Parliament’s Public Accounts Committee yesterday started looking into the findings of a National Audit Office report about fuel procurement by Enemalta between 2008 and 2010. Kurt Sansone followed the proceedings.
An audit of Enemalta’s fuel procurement when Austin Gatt was minister did not conclude that he interfered in oil buying, according to Auditor General Anthony Mifsud.
But Mr Mifsud said there was ministerial interference in the hedging strategy adopted by Enemalta that may have tied the corporation’s hands in trying to secure the best deal.
Among its damning findings, the audit report spoke of oil hedging strategy being influenced by ministerial interventions and the purchase of oil between 2008 and 2010 having bypassed “the most fundamental principles of good practice”.
The Auditor General was yesterday answering a specific question by Nationalist MP Beppe Fenech Adami as to whether the audit report implied that Dr Gatt interfered in Enemalta’s oil buying.
The reference was to an e-mail uncovered during the audit which Dr Gatt sent to then Enemalta chairman Alex Tranter as to what hedging strategy the company should use. Dr Gatt instructed Enemalta not to hedge for the long-term unless the price of oil reached $81.80 or less.
This is a vicious attack on the autonomy of this office
Mr Mifsud said his office felt the e-mail constituted “undue interference” because it was not best practice for the minister to interfere in the workings of “a technical and specialised committee” that was established to determine strategy.
Mr Mifsud and NAO official Keith Mercieca insisted on drawing a distinction between policy direction and strategy. Setting policy was a question of ministerial discretion but good governance meant strategy should be the remit of the risk management committee, they argued.
Dr Fenech Adami insisted the NAO stuck to “a fictitious” distinction between policy and strategy that the law did not make.
He insisted the Enemalta Act allowed the minister to give the company direction on matters he felt were of public importance.
Mr Mercieca explained that if the price of oil was higher than the ministerial benchmark, Enemalta had its hands tied and could not hedge even though the oil price was likely to increase further.
Parliamentary Secretary Owen Bonnici said the price benchmark set by Dr Gatt cost the country an extra expense of €3 million in oil purchases.
The figure came from the audit report but Mr Mercieca was reluctant to draw a direct causal link between Dr Gatt’s direction and the outcome, pointing out that when the exchange rate was taken into consideration the country actually saved €14 million.
The NAO official insisted that irrespective of the positive outcome of Enemalta’s oil buying strategy, it was bad practice for any minister to interfere in the company’s technical workings.
The Opposition launched a defence of Dr Gatt through its line of questioning which attempted to put the NAO officials on the spot for failing to question the former minister and for attributing ministerial interference.
The scene was set in the morning session when Dr Fenech Adami also asked for the names of the NAO’s staff members who worked on the audit, something Mr Mifsud objected to.
“This is a vicious attack on the autonomy of this office,” Mr Mifsud said, saying that he was responsible for the report and by putting his staff on the spot it would be difficult to find people who were ready to work for the office.
On the other hand the Government side was interested in painting Dr Gatt in a bad light by implying that he interfered in how Enemalta bought oil and this impinged negatively on the bills consumers had to pay.
Dr Bonnici and Labour MP Luciano Busuttil tried to place the findings within a wider context that included the fuel scandal that was uncovered at the beginning of the year, the high energy bills that were introduced in 2009 and the controversial BWSC power station tender.
The Auditor General refused to be drawn into this argument by insisting the audit only covered administrative practices between 2008 and 2011: “What you are saying is relevant but beyond the scope of this audit.”
Mr Mifsud said Enemalta had accepted all the NAO’s recommendations except one about the recording of telephone calls when oil deals were discussed.
He said that during the last meeting about the audit in July this year, the chief financial officer insisted he did not feel comfortable having these phone conversations recorded because an element of “bluff” was involved.
A heated exchange
Beppe Fenech Adami (BFA): After seeing the unacceptable minutes... the person who carried out the audit did not feel the need to question the person who was responsible for these minutes...
Keith Mercieca (KM): We used the documentation given to us by Enemalta... sealed documentation related to fuel procurement committee meetings... our go-between was Enemalta’s chief finance officer.
BFA: But the investigation also implicated persons...
Anthony Mifsud (AM): We did not investigate people. We analysed the processes and systems used.
BFA: You spoke of undue ministerial interference. Isn’t this reference to a person? The report does identify individuals and does implicate them...
AM: This was an analysis not an investigation of people.
BFA: It is not fair on these people to remain with the mud and spin stuck to their names simply because this was an analysis [that did not require them to be interviewed].
AM: The mud and spin was the media’s.
KM: We questioned those officials who are still at Enemalta and their answers were satisfactory.
The salient questions
Why did the Opposition imply unfairness?
PN deputy leader Beppe Fenech Adami insisted it was a shortcoming on behalf of the NAO not to question people like former minister Austin Gatt and former Enemalta chairman Alex Tranter. Dr Fenech Adami said this went against the principle of a fair hearing. His line of questioning in this regard reflected the criticism made by Dr Gatt in his only public utterance on the damning report.
Why did the NAO not question Gatt and Tranter?
The Auditor General insisted the oil procurement analysis was a performance audit and not an investigation of people. He argued that NAO officers had the necessary documentation from Enemalta and the information contained in the documents was sufficient to arrive at conclusions on whether good governance was observed or not. The poor minutes were proof enough of lack of good governance from an audit perspective and so it was not necessary to speak to the person responsible for them.
Were criminal shortcomings found?
The Auditor General confirmed that the audit did not uncover any criminal shortcomings and had it done so the NAO would have gone to the police. But he insisted the audit was only looking at issues related to performance and good governance. He said the audit uncovered administrative and strategic shortcomings such as improper minute taking.
Did Austin Gatt interfere in oil buying?
The NAO report does not indicate this but there is one instance that is highlighted in the audit where Dr Gatt sent an email to Enemalta chairman with instructions on hedging strategy, which has nothing to do with the purchase of oil but with the financial mechanics involved in trying to secure the best prices over the long term.
What is the difference between hedging policy and strategy?
The NAO distinguished between the two by saying that policy was a ministerial direction but strategy to implement the policy was the remit of experts on the risk management committee and not something the minister should have interfered with.
ksansone@timesofmalta.com