Directors of a government entity “self-awarded” themselves extra perks without seeking the necessary authorisation at ministerial level, an audit has found.

An auditor general report details how Malta Government Investments’ (MGI) board members granted themselves additional allowances and benefits that were not provided for in the applicable regulations.

Although not mentioned in the auditor general’s report, corporate records show the MGI board includes Labour backbench MP Davina Sammut Hili, who was appointed director in 2017.

Labour MP Davina Sammut Hili with Prime Minister Robert Abela.Labour MP Davina Sammut Hili with Prime Minister Robert Abela.

Sammut Hili did not reply to a request for comment from Times of Malta.

The audit of the investment body’s spending found that both the remuneration and benefits of the board of directors were not in line with the respective regulations.

Just last year, the six-member board was collectively found to have been paid €64,000 “over and above their entitlement”. A total of €30,000 of this amount was packaged as a ‘subsidiary allowance’, merely for attending the corporation’s annual general meeting.

An additional €19,000 was found to have been paid in ‘directors’ allowances’, with the auditor general unable to find any documentation detailing what exactly this particular allowance was meant to cover.

Additional payments of €6,000 for mobile allowances, €5,000 in ‘secretarial fees’, €2,632 in ‘fuel costs’ and a €1,800 ‘fuel allowance’ were similarly flagged by the audit.

“Whilst some of the above-mentioned benefits were approved by the board of directors itself over the years, between end of year 2015 and beginning of 2019, it was not always clear who approved the remaining benefits,” the auditor general said.

Minutes from a November 2015 board meeting show that monthly fuel costs of €150 were to be backdated and paid in arrears from May 2013.

Despite the extra perks, the board was found to have only held three “formal meetings” last year – in January, March and July.

A sample of board minutes reviewed by the auditor general were found to have “very often” lacked details, namely the date and time of subsequent meetings and the time of adjournment.

In giving its feedback to the audit findings, the Economy Ministry said any allowances and benefits which are not in line with the regulations will be stopped “with immediate effect”.

Furthermore, a note will be issued to all boards to further remind them that “self-awarding” of any allowances or additional benefits is, in general, prohibited, and a request for any exception should be made to the line ministry for evaluation, consideration and discussion with the cabinet’s steering committee, the government said.

Apart from the “self-awarded” perks, the board’s base pay was also found to be higher than that stipulated.

This is because the size of MGI’s operations had been “incorrectly classified” in 2017, by including 18 of its subsidiaries.

Government board remuneration is calculated on a sliding scale, according to the entity’s income, asset value and number of full-time employees.

The inclusion of MGI’s subsidiaries in the calculations submitted to the Economy Ministry led to the board receiving a higher pay than it was entitled to, had the subsidiaries been excluded, according to the audit findings.

In response to the concerns, the ministry said it will undertake an “in-depth review” of MGI and its sister company MIMCOL.

The ministry said that once this is concluded, it shall reassess the board’s classification level in line with its responsibilities and submit its findings to the cabinet office.

'Divergences’ in CEO’s pay

 It was not only the Malta Government Investments’ board that benefitted from extra perks. Its CEO, Herald Bonnici, was also found to have benefitted from what the auditor general described as “supplement agreements” to his original contract without the necessary authorisation from the Office of the Prime Minister.

The CEO was originally engaged with MGI in 2016 on a €70,000 pay packet, a fully expensed car, a fully expensed smartphone and €1,600 communication allowance, including internet, in a contract signed with the Office of the Prime Minister.

The following year, an additional clause was inserted by MGI into the CEO’s contract, stating that if his employment is terminated or revoked, he shall be entitled to a service bonus based on his salary and years served.

Another MGI agreement that same year gave the CEO a yearly ‘management allowance’ of €12,500 for duties performed in relation to MGI’s subsidiaries.

In 2019, MGI increased the CEO’s basic salary from €70,000 to €80,000.

Last year, the CEO was paid an €11,000 performance bonus for 2020, which was endorsed by MGI’s board of directors.

The auditor general said that any departures from the CEO’s original remuneration package should have been endorsed by the Prime Minister’s Office, who signed the original 2016 agreement with him.

“Hence, MGI is to regularise its position accordingly,” the auditor general said.

In response, the Economy Ministry argued that the appointment procedure and determination of pay packages of CEOs in general has been somewhat confusing and, along the years, different yardsticks and measures have been applied, ranging from freehand one-to-one negotiation to strict determination of packages centrally.

“In this case, MGI maintains that the remuneration of CEOs is within the duties and responsibilities of the board of directors and that any revisions were in line with the renumeration packages of previous CEOs and senior officials of the company,” the ministry said.

The ministry said that nonetheless, the auditor general’s recommendations have been noted, and following the resignation of the CEO in question, the new CEO’s pay package shall be reviewed by the ministry, submitted to MGI’s board and then sent to the OPM for approval.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.