VoM excluded from financial regulations

Lawyers and senior civil servants agreed at a meeting of Parliament's Public Accounts Committee yesterday that the operations of the Voice of the Mediterranean radio station did not fall under the government's financial regulations.

The PAC is discussing a report by the Auditor General issued earlier this month which was highly critical of the way funds at the station were administered until it closed down three years ago.

The applicability of the regulations was first raised at a meeting of the committee on Tuesday.

Public Investments Minister Austin Gatt observed that when an earlier inquiry was conducted by the Foreign Ministry, Peter Grech from the Attorney General's office had said that the regulations did not apply to the station.

Auditor General Joe Galea said that when his office started its inquiry it saw the legal advice given by Dr Grech and he had also consulted Ian Refalo, his own legal adviser who shared that view.

Dr Grech had also opined that the government's employment procedures did not apply to VoM since this was a Libyan-Maltese joint venture.

Dr Gatt added that Dr Grech had also said that even public service procurement regulations did not apply to VoM unless so specified when funds were transferred to it.

He asked the auditor whether such conditions had ever been made. Mr Galea said that although there was nothing in writing, verbal statements made during the inquiry led his office to understand that they were.

Committee chairman Charles Mangion asked whether it was normal practice for ministries to advise entities to follow the financial regulations whenever funds were transferred, or whether it was presumed that when funds was approved by Parliament, the regulations were applicable and had to be followed.

Dr Gatt said there were several entities, which were wholly owned by the government or in which the government had a large shareholding which still did not fall under the government's financial regulations, such as Air Malta.

He asked the permanent secretary at the Finance Ministry Salvu Gauci, if VoM fell under the government's procurement regulations. Mr Gauci said it did not. Parliamentary Secretary Tonio Fenech, asked if the Finance Minister had ever issued instructions for the government's financial regulations were to be followed by VoM.

Mr Gauci said it did not.

Labour MP Leo Brincat pointed out that in the Foreign Ministry's internal investigation report by Gaetan Naudi, then permanent secretary, and Charles Mifsud, it had been pointed out that more importance could have been given to the regulations binding the civil service. Mr Gauci said that there were certain instances when ministers requested entities which were not covered by the regulations to still submit to the director of contracts.

Dr Mangion asked whether permanent secretaries went into how funds approved by Parliament were spent by entities falling within their ministry.

Dr Gatt said that even though the government transferred money to the shipyards, for example, the shipyards did not fall under public procurement regulations.

Prof. Refalo said that when he was asked for his advice at the beginning of the investigation, the issue was not whether the financial regulations applied but whether the Auditor General had jurisdiction to investigate VoM.

His advice was that the auditor had jurisdiction in view of the terms of reference laid down by the Public Accounts Committee when it requested the inquiry.

When he was consulted during the course of the investigation his advice on the applicability of the regulations was that the terms of reference imposed by the PAC were in the sense that he should investigate whether the government's financial regulations were followed.

The issue whether VoM was regulated by these regulations was more difficult and did not depend just on the law but on what resulted from the facts. Whether the regulations were applicable depended on whether there had been conditions imposed when the funds were passed on to the station.

Dr Mangion said that effectively, it was being agreed that the committee had unanimously given the Auditor General the specific task to see if the government's financial regulations were followed.

Dr Gatt said this was not the case. The Auditor General had to check whether the regulations applicable to VoM were adhered to. In spite of Prof. Refalo's advice, the Auditor General and his office decided that the government's financial regulations were applicable. The committee agreed that good governance should be followed but not that regulations that were not applicable to VoM should be applied, Dr Gatt argued.

Mr Fenech said the Auditor General should have checked whether VoM had followed its own financial regulations.

Mr Brincat pointed out that independently of whether the Auditor General had been correct or not, even VoM's councillors had felt the need that the financial regulations should be followed. The attention of managing director Richard Muscat had been drawn to this fact and a councillor had resigned because of this issue. Dr Mangion also asked Attorney General Silvio Camilleri whether VoM had been bound to the government's financial regulations.

Dr Camilleri said that although he had not given the advice, he agreed with the advice that was given. The government's financial regulations were not applicable as long as it did not result that the money was transferred on condition that those regulations applied. He did not know of any uniform practice of what should be done when an entity received subventions from the government.

The committee then went on to question Mr Naudi, who was permanent secretary at the time of the operations of the Voice of the Mediterranean. He said he was never officially informed that a decision had been taken by the radio station's councillors that they had to follow the government's financial regulations.

He said that funds from the ministry used to be transferred to one of the councillors, Alfred Zarb, who worked at the Foreign Ministry. There were times when Mr Zarb advised the ministry not to issue as much funds as the station requested. Therefore, there was certain control and payment were always made with his endorsement.

Mr Naudi said that he personally did not agree with the view expressed by the Auditor General that the VoM councillors and its managing director were all public officers.

Two councillors were appointees of the Libyan government as was the deputy managing director. Moreover, Maltese councillor Mannie Spiteri could also not be considered as a public officer.

Mr Naudi said that on June 19, 2003, he received an e-mail from the radio's managing director Richard Muscat who said that the station was facing serious finacial problems since the Libyan government had not paid their share to the station for six years.

Mr Naudi said the Maltese government did not give the station the money it was owed by Libya. Mr Naudi said that following Mr Muscat's e-mail, he had meetings with the minister, then Joe Borg, and the Libyan ambassador, then Ali Nageem, who was also a councillor. Mr Nageem had insisted he wished VoM to continue operating and that he would do his utmost to get the funds.

Mr Brincat asked if the Libyan Foreign Minister had said during a meeting with Dr Borg that he did not see a future for the radio.

Mr Naudi said that although he had not been present for this meeting, he could confirm that this was the case.

Mr Naudi said that on November 12, 2003, a note verbal had been sent to Libya saying that unless it submitted its payment, the Maltese government would have no option but to close down the station. A request for Lm980,699 was made. On November 19, 2003 Dr Borg insisted with Mr Nageem that the Libyans should pay their dues.

Mr Nageem confirmed that he had written to Tripoli telling them that unless they sent Lm250,000 the station would have to close. Payment was not being made because of a bureaucratic problem as to who was responsible from the Libyan side and Col Gaddafi himself had to sign the payment.

Mr Fenech asked if the Libyan government had ever disputed the amount of money that was owed.

Mr Naudi said that during the meeting with Dr Borg, the Libyan foreign minister had said he did not feel the station should continue to be funded but he never said that what was due should not be paid up.

Mr Naudi said that in an e-mail in July 2003, Mr Muscat had proposed that in order to save the radio some money, the payment of the salaries to the Libyan employees should be suspended.

Mr Naudi had told Mr Muscat he should not do this under any circumstance. In October 2003, he called Mr Muscat telling him that he was passing the station a final Lm40,000 which should be used exclusively to pay salaries and other unavoidable legal or contractual obligations which had to be settled. All other expenditure had to be frozen.

Speaking on the transfer of VoM's offices from Floriana to Birkirkara, Mr Naudi said VoM had been asked to move out of its Floriana premises by Mepa, which owned the building. VoM eventually moved to Birkirkara and Mepa paid the rent there.

Mr Naudi said he was never alerted that things were not being done correctly. When the board had felt that a person had not been recruited in the correct manner, the situation was rectified.

The committee resumes this morning.