In terms of Section 108 (5) of the Constitution of Malta and the First Schedule of the Auditor General and National Audit Office Act, the Public Accounts of the Government of Malta are to be audited and reported upon annually by the Auditor General to the House of Representatives.

This Report summarises the findings of the financial and compliance audits on Malta Government, and a number of non central government organisations, which have been concluded up to June 2006 in respect of financial year ending 31 December 2005.  The Report is intended to complement the Annual Audit Report which will be published towards the end of the year.

The following were the main issues identified:

The handover of Pre-1998 Class 1 Social Security Contributions from Social Security Department (SSD) to Inland Revenue Department (IRD) was late and incomplete, with IRD failing to verify information provided by SSD. IRD is not equipped with an official specialized software enabling quick data analysis, identification and generation of reports of Contributions’ defaulters, but makes use of in-house developed programmes ‘scripts’. The IRD failed to hold meetings with the NAO and to supply computer systems logins thus further limiting the scope of the audit.

An audit carried out on Children Allowances revealed that the Social Security Department failed to physically confirm custody of children and the composition of households as claimed by applicants. The Department also failed to verify income disclosed by beneficiaries for Children Allowance purposes with the respective declarations at the Inland Revenue Department.  A number of overpayments or underpayments in allowances during the period under review were also highlighted.

The Industrial and Employment Relations Department lacked the adequate enforcement mechanism to recoup the amount of arrears due.  In particular no form of security or guarantee was requested by Government from applicants upon the granting of loans.  Furthermore, any form of checking with records held by the Inland Revenue Department and the Social Security Department in respect of the financial situation, employment and welfare state of defaulters could not be carried out as such access is currently not legally possible.

Customs Department lacked the formal established procedures and systems documentation in relation to goods in transit specifically for the carrying out of the general screening and the physical and documentary examinations. This weakness was also found in the special instructions for the issuing, management and use of guarantees and guarantee waivers, and detailed sub-classified information and data.

Potential risk areas concerning Traditional Own Resources (TOR) were identified during meetings with Customs.  Main deficiencies concerned the compilation of data in statements forwarded to the Commission on a periodical basis and release of goods by Customs prior to duty payments.

The Public Debt Budgeting process is not fully documented and lacks audit trail.   Weaknesses included:

·       inadequate formal public debt planning organisational structure;

·       no formal debt management strategic plan;

·       public debt mix lacking policy guidelines;

·       non-functionality of the Public Debt Management Advisory Committee;

·       inadequate formal authorisation procedures for the publication of Malta Government Stocks Annual Issuance Calendar and for new Government stock issues; and

·       failure to set up the Debt Management Office.

Audit of salaries carried out at the Courts of Justice as well as within the Ministry of Education, Youth and Employment revealed weak controls over attendance and overtime records. Medical certification could not always be evidenced to cover sickness absence. 

The source of authority supporting the rate payable to transcribers of Court hearings was not made available. Furthermore though such tasks were to be performed after office hours, some officers were carrying out this job during normal working time.

Government owned vehicles have been availed of after office hours by untitled officers within the Ministry of Education.  Moreover, no tax has being deducted on this fringe benefit. 

The Government Quarry (Ta’ Robba) lacks adequate records of the material being used up.  Standing regulations governing attendance records are not being applied to Quarry workers.   These are said to be engaged on a ‘task and finish’ basis, however no formal daily routine tasks or production quotas are in place. 

An audit carried out at the Bio Medical Engineering Stores located at Karen Grech Hospital revealed stock discrepancies between stock records and physical stocks. Details such as the unit cost and supplier details of various items are either incorrectly recorded or have not been inputted in the stock control system.

The Paying Agency (PA) within the Ministry for Rural Affairs and the Environment, responsible for the management of funds received from the European Union (EU) lacked cash flow management process.  Payments to beneficiaries are effected subject to availability of funds and EU Commission deadlines.  Besides the lack of segregation of duties, adequate internal controls are not in place and communication with the Integrated Administration and Control System (IACS) Department is weak.

Shortcomings in the computerised system in use by the IACS Department were noted. Notwithstanding, the Department is placing heavy reliance on the inbuilt mechanisms of the system and is also very dependant on one officer who is responsible for a vast range of tasks.  There is room for improvement on location spot checks as well as on subsequent quality control checks. 

A number of audits carried out on selected Non-Central Government Organisations (NGOs) and other Government Authorities revealed that the financial statements of Non-Central Government Organisations/Authorities did not fully comply with International Financial Reporting Standards (IFRSs).  Weak control over the safeguarding of fixed assets resulting from incomplete Fixed Assets Registers was also noted.