Updated | PN reacts to government ‘spin’ on hollowed-out lotteries fund

The government has attacked the former administration's lack of transparency in the way public cash was being spent, citing a report by the National Audit Office revealing the way the Good Causes Fund was being administered.

"The report shows the lack of transparency in the way taxpayers' money was spent. This is another case where the former administration lacked in governance and employed an irresponsible spending of public monies for partisan interest," the government said.

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The National Lotteries Good Causes Fund (NLGCF) was set up under the Lotteries and Other Games Act (2008, Cap 438) to partially fund projects of a philanthropic, cultural, sports, educational, social, religious or civic nature, or other deserving causes, proposed by individuals and non-governmental organisations.

But the fund was revealed to be over-committed to 2014 due to monies promised by the former government to entities, well into the next year.

"The report confirms that from mid-2102 onwards, funds that should not have been dispensed were promised, right up until March 2013, effectively emptying the fund's coffers well into 2013.

"The former finance minister often signed fund appropriations without the approval of the fund's advisory board, especially between January and March 2013, right before the general elections."

PN reaction

The Nationalist Party however welcomed the comment that "the NAO 'considers the funding of most... initiatives as a valid means of supporting deserving causes that are of benefit to many and which tie in with the broader national objectives'," the PN said, quoting the report.

"It's a clear conclusion that goes against the deceptive way the government is trying to spin the report."

The PN accused the Labour government of having failed to understand the way the fund worked, and that commitment letters were introduced on the request of the NAO itself.

"Commitment letters allowed beneficiaries to loan money from banks, and then receive the funds during the completion of their project. The government is giving the misleading impression that the commitment letters, being issued a few months earlier, is something scandalous: it is indeed normal, that it takes some time from preparation to designing a project, that the money is finally disbursed."

The PN also cited the NAO report where it point out that, even after paying all commitments entered into before March 2013, "the year 2014 is expected to end with a balance of approximately €129,000, which could then be used to pay any commitments made after March 2013."

The PN challenged the government to state whether it was not in agreement with the understanding reached under the fund with the MFA, the Aviation Society, and the Fondazzjoni Wirt Artna.

"This is another case where the government, in throwing out all modicum of transparency and accountability, is trying to give a misleading impression by mud-slinging," the PN said.

The fund generates its income through a percentage contributed from tax payable on gaming activity, unclaimed prizes and interest earned on its account. For the past three years, the annual income directed towards the Fund averaged €1.7 million.

NAO report

Applications for funds fall within either of two streams of NLGCF funding: Tier 1 initiatives which exceed €5,000 in funding requirement and which are submitted after a call for applications is issued; and Tier 2 projects that do not exceed €5,000 in their funding requirement and for which application remains open all year round. An annual allocation threshold of €200,000 has been set for Tier 2 projects.

The NAO found that commission based on a percentage of lotto sales, to a number of band clubs and other organisations that house or host a lotto booth, was paid bi-annually out of NLGCF. Agreements were also entered into with a number of organisations who received grants not strictly regulated by the parameters of NLGCF funding.

Following the NAO review, it was revealed that commitments were made out of NLGCF that bound funds well into the future, to the possible detriment of other potentially deserving causes. Considerable commitments were made particularly at the end of 2011, as well as from mid-2012 onwards, which have resultantly restricted the fund up to end-2014.

"The funding parameters were not always respected with instances where the thresholds for grants out of NLGCF were surpassed. In a few cases, the actual allocation was more than that recommended by the Advisory Board or, in cases of greater concern to NAO, more than that actually requested by the respective beneficiaries," the NAO said.

It also found that for some months during the period under review, the Advisory Board was composed solely of an acting chair, one member and the secretary. "This, in NAO's view, seriously undermined the relevance of the Board, and hindered its performance."

NAO's review of income generated by the fund established that this averaged out at an approximate €1.78 million annually. The income generated in 2012 was markedly more than that of the preceding two years, with

€1,710,218 and €1,642,191 followed up by €2,011,230. This increase is attributable to an additional unclaimed prizes payment of €275,262, which was received by the fund in December 2012 instead of January 2013, which is the time of year when such a payment was ordinarily received in preceding years. Reallocating this payment to 2013, results in a revised approximate average income of €1.7 million annually.

From January 2010 to March 2013, the NLGCF balance fluctuated from €562,558.12 in January 2010, closing balance as at €810,682.19, then €1,006,621.10 in end-2011, down to €593,853.30 in 2012, and further down to €106,308.76 by March 2013.

The fund is now committed by more cash that has to be dispensed. There is an annual obligatory expense of approximately €350,000 emanating from agreements signed between government and band clubs as well as other organisations that house or host a lotto booth.

On 11 February 2012, an agreement was signed with the Malta Football Association where it was agreed that government would commit €400,000 out of the NLGCF to be paid to the MFA during the years 2012 and 2013. Of this amount, €100,000 were paid to the MFA by December 2012. The remaining balance of €300,000 was to be paid during 2013, €50,000 of which were paid in January 2013. Therefore, the remaining outstanding commitment as at end March 2013 was of €250,000.

On 1 November 2012, a lease agreement was signed between MIA plc and government whereby it was agreed that the annual rent for the use of a lotto booth by a lotto receiver at the MIA will be provided through the NLGCF. The period of the lease was of 11 years, commencing on 31 July 2011 (that is, the lease agreement was backdated) and expiring on 30 July 2022. The rent for this lotto booth was set at €6,500 exclusive of VAT and any other taxes per annum, subject to an annual cumulative increase of five per cent which was to be paid quarterly in advance. As at end March 2013, the amount owed to MIA was €4,991.

During 2013, a memorandum was signed between government and Malta Aviation Show, whereby it was agreed that government would partially finance the organisation of the Malta International Air Show for three consecutive years commencing in 2013 by means of an annual contribution of €30,000 out of the NLGCF. No payments were made to MAS by end-March 2013 in this regard, resulting in an outstanding commitment of €90,000 due by 2015.

The total amount of commitments entered into between January 2011 and end March 2013, which were deemed as still pending as at end Q1 2013, and which applicants could claim by end 2013 was €1,811,740.

Additionally there were other commitments made for the years 2014, 2015 and 2016. The total commitments for 2014 corresponded to nineteen beneficiaries and amounted to €294,150. Furthermore, two commitments entered into with respect to 2015 accounted for €65,000, while an additional commitment for 2016 accounted for €30,000.