Auditor General Charles Deguara presented the Annual Audit Report on the Public Accounts for 2022 to the Speaker of the House of Representatives, Anglu Farruġia, on Monday.
It comprises 26 audit reports on the operations of several public sector entities. This publication also includes an analysis of the Financial Report 2022, as well as an overview of the Statements of Arrears of Revenue for the same year, as submitted to Treasury by the respective Ministry, Department and Entity, the National Audit Office said.
“The National Audit Office has judiciously analysed the level of compliance of various expenditure and revenue items with prevailing rules and regulations. The report gives over 250 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.
The NAO said that some of the key findings identified were the following: Limited internal controls and lack of segregation of duties; Habitual bypassing of procurement regulations, including irregular use of negotiated procedures, services rendered under expired contracts and lack of necessary approvals; Weaknesses in the payroll system, leading to incorrect calculation of allowances and regular use of overtime, often unauthorised; Insufficient enforcement on amounts due to Government; and Lack of audit trail and Standard Operating Procedures.
As an example, the audit of the Building and Construction Authority (BCA) found that “during its first two years of operation, the authority’s procurement was generally made by direct order. This amounted to €697,545 and €616,753 both excluding Value Added Tax (VAT) in 2021 and 2022 respectively. This mainly related to consultation fees, professional services, auditing service of method statements and the provision of IT services. Most of these direct orders were split into various amounts not exceeding €10,000 (VAT excl.) evidently, to bypass procurement regulations and thus not necessitating approvals from the Direct Orders Section within the Ministry for Finance and Employment. Quotations were not obtained to ensure that the best price was acquired. No evidence was provided regarding the approval of these direct orders within BCA.”
For the Ministry for Gozo, among other things the NAO report reads: “Services of substantial value were being habitually split into several contracts not exceeding the €10,000 excluding Value Added Tax (VAT) threshold laid down in public procurement regulations. Such method of procurement, which actually merited a public call for tenders, was endorsed by the respective Permanent Secretary.” It mentioned, for instance, with regard to cleaning services that “between March 2020 and August 2022, the ministry for Gozo was acquiring cleaning services from the same service provider through consecutive direct orders of one month each. Total payments during aforementioned period amounted to €219,588 (VAT excl.)”
With regards to the Active Ageing and Community Care Department (AACC), which falls under the responsibility of the Ministry for Active Ageing, the report reads that “testing revealed frequent use of negotiated procedures, at times without adequate service period coverage, as well as retrospective approvals, even endorsed by the Department of Contracts. Due to inadequate planning, this was the only option remaining, so as not to disrupt the provision of such services. Moreover, contracts of present service providers continued to be extended when the term expired. This approach also departs from the spirit of the public procurement regulations and hinders competition. Furthermore, in most of the cases, the continued renewal of contracts was not supported by feasibility studies or assessments to determine whether call for tenders would result in more advantageous rates and better-quality service. Moreover, these circumstances do not reflect good governance and it exposes Government to potential litigation and related repercussions.”
PN statement
In reaction, the PN said that the lengthy report published by the Auditor General is yet another certificate of the Government’s shortcomings and mishandling of public funds.
The Opposition said that this report detailed a number of deficiencies in the Government’s operations which Nationalist Party MPs have “raised awareness about in their respective sectors”. The PN added that this is evidence of its strength as an alternative to the current government.
The PN said that the Auditor General’s report is a “black and white” statement that a number of deficiencies were found in the Government’s operations, including findings that the rules of procurement procedures were systematically ignored, services were performed under expired contracts, the Government failed to enforce and collect amounts owed to it, that there were deficiencies in appropriate audit records, deficiencies in the public sector wage calculation system, and deficiencies regarding controls and segregation of roles in the government, the party said.
It reiterated that this report is a “detailed condemnation” of the extent that the Government is abusing the Maltese people’s taxes. The PN added that it will continue to dedicate itself to scrutinising deficiencies which are harmful to the public.
Concluding its statement, the PN said that it is expecting a clear reaction and statement from the government regarding how it will take on the “250 and more” recommendations issued by the Auditor General in order for the state to “change course and make good use of the funds and the public accounts”.