Energy audit shambles found inside building and construction agency

An inspection by the National Audit Office has revealed weak controls and inexistent audit trails on energy performance certificates for properties and permits issued by the Planning Authority.

Malta’s Building and Construction Agency is still working on the planning permits for properties filed in 2017, but it cannot establish whether all permits have been backed up by a mandatory energy performance certificate (EPC).

The BCA has to issue EPCs, a rating of a building’s energy efficiency. The EPC – since 2012 obligatory for all new-builds, rentals and transfers – is produced after a professional assessment by a warranted architect or engineer. Even banks are bound not to issue sanction letters for property loan unless an EPC is presented.

At a fee of €75 per EPC, which the assessor pays on behalf of the applicant to the government, the annual estimate for government should be at some €2.5 million.

Yet during 2020, a total of 9,619 EPCs were registered – at an aggregate value of €721,425. Since 2012, over 80,000 EPCs have been registered.

But the NAO found a weak control environment and a lack of audit trail where PA applications are concerned or EPCs for rental properties. And any type of alteration to a building has to be authorised by the PA, and this necessitates an EPC following a major renovation or alteration.

The BCA could not even determine how many of the 57,000 planning permits issued in 2017 had acquired an EPC.

“BCA was only made aware when an EPC form was submitted by the applicant or when the actual EPC was analysed following receipt. Thus, there is the risk that, in certain cases, the respective certificate is not obtained, and no enforcement measures can be taken. Apart from loss of revenue, Government will not have the relevant statistics,” the NAO said.

While EPCs received are hard copies, there is no cross reference to the related PA number, making it close to impossible to find a particular EPC. As a result, the BCA is not in a position to know which PA applicants carried out an EPC and how many EPCs are still pending.

“A BCA official estimated that, based on the number of property sales, applications for development, and registrants renting property for tourism purposes, there are around 85,000 pending EPCs still to be carried out, to the tune of more than €6 million,” the NAO said.

When then NAO requested the list of those PA applications the BCA analysed during 2020, the agency was still combing through a four-year backlog.

“Unless the applicant complied and carried out the EPC, timely action was not being taken. Furthermore, the process to establish whether an application for alteration to property requires an EPC is very time consuming and, at this pace, the backlog of PA applications cannot be cleared.”

While the BCA issues notification letters to PA applicants to carry out an EPC, the agency has no means to link each PA application number with an EPC by using the same PA number, to exclude those who already obtained the certificate. “Additionally, the process of issuing a second notification letter is done manually, since there is no system in place to trigger it automatically when a certificate is not duly issued.

Out of the 2,460 PA applications relating to 2016 that required an EPC, a number of notification letters were still to be submitted, although the BCA was not aware of the exact number of certificates actually obtained.

The slow pace at which notification letters are submitted triggers a lot of delays in the process for government to ensure compliance and collect what is due. In relation to 2017, no notification letters were sent for the first five months.

As for rental properties, the EPC should be presented by the lessor to the lessee, both for long and short-term rentals. However, no control for compliance in this respect is in place.

While the notification letters sent to PA applicants requiring an EPC mention that a fine of between €1,500 and €5,000 will be applied to those who do not comply, no such enforcement was made to date.

“The process that is undertaken when PA applications for changes to existing property are filed, is dependent on one officer and his judgement. This implies a lack of segregation of duties, which undermines internal controls and the efficiency of the process. It also increases the possibility that human error remains undetected.”