Reference Number: pr2436eng, Press Release Issue Date: Dec 14, 2011
The Auditor General presented to the Hon. Speaker of the House of Representatives the Annual Audit Report on the Public Accounts for 2010 on 14th December 2011.  The main observations are reported hereunder.
Following examination of the Government of Malta Financial Report for year ending 31 December 2010, the National Audit Office (NAO) noted that:
·               a detailed analysis of variations for 2010 is still required by the Ministry of Finance, the Economy and Investment (MFEI) in respect of certain items of Revenue, although an improvement over last year was observed in explanations given;
·               variance analysis systems at Ministerial and Departmental levels still need to be improved, as evidenced by the substantial excesses of actual over budgeted figures of certain items of Expenditure;
·               notwithstanding reported action being taken by Treasury, Cash Book and Central Bank balances reported in the Financial Report 2010 still do not tally with corresponding figures in the December 2010 Bank Reconciliation Statement; and
·               Letters of Comfort and Bank Guarantees have reached €1,037 million (against €893 million in 2009).  These constitute Contingent Liabilities for Government.
In contrast to previous years, only four Ministries/Departments failed to comply to send their annual Arrears of Revenue Returns for 2010.  However, verification of a number of Returns forwarded to NAO could not be performed, due to the lack of supporting information provided by Departments.
The two Reports on Fully-Expensed Cars within Extra Budgetary Units (EBUs) and Official Travel Abroad revealed numerous shortcomings across various Ministries. 
In contrast with the decreasing trend in the number of Irregular Immigrants in Closed Detention Centres, which went down to 58 by the end of 2010, as compared to an average number of 393 as at the beginning of the same year, the contract for the supply of daily meals to these irregular immigrants covered a maximum of 2,500 persons.  To honour this agreement, the provision of meals was extended to the more vulnerable of the residents housed in selected Open Centres and the inmates at the Corradino Correctional Facility. 
The following concerns were noted from the audit reports and relative Management Letters submitted by Local Government Auditors (LGAs) for all Local Councils:
·         By mid-October 2011, the audited Financial Statements of 2 out of sixty-eight Local Councils were not yet submitted to NAO when these should have been received by 2 May 2011. 
·         LGA could not express an opinion on the Financial Statements as presented by 2 of the Local Councils due to the various material shortcomings encountered. 
·         Another sixty-one Audit Reports were qualified with an ‘except for’ audit opinion.
·         Seven Local Councils recorded a negative Working Capital in the Statement of Financial Position.
·         Seventeen Local Councils registered a Financial Situation Indicator below the 10% benchmark.
·         Sixteen Local Councils registered a deficit in the Statement of Comprehensive Income.
An examination of the records retained by the Head Office of the Ministry of Foreign Affairs, related to the Embassies in The Hague and Lisbon, revealed that at times source documentation was not available or was only kept by the Mission.  Consequently, completeness of revenue collected and/or correctness of payments made by the respective Missions, and compliance with standing rules and regulations, could not be ascertained.
Procurement regulations were not always followed by the Ministry for Gozo.  Certain goods and services exceeding the threshold of €6,000 were procured direct from the Open Market without a public call for quotations or tenders.  
Payments issued to a consultant rendering services to the Ministry for Infrastructure, Transport and Communications by-passed the purchases ledger and were not even backed by a fiscal invoice.  Lack of control was also noted over the issue of payments relating to cleaning as well as for lift maintenance services. 
Due to the considerable number of weaknesses revealed by the audit carried out on the Students’ Maintenance Grants, NAO considers that the administration and monitoring of the Smart Card Scheme is rather ineffective and the costs in administering the Scheme could be outweighing the benefits derived.  The provision and administration of the Smart Card Scheme system by a Management Company was also characterised by a number of shortcomings. 
Procurement regulations were not followed by the Malta College of Arts, Science and Technology (MCAST) in the engagement of a consultant providing his professional expertise and assistance in the implementation of a European Social Fund project.  Payments to this consultant could not be verified by NAO since no attendance sheets were kept.  Shortcomings in the management of petty cash were also noted.
An audit on Children’s Allowance payments revealed that the Social Security Act does not provide for penalties when claimants are found to be in breach of its provisions.  NAO also noted that when claimants are notified of any overpayments by the Social Security Department, they are not specifically requested to refund the amount overpaid.
Lack of compliance with procurement regulations, as well as inadequate control over expenditure incurred by specific Cost Centres on behalf of other locations, was noted during an audit at the Health Division. 
The implementation of Phase Two of the Exemption Order Scheme, launched by the Minister of Finance, the Economy and Investment in July 2010, was extended to employers with outstanding balances from the Final Settlement System (FSS) and Social Security Contribution (SSC) to regularise their position with the Inland Revenue Department (IRD).  From a review of the implementation process, it transpired that a complete analysis of taxpayers was still not yet finalised before Notification Letters/Agreements to participate in the Scheme was forwarded to them. 
Following a review of amounts reported under ‘Past Arrears Written-Off’ and ‘Amounts Not Due’ as reported in the Arrears of Revenue Return for 2009 of the VAT Division, it resulted that a number of inter-departmental adjustments were erroneously classified as written-off in the Return.
Official standard rates have not yet been established for various professional services rendered to the Criminal Court.  The tariffs actually applied are taxed by the Court after negotiating the fee due with the respective Court Experts. 
From a review on Personal Emoluments at the Civil Protection Department a number of shortcomings transpired.  These related to incorrect salary payments, incomplete and/or not updated records, specific procedures not backed up by official regulations, certain provisions not being complied with and lack of control over particular administrative procedures. 
An audit on Free Medical Aid granted to out-patients through the Pink and Yellow Cards revealed poor internal controls with respect to means testing procedures and the issue of Pink Cards, especially to diabetic patients in Gozo.  In addition, it transpired that the Yellow Card was also being approved in connection with certain conditions, other than those officially approved under Schedule V of the Social Security Act. 
The full report can be viewed as from 14th December 2011 on NAO website: