Three Transport Malta employees have been suspended after an investigation uncovered serious irregularities in the licensing and testing department right up to 2009.

The investigation by a private audit firm was commissioned in January following allegations by Labour MP Joe Mizzi. It has named "a number of individuals employed or formerly employed" with the authority whose actions were not "satisfactorily explained".

The Transport Ministry said last night it did not publish the report not to hamper an ongoing police investigation into the same allegations but the report was passed on to the police to assist them.

"The findings of the report are of deep concern to me... It seems clear that the environment at the front office was, and presumably remains, conducive to allow these irregularities to occur," Transport Minister Austin Gatt said in a letter to Transport Malta chairman Mark Portelli, highlighting a number of urgent recommendations.

He added that the employees against whom disciplinary action was to be taken should be suspended and the disciplinary process should be dealt with "expeditiously".

The report by PricewaterhouseCoopers found that some people "fraudulently benefited" from the addition of a new licence category without having sat the appropriate test.

The auditors tested 127 cases reported since 2001 and found that while in 42 cases people had sat for the driving exam, 85 cases "remained questionable".

A sample used to test pre-2001 licence holders found 75 per cent of cases to be "suspect".

Transport Malta will now have to verify all pre-2001 extensions, case by case and ask all identified drivers to either prove their eligibility or else sit for the appropriate exam.

The auditors also found that 12.5 per cent of licences between 2007 and 2009 are suspected to have been issued "free of charge".

Meanwhile, an investigation into misappropriation through cancellation of receipts found another 12.5 per cent of cases were "suspect".

The receipts were traced to clerks who were also named in the findings on the inclusion of invalid additional driving categories and in one case in the findings on driving licences issued without fee, according to the ministry.

In his letter to Mr Portelli, Dr Gatt said it was "obvious" that processes and procedures remained informal and relied "excessively" on the initiative of staff rather than objective decision making criteria.

"This section handles some 40,000 transactions yearly for a value of some €100 million. It is more akin to a major bank branch than a government department... much stricter processes and controls are required..."

Dr Gatt ordered Transport Malta to immediately employ a person with experience in banking procedures and checks and balances by the end of June.

He also asked the authority to avoid "the risk of familiarity" between customers and service providers by introducing rotations of services for all employees within the cash office.

"I support your view that any doubt about the eligibility of licence holders must be cleared and confirmed whether by evidence of past eligibility or the conduct of a new test," Dr Gatt told Mr Portelli.

Dr Gatt ordered that inclusions not reviewed by the audit should be re-assessed in good time to confirm eligibility.

"I would also like to be informed of the outcome of your review of an incident reported by the auditors of an individual who was issued with a licence even though she failed the practical test."

Dr Gatt called for further observation on high volumes of VRT tests sustained by a small number of stations to verify that all tests were being conducted according to law.

"I expect the authority to send me a report detailing the actions it had taken in all these regards and the results obtained by not later than the end of July."

Mr Mizzi had said in Parliament last January that the then Malta Transport Authority was not collecting its dues and instead money was being pocketed.

He claimed people were given bribes to re-issue licences on the pretext that these had been lost or destroyed. Information on the authority's computers was being deleted and files destroyed.

In 2006, the transport regulator was hit by a scandal that saw two driving instructors being convicted of bribery.

Two authority officials were convicted of taking bribes the following year.