By Angelos Anastasiou
FINANCIAL auditing of local authorities will be delegated by the Audit Service to private firms in an effort to work through years of backlogs, Auditor General Odysseas Michaelides told the House Finance committee on Wednesday.
“Assigning services to the private sector is imperative,” Michaelides told lawmakers during discussion of his service’s budget by the committee.
He said auditing local councils’ books, which is the single biggest problem faced by the Audit Service, will be the first step in this process, for which it has already prepared the documentation necessary for the tenders process – slated to be invited in November.
According to Michaelides, of a total 350 local communities, the accounts of 250 have gone unaudited for years due to understaffing at the Audit Service.
“In some cases, audits haven’t been performed for eight years,” MPs heard.
The Auditor General noted that audits by private firms will incur no additional cost to the government as the auditees will bear the cost.
At this point the committee’s chairman Fidias Sarikas objected, arguing that communities could hardly afford auditing fees on their shoestring budgets.
But, Michaelides pointed out that auditees already pay for audits performed by the Audit Service, and added that communities have already paid to have their accounts prepared.
He explained that each annual audit costs approximately €800, so in the worst-case scenario audits for eight years would cost roughly €6,500.
He did acknowledge problems with financial auditing of local councils, and spoke of departing council heads taking the books with them, which constitutes a criminal offence.
“Some cases have been passed to Legal Services, but some leaders maintain that burglars stole the books from local council offices,” said Michaelides.
In addition to auditing local authorities, the Audit Service plans to delegate the auditing of any organisation that is not part of central government.
“For large organisations, the Audit Service will retain administrative auditing and delegate financial auditing to the private sector,” Michaelides said.
Further private-sector involvement will include the commissioning of services for the auditing of the Audit Service itself, Michaelides explained.
With regard to the thorny issue of auditing the Central Bank of Cyprus, the Auditor General said that his service does audit the CBC, but only to some extent.
“The European Central Bank forbids any auditing on issues relating to the Eurosystem,” he said.
“We stress the need to audit the CBC – we have some interesting findings concerning it,” he added.
But he acknowledged that, while the issue of auditing central banks is being raised by several national auditing authorities throughout Europe, all efforts stop at the ECB’s refusal.
“This may change, in light of the assumption of the monitoring of Eurozone banks by the ECB’s single supervisory mechanism,” Michaelides said.
The Auditor General said his annual report for 2013 is due to be issued in mid-November.
With regard to the issue of organisations’ compliance with his remarks and recommendations, Michaelides said he will notify the House of any differences between the Audit Service and an organisation.
He also noted that the government’s “fiscal responsibility” bill includes a clause mandating state organisations to submit compliance reports along with their annual budgets.
The Audit Service’s 2015 budget includes expenditure of €5.5m, 3.5 per cent down from last year’s €5.7m.
The budget includes €15,000 for the installation of closed-circuit TV at the service’s offices, per the recommendation of the National Security Committee.