A National Audit Office (NAO) review of Infrastructure Malta flagged how a sample of invoices issued by three contractors to the roads agency could not be considered as valid fiscal documents.
As part of a wider audit of the 2019 government accounts, the NAO found that the payment requests by the three contractors with €1.5 million worth of VAT due on them did not contain the roads agency’s VAT number, meaning it was not a valid fiscal document.
“Lack of compliance with fiscal obligations may indirectly encourage tax evasion, resulting in loss of revenue to government,” the NAO warned. The Auditor General insisted that proper fiscal documentation is obtained by the agency for every purchase of goods or services, in line with VAT regulations.
In a reply to the NAO’s findings, Infrastructure Malta assured that internal measures had been taken last year so that accounts officials could identify any “errors” in invoices and fiscal receipts.
The NAO also highlighted how the agency gave upfront payments to contractors for ongoing works, in conflict with tender documents that ruled out any pre-financing of such works.
A €63 million tender for the construction and resurfacing of residential roads, which was split into five separate lots, was awarded to three different contractors.
The NAO said each contractor requested and was subsequently paid lump sums of €1 million before the actual certification of the works had been carried out by Infrastructure Malta.
A total of €16 million was paid out in advance to the contractors, the NAO said.
By end of 2019, the NAO said actual certified works with respect to this project amounted to €7,170,571, thus the amount of €8,829,429 had been paid against no certification.
According to the report, Infrastructure Malta verbally confirmed that it did not have sufficient resources for certification to take place on time and reiterated that this procedure was followed to ensure that the contractors had adequate cash flow to enable them to continue with the projects entrusted to them.
The NAO insisted that Infrastructure Malta is expected to adhere to the conditions laid down in the contract and tender document, by ascertaining that it has sufficient resources to certify works in a timely manner.
“Besides avoiding substantial amounts paid in advance, this would also provide comfort that the required standards have been met and that the amounts charged are justified and accurate,” the NAO said.
Infrastructure Malta explained to the NAO how it confirmed through its architects in charge of the projects that the works were indeed being carried out and the payments were made following “visible progress of works”.
It was also determined that the value of the actual works on site exceeded the amounts actually paid, Infrastructure Malta said.
The agency has since issued a call for more quantity surveyors due to an internal shortage.
Apart from the Infrastructure Malta findings, the NAO audit found an array of administrative failures at other government entities, including the bypassing of procurement regulations by the Foundation for Tomorrow’s Schools and a lack of checks on the hours worked by MCAST lecturers.
Among other areas, the NAO also focussed on what it described as the lack of ownership over the Malta national shooting range project, which led to “compromised internal controls”.