The government made an “irregular and unwarranted” payment of €1.3 million to Vitals Global Healthcare, an audit has found.
A comprehensive investigation of the hospitals deal by the auditor general discovered that VGH received payments for services it was contractually obliged to provide at its own expense.
The start-up company was handed the running of the St Luke’s, Karin Grech and Gozo hospitals after winning a 2015 tender that increasingly looks to have been the result of corruption.
When VGH formally took over day-to-day management of the hospitals in June 2016, the auditor general says the company was meant to foot the bill for ancillary services like cleaning, security and other subcontracted staff.
Notwithstanding this contractual obligation, the auditor general found the government signed off on a €1.3 million payment to VGH for these same services.
The auditor general says the government “backtracked” on the obligation for VGH to cover the costs for subcontracted staff, as it “conceded” in a side letter to the original contract to pay for ancillary services itself.
“The National Audit Office contends that the payment of €1,305,688 by the government to VGH was irregular and unwarranted, for the health service delivery agreement stipulated that such services were to be provided by the VGH and therefore costs were to be accordingly borne,” the auditor general said.
Former Tourism Minister Konrad Mizzi was identified as the primary government official who consistently conceded more favourable terms to VGH through the signing of such side-letters.
According to the NAO, cabinet authorisation for two such side letters was only sought “weeks” after they had already been signed by Mizzi and VGH.
The two side letters in question extended the date by when financing by VGH was meant to be secured.
In another instance of “grave concern”, the auditor general said an addendum to one of the original contracts which made “crucial amendments” to the dates of certain contractual milestones by VGH was not authorised by cabinet.
The auditor general said the government’s failure to refer important contractual changes to cabinet was a recurring shortcoming identified by the NAO.
“In a consistent manner, the Hon. Konrad Mizzi, in his various capacities as a minister of government, first entered into agreements or commitments with the VGH to extend financial close, then sought cabinet’s approval,” the auditor general said.