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Our View: Private sector can help clean up public audit mess

Auditor-general Odysseas Michaelides will be asking the private sector to sort out the finances of 500 public entities

ACCOUNTING firms will be invited to submit tenders for the audit of some 500 public entities, the Auditor-General Odysseas Michaelides has said. Among these entities are municipalities, community councils, sewerage boards, government water projects, school commissions and funds, which had not submitted accounts for years. Some entities have not been audited for 30 years, it was revealed, while most have not been audited for between five and eight years.

The House finance committee was told that the work had accumulated for a variety of reasons. The state auditing service was short-staffed but had not scheduled audits by private sector firms, while many public entities had not submitted accounts for years. For instance, the audit of the water project at Coral Bay in Peyia has been pending since 1984 and one at Meneou-Pervolia since 1995. Sewerage boards have been audited this century but several of them not since 2007.

All this sounds like a bad joke, but it is an illustration of a malfunctioning state administration. Leaving aside the Coral Bay water project, why had all these public bodies failed to submit accounts to the state for six, seven or eight years? Had nobody from the Auditor-General’s office chased up these bodies to demand that they filed accounts? And if the office was short-staffed and could not take on a bigger workload, why had its head not demanded the hiring of private accounting firms a few years ago?

Many of these bodies handle public money and have been left to operate without any supervision from the state for years. Is this not encouragement for irregularities and possibly corrupt practices? People would be more inclined to engage in illegalities or violations of procedures when they sense there is no control from anywhere. And it is easier for them to cover their tracks when the audit takes place once every five to ten years.

Private firms carrying out audits next year will have great difficulty doing their job properly if they have to search for paperwork and bills from ten years ago. Considering the Auditor-General’s annual report records many hundreds of irregularities in a single year at state organisations that are run more competently than sewerage boards and community councils, it would be fascinating to know what accounting firms would find when they complete audits that cover a decade or more.

There is positive side to this. The problem has forced the state to seek the help of the private sector for audits. Accounting firms are not only more efficient than state services they also employ much better-trained staff that are much more likely to identify irregularities. And they will have no reason to cover anything up as the firm will be obliged to sign off on the accounts. Perhaps this would start a trend of the state using the services of the private sector more frequently.

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