After Damning Audit, MFSA Steps Up Processes For Direct Orders, Contracts And Donations
The Malta Financial Services Authority (MFSA) has made significant progress in rectifying the issues identified in the 2019 audit conducted by the National Audit Office (NAO).
The audit report, titled “Malta Financial Services Authority,” highlighted several areas of concern, including non-compliance with procurement regulations, lack of service agreements, improper contract management, and governance issues related to donations.
In response to the audit findings, MFSA has taken proactive measures to address these shortcomings and improve its governance practices.
One of the key issues identified in the audit report was the use of direct orders without the necessary approvals.
The report revealed that MFSA had procured services from the open market without following the required procurement procedures, resulting in unfair competition and bypassing of procurement regulations.
To address this issue, MFSA introduced new procurement procedures in November 2019, aligning them with the Public Procurement Regulations (PPR).
This step aims to enhance controls and ensure better governance by seeking the necessary approvals from the Direct Orders Office within the Ministry for Finance and Employment.
The audit report also highlighted the absence of service agreements for four separate information technology-related services provided by MFSA. While the Authority used quotations and purchase orders as references, these documents did not include the necessary terms and conditions.
To rectify this issue, MFSA has implemented formal agreements for the services provided, ensuring that all six reviewed agreements are supported by a valid contract. This step improves accountability and regulates the provision of services with clear terms and conditions.
Another concern raised in the audit report was the procurement of services through expired contracts. MFSA had continued to receive services even after the agreements had expired, resulting in an inability to seek retrospective direct order approval.
To prevent such occurrences in the future, MFSA initiated the process of acquiring a procurement system with a contract management module.
Until the new system is in place, the Authority is closely monitoring contract expiry dates using a spreadsheet with conditional formatting, highlighting contracts that are four months away from expiration. This proactive approach ensures timely renewal or termination of contracts in line with the PPR.
The audit report expressed concerns regarding donations made by MFSA, emphasising the need for good governance in disbursing public funds. In response, MFSA made important changes to its practices.
Following a Board decision in 2020, donations and sponsorships are no longer permissible, reducing the potential risks associated with discretionary disbursements. By utilising the Social Causes Fund, MFSA aims to regulate and minimise donations while ensuring funds are allocated in a transparent and controlled manner.
The NAO report highlighted disparities between MFSA’s travel policy and procedures and those of the public sector.
To align with standard practices, MFSA revised its travel policy and procedures, bringing them in line with the Manual on Transport and Travel Policies and Procedures. This revision ensures consistency in subsistence allowances granted to employees during official travel, adhering to per diem rates issued by the Ministry for Finance.
The audit report identified shortcomings related to the acquisition of appropriate fiscal receipts for payments made by MFSA for goods and services.
MFSA has since taken steps to ensure that fiscal receipts are obtained promptly in line with Value Added Tax (VAT) legislation. Additionally, the Authority has started reporting defaulters to the VAT Department, fulfilling the requirement outlined in relevant circulars and enhancing compliance.
The audit report noted a failure to publish variations to awarded contracts exceeding €5,000 in the Government Gazette, as required by circulars and the PPR. However, MFSA has since published all agreements related to direct orders and negotiated procedures reviewed during the audit, as well as several variations, demonstrating a commitment to transparency and accountability.
The recent audit report conducted by the NAO highlighted several areas of concern within the Malta Financial Services Authority. However, MFSA has made commendable efforts to address these issues and implement the recommended improvements.
By enhancing procurement procedures, establishing service agreements, improving contract management, regulating donations, aligning travel policies, ensuring compliance with fiscal documentation, and enhancing transparency through publication, MFSA has demonstrated its commitment to good governance and prudent use of public funds. These proactive measures contribute to strengthening the Authority’s operations and rebuilding trust in its practices.
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