The National Audit Office (NAO) said on Tuesday that it had been unable to carry out an investigation requested almost three years ago into the Mater Dei Hospital project due to a significant lack of documentation in all stages of the project.
Finance Minister Edward Scicluna in June 2015 asked NAO to investigate the process, from design to eventual conclusion, of the Mater Dei Hospital (MDH) project, citing concerns relating to governance, transparency, and financial management.
Responsibility for the overall management of the hospital project had rested with the Foundation for Medical Services (FMS), with various roles in several phases of the project entrusted to other stakeholders.
"Despite all efforts by the NAO, a comprehensive investigation of the Mater Dei Hospital project was not possible, primarily due to the significant lack of documentation with respect to all stages of the project. This deficiency prohibited the Office from establishing a comprehensive understanding of the project, an essential requirement in formulating an audit opinion," the audit office said.
"Notwithstanding the foundation's long-term responsibility for the management of this project, dating back to 1998 and concluding in 2011, it was unable to provide the documentation requested by this Office, including the project’s accounting and fixed asset records. The NAO is of the opinion that the Foundation’s inability to provide this basic information represents an institutional failure and gross negligence in the administration of public funds," the audit office said.
The Foundation’s inability to provide this basic information represents an institutional failure and gross negligence in the administration of public funds.
"Moreover, an inadequate and unreliable audit trail detracts from the expected level of accountability, transparency, fairness, and governance warranted in this national project."
It said it was not in a position to provide assurance with respect to the comprehensiveness of the contractual framework regulating all aspects of the project. Neither was it in a position to provide assurance as to whether applicable public procurement regulations were adhered to and the required approvals sought for all contracts/agreements.
No documentation was provided to back the decision to adopt the San Raffaele Hospital of Milan as a model. Successive radical changes in policy and in the scope of the project following the 1996 and 1998 changes in administration perpetuated the haphazard management of the project.
In December 1998, Skanska (Malta) Joint Venture (SMJV) assumed the design function in addition to its existent role in the construction of the hospital; however, the the audit office said it was not provided with any related documentation.
"In the NAO’s understanding, this disorganised series of changes reflected poorly on the overall planning and management of the project and bore long-term negative effects.
"Between 2000 and 2003, concern regarding material escalation in project cost emerged, with the final cost estimated at Lm121 million from the initial Lm83 million. This led the government to resort to a Lump Sum Agreement, intended to limit the further escalation of costs and associated risks.
"However, this was not the case, as a Settlement Agreement, later confirmed through a Project Closure Agreement entered into in February 2009, comprised an additional disbursement by the government of €5,125,000 (excl. VAT) and, more importantly, an absolute waiver of rights, which provision exposed the government to significant risks arising from latent defects and provided for severely limited means of recourse," the audit office added.
It was not possible to ascertain whether payments made were in relation to eligible goods and services under the relevant contracts and established controls.
In addition, the Office could not verify whether there were instances when claims for payment were signed despite identified shortcomings in terms of the quality of work.
A reconciliation between the amounts submitted as certified works/goods by the contractors and the government/FMS accounting records and hospital inventory was not possible.
Notwithstanding this gross limitation, based on the partial information obtained, the NAO arrived at a best estimate project cost of Lm234 million (€546 million).
The full report may be accessed through the NAO website: www.nao.gov.mt of www.facebook.com/NAOMalta.
AUDIT REPORT SHOWS LACK OF ACCOUNTABILITY UNDER PN - PL
The Labour Party said the audit report showed lack of accountability under successive PN governments.
The audit report, it said, raised more questions than answers owing to the absence of documentation in the foundation managing the project.
The party observed that Clyde Puli, now PN general secretary, had served as a senior official of the foundation.
This report, it said, was further confirmation of the lack of accountability at the time of the PN governments. It was, therefore, no surprise that Malta had a deficit under the PN and now had a surplus. The PN was neither credible to speak about the health sector, nor about accountability.