Annual Audit Report of public accounts for 2008 issued
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The Auditor General presented to the Speaker of the House of Representatives the the Annual Audit Report on the Public Accounts for Financial Year ending 31 December 2008.
Subject to the observations referred to in the Annual Audit Report of the Auditor General, the Government statements and accounts scrutinised by NAO were fairly presented in accordance with the accounting policies of Government. The main observations are reported below
Following examination of the 2008 Financial Report, NAO noted that:
· debenture interests recorded as revenue were effectively paid by Government;
· an Advance of approximately €25.3 million was issued for the purpose of accounting for the 14th Social Security Benefits due in 2008;
· none of the €14.1 million budgeted funds, aimed towards paying Treasury Clearance Fund Advances, were actually utilised;
· the completeness of reporting of the Statements relating to Investments and Abandoned Claims, Stores Written off and Cash Losses, could not be ensured;
· Cash Book and Central Bank balances reported in the Financial Report 2008 still do not tally with corresponding figures in the Bank Reconciliation Statement; and
· Letters of Comfort and Bank Guarantees reached €774 million.
Once again a number of Ministries and Departments failed to send their annual 2008 Return of Arrears of Revenue. Figures of some Departments had to be published as given, while others lacked detailed breakdown of figures.
The examination of the list of Bank Accounts submitted by Commercial Banks revealed that these lists were incomplete. Lack of liaison between Ministries/Departments, the Ministry of Finance, the Economy and Investment (MFEI) and Treasury puts Treasury in a position of not being able to verify whether Bank Accounts operated by Ministries and Departments are being used for their original purpose.
Following amendments to the Pensions Ordinance, MFEI established the claims related to amounts owed to Government by entities, which at the end of 2008 stood at €7.38 million. The audit exercise revealed, that Ministry of Finance (MF)/Treasury Division lacked a consistent and periodical claims’ system.
Testing on internal controls presently in place in respect of Class 2 Social Security Contributions (Post 1998) revealed that 28,810 taxpayers with an actual balance of €4.5 million have fallen into arrears.
During testing at the Capital Transfer Duty Department, NAO noted a discrepancy of €928,294 between Provisional Duty refunds issued during 2008 as per Capital Transfer Duty System as against the Departmental Accounting System. Also noted were missing/incorrect property details in the former System and undelivered refund cheques not accounted for in both systems.
A follow-up audit was conducted to enquire on the developments following the 2006 VAT Information Exchange System (VIES) audit, including the extent to which NAO’s recommendations have been acted upon by the VAT Division.
Following an audit of the Local and Small Claims Tribunals, it was noted that Commissioners were paid per Sitting irrespective of the number of cases heard. The Courts of Justice Division was limited in its verification over payments to the Commissioners due to lack of source documentation.
The system and current procedures in use at the Police Department in respect of Revenue arrears need to be updated. Lack of adequate information is particularly evident in cases where weapons/firearms cannot be traced or located.
The Energy Benefit aimed to alleviate the effect of increasing oil prices on water and electricity bills for approximately 29,000 eligible households. Tests performed at the Ministry for the Family and Social Solidarity indicated internal control weaknesses, with some beneficiaries exceeding the applicable means limit.
Verification over the expenditure in relation to the Home Care Help Services Scheme was carried out at the Elderly and Community Care Department in Malta and the Ministry for Gozo. Common observations noted relate to the lack of means testing, charging of a fixed nominal fee irrespective of the service given and lack of audit trail.
The current procedure for the free of charge loaning out/in of Medical Equipment from Mater Dei Hospital to Private Hospitals and Clinics was reviewed. Clear responsibility and accountability for medical equipment loaned out by MDH must be delineated preferably in writing.
The 10% administrative fee, charged to Government on the Main Sewer Contributions by MEPA, is not documented. Internal controls operated by the Ministry for Investment, Industry and Information Technology are not sufficient, leading to approximately €2.7 million MSC collections by MEPA pending at year end.
A regular Financial Audit could not be performed on the accounts presented to NAO for Financial Years 2006 – 2008 in relation to the Funds regulated under the Pilotage and Mooring Regulations, 1975. Matters arising during a meeting questioned the sustainability of the Mooring Fund.
The Agriculture Support Schemes in relation to the Pig Meat and Fruit and Vegetables Subsidies were tested. The report focused on the inaccuracies in effecting subsidy payments identified, as well as on any inefficiencies noted in the management processes in use and in the administration of both Schemes concerning these subsidies.
Verification of procurement and contracting activities, specifically payments issued from the Civil Society Fund administered by the Forum Malta fl-Ewropa, concluded that, in a number of instances, source documentation and evidence supporting payments were lacking.
The audit covering the procurement of Operating Materials and Supplies by the Gozo General Hospital was limited due to non-availability of certain source records, coupled with the absence of a stock recording system on food provision. Various key irregularities, such as lack of control in the Food Provisions Section, were also identified.
The €4 million variance in the Operational and Maintenance Expenditure at the Armed Forces of Malta was mainly due to the unforeseen flow of irregular immigrants. Shortcomings within inventory records for vehicles were also noted.
Conclusions reached following previous years’ audits carried out by NAO on Procurement prompted this Office to conduct compliance audits in relation to the Contractual and Professional Services at the Ministry for Rural Affairs and the Environment, the Ministry for the Family and Social Solidarity and Social Security Division and Tourism Directorate. The following shortcomings were commonly noted:
· No agreements with service providers and/or procurement regulations were not followed.
· Commencement of service prior to approval or formal contract.
· No formal extension of existing agreements.
· Amounts charged by service providers not verifiable.
· No tax invoices or fiscal receipts attached to Payment Vouchers.
The following were the main concerns noted from the audit reports and relative Management Letters submitted by Local Government auditors for all Local Councils:
· Fifty-two out of sixty-seven Financial Statements submitted were qualified.
· Twelve Local Councils recorded a negative Working Capital in the Statement of Affairs, while twenty-four Local Councils registered a deficit in the Income and Expenditure Account. Twenty registered a Financial Situation Indicator below the 10% benchmark.
· One Local Council did not submit the Audit Report by 13 November 2009.
Testing and verification at the Malta High Commission in London, Ministry of Foreign Affairs, was limited as some source records were not available for audit purposes. Lack of controls and segregation of duties were evident in various areas.
The IT audit held at the Malta Tourism Authority focused on the review of Entity Level Controls and Business Continuity planning with respect to IT.
The full report can be viewed as from 3 December 2009 on NAO website: http://www.nao.gov.mt.