(Adds government statement)

The National Audit Office has slammed the government's purchase of Cafe' Premier, saying that it did not obtain value for money even though the property was bought at market value. 

In a report tabled in Parliament this evening, the NAO expressed a number of reservations regarding the manner in which the government acquired the property.

The NAO had been requested to investigate reports that the government had paid €4.2 million for the re-acquisition of the Café Premier, which it had conceded through an emphyteutical grant to Cities Entertainment Ltd (CE) in 1998.

“The lack of rigorous and documented consideration of other options and the failure to properly evaluate such alternatives constrains the office in determining whether value for money was achieved.

“One such alternative was the follow-through of legal action, which government failed to pursue. This resulted in the eventual withdrawal of legal proceedings without clear justification or documentation, which action detracted from the required level of transparency expected in such a decision.

“This must be seen within a context where the tenant, CE, was in breach of the lease agreement, as the three-year threshold in ground rent payments had been exceeded when negotiations commenced. Poor governance was a factor central to this shortcoming, with Government’s negotiating team failing to involve the Government Property Department from the initial stages of negotiations.”

The NAO said the government’s justification for the reacquisition of the Café Premier focused on four main objectives, namely, the removal of possible danger posed to the National Library, the provision of greater accessibility, resolution of the problem of arrears faced by CE and the re-dimensioning of available space.

But the absence of documentation substantiating these policy objectives was considered a significant shortcoming, the NAO said.

It established that a payment of €210,000 to M&A Investments Ltd was a brokerage fee or commission, equivalent to five per cent of the transfer value.

Despite the fact that the government would still have paid €4,200,000, irrespective of the arrangement with M&A Investments Ltd, the €210,000 payment should not have featured in the agreement.

“The dealings between CE and M&A Investments Ltd were a private matter, and the government bore no relationship with the latter.

“Moreover, the €210,000 payment made in this respect was unsubstantiated and deemed by the NAO as inappropriately included in the agreement.

“Aside from this payment, no evidence of other commissions being paid out of public funds was found,” it said.

The report may be accessed through the NAO's website.

GOVERNMENT STATEMENT

In a statement, the government said it took note of the auditor general’s report and welcomed the debate within the Public Accounts Committee.

It noted that while the NAO did not find irregularities and the price paid was the market value, a number of observations which should be taken into consideration and explained in more detail were made.

This government, it said, respected the institutions and would see that the necessary safeguards were implemented for similar mistakes not to be repeated in future.