Direct order for legal services extended without proper documentation – NAO

The Commissioner for Revenue continued using the legal services of four lawyers after their contract ended. The Legal Unit within the Commissioner for Revenue had been granted approval by the Finance Ministry to extend the service rendered by four lawyers for an additional 12 months. This was done before a tender was issued to strengthen the legal unit.

The legal services were contracted through a direct order for a period of one year. The department had entered into a formal agreement on 14 June 2018. The direct order approval and their respective contracts included a fixed rate per hour and the maximum total possible outlay.

When the National Audit Office conducted a follow up visit, it was not provided with any further direct order approval from the ministry and extension agreements with the service providers.

This emerged in the first volume of a follow-up report by the National Audit Office which was published recently. In its report, the NAO looks into the progress registered by various public entities that it had audited a few years prior. Among those audited, is the Value Added Tax Department.

The National Audit Office (NAO) had published a write-up entitled ‘VAT Department – Expenditure and Personal Emoluments’ in its Report by the Auditor General – Public Accounts 2015. The objectives of the audit were to verify that, during financial year 2015, there were adequate internal controls on the operational and maintenance expenditure incurred by this Department, as well as that personal emoluments were appropriately processed and recorded.

The main areas of concern included lack of internal controls within the Human Resources and payroll function. Other shortcomings included non-compliance with procurement regulations in the provision of legal services.

The VAT Department has been integrated with the Inland Revenue Department in July 2019. This led to the merging of the administration and the human resource departments including the payroll function.

The NAO analysed supporting documentation provided to back up the extent of the implementation progress by end of 2019.

The NAO found that considerable efforts were undertaken by the VAT Department to address the shortcomings highlighted in the 2015 Annual Audit Report. However from the review it carried out, the NAO found that there was a need for the enhancement of a number of controls in specific areas, especially in light of the merger which took place with thin Inland Revenue Department and the introduction of the accrual based accounting and Corporate Financial Management System.

Among the efforts registered, the National Audit Office found that a daily reconciliation of attendance records was now being performed by an HR official. The NAO selected four random dates when auditing the process. Prior to the report, the NAO had found discrepancies between Vacation Leave and Time Records. “Several discrepancies were noted between the Vacation Leave records and that recorded in the Attendance Verification System.

The VAT Department scored points on undertaking the necessary efforts to ensure that personal files are properly maintained and that they were safeguarded against unauthorized access. The VAT Department also took steps to address the issue of teleworking procedures and implemented the necessary agreements and followed the necessary procedure.

Other issues which were addressed by the VAT Department include that of the lack of authorisation of vacation leave, and discrepancies between sick leave documentation and time records. During the audit, the NAO found that for these three issues the VAT Department had taken the necessary steps to fully implement the lacking procedures.

Temporary Absences Records not maintained

The VAT department however registered insignificant progress on the maintaining of temporary absence records.

Temporary absences are to be recorded in a temporary absences record sheet. In its 2015 report, the NAO found that the VAT department was not always in a position to provide justification for temporary absences since the respective template was not filled in.

VAT Inspectors are to record their outdoor duties on a logbook apart from filling in the temporary absences record sheet. However, the NAO was not provided with the logbook for the sampled period when auditing the department.

The NAO also sampled two inspectors and found that information on temporary absence could not always be corroborated with other documents. This was due to either missing or different information.

Inventory list has not been finalized

The Commission for Revenue has tasked two officials with carrying out an update to its inventory list. This was not yet finalised by the follow-up audit. In its 2015 report, the NAO had found that the inventory database was dated June 2012 and had not been updated since.

The NAO could not carry out proper testing of the inventory and a planned physical inspection of selected inventory items held at the department back then, as it was not provided with the related room inventory lists for review.