EPFL’s ME construction project – results of the enquiries, and recommendations
Berne/Zurich, 28.04.2016 - As the EPFL announced in March 2015, one of its construction projects had incurred a cost overrun of approx. 24m CHF. In order to establish the reasons for this and thus avoid such cases in the future, the ETH Board and EPFL immediately commissioned external enquiries. The ETH Board has now published the relevant reports. Meanwhile, EPFL has already taken in hand recommendations made by the enquiry reports. Thus it has decided to create the post of a CFO and to improve internal communication in the field of real estate management.
The Ecole polytechnique fédérale de Lausanne (EPFL) had informed the President of the ETH Board in March 2015 that the conversion of the “Halles de mécanique” (ME Building) on the EPFL Campus in Ecublens had caused additional costs. The ETH Board was told at its meeting of May 2015 that with an overall budget of 66.25m CHF, additional costs had been incurred in the amount of 23.76m CHF, which were absorbed by the EPFL’s current budget (16.8m CHF) and third-party funds (7.0m CHF). According to EPFL’s press release of June 2015, no additional federal funds had been required. The ME Building has been completed by now and will be inaugurated in May 2016.
According to information provided by EPFL, the designated utilisation of the building had to be adapted during the construction stage in order to incorporate the new opportunities offered through the construction of the Biotech Campus in Geneva. Owing to the changes in the utilisation purpose, overall costs could be decreased significantly since no additional buildings had to be erected. In addition, teaching premises could be made available, particularly for practical student work, which resulted in a considerable gain in time and took into account the current reforms in the field of education.
Analysis and investigation reports
Immediately after learning about the cost overrun from EPFL in March 2015, the ETH Board instructed its Internal Audit to subject the circumstances to a thorough examination in cooperation with a specialised firm (first report). In its report of April 2015, the firm noted that the extra costs had been apparent ever since spring 2013 and that the ETH Board should already have been notified of them at that point in time. On the basis of these insights, the ETH Board instructed EPFL to initiate an internal administrative enquiry. This enquiry was conducted by an external, independent auditing company.
The second report confirms that the cost overrun in connection with the ME Building was understandable, as had been demonstrated by the first examination carried out in April 2015. The second report also states that the main cause of the increased construction costs was the adaptation of the designated utilisation of the building. The report also lists the various mechanisms which resulted in the delayed notification of the cost overrun. Although the initial indication had already been apparent in spring 2013, the project leaders were firmly resolved to get the extra costs under control. The change in the vice-presidency responsible for resources and infrastructure in 2013, as well as the fact that two accounting systems are used in the field of real estate, also made budget consolidation more difficult. Finally, the vice-presidency responsible for real estate management and reporting already informed the EPFL Management about the additional costs in October 2014. The vice-presidency wanted to analyse the situation in more detail. Subsequently, it took a few months for the vice-presidency to be able to obtain a complete overview of the cost overrun, to document it and then to inform the ETH Board about it.
Furthermore, the second report discovered deficiencies in the external report in respect of contents and validation. Added to this, there were some liabilities and payments for 2013 and 2014 in connection with the construction project which had been falsely reported; this had been the result of the fact that certain costs in the ME construction project had wrongly been settled through an internal fund of EPFL rather than through the investment credit line. Both this wrong information and the belated notification are not acceptable, which is why measures will have to be taken to avoid such a case in the future. EPFL has already taken various measures in this respect.
Responsibilities under service regulations
The first two reports do not comment on any possible responsibilities of the persons involved at EPFL under personnel law and service regulations. In late 2015, the ETH Board’s Audit Committee therefore commissioned a third firm to clarify these issues. The report of January 2016 comes to the conclusion that on the strength of the falsely reported liabilities and payments, it may be assumed that all the objective criteria of forgery of documents (false certification) by a public official are satisfied (Art. 317 Swiss Criminal Code). A second opinion obtained by the President of the ETH Board from a lawyer supports this assessment. The ETH Board notified the Federal Department of Economic Affairs, Education and research (EAER) and the Swiss Federal Audit Office (SFAO) of this and decided to refrain from a preliminary disciplinary investigation and to focus further proceedings on administrative measures. The ETH Board, the EAER and the SFAO have come to the conclusion that a criminal proceeding would be neither expedient nor appropriate. Instead, they are banking on a sustainable improvement of the financial processes and the reporting culture with regard to real estate. This is intended to close existing gaps and to raise these processes, too, to a level that is equivalent to the excellence of research and teaching at EPFL.
EPFL improves processes in real estate management
Once the problems had been recognised, EPFL immediately initiated certain measures to remedy the deficiencies. The second report makes two recommendations, which EPFL is committed to implementing. The first concerns the creation of the post of a CFO, who will assume overall responsibility for financial matters. The second concerns the improvement of internal communication in real estate management. The ETH Board set up a working group from among its own members in March 2016; they have already started their work. In cooperation with EPFL, and complementary to the activities already undertaken within EPFL, the working group will submit proposals for measures to improve the management of real estate projects. EPFL will report on initial results at the next meeting of the ETH Board in late May 2016.
For reasons of transparency, the ETH Board, the EAER and the SFAO have meanwhile jointly decided to publish all the reports about the enquiries regarding the cost overrun in EPFL’s ME construction project on the website of the ETH Board.
The reports are available as a download from www.ethboard.ch > Media > Media releases.
Address for enquiries
Christoph Leuenberger
Head of Communication of the ETH Board ad interim
CH-8092 Zürich
christoph.leuenberger@ethrat.ch
+41 44 632 75 77
Publisher
Board of the Swiss Federal Institutes of Technology
https://www.ethrat.ch/en
