The financial results registered by the joint venture between the Gozo Channel and the Gozo Ferries for the provision of maritime transport between Malta and Gozo in 2011 were below the projected profits of the Public Service Obligation bid, with adverse variances of €0.9 million in 2011 and €2.2 million in 2012.

A National Audit Office report tabled in parliament this evening noted that Gozo Channel incurred capital costs on behalf of the Gozo Ferries with €8 million outstanding in 2014.

It warned that, as things stood, should Gozo Ferries fail to settle these dues, the Gozo Channel’s going concern status would be uncertain. Nevertheless, Gozo Channel registered a marginal profit of €59,000 in 2014.

The report was carried out following a request by Finance Minister Edward Scicluna in December 2013.

It states that factors contributing to these variances included the PSO payment, ticketing and other operating revenue, as well as payroll and vessel costs.

Justifications cited by the Gozo Channel were the drawing forward of the effective date of the PSO, the payment of a dividend, as well as road works and the construction of the Ċirkewwa Terminal.

Other explanations included lost ticket revenue arising from traffic-related discrepancies, salary increases resulting from new collective agreements and the inability to enter into fuel hedging agreements.

According to the NAO, certain initiatives were not seen through due to insufficient action by the Gozo Channel, such as the case of fuel hedging. Other results were not attained due to the over-ambitious targets, with commercial space leasing as a case in point.

Additional factors that limited Gozo Channel’s attainment of the targets were beyond the company's control. These included roadworks undertaken during the period under review.

Gozo Channel’s fuel expense for the three-year period (2010 to 2012) amounted to €9.8 million, with the NAO noting multiple instances when the procurement of fuel was not regulated by any contractual agreement, the value of which exceeded €5.6 million.

Other concerns related to difficulties in establishing the quantity and quality of fuel procured, with instances noted where the Gozo Channel’s and the contractor’s meter readings were left empty and insufficient laboratory testing ascertaining compliance with specifications.

Payroll costs incurred by the amounted to €5.9 million, €5.8 million and €6 million between 2010 and 2012 with a staff complement of 249, 237 and 228, respectively.

Shortcomings identified by the NAO with respect to overtime, which amounted to €1.8 million over the audit period, centred on the fact that no formal system of authorisation was in place. There were instances of excessive overtime, at times exceeding 1,000 hours during the year, with the highest registering over 1,300 hours.

Other concerns related to the company-wide inclusion of break periods as part of the working week as well as notable errors in the computation of salaries.

Ticketing revenue represented Gozo Channel’s main source of income, with over €30 million earned between 2010 and 2012.

Inconsistencies in passenger and vehicle data registered at Ċirkewwa and Mġarr raised the NAO’s concern, with potential loss of ticketing revenue estimated at an aggregate of €1.5 million.

Passenger variances were highest in 2012, at 106,000, while that of vehicles stood at 21,000 in 2014.

Another shortcoming related to the delays in the remittance of cash generated through ticket sales to the bank. The balances unpaid to Gozo Channel were most pronounced in the case of a number of ticket sellers, who averaged daily undeposited sales for particular months as high as €27,394, €28,211 and €33,694.

The report may be accessed here.

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