The financial performance of the joint venture between Gozo Channel and Gozo Ferries for the provision of maritime transport between the Maltese islands was below the projected profits of the public service obligation bid, the Auditor General has reported.
The difference amounted to €900,000 in 2011 and €2.2 million in 2012.
A National Audit Office report tabled in Parliament yesterday also noted that Gozo Channel incurred capital costs on behalf of Gozo Ferries, standing at €8 million last year.
It warned that, as things stood, should Gozo Ferries fail to settle the dues, Gozo Channel’s going concern status would be uncertain. Nevertheless, Gozo Channel registered a marginal profit of €59,000 in 2014.
In December 2013, Finance Minister Edward Scicluna asked the NAO to report on whether due diligence was exercised in the bid for the provision of maritime transport between Malta and Gozo. He also asked the Auditor to review Gozo Channel’s operations between 2010 and 2012.
The NAO focused on fuel procurement, payroll costs and ticketing revenue on the basis of materiality and, where deemed necessary, extended the scope of the review to include 2014. The report shows that the factors contributing to the variances noted included the PSO payment, ticketing and other operating revenue as well as payroll and vessel costs.
Other concerns related to difficulties in establishing the quantity and quality of fuel procured
Justifications cited by 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 given included lost ticket revenue arising from traffic-related discrepancies, salary increases in the wake of 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 Gozo Channel, such as the case of fuel hedging. Other results were not attained due to the over-ambitious targets set, with commercial space leasing being a case in point.
Additional factors that limited Gozo Channel’s attainment of the PSO targets were beyond its control, such as the road works 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 Auditor noting multiple instances when the procurement of fuel, the value of which exceeded €5.6 million, was not regulated by any contractual agreement.
Other concerns related to difficulties in establishing the quantity and quality of fuel procured, with instances noted where Gozo Channel’s and the contractor’s meter readings were left empty, as well as insufficient laboratory testing to ascertain compliance with specifications.
Payroll costs incurred by Gozo Channel 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. Accentuating further this concern 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 represents 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 worried the NAO, which estimated the potential loss of ticketing revenue at an aggregate of €1.5 million.
Passenger discrepancies were highest in 2012, at 106,000, while vehicle discrepancies 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 even €33,694.
The Audit Office report can be accessed at www.nao.gov.mt.