The recent arraignment of Francine Farrugia, a finance manager and PN councillor, accused of defrauding MCAST of €2.3 million, has raised serious questions about the internal controls and governance practices within the state educational institution.

From double salaries to luxury spending sprees, the alleged crimes underscore systemic weaknesses in financial oversight.

Here are seven key ways this incident could have been prevented if proper financial controls and risk management practices had been in place:

1. Segregation of Duties (SoD) in payroll management

Ms Farrugia allegedly had access to payroll functions and exploited this to issue double salaries – to others and to herself. This suggests a lack of segregation between input, approval, and reconciliation functions, a basic principle of financial governance.

Prevention: No one person should control end-to-end payroll. An independent party should review payments before processing.

2. Regular internal and external audits

The magnitude and duration of the alleged fraud – spanning at least over several months - implies an absence of effective internal or external auditing procedures.

Prevention: A quarterly or even monthly audit, especially on payroll and bank transfers, could have flagged discrepancies such as duplicate payments or unusual transfer patterns early on.

3. Real-time financial monitoring systems

The fact that the alleged €2.3 million was transferred without internal flags points to poor financial monitoring systems. Many institutions now deploy real-time transaction monitoring, especially for payroll and high-risk departments.

Prevention: Implementing automated controls and anomaly detection (e.g. flagging duplicate salaries or high-value personal transfers) could have detected this misconduct sooner.

4. STR oversight and follow-up

While a Suspicious Transaction Report (STR) reportedly triggered the investigation, this appears to have come externally, via the police or banks, not MCAST.

Prevention: MCAST’s own compliance team should have triggered STRs and collaborated with the FIAU for red flags such as the sudden influx of large personal transactions.

5. Monthly reconciliation of payroll to bank statements

There is no indication that monthly reconciliation was happening – or if it was, that it was done independently. This should be standard practice across all organisations of any size, making this a major institutional failure.

Prevention: Each payroll run should be reconciled by a finance officer not involved in its preparation, cross-checking names, amounts, and authorisations against actual disbursements.

6. Lifestyle audits for key finance roles

Ms Farrugia’s alleged lavish spending – €113,000 at Harrods, multiple luxury items, and real estate deals - was reportedly inconsistent with her public salary.

Prevention: Lifestyle audits, especially for employees in sensitive financial roles, are a growing trend in public institutions to detect potential fraud or corruption.

7. Lack of immediate suspension mechanism

The court heard that MCAST only held an emergency board meeting to suspend her after her arrest. This delay hints at either a lack of awareness or a slow crisis response framework.

Prevention: Institutions must have immediate-response protocols once investigations are launched or red flags raised – including automatic leave-of-absence triggers pending inquiry.

Conclusion: A wake-up call for institutional financial governance

This case is not just a criminal matter – it reflects deep-rooted structural weaknesses in public sector financial governance. The scale of the alleged fraud at MCAST should serve as a catalyst for reform, not only at MCAST but across all public institutions managing significant budgets and payrolls.

Stronger systems, smarter oversight, and a culture of accountability are the only real long-term deterrents to financial abuse.