Updated 9.21pm with Film Commission statement -
Malta's film commission has done a good job attracting big film productions to the country but it lacks strong governance and transparency, and policymakers must assess the return on investment of its generous 40 per cent cash rebate, the National Audit Office (NAO) has said.
The report, tabled in parliament on Monday, found that between 2018 and 2022, film companies spent a total of €231.5 million in Malta.
"The foregoing implies that the Malta Film Commission was largely successful in attracting film producers – some of which were highly reputable – to Malta," the report says.
"At this point, however, the return on investment discussion concerning the expenditure incurred by the MFC to attract film production business to Malta needs to consider another important element - the various financial incentive schemes. [...]
"Ultimately, it remains a matter of government policy to decide whether this return on investment is acceptable or constitutes value for money. Within this vein, policymakers must consider the opportunity cost and socio-economic variables as well as the make-up of Malta’s economic portfolio when considering investment levels into the Maltese film production industry."
The commission has, over the past five years, faced harsh criticism from politicians and local film producers for its lavish spending on star-studded film events and marketing campaigns, the cost of which remains largely shrouded in mystery.
Perhaps most controversial is its cash rebate, which promises 40 per cent cash back to film productions that choose to shoot or work in Malta - a rebate that awarded the Gladiator sequel a record-breaking €47 million in taxpayer money.
The government and the MFC have defended the costs, saying the return on investment in the economy is three times the amount spent.
The NAO agreed with those calculations in its report.
"Barring some minor qualifications, the NAO agrees with the figures reported by MFC-commissioned reports regarding the impact of the Maltese economy from the film production industry in terms of expenditure, employment, gross value added and taxation," it said.
"Of note is that the employment figures do not necessarily relate to the creation of new jobs in the industry but consider new and previously held jobs which would have been lost without attracting new productions."
The NAO reviewed MFC's accounts for the years 2018 through 2022, after the Opposition and independent candidate Arnold Cassola urged the Auditor to investigate.
The report examines how the MFC is run, how it spends its money and what value for money its events - such as the 2022 Malta Film Week - and operations have on the Maltese economy.
Good facilities, weak governance
The report said the number of film productions using Malta Film Studios and seeking support from the MFC has grown steadily in recent years.
This was attributed to the quality of facilities, Malta's unique locations, MFC's marketing efforts, and the government's cash rebate for film production expenses.
However, it also highlighted weak governance at the commission, delayed financial reporting, staff shortages, lack of strategic planning and questionable decision-making, and called for increased transparency and accountability within the organisation.
A lack of audit trails
The report noted a "lack of audit trails" and delayed financial statements.
"The MFC did not always document all decisions taken by the management and Ministry approvals concerning certain expenditures," it said.
"MFC audited financial statements for 2021 and 2022 were concluded in October 2024 and made available to this Office in the subsequent days. A similar situation materialised with respect to the audited accounts of 2020, which were finalised in October 2023 and made available to this office in September 2024."
The report also raises concerns about the decision-making processes within the MFC, particularly regarding the allocation of funds and the justification of expenditures.
"This situation is further compounded by the centralisation of decision-making to a single point of reference, namely the Commissioner of the MFC and subsequently by the lack of documentation to support budget prioritisation and selection of service providers rather than appointing a project management committee specifically set to deal with an event of this size at planning, implementation and post-mortem phases."
Insufficient documentation
The NAO also took a deep dive into the 2022 Malta Film Week - a series of events that the MFC organised to celebrate a century of film-making in Malta and intended as a marketing tool to increase international awareness about Malta's film industry, facilities and locations.
The report found there was insufficient documentation outlining business plans and expenditures.
Most crucially, the "MFC could not support its claim that the Malta Film Week constituted value for money", it said.
"MFC did not carry out any studies to determine the number of production houses that decided to invest in the Maltese Film Industry because of this event," the report said.
"MFC contended that the Commission’s main aim was to celebrate the Maltese film professionals and increase the prominence of the sector on a national level. Nevertheless, the event was used to support MFC marketing campaigns in subsequent months.
"The foregoing prohibited this Office from embarking on a cost-effectiveness exercise. Moreover, such a situation raises concerns relating to accountability and transparency related to provenance, spending and administration of public funds."
Good marketing
The NAO found the MFC's marketing strategies generally aligned with industry best practices, like showcasing successful productions filmed in Malta, highlighting financial incentives, maintaining an updated online presence, and attending industry events.
However, the MFC lacked comprehensive data on the effectiveness of specific marketing initiatives, it said.
The NAO also confirmed the cash rebate scheme complies with state aid protocols, but noted a delay in finalising audits for some productions, which holds up the disbursement of rebates.
It also recommended infrastructure updates at the film studio facilities, namely the construction of sound stages, which have been in the pipeline for quite a while.
Film Commission welcomes report
The Film Commission said it welcomed the report by the audit office.
"The NAO’s findings endorse the Film Commission's Cash Rebate return on investment study, published in 2023, confirming that the programme delivers a substantial return on investment for the economy. Both the NAO’s analysis and the Film Commission’s figures are closely aligned, underscoring the programme's positive impact on different sectors of the Maltese economy," the commission said.
"This validation supports the Film Commission’s long-standing position that the Cash Rebate is vital in boosting the Maltese economy by attracting foreign investment, creating both direct and indirect employment opportunities, and establishing Malta as a world-class destination for international film productions."
It also noted that the NAO confirmed that that no funds allocated for local film production schemes were used for the 2022 Malta Film Week.
"The report does identify a number of general routine administrative shortcomings within the Film Commission, pointing to areas where processes and oversight could be improved. However, it also acknowledges that the Film Commission operates with a significantly limited staff, especially in light of the high volume of responsibilities and tasks it is required to manage," the commission said.
"This staffing shortage is highlighted as a key factor impacting the Film Commission’s ability to effectively address its administrative obligations and maintain optimal efficiency in its operations.In fact, the Film Commission managed tens of millions of euros in cash rebate funding with a complement of only nine office staff members. Since the period under review, the Film Commission has already implemented several measures to address these issues, including the employment of additional personnel."
The commission said it was committed to continue extending the cash rebate incentives to local productions, totalling over €12 million in a seven year period, apart from the local funding schemes.