Manual AFM payroll system exposing it to fraud, error risks - audit
'One-time' payments paid twice, extra allowance paid during regular hours
Malta’s armed forces rely on paper-based records for payroll management and payment of allowances, exposing it to risks of fraud and human error, an audit has found.
The Auditor General found the reliance on manual calculations and data entry creates a “significant risk” of mistakes and can lead to inaccurate payments.
From the audit testing performed, it was noticed that verifications carried out by Armed Forces of Malta (AFM), if any, are limited.
The audit found that a one-time annual cash payment was erroneously paid twice to the 35 officers who were entitled to this compensation in 2024, resulting in a total overpayment of €4,328.
This highlights a vulnerability in the current process, which lacks vital controls for the detection of such errors, the Auditor General said.
Issues were also discovered with payments of stand-by allowances in the AFM’s air wing section.
The “unclear” stand-by returns used to process payments included “ambiguous codes” which were eventually misunderstood by the AFM’s financial and management bureau, since stand-by hours were not clearly identified.
This issue was amplified by the fact that most of the ambiguous codes were marked on Sundays, when “coincidentally”, the stand-by allowance is significantly higher than the rate paid for weekdays, Saturdays and public holidays.
Several cases were found where a stand-by allowance was paid for times when officers were performing active-duty hours.
Although senior officers from the air wing section endorsed the relevant stand-by returns, the Auditor General said findings indicate that no verifications were actually carried out to confirm correctness of the contents.
These signatures were considered as the final and authoritative source, and payment calculations were based on this data without additional independent verification.
The Auditor General warned that the lack of adequate verifications leaves the AFM exposed to an increased risk of inaccurate or fraudulent payments, while also limiting the timely detection of such payments.
In addition to payroll issues, the audit highlighted vulnerabilities in vacation and sick leave recording.
Records are maintained manually, and verification procedures are weak. Instances were noted where vacation leave deductions were understated, and cases of officers marked as sick were contradicted by guard report entries showing they were present.
It was recommended that the AFM considers implementing an automated payroll system that can be used across all units. Such a system will have built-in controls to prevent common errors, and will leave an audit trail.
The AFM pledged that a review aimed at strengthening internal controls will be carried out by its newly engaged internal auditor.
It said the finance and management bureau will analyse all on-call payments effected from January 2024 and take remedial action to correct resulting over and/or under payments.