Why public finance is in disarray

The latest annual report by the auditor general on public accounts, covering the year 2001, was laid on the Table of the House of Representatives on Monday.

There is no doubt that the office of the auditor general is becoming more inquisitive, more investigative and more efficient. It is progressively investigating every nook and cranny of the administration, as evidenced by the fact that the latest report runs to 410 pages, compared to 220-odd pages that make up the reports for the two preceding years.

The more one digs into this report, the more one finds out that various sensitive areas of the administrative civil service do not go by the book and could not care less. It is not enough that these sectors are ignoring established rules and regulations. This state of affairs has prevailed in spite of repeated admonitions by the auditor general and the watchdog role of the press.

The first 'audit concern' highlighted in the last annual report refers to the old chestnut relating to the conciliation (or lack thereof) between the public account held at the Central Bank and the Treasury Books.

This reconciliation exercise has not been held since June 1992, which, incidentally, was the same year when the present minister of finance took control of his ministry. Year after year, the auditor general referred to this "critical shortcoming".

The latest report stated that monies "held in trust, received or paid by the government, at December 31, 2001, amounted to Lm7,085,177 as accounted for in the Treasury Books. However, the Central Bank statement of the public account ended with a closing balance of no less than Lm16,048,465, as on the same date".

The discrepancy does not represent small beer and raises the ominous question as to who has been responsible for this ongoing situation and why no prompt disciplinary steps were taken to regularise matters in the span of eight years.

Yet another prime concern of the auditor general, which has become a regular feature of his reports, relates to arrears of revenues due to the government. These have been accumulated with the years and amounted approximately to Lm404 million as at December 31, 2001.

This is an area where significant improvements would have been registered, considering the inefficient procedures for the collection of debt, weak enforcement procedures for the settlement of fines imposed, and lack of correct documentation.

The auditor general has confessed that the balance of arrears of revenue reflects approximative figures because not all revenue collecting sources submitted their returns. Some returns are incomplete or are themselves made up of approximations.

Some arrears are time-barred. The auditor general noticed that there is "clear evidence" that the gross amount of arrears due to the social security department "is unrealistic and unreliable". To cap it all, a number of departments did not submit any return.

This amounts to a terrible official indictment of the way government finances are managed. The wonder is how the National Audit Office can find its way through this shambles.

The indictment is not restricted to the manifestly inadequate book-keeping. It goes far beyond. It relates to non-compliance with standing regulations, inadequate record keeping, payment vouchers not covered by VAT receipts, disregard of inventory regulations, and delay in remitting receipts to the public account held at the Central Bank which affects the liquidity of the government, besides increasing the risk of abuse.

The auditor general highlighted a range of irregularities whose nature and effect warranted a mention, even though these were not consistently encountered.

These included a lack of accountability and non-existence of the basic elements of stock control; weak internal controls, including segregation of duties, double payments being made out of public funds as a result; and poor utilisation of ad hoc computerised facilities. The latter leads to a situation where revenue collection is not effective.

Four departments/sections failed to submit the relevant information to the National Audit Office with the result that planned audits had to be aborted. This was in flagrant breach of Section 108(5) of the Constitution.

The report meticulously examines the operation of all ministries and departments and exposes several irregularities and misdemeanours.

The ministry of finance, for example, does not keep a petty cash book as stipulated by the General Financial Regulations.

At the ministry of education, the National Audit Office examined 122 vouchers in the course of their audit. Sixty of these (49 per cent), relating to 48 suppliers, were not covered by a fiscal document. A total amount of Lm32,000 is not covered by a VAT receipt. This may result in VAT collections not being passed on to the VAT department.

The ministry of economic services was in breach of the provisions of financial rules and regulations when it failed to remit immediately to the Central Bank money that was being collected.

The control issues raised at the Department of Information, and calling for improved management systems, referred to the disregard of procurement regulations, an unreliable inventory ledger and inaccurate stock records.

Of the total revenue arrears due to the government at the end of 2001, amounting to Lm404 million, no less than Lm73.3 million were due from the government departments and parastatal bodies.

There are several reports of non-compliance with standing transport regulations and references to the lack of proper record-keeping of vehicle log books, attributed to far too many departments; to lack of control over the use of vehicles and consumption of fuel; and to the drawing up of purchase orders after the respective purchases were made.

One does not know whether to weep or cry at this state of affairs which seems to be endemic in the general service. It certainly raises the legitimate question as to whether or not the high-faulting talk about quality service charters to certain government departments is about fact or fiction!

The due diligence exercised by the auditor general raises serious questions about the apparent lack of accountability at the top levels of the civil service and, even more so, about the fact that Maltese taxpayers never, ever, hear about disciplinary measures against defaulters who are in breach of the provisions of the constitution, let alone standing finance legislation.