EU: Penama Audit Report “Confidential“

An auditors‘ report into a controversial EU-ACP copra oil electricity generation project in Penama providence is considered contractually confidential and won‘t be published, EU officials confirmed to the Daily Post this week.

The project is currently the subject of a Vanuatu Commission of Inquiry after allegations of mis-spending and delays.

Guy Janaway, a European Commission official who focuses on Pacific affairs, told the Daily Post last week that “the audit report is confidential and not made public because it is part of the contractual relation with the beneficiary“. “The European Commission“, he continued, “is now following up the recommendation of the conclusions of the audit.”

Janaway stated that he was responding to the Daily Post‘s questions “on behalf of Mr Renato Mele“, who is the Head of Operations for the EU‘s Delegation for the Pacific.

This is the first time the EU has explained why it chose not to publish the auditor‘s report into the project. The issues associated with the project had attracted significant attention in Vanuatu after first being uncovered by a Daily Post Investigation in late 2016.

The European Commission first announced its view that the auditor‘s report was confidential in a 6th of February 2017 written answer to questions from three Members of the European Parliament about the project, delivered on behalf of the Commission by Commissioner Mimica.

Back then, the Commission claimed it had a “strict approach to fight against corruption“ and “follows sound financial management“ in its undertakings. In the case of the Penama ACP project, the Commission said it had “launched an independent external financial audit of the project in May 2016“, long before the Daily Port report on the subject appeared.

“The audit however did not lead to any evidence of fraud,” the commission said.

But it also said that “some ineligible expenditure was identified, as the grantee did not fully comply with the contractual procurement procedures and as supporting documents were missing”.

It told the European Parliament Members that the audit report could only be made available under the terms of a European regulation called “Annex II“, the “framework agreement on transmission of confidential information between the Commission and the European Parliament”.

Annex II, the Daily Post discovered, is a little-known European regulation that deals, among other things, with the question of when and how classified information, “the unauthorised disclosure of which could harm the essential interests of the Union“, can be shared between different European Officials. But it also deals with an open-ended, vaguely-defined category of “other confidential information“, including “information covered by the obligation of professional secrecy“.

In its answer to the question from the European Parliament Members, the European Commission did not specify how the audit report on the Penama ACP project fell under Annex II‘s definition of confidential information.

Considerable confusion also continues to surround the role of the European Union‘s Anti-Fraud Office, commonly known as OLAF, in regards to the project.

In its 6th of February 2017 answer to the European Parliament Members, the Commission implied that no decision had been taken by the body yet on whether to investigate the allegations in a fraud probe. The Commission’s answer stated that following the late 2016 Daily Post report, the Commission had transmitted a “project dossier“ to OLAF.

The Commission stressed that should OLAF “decide to open an investigation, the final report will detail all its findings and conclusions, including possible recommendations on actions to be taken”.

However, in a signed, official letter dated the 5th of January 2017 – over a month before the European Commission‘s baffling answer, OLAF had already told the Daily Post that it had moved to “dismiss“ the case of investigating the Penama ACP project, following the Daily Post‘s reporting, for a range of reasons.

In some countries, public authorities are obliged by law to investigate any credible allegation of fraud and misconduct when it comes to public works and tenders.

In South Africa, for example, this has been a fundamental requirement since the 2010 Constitutional Court case CCT number: 34/10.

In terms of the EU‘s OLAF agency, the situation is however rather different. Ever since 2013, OLAF has a central “Investigation Selection And Review“ unit, whose explicit duty, according to the rules governing OLAF, it is to select only certain cases for investigation, and dismiss others. The selection criteria are complex, but include criteria such as “added value“, “proportionality“ and “special policy objectives/criteria”.

According to a 2014 legal opinion by OLAF‘s Supervisory Committee, testing for proportionality should for example involve assessing “the forecast of the manpower required and other foreseeable costs, weighted against the likelihood of financial recovery and/or of prosecution, and deterrent value“.

Over 70% of cases submitted to OLAF are dismissed, according to a 2014 sample of cases by OLAF‘s supervisory committee.

InJanuary the agency explained that it “has dismissed the case on the grounds that it would not be proportionate to open an investigation, the opening of an Investigation would not be an efficient use of OLAF investigative resources, the matter would be better dealt with by another authority (here: DG DEVCO) and that, there would be no added value to open an investigation.”

OLAF reiterated the same position in an almost identical letter on the 28th of January 2017. Later on, OLAF‘s Press Office even told the Daily Post that one of the reason‘s for the dismissal of the case was that a procedure for the recovery lost of funds was already ready underway by a different EU agency, the European Commission‘s DG DEVCO. OLAF‘s Press Office Stated “In this case, as a procedure from the Commission’s Directorate-General for International Cooperation and Development (DG DEVCO) for a recovery was already underway, it was decided that OLAF’s involvement would not bring added value…“

In June 2016, an EU spokesperson who insisted that their comments “cannot be quoted in my name“ gave the Daily Post a different chronology of events. Back then, the EU Spokesperson told the Daily Post, “Since there had been allegations of misconduct, Commission services further examined the dossier and transmitted it in October 2016 to the European Anti-Fraud Office (OLAF) which decided in April 2017 for OLAF to dismiss the case.”

The anonymous EU Spokesperson’s June 2017 wider explanations of the audit and the project however closely mirrored those given in the European Commission’s answer to the European Parliament Members in February 2017.

“In May 2016”, the spokesperson explained “in line with our normal procedures, the development department of the European Commission (DG DEVCO) launched a financial audit on an EU-ACP energy project in rural Penama Province, focussing on electricity generation with bio-fuel from coconuts.“

The spokesperson noted that the audit had detected “no fraud” but had discovered that “a substantial amount of the money had been spent outside the terms of the contract – so-called ineligible expenditures”.

The spokesperson noted that the findings of the audit were being followed up on and had been communicated to the Government of Vanuatu, but also stated “audit report is confidential and cannot be made public“.

Last week, EU official Guy Janaway did not respond directly to Daily Post questions about the discrepancies regarding the timing of OLAF’s decision to dismiss the Penama ACP project case. He merely stated “for questions related to the European Anti-Fraud Office (OLAF), you may wish to contact them directly”.

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