Annual Audit Report Public Accounts 2019 Report by the Auditor General December 2020 Table of Contents List of Abbreviations 4 Guide to using this Report 7 Executive Summary 9 Opinion on the Financial Report 13 Opinion on the Financial Report to the House of Representatives 14 Financial Report 17 Analysis of the Financial Report 2019 18 Compliance Audit Opinion 49 Opinion on the Compliance Audits to the House of Representatives 50 Arrears of Revenue 53 Arrears of Revenue 2019 54 Office of the Prime Minister 79 Malta Financial Services Authority 80 Ministry for Health 87 Mater Dei Hospital – Maintenance of Medical Equipment 88 Mount Carmel Hospital 91 Mater Dei Hospital – Purchase of Supplies and Medical Equipment 102 Ministry for the Economy, Investment and Small Businesses 106 Malta Industrial Parks Ltd 108 Ministry for Education and Employment 114 Foundation for Tomorrow’s Schools 116 Institute for Education 124 Malta College of Arts, Science and Technology 128 Malta National Shooting Range 139 Ministry for Energy and Water Management 149 Energy and Water Agency 150 Water Services Corporation 152 Ministry for European Affairs and Equality 159 Malta-European Union Steering and Action Committee 160 2 National Audit Office – Malta Minsitry for Finance 163 Duty on Documents 164 Commissioner for Revenue 172 Department of Customs 178 Financial Intelligence Analysis Unit 182 Ministry for Tourism 187 Licences to Hotels and Catering Establishments 188 Ministry for the Home Affairs and National Security 193 Police Department 194 Agency for the Welfare of Asylum Seekers 200 Ministry for Justice, Culture and Local Government 205 Heritage Malta 206 Local Enforcement System Agency 211 Ministry for the Environment, Sustainable Development and Climate Change 227 Waste Separation – Organic Bag 228 Ministry for the Environment, Sustainable Development and Climate Change 233 Veterinary and Phytosanitary Regulation Department 243 Ministry for Foreign Affairs and Trade Promotion 249 Trade Malta Limited 250 Madrid Embassy 258 Ministry for Transport, Infrastructure and Capital Projects 267 Infrastructure Malta 268 Infrastructure Fees 272 Planning Authority 276 Lands Authority 279 Ministry for Transport, Infrastructure and Capital Projects 284 Transport Malta 289 Ministry for Gozo 291 Residential Services in Gozo for Older People 292 Ministry for the Family, Children’s Rights and Social Solidarity 295 Energy Support Measures 296 Aġenzija għall-Ħarsien tat-Tfal 300 St. Vincent de Paul Residence 307 Elderly and Community Care – Debtors and Prepayments 315 Elderly and Community Care – Creditors and Accruals 322 National Audit Office – Malta 3 List of Abbreviations List of Abbreviations AACC Active Ageing and Community Care AAR Annual Audit Report AĦT Aġenzija għall-Ħarsien tat-Tfal AHWD Animal Health and Welfare Department ARMS Automated Revenue Management Services Ltd ARR Arrears of Revenue Return ASM Assessments Application AWAS Agency for the Welfare of Asylum Seekers AWPSD Animal Welfare, Promotion and Services Directorate CBM Central Bank of Malta CCTV Closed Circuit Television CEO Chief Executive Officer CFMS Corporate Financial Management Solution CfR Commissioner for Revenue CPSU Central Procurement and Supplies Unit CTD Capital Transfer Duty Department DAS Departmental Accounting System DC Department of Contracts DLG Department for Local Government DMD Debt Management Directorate DO Direct Order DOC Department of Customs DSS Department of Social Security EB Energy Benefit EBU Energy Benefit Unit EU European Union FIAU Financial Intelligence Analysis Unit FMS Foundation for Medical Services FR Financial Report FSWS Foundation for Social Welfare Services FTS Foundation for Tomorrow’s Schools 4 National Audit Office – Malta GDP Gross Domestic Product GRN Goods Received Note HM Heritage Malta HO Head Office IM Infrastructure Malta IPSAS International Public Sector Accounting Standards IRD Inland Revenue Department ISC Infrastructure Services Contributions ISSAI International Standards of Supreme Audit Institutions IT Information Technology LA Lands Authority LC Local Council LES Local Enforcement System LESA Local Enforcement System Agency LSE Learning Support Educator MAFA Ministry for Agriculture, Fisheries and Animal Rights MBO Malta Based Officer MCAST Malta College of Arts, Science and Technology MCH Mount Carmel Hospital MDH Mater Dei Hospital MEDE Ministry for Education and Employment MEUSAC Malta-European Union Steering and Action Committee MFIN* Ministry for Finance MFSA Malta Financial Services Authority MG2I MCAST Gateway to Industry MGI Malta Government Investments Ltd MGOZ Ministry for Gozo MGS Malta Government Stocks MIP Malta Industrial Parks Ltd MITA Malta Information Technology Agency MTA Malta Tourism Authority MTIP Ministry for Transport, Infrastructure and Capital Projects MUT Malta Union of Teachers *As from January 2020, Ministry for Finance and Financial Services. National Audit Office – Malta 5 List of Abbreviations NAO National Audit Office NSO National Statistics Office OECD Organisation for Economic Co-operation and Development PA Planning Authority PCRB Public Contracts Review Board PD Police Department PO Purchase Order POYC Pharmacy of Your Choice PPR Public Procurement Regulations PSMC Public Service Management Code SABS Social Assistance and Benefits System SAMB State Aid Monitoring Board SAV Supervised Access Visits SL Sick Leave SOP Standard Operating Procedure SSC Social Security Contributions SVPR St. Vincent de Paul Residence TM Transport Malta TML Trade Malta Limited TMS Traffic Management System TOIL Time Off In Lieu VAT Value Added Tax VL Vacation Leave VRD Veterinary Regulation Directorate WAM Weighted Average Maturity WRA Work Resources Allowance WSC Water Services Corporation WSM WasteServ Malta Ltd 6 National Audit Office – Malta Guide to using this Report As a result of the various financial and compliance assignments carried out by the National Audit Office, the Auditor General is hereby presenting separate opinions, on the financial and compliance aspects respectively, to the House of Representatives. In line with normal practice, we sought to spread our reviews across Government Ministries and Departments and Entities or across Government-wide activities in accordance with the National Audit Office Annual Audit Programme. We have also attempted to make this Report as user friendly as possible and thus have tried to adopt common language, although this was not always possible due to the technicality of some of the issues raised. This Report is presented by Ministerial portfolios as featuring in the Government of Malta Financial Estimates 2019, each containing either the Ministry itself, or one or more Departments or Entities which were the subject of our review. Most write-ups under the Ministerial portfolios have the following structure: Background Includes a brief description of the relevant activities, roles and operations of the respective Ministry, Department or Entity under review. Where applicable, it may also include new legislation governing the Entity in question. Audit Scope and Methodology Gives an indication of the areas that the audit covered and how deep the assignment was performed. It also defines the steps taken to reach the audit objectives. Key Issues Highlight any material findings or outcomes of our audit and any major developments impacting on the respective Ministry, Department or Entity. Control Issues Outline any shortcomings that came to our attention relating to the internal controls of the Ministry, Department or Entity. These controls are expected to be in place so as to serve as an effective safeguard of public assets and resources. Compliance Issues Summarise instances whereby the relative Ministry, Department or Entity lacked compliance with effective legislation, standing regulations and circulars issued from time to time. National Audit Office – Malta 7 Guide to using this Report Recommendations This is the most important part of our Report since ultimately our principal objective is to ensure that public resources are used in the best manner possible, in line with existing public finance management rules and regulations. Thus, it outlines our suggestions to the respective Ministries, Departments and Entities, to encourage them to address any weaknesses that came to our attention, as well as to consolidate and improve upon the management and proper discharge of public funds. In general, our recommendations are aimed at improving the internal control systems, addressing areas where there is lack of compliance with pertinent rules and regulations, and promoting good practice in the best interest of the taxpayer. Management Comments Seek to include, in as comprehensive manner as possible, the Management’s reaction to the comments of the National Audit Office and action taken, or planned to be taken, so as to address in a timely manner the issues and any shortcomings identified. 8 National Audit Office – Malta Executive Summary Following an Analysis of the Financial Report 2019, submitted by the Accountant General in terms of the Public Finance Management Act, 2019, it was noted that Letters of Comfort and Bank Guarantees, considered as contingent liabilities, reached almost €1.1 billion. Furthermore, Advances at year-end totalled €12.5 million. As at end December 2019, the percentage of Government’s debt to the country’s gross domestic product stood at 42.6%, resulting in a decrease of 2.6% over the previous year. Thus, the respective ratio continued to decline