Cyprus Mail
Cyprus

CyTA support fund and Greek expansion criticised in auditor’s report

By Angelos Anastasiou

Auditor General Odysseas Michaelides found weak expenditure controls, failing businesses, and lack of transparency at the Cyprus Telecommunications Authority in his 2014 audit report for the semi-state organisation, which was released on Monday.

The key findings of his 63-page report included staff benefits, including contributions to the Support Fund and medical fund and life insurance premiums, to the tune of over €5 million for the year, contributions which should burden employees, and not the organisation.

“Investigation of the Support Fund’s investments in previous years revealed various issues that warrant further investigation – for example, the signing of the purchase of a building for £1 million by the fund’s chairman and secretary without the board’s approval,” Michaelides noted.

Marred by the Dromolaxia scandal – a case of fraud against CyTA employees’ pension savings, which landed several former CyTA officials in prison last year – the pension fund was not run prudently or diligently.

“In terms of the investments made from 2009 to 2013, the fund’s interests were not protected,” Michaelides’ report said.

“The fund was exposed to significant risks and financial damage.”

Against the Audit Service’s prior advice, CyTA’s Greek subsidiary CytaHellas launched new operations in Greece in mid-2014, to disappointing results.

“Despite the fact that our 2013 report noted our opposition to the company’s planned expansion to mobile telephony services without prior consultations with the ministerial committee on denationalisations, the board entered the mobile telephony market in August 2014,” it argued.

“The targets set for 2014 were not met and, as at December 31, 2014, the company had 55.3 per cent of the customers envisioned in its business plan.”

CyTA’s subscription-based TV arm was an especially troubling case, according to the Audit Service’s report. The unit made a spectacular loss, since “total subscription revenues did not even meet the direct cost of securing content.”

“With regard to television rights and sponsorships to sports clubs, there is no transparency as to the way and criteria employed in selecting the teams to sponsor, and no method of evaluating the rights’ commercial viability has been employed,” Michaelides found.

“The authority’s board of directors must exercise stricter control to rein in spending on team sponsorships, and safeguard the authority’s interests.”

Further issues spotted by the Audit Service relating to the telecoms company involved advertising spending, which reached €8.7 million in 2014, of which almost 30 per cent were ads placed in media, and 30.8 per cent in sponsorships.

“Sponsorships are not governed by an adequate policy framework, and there is no mechanism for establishing whether the returns are requisite with the cost incurred,” the report noted.

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