Childcare centres tampered with attendance records to siphon off more public money from the free childcare scheme, the National Audit Office has found.

Now in its third year, the scheme pays private and public childcare centres a fixed rate per hour for every booked child.

But in its annual audit report for 2015, the NAO flagged abuse of the system by some centres. It said 60 of them were paid more than €90,000 for booked hours for which children failed to attend.

In its reply, the Education Ministry, which runs the scheme, said €24,000 were recouped.

But the NAO found that the scheme was characterised by lax controls, which led to overpayments. In one instance, between November 2015 and January this year, the government paid a childcare centre the sum of €2,534 for two siblings who were, during the same period, recorded as present at two other centres.

A similar incident was recorded between July and December last year, when another centre was paid €4,380 for two children who were recorded at two different centres. The NAO reported that an attempt by the ministry to recoup this amount hit a brick wall, since the foreign owner of the centre had left the island.

The NAO report was tabled in Parliament yesterday and covers public expenditure including the childcare scheme, which was audited for the first time.

The publicly funded scheme, inaugurated in mid-2014, is intended to offer free childcare to working parents. In 2015, it cost taxpayers €11 million, and another €11 million was voted for 2016.

The number of children enrolled in the scheme went up from 2,337 in 2014 to 2,842 by April of this year. The scheme also saw the participation of 91 centres.

Child attendance records are crucial, since the government pays centres €3.05 per hour for every booking. Before 2015, records were kept manually, providing ample space for manipulation by the centres.

However, an electronic system introduced in January this year did little to curb abuse, the NAO said, since controls were lacking and the ministry still depended on the goodwill of the centres.

The new system, which cost more than €240,000, saw parents using individualised keys, called fobs, to clock the times when they dropped off and picked up their children. Physical inspections by NAO auditors at eight different childcare centres confirmed that attendance records were still being tampered with, resulting in overpayments.

The NAO found that contrary to the ministry guidelines, some childcare centres kept a copy of the key, opening up the system to abuse.

“Surprise inspections carried out by NAO auditors at eight childcare centres revealed that in at least two centres, fobs ‘in use’ were being kept by the respective centre… When asked for an explanation as to why the fob was not retained by the parent, auditors were verbally told that it was the parents who opted to leave the fob there, to be used in case theirs was forgotten.”

However, the auditors could not establish whether the fob at the centre was one of the two fobs handed to parents or any other fob which the centre was keeping.

A random visit to one centre showed that 11 children had been clocked out of the centre just minutes after NAO officials left the building, even though the kids were not present when the visit took place.

The audit also uncovered quirks such as timings that were submitted by centres run by the Foundation for Educational Services, a government agency, for days when they were closed. Even so, payments were still processed.

The NAO also noted lax enforcement on the number of children that centres were allowed to hold at any one time. On one occasion, a centre that was licensed by the Department for Social Welfare Standards for 15 children was found to have 87 during an audit visit.

In its reaction, included with the report, the Education Ministry said that in June of this year, it took over the regulatory function from the social welfare standards department. The ministry added that action had been taken against the centres that defaulted on capacity restrictions and instructions were issued for keys not to be retained at the centres.

Changes were also introduced to the machines not to allow clocking in and out on closed days. The ministry is in discussions with childcare centres to introduce a verification system for requests by parents to change the number of booked hours. Before now, any changes would be communicated only to the centres.

Key findings

The NAO report covers various aspects of public expenditure. Some of the main findings are listed below:

• Attendance records kept by the Foundation for Education Services, a government entity, were considered unreliable, such as overtime being approved before it was performed.

• Transport Ministry did not adhere to public procurement regulations with respect to direct orders for a number of services, including a cleaning company for which authorisation was sought retroactively.

• Transport Malta correctly followed procedures in administration of VAT refund scheme on car registration.

• Expenditure on contractual and professional services at Sir Paul Boffa Hospital and Sir Anthony Mamo Oncology Centre revealed a lack of internal control synonymous with “management by crisis”.

• Audit of selected invalidity pensions paid by the Department of Social Security revealed a lack of sufficient internal controls with regards to periodical re-assessment of cases, giving rise to miscalculations.

• Institute of Tourism Studies lacked control over attendance records and related payments. Lack of transparency noted when purchasing contractual services.

• Procedure for nominating court experts was still not formalised, and official standard rates were not yet established despite an audit on judicial expenditure that was released in 2015.