Auditor complains over departmental payments not covered by VAT receipts

The Auditor-General has complained that there was still widespread disregard by ministries and government departments to the requirements of financial rules and regulations.

Writing in the audit report for 2002, Auditor-General Joseph Galea said the most common concerns included a lack of segregation of duties in the procurement process up to the receipt and certification of goods and non-adherence to procurement regulations and controls over purchases.

Another concern was over payment vouchers not covered by VAT fiscal receipts and expenses not charged to their respective account or sub item number, hindering an effective comparison of actual expenditure against tax budgeted.

Mr Galea said there was also a lack of segregation of duties in the revenue collecting cycle and delay in remitting receipts, increasing the risk of manipulation and adversely affecting the liquidity of the government.

There was general non compliance to the provisions of inventory regulations, adversely affecting asset valuation under accrual based accounting.

Mandatory annual physical stocktaking was not performed or reports not made available by various stores, creating difficulty in identifying slow moving, deteriorating or obsolete items, as well as not identifying discrepancies occurring during the year.

The procedure for write offs was not in line with general financial regulations.

In its section on issues and audit concerns, the audit report says that an amount of Lm4.6 million due in respect of 2002 was actually received in 2003 and credited to revenue in the year under review.

Although the public account held at the Central Bank had not been reconciled since June 1992, considerable progress was made in this area.

The Bank Reconciliation System went live on October 14 last year taking the opening balance of the public account as shown by the Central Bank.

The CBM statement of the public account ended with a closing balance of Lm15,824,194 as opposed to the closing balance reported in the financial report 2002 of Lm14,158,033 as on the same date.

The audit report said that arrears of revenue amounted to some Lm363 million at the end of 2002. This was still an area where significant improvement could be registered, considering the inefficient procedures for the collection of debt, weak enforcement procedures for the settlement of fines and lack of correct documentation for the settlement thereof.

Pointing out specific cases discovered during the audit, the report said the Malta Development Corporation's ability to collect arrears due of factory rents and the monitoring function over companies in receipt of various aids needed to be strengthened.

The director of agriculture had a bank account for the administration of funds of the Pitkali Market Scheme. This account was not being charged with stale cheques and the related funds were being retained by the bank against general financial regulations. Under normal circumstances, the director would be obliged to reverse such funds to the public account.

The report said that the custodianship of money on behalf of others at the law courts amounted to over Lm7 million at the end of financial year 2002. No records identifying the owners of the monies held in various below the line accounts were readily available.

Six local councils recorded a negative working capital in 2002 while three had excess expenditure over income.

Some 87 per cent of payers of withholding tax were not complying with regulations, resulting in late remittances to the Inland Revenue among other shortcomings.

Although the social security department had a system where one assessor determined the amount of benefits to be given and another verified its correctness, over and under payments in the distribution of benefits were still encountered. These errors were evidence that the verification process was not being carried out effectively.

All property transferred from the Church to the state had to be validated and registered by the joint office by the end of this year. Yet this exercise was completed in only five out of more than 100 ecclesiastical entities. Serious shortcomings were also identified in the systems and operations of the department.

Recommendations made in June 2000 by a board of enquiry set up to investigate gross irregularities detected by the office at the cash office of the law courts, were not been fully addressed. The recommendations included investigations by the police, reconstruction of cash books and reactivation of cancelled fines.