for future verification, both internally and by third parties," the NAO recommended.

In response, organisation's management said: "IRU was actually involved in the collective agreement process. For transparency, accountability, as well as business continuity, source documentation is being duly filed. Full audit trail is also being kept for future verification, both internally and by third parties. This will be further reinforced through the implementation of a digital overtime approval system. An overtime policy was issued to address the points highlighted. The respective employees have attended training in this regard and the system is being updated so that it starts to function as soon as possible."

Compliance issues were also flagged. "The pertinent collective agreement states that all overtime must be approved in writing by Management prior to its occurrence, except in urgent cases, and 24-hours' notice of the need for overtime is to be given to employees. However, no evidence was provided showing that overtime performed was approved beforehand. The reason for such overtime was also not documented."

"Total overtime payments during the year under review amounted to €74,895, covering 30 individuals. The grades of officers varied from the highest in the collective agreement, being that of Grade A senior professional officer, to the lowest grade for clerical officer."

The report can be read here