Malta Enterprise’s ‘imprudent spending’: a day trip to Sicily and boat party

During 2012, Malta Enterprise - the government's investment arm - had an intended budget of €15,000, allocated out of the government subvention for the actual purpose of "staff entertainment".

Such entertainment even included a day trip to Sicily and the hiring of a vessel for a boat party, prompting the NAO to comment about the "imprudent expenditure on entertainment costs".

During that year, a total of €6,200,000 were allocated to ME, through the then Ministry of Finance, the Economy and Investment's (MFIN) recurrent vote. An additional subvention of €14,180,000 had also been allocated for investment incentives out of MFEI's capital vote.

According to information provided by ME to the offices of the Auditor General, ME incurred the sum of €6,045 in staff entertainment expenses, of which €1,295 were reimbursed by participants.

The remaining €4,750 was expensed from a staff entertainment account held by the entity.

"Staff entertainment expenses consisted, amongst others, of a day trip to Sicily, the hiring of a vessel for a boat party and the purchase of food items related to several dress-down days," the audit exercise discovered.

"NAO opines that this type of expenditure constitutes an imprudent use of the taxpayers' money."

The nine-page report on Malta Enterprise from the voluminous report by the Auditor General on the public accounts during 2012 also highlights non-adherence to public procurement regulations, irregular contracts for service, lack of control on the use of government-owned vehicles and fuel consumption and non-adherence to travel regulations among others.

The audit exercise was carried out on an initial sample of 93 transactions for the period between January to September 2012, to evaluate the level of existing internal controls over the procurement and payment of expenditure incurred by the enterprise. During the course of the audit, the sample was however increased to 109 "to ensure a more in depth analysis of the transactions".

Among the key issues highlighted by the NAO, "a general lack" of internal control procedures in the area of procurement of goods and services was noted, "which is conducive to an inefficient use of government funding".

For example, advertising costs totaling €31,601 relating to Business First were paid to suppliers without any calls for quotations or call for tenders. In a separate case involving graphic design and audiovisual production, an expression of interest - with a closing date in May 2011 - and request for proposals were issued. It however transpired that ME had already allocated a number of assignments to the supplier to the successful bidder. ME had also received invoices amounting to €12,703 between end April and May 2012, out of which the amount of €8,726 was already endorsed by the then executive chairman, Alan Camilleri.

Camilleri left ME in mid-May 2012, when he asked the then finance minister not to renew his contract for personal reasons.

In its auditing of business delegation expenses, the NAO found that, besides bypassing procurement regulations, no approval for direct order from MFEI was obtained over €7,075 in settlement of venue and catering expenses for a business delegation organised by ME in Israel in March 2012.

A further two business delegations organised by ME - one to South Africa in February and another to Cologne and Munich in July - had the contract with foreign event organisers signed before the respective approvals were obtained from MFEI. The expenses amounted to €19,000.

Non-adherence to travel regulations was also noted. During the examination of a sample of four payments relating to the purchase of air tickets totaling €10,682, it transpired that no quotations were obtained, as required by regulations.

Simple keeping of logbooks was also ignored, with logbooks only being kept for two out of five general-use cars at the disposal of ME. From information provided during the audit, NAO found that a total of €5,814 was paid, but no fuel requisition notes were traced over the sample selected, amounting to €725.

In its comments to the NAO, ME - at this point under the chairmanship of Lawrence Zammit - clarified that most of the expenditure commitments referred to in the report were into during the years preceding 2012, but remedial action had been taken.

The management also acknowledged that internal controls had to be improved and presented the Auditor General's Office with a detailed action plan.

Of particular interest was that Malta Enterprise admitted that "through oversight", a contract to a regional leader had expired in August 2011 and had not been renewed. During its audit, the NAO was provided with 14 contracts when ME availed itself of the services of 15 individuals, better referred to as "regional leaders".

ME clarified that the individual had been on a contract with ME for the past 10 years.

One contract for the services of regional leader for India and Asia Pacific subject to NAO testing found that, despite being valid for one year until June 2012, the individual received three payments of €2,430 each for services rendered during the months of July, August and September 2012.

NAO found that three out of four regional leaders on a contract for service were on a definite three-year contract, "which goes against ME's operating procedure, stipulating a contract covering a period from three months to a maximum of one year".

The contract reviewed by the NAO during this exercise was that of a regional leader for China and Asia. The contract stipulated a remuneration of €30,000 per annum, excluding VAT, rent of €500 per month, the reimbursement of pre-approved flights and an incentive allowance of a maximum of €15,000 spread over a five-year period.

An NAO enquiry confirmed that ME had failed to seek out clearance from MFEI before signing the contract.

The audit also identified a number of reimbursements for which the regional leader was not entitled to and a transaction list provided by ME revealed a total of €10,991 - covering hospitality, freight, stationery and promotional expenses -which were not covered by the applicable contract.