The Auditor-General has called on the government to strengthen its estate management function as state-owned entities continue to lease property from the private sector while government-owned properties lie idle.

In a report presented to parliament, Auditor General Charles Deguara observed that the leasing of private property by governmental entities has been increasing over the years. At the end of 2022, governmental entities were leasing at least 260 properties from the private sector, excluding property where leasing costs were less than €1,000 annually. 

Yet the Lands Authority had more than 4,000 unutilised properties.

Government leasing of private properties rose sharply in recent years. (Audit Office graphic)

The auditor said a range of issues were hindering the Lands Authority from ensuring more effective and efficient estate management.

"The Authority has historically experienced an acute shortage of financial, human and technological resources.  Additionally, most of the unutilised property requires extensive refurbishment at a considerable expense. Such properties cannot be made available for use by government entities in a short timeframe.  Constraints limiting the availability and use of government-owned properties also exist at the Joint Office where complex issues related to the registering of ecclesiastical properties transferred to the State under the 1993 Church-State Agreement prevail," the Auditr Office said. 

The Office observed that the government has not developed a comprehensive strategy and a detailed action plan for the refurbishment of existing unutilised buildings. The Lands Authority, as the entity responsible for the government’s estate, told the Office that one of its strategic aims was to be able to actively market government-owned properties to increase take-up, thereby making better use of public assets. A refurbishment programme is still at its very early stages and no costing exercises have yet been undertaken to assess the feasibility of undertaking such works.

In 2022, the leasing cost of the 260 Government-leased private properties  considered in a preliminary review by the Audit Office amounted to €22 million (excl. VAT).  In 43 per cent of these leases, governmental entities did not carry out a formal or documented needs assessment before leasing private properties.

In around nine per cent of the 260 leases, the entities 'diverted' from the Procurement of Property Regulations which came into force in April 2020.   Prior to this date, the procurement and leasing of property was exempted from the regulations.

The Gozo Ministry was the worst offender when it came to divergence from procurement regulations.

Two-thirds of the 260 government-leased private properties were used as offices. In six of them, the entities spent more than €1 million on upgrading costs, in addition to the leasing fees. These arrangements had an average lease of 13 years.

The Audit Office said the preliminary review uncovered various governance concerns, particularly relating to compliance with the regulatory framework, economy, efficiency, and effectiveness, as well as accountability and transparency.  

The Office said it intends to carry out a detailed analysis of a number of the  leasing arrangements.  

The audit report may be accessed through the NAO’s website www.face  https://nao.gov.mt/ or Facebook page https://www.facebook.com/NAOMalta