[WATCH] 'By no stretch of imagination' 2006 FAC report was a policy - live blog

Welcome to MaltaToday's live blog of the PAC hearing into the Auditor General's audit of Enemalta's fuel procurement policy

EXPLAINER | Auditor General's report on Enemalta fuel procurement

13:11 Meeting adjourned to Friday morning at 9am with a continuation of the Auditor General's hearing.

13:04 Currently NAO officials are explaining that the lack of accountability and lack of transparency are a cause for concern.

"I wouldn't know what to reply because we wouldn't know what sort of negotiations occurred," the Auditor General said when asked whether the situation they found cast doubts on the integrity of the contracts awarded.

12:45 TOTSA and BB energy were awarded tenders the highest number of times. The NAO official has been asked to explain the circumstances which led to awarding these contracts even though they may have not been the most preferable bid.

The NAO officials said they needed time to compile information. Question postponed to a later session.

€467 million in fuel procurement were spent in 2008.

12:34 Jason Azzopardi wants a "direct confrontation" between NAO experts and the experts behind the 2006 fuel procurement report. The Auditor General has objected saying that: 1. he is not a witness but a "consultant" to the PAC on the report and 2. he felt this was "a direct attack" on the autonomy of the National Audit Office.

Profs Ian Refalo, acting as the Auditor's legal advisor, has insisted that the PAC should direct its questions to the procurement members and other experts and reach its own conclusions.

"Where is the NAO's autonomy if you keep calling for confrontation?" Refalo said, to which Azzopardi replied that "autonomy is not immunity from being asked questions".

The Opposition is seemingly trying to undermine the expert opinion given to the NAO on the report. "I don't doubt you're genuine but I have a right to beg to differ."

12:26 Azzopardi now asks about the "competence" of the NAO staff who said the 2006 report was not a policy. NAO says the staff worked at audit firm PwC - [one of the audit firms mostly used by the Nationalist administration for consultancy services].

"I repeat that we took note of the report, so much so that we said we couldn't understand how it was ignored. Because the report constitutes a good set of recommendations. It is not a strategy. And I would suggest that you ask fuel procurement members why the recommendations were ignored," the deputy auditor general says.

12:21 "You said there was a policy. To understand your statement I am kindly asking you to explain this policy," Bonnici asks Fenech Adami.

Fenech Adami: "The fuel procurement advisory committee tasked with drafting report presented the report to the minister. The minister adopted the recommendations and the report was adopted by Enemalta. I am not an expert to explain the technicalities of this policy."

Bonnici: "A policy is not adopted after a minister tables a document in parliament. What is this policy you talked about?"

Fenech Adami: "I already replied that this question should be made to the technical experts [Roderick Chalmers]."

12:14 Fenech Adami continues to insist that Austin Gatt "said the recommendations have been adopted" during a speech in parliament.

"Did Enemalta refer to you this information?" Fenech Adami asks. "What I'm saying is that there had been a shortcoming from those who were giving you the information after failing to say that Austin Gatt was to implement the report."

"Do you think you should have been informed about Gatt's statement?" Fenech Adami says.

Trying to explain, Mercieca says "Enemalta was not incorrect when it told us there had been no policy because this document does not help fuel procurement committee to evaluate tenders and it does not set criteria."

Fenech Adami continues to say it was "relevant" that a minister appeared before parliament to say the recommendations would be adopted.

"This document is not a policy," Mercieca repeats for the umpteenth time.

12:03 In explaining what a policy document referred to, NAO official Keith Mercieca said during the period in question, Enemalta purchased billions of euros in fuel. 

Pointing to the policy adopted in 2011, Mercieca said "this is what justifies the purchase of millions of euros in fuel and not this paragraph" referring to the document tabled by Austin Gatt in 2006 which Fenech Adami is implying it constituted a fuel procurement policy.

Mercieca challenges Beppe Fenech Adami to quote from the report how the procurement committee should evaluate tenders "if this were to be a policy".

"There is nothing in it which guides the committee and it does not provide paramenters for the committee on how it should evaluate tenders," Merceica insists.

He goes on to explain that the document was about hedging... leaving Fenech Adami commenting that he was "not an expert".

Bonnici has also asked to explain how the report issued by the Fuel Advisory Committee issued in 2006 was a policy - given that it was Beppe Fenech Adami himself who produced the report and claimed it was the policy.

"We will bring in Roderick Chalmers to explain that," Fenech Adami replied.

11:58 The NAO says the report was not a policy but a recommendation. Beppe Fenech Adami is insisting that Austin Gatt had asked Enemalta to implement the "policy" in 2006, a declaration which he apparently made in parliament.

"Your statement is completely incorrect," Keith Merceica insists. "I challenge you to read the report. If the minister said it were a policy, than he was wrong."

"By no stretch of imagination can the report be considered as a policy."

11:50 The report, NAO says, was referred to as a base for the hedging strategy.

"In that case, Enemalta's shortcomings would take a new turn as that would mean Enemalta blatantly ignored a policy," the NAO report manager said.

Beppe Fenech Adami is suggesting that this report may have been adopted and therefore there had been a policy.

"Did you ask whether the report was adopted as a policy?" Fenech Adami asks.

"We asked whether there was a policy between 2008 and 2010 and we were told no," the NAO replied.

"Rephrase: did you ask whether the report was implemented as a policy?"

Fenech Adami says Austin Gatt appeared before parliament declaring that the report will be adopted as policy.

"That report is not a policy," the NAO says... it is "the way forward, developing a policy".

The Auditor General intervenes to point out that "adopted" and "implemented" were different.

11:45 Jason Azzopardi says that in April 2006, Austin Gatt had tabled in parliament fuel recommendations provided by the advisory committee. NAO confirms they read the report.

The NAO official says Enemalta, Chief Financial Officer Antoine Galea, never told them that the recommendations were eventually taken on board as a policy, if that were the case.

"We were never informed that the advisory committee policy should have been treated as the procruement committee's policy," he said.

Azzopardi said the Enemalta official should have been ashamed not to have provided the NAO with this information in 2011.

11:41 Sidenote: parliament staff were kind enough as to provide both committee members and journalists with nuts. We're getting hungry here.

11:35 During 2008, when there was no proper taking of minutes, five contracts were issued all to TOTSA. In 2009, four were awarded to TOTSA, one to BB energy and one to PetrolDeal.

The NAO officials could not confirm that in January 2013, TOTSA and Trafigura were blacklisted by Enemalta and did not delve into information which confirmed that George Farrugia, granted presidential pardon, was TOTSA's local agent.

"Based on media reports, it transpires so. But we did not confirm it as it happened after 2011," the Auditor General said.

11:34 Committee meeting resumes.

11:19 Committee suspended for five minutes while NAO carries out verifications.

11:16 Currently going through the list of contracts awarded by Enemalta [refer to our own Explainer]

11:10 The deputy auditor general says it was "secondary" to the NAO who wrote the scribbled notes. "What was pertinent to us was that their were no proper minutes," Deguara says.

The minutes of every meeting were kept in a sealed envelope, signed and kept in the office safe of the Enemalta Chairman.

The NAO couldn't say who signed the sealed envelopes and it had not asked. The NAO's viewing of the minutes was carried out at the Enemalta offices.

Owen Bonnici said minutes started deteriorating in 2003, as before all minutes would have been typed out and signed. He also said that in December 2003, TOTSA had won a contract without having even carried out a bid.

11:07 Pressed by Luciano Busuttil, the NAO confirmed that it was very difficult to confirm that the choices made by the fuel procurement committee had been the most preferable due to the lack of existent documentation and proof.

11:02 "Outside audit scope" - any questions which follow up on the audit report but which refer to years before 2008 is met with the same reply, irrespective of whether it was a continuation of the same practice for years.

10:54 The past 20 minutes were spent in clarifying a number of points on the information provided by Enemalta to the NAO in 2011. At one point, Fenech Adami says that the list of members of the fuel procurement committee could be found on the DOI website, to which Justyne Caruana retorted that "apparently Enemalta didn't know that".

However, for the first time, both sides of the House agreed it was "unacceptable" that at times Enemalta had procrastinated in providing the requested information to NAO during the compilation of the report during 2011 and 2012.

10:37 Sarcasm and jibes fly high: Fenech Adami confirms that the fuel procurement committee was set up in 1987. "Before we had Dom Mintoff dealing oil for us," the Nationalist MP told Owen Bonnici.

"Thank you for your help Dottore," Bonnici says in his trademark soft voice, bordering on the sarcasm.

10:35 Azzopardi turns the guns on Energy Minister Konrad Mizzi and asks whether it is "good governance" that a minister negotiates gas deals. The Auditor General says "this is not the scope of our audit".

10:27 Beppe Fenech Adami is now suggesting: the fuel procurement advisory committee (in 2005) may have drafted a policy which could "belie" the notion that the fuel procurement committee "operated in a vacuum".

The Nationalist MP insists that the NAO should have also turned to those responsible of Enemalta during that period to confirm it.

Jason Azzopardi and Kristy Debono are also hinting that Enemalta officials may have not passed on the full information to the NAO. The Auditor General says that was simply "an assumption".

10:22 Sounding increasingly irritated, the Auditor General tells Beppe Fenech Adami that "interviewing people from the past could have hindered our analysis".

"Isn't it obvious that they would have defended their position?" the Auditor General said.

"By the same argument don't you think that those who are present today have an interest in not defending their predecessors?" Fenech Adami retorts.

The NAO reiterates that the documentation it had was enough to go with its declaration that there was no policy.

10:16 Beppe Fenech Adami's turn to make questions. He is asking whether a governemnt had the right to "carry out procurement without obstacles".

NAO repeats that in terms of good governance, regulations, written documentation and policies are key.

10:11 Azzopardi is now asking about the fuel procurement advisory committee, chaired by Joe Falzon. He is now asking on what it focused, but because it's outside of the audit scope the NAO official couldn't reply.

Azzopardi says the presence of the advisory committee meant that Enemalta was being guided, and therefore "incorrect to say there was a policy vacuum". But the NAO official says if the committee was to serve as a policy, Enemalta would have said so.

10:07 Jason Azzopardi asks whether there was causality between the lack of minutes and the choices carried out by the fuel procurement committee.

"I cannot answer that question particularly because of the lack of minutes," the Auditor General replied.

10:04 Floor back to the Opposition.

9:58 Owen Bonnici asks whether the auditors felt the need to delve further into how Enemalta procured its fuel when there was no policy before 2008. The NAO officials repeat there was no documentation which confirmed how the committee operated.

Busuttil says this led to a situation were "billions of euro were spent on fuel procurement without a policy".

9:54 The government side continues with its questions based on what is written in the report. Questions being made are pertinent to the audit work carried out by the National Audit Office. However, the Auditor General continues insisting that the questions have to be made to the Corporation.

The reply frustrated the Labour MPs, given that the points they are raising are already written in the report.

Intervening, the deputy auditor general added that, lack of documentation was cause for concern for any auditor.

9:46 At one point the Auditor General said there "could have been an unwritten policy" and continued insisting that the questions had to be made to Enemalta.

Caruana points out that certain committees were regulated but the most important committee, that which purchased fuel, was not regulated. Hadn't been this distinction a cause for concern?

"The lack of policy in itself was already grievous but we didn't stay comparing it to other committees which were regulated," he said.

At one point, Fenech Adami accused Caruana of going on a fishing expedition, to which the Labout MP striked back: "A fishing expedition carried by someone who procures fuel without a policy."

9:39 The fuel procurement committee is not covered by the general procurement rules. According to the NAO, Enemalta is "exempt" from these rules by law.

Bonnici asks who were the persons who drafted the fuel procurement policy, but the NAO said they will check. They also didn't delve into the process which led to the drafting and the revision of the policy which only came into effect in 2011.

"So before January 2011, when there were no general procurement rules and policy, the committee operated in a vacuum. Does this mean thay they could do as they please?" Bonnici said.

"I cannot say how they operated. We said Enemalta operated in a policy vacuum based on the assumption that the corporation passed on all the requested information," Merceica said.

9:29 For those who have joined this blog today, in brief, the PAC is discussing the NAO report on post-2008 fuel procurement. The PAC this morning continued grilling the Auditor General whose stand for the past sessions has been "what is written is written and we have nothing to add".

Labour MP Luciano Busuttil has asked whether the "abysmal level of record-keeping, the hedging strategy and the operations of the fuel procurement committee" have affected Enemalta's performance. According to the NAO official, "in no way are the three related".

The NAO official, Keith Mercieca, also said that the hedging strategy had "no direct" impact on the final price of utilities as passed on to the consumers.

9:27 Despite the detailed explanation by Justyne Caruana on how the report went into the financial situation of the company and its reference to S&P and insisting that the NAO officials must take ownership of what was written in the report, the Auditor General says "ask Enemalta about its financial situation".

9:19 Opposition MP Jason Azzopardi intervenes to ask technical questions about external audits carried out, clarifying information he had.

Owen Bonnici is now making a point that, repeatedly, Enemalta failed to present its financial accounts on time prompting the S&P criticism.

"It's outside the investigative aim of our report," Auditor General's short reply comes.

Justyne Caruana however presses on, noting that the report also delved into the financial situation of Enemalta and how it impacted the performance ability of the state entity.

9:15 Labour MP Justyne Caruana asks the NAO's opinion on the relation between lack of good governance and the delay in Enemalta presenting its financial reports.

"No auditor can say that not presenting a financial report is a good think," deputy auditor general Charles Deguara says.

9:11 Here we go: first question by parliamentary secretary for justice Owen Bonnici. Refers to a Standard & Poor's statement on "weak government corporate practice".

"Obviously S&P obtained its information from Enemalta and the finance ministry. However, we worked parallel with the S&P report while carrying out a performance audit," Mifsud said, confirming they zoomed into the whole system, delving into more detail than the S&P.

Auditor General Anthony Mifsud says there were years when Enemalta financial statements handed in the reports to parliament later than it was meant to.

9:09 Good morning once again from the Public Accounts Committee where we continue with the hearing of the Auditor General. Formalities underway... questions by the government to start soon.

9:00 Meeting expected to start shortly.