The Annual Audit Report, which was submitted to the Speaker of the House of Representatives before the close of 2005, as stipulated in Chapter 396 of the Laws of Malta, covers audits carried out during the second part of 2005 in respect of financial year ending 31 December 2004. It also contains a reference to the audits carried out during the first part of 2005 published in the Mid-Year Audit Report and laid on the Table of the House on 30 July 2005. The Audit Opinion in the Annual Audit Report covers also the Mid-Year Audit Report.

The following were the main areas of concern identified in the Annual Audit Report: 

·       The Analysis of the Financial Report 2004, covering the Consolidated Fund and Statement of Assets and Liabilities, highlights issues regarding variances in ordinary revenue and expenditure, outstanding advances, loan repayments, investments and public debt.  

·       During 2004, the Government Securities Board was not set up, thus hindering inspection of the List of Securities held by Government as at 31 December 2004.  

·       Treasury still maintains that January 2002 should be recognized as the start-off date for reconciliation of the Public Account at the Central Bank of Malta that was unreconciled with Treasury records since June 1992.  With effect from February 2005, reconciliations are being carried out immediately after the month end routine, allowing better monitoring of transactions on real time basis and avoiding the creation of further backlogs.  

·       Arrears of Revenue totaling over Lm482.1 million were reported as at 31 December 2004, of which approximately Lm93.4 million are estimated as collectible. This is still an area where significant improvements can be registered by introducing efficient procedures for both the collection of debt enforcement and settlement of fines, and correct documentation for the settlement thereof.  

·       An amount of Lm2.8 million, arising from overpayments of social benefits, are doubtful of repayment. No adequate enforcement action is being taken by the Department to recover these overpayments.  

·       When a sample of Lm1.75 million out of the amounts being reported as pre-1998  Arrears of Revenue for Social Security Contributions, totaling Lm 4.36 million, were examined, it was found that forty-seven per cent (47%) of the balances were overstated while another forty-four per cent (44%) were understated. Only six per cent (6%) of the defaulting employers were effecting instalments on a regular basis.   

·       The Ministry for Competitiveness and Communications (formerly the Ministry for Transport and Communications) exercises weak control over the refund of mobile telephone calls.  Clear Regulations regarding purchases and replacement of lost mobile phones are lacking.  

·       Audit of salaries carried out at the St. Luke’s Hospital and the Elderly and Community Services Department revealed lack of general controls in the recording and payment of salaries.  Errors in the computation of salaries within both units were mainly due to the manual calculation of various types of allowances.  Furthermore, the hospital is still dependent on the Treasury to issue the salaries for all its employees even though there is a computerized payroll programme interfaced with the human resource function.   

·       Further irregularities were also noted in overtime allowance payments made by the Ministry for Urban Development and Roads (formerly part of the Ministry for Transport and Communications) in respect of Private Secretariat staff. Appropriate action was not taken in respect of late arrivals and there was weak control over records of attendance. 

·       The accuracy of basic salaries paid out to Malta-based officers (MBOs) working in Malta Embassies abroad could not be fully verified with relevant Ministry of Finance (Finance) criteria, and other authority sources.  Lack of communication between the Ministry of Foreign Affairs and the Department of Social Security has resulted in MBOs being paid children’s allowance both by MFA and DSS.  The justification and accuracy of the different rates of overseas allowance payable per child, depending on country of posting, could not be verified.  

·       Civilians on the AFM paylist assigned to a particular unit are working on a reduced hour roster which is not covered by approval from the Office of the Prime Minister.  .

·       Government-owned immovable property in Camberra (Australia), housing the chancery and residence of the High Commissioner, has always been omitted from the inventory records kept at the Post.  Although the new property purchased in 2000 was meant to accommodate both the chancery and the residence, the former residence was retained. Moreover, neither the total capitalized cost of the land and building of the new property nor that of the various inventory items procured in connection with the acquisition of the property could be precisely ascertained. 

·       The lack of accountability at the embassy in Rome accredited to Italy and San Marino was mainly attributed to the unsatisfactory accounting treatment in use, especially for consular services rendered.  The present accounting system is causing duplication of manual work and is prone to a higher degree of error.  Malta-based officers in diplomatic grades at the Mission are being involved in daily cash transactions and all bookkeeping. This work could be delegated to more junior personnel already employed by the Embassy.   

·       During the year, the compliance rate with financial regulations within the ambit of Local Councils registered no improvement over previous years. Excessive expenditure being incurred was not deemed necessary for the efficient running of the Councils.  A considerable number of Local Councils have also registered various weaknesses with respect to the accounting of the Local Enforcement System. These shortcomings mainly relate to the absence of audited Joint Committees’ accounts.  Furthermore a number of material concerns occurred in specific Local Councils. These are being reported upon separately, together with the Councils’ comments. 

·       A number of audits carried out on selected Non-Central Government Organisations and other Government Authorities revealed the following weaknesses:  

§         The financial statements of Non-Central Government Organisations and Government Authorities did not fully comply with International Financial Reporting Standards.

§         The Procurement procedures of Authorities’ Acts were not in line with the provisions of the Public Contracts Regulations 2005.

§         Lack of controls over the safeguarding of Fixed Assets due to incomplete Fixed Assets Registers.

§         Approval of expenditure not evidenced, increasing the risk of incurring unnecessary and unauthorised expenditure.

§         Proper cut-off procedures not observed in the recording of liabilities.

§         Lack of full compliance of overseas travel expenses and practices with the relative provisions in the Public Service Management Code.