Gozo Channel’s finances were “in serious jeopardy” as the company approached a situation in which it could not pay wages, according to an audit report out yesterday.
The dire situation was made worse by “illogical” decisions such as engineers being paid an allowance to do the work of their superiors, who in turn were paid overtime to do the job of their underlings.
These findings were highlighted by the National Audit Office in a review that formed part of the 2013 annual audit of ministries, departments and government tabled in Parliament yesterday.
The NAO said Gozo Channel appointed three second engineers to serve as acting chief engineers when the need arose. The second engineers were awarded a substitution allowance for each hour worked in the grade of chief engineer.
But tests conducted by the NAO between January and April 2013 revealed that chief engineer duties were assigned to the second engineers rather than officers in the same grade. This caused a shortage of second engineers, which forced the company to fall back on chief engineers to cover both posts.
“This gave rise to the illogical situation where chief engineers were paid overtime to perform duties of second engineers, and at the same time, the latter were paid an allowance to carry out the duties of the former,” the NAO noted.
Gozo Channel’s finances are in “serious jeopardy”.The allowance paid to the second engineers amounted to €2,578 for the four-month period reviewed.
To top it up, change of duty applications for the whole year were not provided for audit purposes because the company could not trace them.
“In the absence of the original applications, it could not be confirmed that such changes were approved and authorised by management,” the NAO said.
This was one example of mismanagement noted in the review of the ferry company, which registered a loss of more than €1 million in 2013.
The audit found the company registered a profit between May and October but suffered a massive loss of €284,000 in November.
The annual loss was an improvement over the €1.6 million lost in 2012 but according to the NAO this was not enough to stave off the dire situation.
By last February the financial controller was relying on the government subsidy to be able to settle wages, the NAO reported.
The company has 211 workers with a basic salary bill of €4.2 million. This goes up by a further €2 million when overtime, allowances and statutory and performance bonuses are included.
The NAO said the precarious financial situation was brought about by two main factors: the drop in government subsidy as a result of the 2011 public service concession contract and an outstanding balance of €8 million in relation to the installation of hoistable decks.
According to the six-year contract awarded by the government in 2011, the subsidy had to drop from €4 million at the time to €695,564 in 2013.
This presupposed the company would have improved in its revenue streams and cut expenditure to make up for the loss in subsidy. But the NAO flagged deficiencies in Gozo Channel’s projections at the time in order to win the contract.
The ferry company’s plans were based on “overly optimistic projections”, which failed to include the considerable amount of expenses involved in the addition of a hoistable deck on MV Ta’ Pinu, one of the ships.
The NAO also noted that initial quotations for regular vessel overhauls were substantially less than actual bills while a forecast reduction in the wage bill as a result of retirement was “incorrect”.
And in yet another example of money squandering, the NAO noted that in December 2012 the company board approved an ex-gratia payment for two heads of department amounting to more than €11,600 as compensation for untaken leave. This decision was taken during the same board meeting that discussed the company’s precarious financial state.
The NAO could not verify leave records and in some instances found that work absences were not always deducted from leave entitlement.
“The board needs to be transparent, willing to take strong positions and whenever necessary make tough decisions for the benefit of the company,” the NAO insisted.
Claims for compensation by employees had to be duly verified and evaluated to avoid unnecessary expenses and precedents, it added.
Reacting to this parti-cular case, the current board washed its hands, blaming the previous board for the ex-gratia compensation.
The board also confirmed that vacation leave for heads of departments was now being authorised by the chairman.
The NAO’s damning conclusions point towards no budgetary controls, little internal coordination and a lack of clear strategic vision.
Reacting to the NAO findings, Gozo Channel rebutted the conclusions saying management was determined to turn the company from a loss making entity to a profit making one.
2013 in numbers
•19,431 trips on the Ċirkewwa route
• 199 trips on the Sa Maison route
•4.4 million passengers carried
•1.2 million cars carried
•€10.9 million in ticket sales
•€700,000 in subsidy