1. Following today's publication of the newspaper "Phileleftheros" regarding a new request by the Director General of the Ministry of Finance to the Parliament for the release of €191.238 to secure consultancy services for the valuation of the value of a possible extension of the Hermes Agreement and for the valuation of the company's receivables, a request that was rejected by the Parliament when it was submitted in September 2022, the Audit Service notes the following:
(a) In a statement on 23.1.2023 we stated that on 2.1.2023 we informed the Attorney General of the possibility of committing criminal or civil offences in connection with the conclusion by the Ministry of Finance of two contracts with financial consultants, one in November 2021 worth €95.200 and one in July 2022 worth €191,238, without the existence of available appropriations and by direct award, without an open tender, in violation of the relevant public procurement legislation. The relevant decisions were taken by the former Minister of Finance and the Director General of the Ministry.
(b) The Attorney General, exercising his constitutionally unchecked powers as public prosecutor, decided that the alleged obligation to obtain Parliamentary approval only applies at the time when a payment is made under a contract, and not even before the contract is signed, overturning a well-established practice in the Public Service over many years, which is derived from legislation and relevant circulars, even signed by the Director-General of the Ministry of Finance himself, who violated them. It also decided that the direct award to the two consultancy firms was allegedly legal, when this award was in flagrant breach of the relevant European Directive, as the European Commission itself later explained at our request.
[C] The consultancy services provided under the two contracts related to the agreement that the Government was launching to extend the Hermes Agreement by 5.5 years. This amendment concerns a direct award of work with gross revenues of €1.5 billion. The size is colossal.
(d) The 2006 Concession Agreement provides that if Hermes is demonstrably unable to find financiers for the Phase 2 projects, then the parties may consider various options such as extending the Agreement, financing some or all of the needs from the Republic itself, or providing a guarantee on its behalf to the lenders, etc. If they do not find them, then the Republic can release Hermes from the obligation to construct Phase 2 and receive the difference as an additional concession fee, or terminate the Agreement. The additional concession fee is calculated so that Hermes does not benefit from not building Phase 2 (the 'no better no worse position' principle).
(e) On the basis of letters from banks provided in the summer of 2021, when passenger traffic was minimal due to a pandemic, and on the basis of passenger traffic forecasts made at the end of 2021, the Ministry of Finance unauthorisedly conducted negotiations and reached a preliminary agreement on the 5.5-year extension. It is noted that the contracting authority is the Ministry of Transport, Communications and Works and a special management committee has been established for the project under the relevant Regulations, and they are the only ones who can lawfully handle Concession Agreement matters.
(f) Our Department has from the outset described the proposed agreement to extend the Concession Agreement by 5.5 years as scandalous and illegal. The 2022 ridership data, as well as the first quarter 2023 ridership data, confirms the scandalous nature of the agreement. A relevant graph follows.
(g) Our Department believes that in order to conclude a deal with Hermes, the company should update its contacts with potential Phase 2 financiers, now that the 2022 (and now 2023) ridership data is available. This should then be assessed by financial consultants hired by the Department for Transport Communications and Works. At the same time, the legal advisors should evaluate Hermes' claims and only those that have a basis should be further evaluated by financial advisors from the Ministry of Transport, Communications and Works. These positions had been submitted in writing to the relevant Parliamentary Finance and Budget Committee since September 2022.
(h) Accordingly, our Office agrees with the need to secure services from financial advisers as explained in paragraph (g) above and assuming that an open tender will be issued by the relevant Department of Transport Communications and Works to secure the services. Any extension of the Concession Agreement should be decided on the basis of the provisions of the Concession Agreement as explained in paragraph (d) above, should be the last of the options offered and in no case can it be of such a long duration as scandalously initiated by the Ministry of Finance
2. After being informed of the letter from the Director General of the Treasury to Parliament dated. 20.4.2023, which he improperly described as urgent, the Auditor General contacted the Minister of Finance, who fully agreed that an open tender would be issued by the Ministry of Transport Communications and Works and not by the Ministry of Finance to secure the consultancy services for the requested release of funds, on the basis of new terms of reference to be prepared, and that the requested release in no way relates to or can be used for the PwC agreement signed by the Director General of the Treasury in July 2022.
3. In view of the above, the Auditor General has today briefed the Chair of the Parliamentary Finance and Budget Committee with a request that this notice be circulated to members of the Committee and that the matters set out in paragraph 2 be made by the Committee as a condition on release.
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OP/AN
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