PRESS RELEASE issued on 11 January 2005
The report identifies several areas of concern relating to audits carried out in respect of the financial year ending 31 December 2003.
The analysis of the Financial Report 2003, covering the Consolidated Fund and the Statement of Assets and Liabilities, highlights issues regarding variances in ordinary revenue and expenditure, outstanding advances, loan repayments, investments and public debt. The following were the main issues:
Vouchers amounting to
approximately Lm8.5 million, raised by Ministries and Departments and forwarded
to the Treasury Department during December 2002, were authorized for payment in
January 2003 and therefore were accounted for in financial year 2003. Warrant
No.3 of 2003 relates. These payments were issued through the Multi-Payment
system, thereby bypassing controls in the Payment Voucher system. Other
multi-payments were issued for services rendered during the year.
Since the enactment of Act XV of
2003, all loans and related interest to Malta Drydocks Corporation and Malta
Shipbuilding Co Ltd were assumed by Government. With the coming into
force of the Act on 7 November 2003, loans amounting to approximately Lm166.1
million should not have featured as dues to Government in the Statement of
Assets and Liabilities.
The Electronic Bank Reconciliation
of the Public Account held at the Central Bank of Malta was carried out on
a monthly basis as from 1 January 2002. As at September 2004, Treasury completed
the automated bank reconciliation till the month of November 2003. Management
plans that by March 2005, the automated bank reconciliation would be up to date.
However, no progress was made in the manual reconciliation of the Public
Account bank balance for the period June 1992 to December 2001. Management is
of the opinion that allocating staff to rectify matters for a whole decade is
practically impossible considering that data for the period is not uniform, is
unstructured and sparse.
Arrears of Revenue, totalling over
Lm360.8 million as at 31 December 2003, of which one third are estimated as not
collectible, is still an area where significant improvement can be registered by
introducing efficient procedures for the collection of debt, enforcement
procedures for the settlement of fines and correct documentation for the
settlement thereof.
Follow-up action by the Capital
Transfer Duty Department, within the Inland Revenue Department, is not in
conformity with commitments made during Public Accounts Committee Sitting No.60
held on 21 March 2001. Very weak control was noted throughout the full process
of collecting duty on credit cards issued by Commercial Banks and duty on premia
collected by Insurance Companies, including inspections carried out by the
Inspectorate Team.
Over a span of eleven (11) years,
the number of outstanding travel advances is considered substantial and
preoccupying. The total outstanding travel advances for the 1993-2003 is 559,
carrying a face value of Lm261,647. In its report, National Audit Office
highlighted various areas of concern and recommendations addressing them.
Recommendations forwarded by the
Working Group, set up by the Ministry of Finance, in collaboration with the
Office of the Prime Minister and the Internal Audit and Investigations
Directorate, have to date not been taken into account in updating the guidelines
and regulations regarding government transport.
During the year, the compliance
aspect and internal controls within the ambit of Local Councils continued to
deteriorate. Furthermore, there was an increase in the number of defaulting
Councils and qualified audit reports.
Recovery efforts by the Social
Security Department were weak in the collection of arrears, resulting in
overpayments amounting to Lm2.7 million. Furthermore, no interface existed
between the Social Security Department and Inland Revenue in the collection of
outstanding National Insurance Contributions preceding 1998, amounting to Lm5.1
million.
It was only in October 2004,
following NAO’s initial report, that the Cooperatives Societies Board resolved
to issue a Dissolution Order in respect of the inoperative Kooperattiva
Indafa Pubblika (KIP). KIP’s debts amounted to over Lm1 million.
No audit trail is in place in
respect of items purchased using Students’ Maintenance Grants (SMG) swipe cards,
resulting in insufficient proof that funds are being used for their intended
purpose.
The VFM Section of the NAO carried
out a pilot study on the Quality Service Charter Initiative in 2001 and followed
this up with an audit in 2004. The audit dealt with the launch and management of
the Initiative and with the upholding of charters. Weaknesses in the overall
monitoring functions rendered NAO unable to determine whether the services being
delivered reflected standards stipulated in the charters.
Weaknesses repeatedly featuring in the Auditor General Annual Reports remaining unaddressed, particularly weaknesses relating to internal controls, namely:
Lack of segregation of duties in the procurement process up to the receipt and certification of goods.
Non adherence to Procurement regulations and controls over purchases.
Payment Vouchers not covered by VAT fiscal receipts.
Expenses not charged to their respective account or sub-item number, hindering an effective comparison of actual expenditure against those budgeted.
Lack of verification before authorizing invoices for payment.
The completeness of records could not be ascertained in various revenue generating departments due to inadequate audit trail and unreceipted revenue.
Lack of segregation of duties in the revenue collecting cycle and delay in remitting receipts, increasing the risk of misuse and adversely affecting the cash liquidity of Government.
Unofficial use and lack of proper authorization for the use of government owned vehicles after office hours.
Inventory
Compliance with the provisions of inventory regulations still weak, hindering asset valuation necessary for the introduction of accrual- based accounting.
Stores
Mandatory annual physical stocktaking of various stores not performed, creating difficulty in identifying slow moving, deteriorating or obsolete items, as well as discrepancies occurring during the year.
Variances between physical as against recorded balances and store items not properly coded.
Non-existence of stock control through the maintenance of a store ledger.
Procedure for write-offs not in line with General Financial Regulations.
Cash and Bank
Although lack of control over cash and bank balances resulting from a large number of missing receipt books was only encountered in one (1) Department, its nature and effect warrant mention. Moreover, the reconciliation of bank account balances was also not carried out in a number of instances.
Below-the-Line Accounts
Details of the closing balances of various Below-the-line accounts were not kept. Verification of idle funds that should eventually be transferred to the Deposits Fund Account, as required by the Financial Administration and Audit Act, could not be effected.