NAO slams €12 million MGA offices deal overseen by Joseph Cuschieri

A €12 million office lease and refurbishment project overseen by former Malta Gaming Authority (MGA) Executive Chairman Joseph Cuschieri has come under fresh criticism from the National Audit Office (NAO), raising new questions over Robert Abela’s government’s decision to return the disgraced regulator to a senior public post responsible for managing hundreds of millions of euro in taxpayer-funded projects.

The Auditor General’s latest report on the government’s leasing of private property has identified serious shortcomings in the MGA’s decision to lease offices at SmartCity and spend €4.3 million on their fit-out, concluding that the arrangement suffered from governance failures, weak financial planning, and poor procurement practices.

The project dates to 2014, when Cuschieri headed the MGA and was responsible for the regulator’s administration. It was under his leadership that the Authority entered into a 15-year lease for offices at SmartCity and embarked on a luxurious multi-million-euro refurbishment of premises it did not own.

Although the expenditure itself was first revealed in 2017, the NAO has now delivered its first comprehensive official assessment of the deal, identifying a series of deficiencies in how millions of euro in public funds were committed.

According to the audit, the MGA entered into a lease worth more than €8 million in rent and service charges over its lifetime before spending a further €4.3 million transforming shell premises into its headquarters, effectively increasing the overall cost of the arrangement to more than €12 million.

The fit-out included mechanical and electrical installations, partitioning, plastering, tiling, ICT infrastructure, office equipment, lighting, furniture and soft furnishings.

Despite the scale of the investment, the Auditor General found that while the lease agreement stated that the MGA would pay for the refurbishment works, it never specified how much those works would cost.

“The contract did not specify the total costs involved,” the NAO noted, warning that the omission raised “transparency concerns and financial management issues”.

The report is equally critical of how the refurbishment was procured.

Instead of issuing a public tender through the Department of Contracts, the works were organised through a closed invitation – direct order – managed by SmartCity Malta itself, with only a selected specific contractors invited to submit bids.

Although the procurement pre-dated current public procurement regulations, the Auditor General concluded that involving the Department of Contracts “may have been beneficial and enhanced good governance”, particularly considering the value of the project.

The audit also revealed that one of the principal refurbishment contracts escalated significantly during implementation.

Following a series of change requests, the contract increased by 61%, rising by almost €1.35 million to exceed €3.5 million. The increases were attributed mainly to changes in office design and an expansion of the leased space after the original agreement had already been signed.

While the MGA defended the expenditure by arguing that the offices had been finished to a high standard and would require little maintenance, the Auditor General concluded that the substantial capital investment significantly undermined the value for money of the lease.

Although the rental rates themselves broadly reflected prevailing market conditions, the NAO found that once the €4.3 million fit-out costs and inflated parking charges were taken into account, the overall arrangement exceeded the upper end of market prices by an estimated €1.5 million over the life of the lease.

The Auditor General also questioned the wisdom of investing millions of euro in improving a building that remains privately owned, noting that the refurbishment costs were being amortised over a maximum lease period of only 15 years.

The MGA has since indicated that it is considering extending the lease in an attempt to spread the investment over a longer period.

The audit further noted shortcomings in the documentation retained for aspects of the procurement process, while the identities of the contractors who ultimately benefited from the €4.3 million refurbishment remain undisclosed.

The latest findings add another chapter to the controversial, politically-fuelled career of Joseph Cuschieri.

After leaving the MGA, Cuschieri – part of disgraced former prime minister Joseph Muscat’s coterie – was appointed chief executive of the Malta Financial Services Authority before resigning in 2021 following revelations that he had accepted a luxury trip to Las Vegas with Yorgen Fenech, who has since been charged with complicity in the assassination of Daphne Caruana Galizia.

His tenure at the financial regulator was also marked by repeated scandals over governance failures and shortcomings in Malta’s financial supervision.

Despite that record, Cuschieri was brought back into public administration by Environment and Energy Minister Miriam Dalli, who appointed him chief executive of Project Green, the government agency entrusted with delivering and managing hundreds of millions of euro in environmental and urban regeneration projects.