AG: Trust accounts misused

 TRUST accounts, into which a lot of excess government funds have been paid in periods of surplus revenue, have not been maintained within the legally stipulated trust instruments for many departments, the Auditor General’s 2010 report revealed.

Out of 18 departments operating trust accounts, the AG identified six trust accounts that were not operating under the government account system.

In most of the departments with trust accounts, payments were made contrary to the purpose of the trust, the AG reported. These agencies did not submit monthly reconciliations and statements or receipts and payments to the Finance Department.

Surplus monies available in the trust accounts were not invested in line with the Public Finances Management Act. Not a single department submitted its trust bank reconciliation statements within 14 days of the close of each month as required by law.

Employee entitlements and payroll functions account for 20% of annual recurrent budgets of the State but even those were mishandled in 2010 as in previous years.

Common weaknesses included the fact that no payroll reconciliations were performed in all 18 departments throughout 2010. Previous audits indicated also that the departments had a history of neglecting this crucial function.

“The lack of this key control can facilitate fraudulent payroll activities where payments processed outside the system such as manual cheques would not be easily detected in the absence of independent records and reconciliation,” the AG said.

Testing of a sample of employee files noted that salary history cards in these departments were not updated on a regular basis.