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Cyprus

Auditor’s report: CyTA’s loss making subsidiary, EAC’s tardy arrears collection

Semi-governmental organisations (SGOs), funded by the taxpayer, can do a lot more to trim costs, including by rationalising their benefits payouts to employees, Auditor-general Odysseas Michaelides has noted.

Michaelides made the remarks in his reports on the SGOs for the year 2015, which his office submitted on Wednesday.

On the state-run telecoms CyTA, Michaelides notes that employee benefits – including grants, group life insurance and healthcare – came to €5.28 million last year.

In his CyTA report, the auditor-general recommends that the cost be borne by the employees and not the organisation.

CyTA Hellas, the organisation’s wholly-owned subsidiary in Greece, continues to bleed. It has failed to achieve its profit targets or to financially wean itself off the parent company, the auditor-general finds.

CyTA Hellas’ financial results for 2015 were in the red, as a result of which losses were accumulating.

The company’s pre-tax loss amounted to €2.7 million, compared to €15.2 million in 2014.

The 2015 loss appears lower because during the same year the parent company generated €15.8 million from the sale of property.

At the end of 2015, CyTA Hellas posted a negative working capital – its current liabilities exceed its current assets – of €50.1 million, indicating it is unable to meet its obligations without financial support from the parent company.

To date, CyTA has funnelled some €200 million into its subsidiary.

Michaelides further criticised CyTA Hellas’s decision to enter into the mobile telephony market as a mobile virtual network operator in August 2014, without first consulting the relevant ministerial committee or the cabinet.

The company additionally missed its customer-base targets for 2014 and 2015. At end-2015, its customers accounted only for 51.8 per cent of the target set out in the business plan.

According to CyTA Hellas’ management, the objective for 2015 was to slash staff by 10 per cent and salaries by 5 per cent. The target was not met, as despite a reduction in staff the payroll was virtually unchanged – €16.1 million in 2015, compared to €16.5 million in 2014.

On the Electricity Authority of Cyprus (EAC), the auditor-general recommends it improve its collection performance.

At the end of December 2015, the total amount owed to the EAC relating to electricity consumption came to €92.6 million, of which €40.5 million concerned bills in arrears. Of this €40.5 million, €17.5 million was in arrears for over a year.

Where the arrears concern companies that are deemed high-risk, Michaelides recommends stronger measures, for example the EAC demanding a bank guarantee.

Regarding the special electricity tariffs for large and disadvantaged families, the official suggests that such social policies be implemented by the government, rather than by the EAC.

EAC benefits to employees in 2015 came to €10.5 million. Likewise as for CyTA, the auditor-general says these should be borne by the employees and pensioners and not by the organisation.

The EAC registered a pre-tax profit of €70.3 million, up from €48.5 million in 2014.



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