NAO: Several shortcomings in Government departments and entities
The National Audit Office (NAO) today presented the Annual Audit Report which found that Letters of Comfort and Bank Guarantees reached €1,242 million (against €1,142 million in 2011) constituting Contingent Liabilities for Government, and substantial excess of actual over budgeted figures of various items of Expenditure was once again reported.
The Auditor General presented to the Speaker of the House of Representatives the Annual Audit Report on the Public Accounts for 2012. It comprises 23 reports on the operations of various Departments and other Government entities, including an analysis of the Financial Report 2012.
In his observations, the Auditor General noted that by mid-October 2013, when the report was concluded, the audited Financial Statements of two Local Councils and one Regional Committee were still not forwarded to NAO.
Audit Reports and Management Letters prepared by Local Government Auditors revealed that a number of weaknesses and concerns reported in previous years still prevail, and have been included again in this Report. The following concerns were also noted:
- For the third consecutive year, no audit opinion was expressed on the Financial Statements of Mosta Local Council, due to the various material shortcomings encountered.
- The Audit Reports of another 57 Local Councils and four Regional Committees were qualified with an ‘except for’ audit opinion.
- Twenty-five Local Councils and a Regional Committee recorded a negative Working Capital in the Statement of Financial Position.
- Thirty-one Local Councils registered a Financial Situation Indicator below the established benchmark of 10 per cent.
- Thirty-two Local Councils and a Regional Committee registered a deficit in the Statement of Comprehensive Income.
Internal controls in various areas at the Malta Tourism Authority (MTA) were weak or entirely lacking. It transpired that officers working at the Head Office were not always recording their attendance through the recognition device in place, thus attendance records and overtime claims could not be verified. On the other hand, manual records maintained at certain Tourist Information Offices were incomplete and unreliable. Weak budgetary control on overtime, as well as variances in the basic pay, was also encountered.
The procurement of services by MTA, the Housing Authority, the Malta Enterprise and the Land Transport Directorate within Transport Malta, was not always in line with standing regulations. At times, such procurement was made directly from the open market without a public call for quotations or tenders, and on occasions, without Finance approval.
Completeness of revenue generated by the Medicines Authority could not be ascertained due to the absence of an integrated IT system. Besides other control issues, testing also revealed concerns with employees’ employment contracts.
An audit of the expenditure incurred by the Ministry for Resources and Rural Affairs, for Upgrading works at Main Touristic Areas, revealed that the majority of capital projects experienced unplanned changes, as well as additional work after the issue and adjudication of the tenders, thus defining the planning as inadequate. This caused substantial cost variations to the budgeted tendered amounts, which could also trigger lack of transparency and unfair competition for the amounts in question.
The Ministry of Education and Employment does not have a reliable system in place to reconcile the actual refunds of overpaid Students’ Maintenance Grants, against that actually deposited at the Central Bank of Malta. The inadequacy of the overall internal controls and lack of audit trail were a major concern. The main shortcomings included refunds not deposited at Bank, missing receipt books and official receipts not issued.
The lack of information made available to NAO by the G.F. Abela Junior College limited the scope of audit. Delayed responses to audit queries also hindered the course of the auditors’ planned tasks. Furthermore, shortcomings were noted in purchases effected by academic staff from the Academic Resources Fund, and the reporting of such expenditure. Formal approval for overtime was invariably sought retrospectively. Moreover, no inventory records pertaining to the College were made available for audit purposes.
Inadequate practices and procedures at the Social Security Department created unnecessary overpayments of Social Benefits and limited the recoverability of such amounts, which at times were substantial.
The Malta Statistics Authority lacked a formal system for authorising its procurement activities. The audit also revealed that the rates charged by the National Statistics Office for customised requests were not transcribed by law in accordance with pertinent legislation.
Figures provided by the Government Property Department, covering accrued rent on Government property, were distorted and at times could not be corroborated. Other weaknesses related to rent collectable from commercial tenements were encountered. These included expired lease contracts that were not renewed and reminders for overdue rent that were overlooked.
Various shortcomings in the procurement, administration and payment of a number of services were revealed during an audit at the Department of Correctional Services within the Ministry for Justice and Home Affairs. Several internal control issues, particularly relating to stores, were identified. Amongst others, these comprised lack of transparency in the procurement process, material discrepancies between the balance as per bin cards when compared to those recorded in the computerised system, as well as lack of control on food provisions. Inventory records were also not available for Government-owned assets. Moreover, the completeness of the audit was hindered as Management failed to present the requested information in a number of instances.
The Welfare Committee, within the Ministry of Health, Elderly and Community Care, has been operating without a Chairman and the respective Board for the past five years, in breach of the Social Security Act. Several shortcomings were noted in a number of contracts in force and other long-expired contracts that were still in use. An inefficient system was also observed for the collection of the contributions due by elderly persons. Such contribution is payable for their care and upkeep in state-owned residential homes and institutions.