16th February 2007
The Malta
The Auditor General
kindly sends me a copy of all publications produced by his office. This week I
received a copy of the annual report for 2006 detailing the works of the
National Audit Office (NAO) for last year.
Nothing in the report convinces me that the NAO is achieving its mission of “promoting accountability, propriety and best practices in government operations”.
Let me put my cards on the table. I am biased against the NAO under its present set-up as I have had a first-hand experience which convinced me that the NAO was a mere tool in the hands of the PN, then in opposition. Unavoidably this first-hand experience still colours my judgment of the NAO.
It was the time when I was chairman of Mid-Med Bank in 1997-1998. The bank’s operations centre, then known as Centru Ruzar Briffa (CRB) in Qormi, was bursting at the seams trying to accommodate an ever-increasing number of operations and employees as the bank unavoidably was on a process of centralising all back office processes, leaving its branches as mere points of sale and points of contact with clients.
The bank had been locked in never-ending negotiations to acquire a building next door to CRB for several years. All the bank’s executive agreed on the urgent need to conclude these negotiations and get on with the job of extending CRB.
The building next door belonged to an organisation for whom I had acted as consultant for several years before being appointed chairman. I distanced myself from the negotiations process to avoid any perception of conflict of interest but when the process was continuing to drag on, I had to take the bull by the horns. I publicly terminated all consultancy with the prospective vendor, got involved in the negotiations, obtained improved terms and price discount and got board approval to proceed with the project.
As the bank was still then a publicly-owned organisation, it was important not just to take such decisions with propriety and transparency, but to appear to be doing so in the eyes of the general public. I therefore requested the Finance Minister to ask the NAO to vet the integrity of the process and the appropriateness of the price agreed with the vendor before concluding the deal. In spite of the urgency, I thought that a few more weeks would be affordable in the interest of protecting the bank’s reputation of integrity.
The unbelievable then happened. The NAO took nothing less than nine months to do a job which could have been easily done in nine weeks, if not nine days. Furthermore, although the price negotiated was confirmed as fair by three independent architects appointed by the NAO, the latter still did not deem it appropriate to issue a clean bill of health, arguing that the bank should have decided to relocate its operations centre to a more posh location involving massively increased expenditure and unbelievable disruption to the bank’s operations.
What brief did the NAO have to challenge the strategic decision taken by the bank to extend its CRB operations centre? Since when does any audit office take on an executive role and supplant its opinion over that of the executive of the organisation being audited rather than confirm or deny that the organisation is managed with integrity and with proper financial housekeeping standards leading to value-for-money investments?
What was extremely suspicious was that the NAO issued its report in August 1998, right in the middle of an election campaign. Common sense would suggest that after taking nine months to mull over a very simple exercise, it should have avoided the sensitive election campaign period to issue the report.
Time is the best judge. A few years later, the bank, now under HSBC wrapping, spent far more money than what Mid-Med was proposing, in order to re-develop CRB on its existent footprint. The result is that operations that were meant to be centralised at CRB are still spread around with additional costs and reduced efficiency in spite of the increased investment to respect the confines of the CRB footprint. The NAO argument that CRB was not posh enough to locate the bank’s operations centre impressed no one. So much so that Bank of Valletta opened its own operations centre less than one kilometre away from CRB.
So yes, I have an axe to grind with the NAO. But for goodness’ sake, one needs not have such an axe to be critical of NAO. They attend all sorts of conferences overseas, something like two a month as an average. They run with a staff of 53, a not inconsiderable complement. In their publications they try to impress us with their skills to perform Value for Money Audits.
In its 10 years of existence, what has the NAO been doing to protect the citizens’ interest in the most crazy waste-of-money project we have ever seen on this land? I have said it several times before and I say again.
Excluding the medical equipment contract, the Mater Dei Hospital is costing at least three times what a super five-star hotel of similar size would have cost to build on the same site with today’s money. Can there be a bigger offence to the principle of value for money?
Yet the NAO which found the courage to denigrate during an election campaign the only executive that ever sent it a process for auditing before it got executed, has lost its teeth in front of the massive destruction of value that has taken place over the last 15 years in the Mater Dei project.
They remain silent on many other things as well but then find the time to perform a value-for-money audit of the Occupation Health and Safety – the Construction Industry, where budgets are minimal and the scope for financial misdemeanor is pretty negligible.
A true case of being strong with the weak and honest, and weak with the strong and wasteful.
The NAO needs some auditing itself.
Nothing in the report convinces me that the NAO is achieving its mission of “promoting accountability, propriety and best practices in government operations”.
Let me put my cards on the table. I am biased against the NAO under its present set-up as I have had a first-hand experience which convinced me that the NAO was a mere tool in the hands of the PN, then in opposition. Unavoidably this first-hand experience still colours my judgment of the NAO.
It was the time when I was chairman of Mid-Med Bank in 1997-1998. The bank’s operations centre, then known as Centru Ruzar Briffa (CRB) in Qormi, was bursting at the seams trying to accommodate an ever-increasing number of operations and employees as the bank unavoidably was on a process of centralising all back office processes, leaving its branches as mere points of sale and points of contact with clients.
The bank had been locked in never-ending negotiations to acquire a building next door to CRB for several years. All the bank’s executive agreed on the urgent need to conclude these negotiations and get on with the job of extending CRB.
The building next door belonged to an organisation for whom I had acted as consultant for several years before being appointed chairman. I distanced myself from the negotiations process to avoid any perception of conflict of interest but when the process was continuing to drag on, I had to take the bull by the horns. I publicly terminated all consultancy with the prospective vendor, got involved in the negotiations, obtained improved terms and price discount and got board approval to proceed with the project.
As the bank was still then a publicly-owned organisation, it was important not just to take such decisions with propriety and transparency, but to appear to be doing so in the eyes of the general public. I therefore requested the Finance Minister to ask the NAO to vet the integrity of the process and the appropriateness of the price agreed with the vendor before concluding the deal. In spite of the urgency, I thought that a few more weeks would be affordable in the interest of protecting the bank’s reputation of integrity.
The unbelievable then happened. The NAO took nothing less than nine months to do a job which could have been easily done in nine weeks, if not nine days. Furthermore, although the price negotiated was confirmed as fair by three independent architects appointed by the NAO, the latter still did not deem it appropriate to issue a clean bill of health, arguing that the bank should have decided to relocate its operations centre to a more posh location involving massively increased expenditure and unbelievable disruption to the bank’s operations.
What brief did the NAO have to challenge the strategic decision taken by the bank to extend its CRB operations centre? Since when does any audit office take on an executive role and supplant its opinion over that of the executive of the organisation being audited rather than confirm or deny that the organisation is managed with integrity and with proper financial housekeeping standards leading to value-for-money investments?
What was extremely suspicious was that the NAO issued its report in August 1998, right in the middle of an election campaign. Common sense would suggest that after taking nine months to mull over a very simple exercise, it should have avoided the sensitive election campaign period to issue the report.
Time is the best judge. A few years later, the bank, now under HSBC wrapping, spent far more money than what Mid-Med was proposing, in order to re-develop CRB on its existent footprint. The result is that operations that were meant to be centralised at CRB are still spread around with additional costs and reduced efficiency in spite of the increased investment to respect the confines of the CRB footprint. The NAO argument that CRB was not posh enough to locate the bank’s operations centre impressed no one. So much so that Bank of Valletta opened its own operations centre less than one kilometre away from CRB.
So yes, I have an axe to grind with the NAO. But for goodness’ sake, one needs not have such an axe to be critical of NAO. They attend all sorts of conferences overseas, something like two a month as an average. They run with a staff of 53, a not inconsiderable complement. In their publications they try to impress us with their skills to perform Value for Money Audits.
In its 10 years of existence, what has the NAO been doing to protect the citizens’ interest in the most crazy waste-of-money project we have ever seen on this land? I have said it several times before and I say again.
Excluding the medical equipment contract, the Mater Dei Hospital is costing at least three times what a super five-star hotel of similar size would have cost to build on the same site with today’s money. Can there be a bigger offence to the principle of value for money?
Yet the NAO which found the courage to denigrate during an election campaign the only executive that ever sent it a process for auditing before it got executed, has lost its teeth in front of the massive destruction of value that has taken place over the last 15 years in the Mater Dei project.
They remain silent on many other things as well but then find the time to perform a value-for-money audit of the Occupation Health and Safety – the Construction Industry, where budgets are minimal and the scope for financial misdemeanor is pretty negligible.
A true case of being strong with the weak and honest, and weak with the strong and wasteful.
The NAO needs some auditing itself.
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