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Benefits from film incentive scheme not proportional to payout, audit office says 

Photo: CNA
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The audit service has recommended reviewing certain key provisions of the film industry promotion scheme and ensuring all checks were carried out before payments were made to ensure production company compliance.

According to a report published on Friday, the service said the evaluation committee and the finance ministry had not enforced key provisions of the scheme when assessing applications, which could have been rejected otherwise.

The committee and the ministry neither confirmed the eligibility of certain expenses for which the company that produced Jiu Jitsu had requested a rebate.

Nor was it ensured that the expenses were commercially sound, the report said.

According to the report, 82 per cent of expenses, or €17.9m, for which rebates had been requested, concerned payments to producers and their companies. Of that, 79 per cent ends up outside Cyprus or the EU, it added.

“We also found substantive weaknesses as regards provisions of the scheme, which could be exploited by producers, resulting in substantially higher spending for the republic,” the report said. “In addition, in 2020, amendments were made to the scheme that serve the applicants, without asking the opinion of the Legal Service.”

The service said it had examined the scheme’s provisions following a report.

After that, and taking into account the seriousness of the findings, it extended its audit to two other productions approved in 2019, worth €0.9m and €37.2m respectively.

The audit found key weaknesses and shortfalls both as regards the scheme’s provisions and their implementation by officials.

The scheme that was in force until February 4, 2020, included different provisions from the one approved by the cabinet.

The audit service said the application of different provisions were not covered by the required cabinet approval and despite the evaluation committee informing the ministry of the weaknesses, the latter “ignored the risks.”

One of the risks was the ability of producers to present the state’s certificate of provisional approval of expenditure coverage to a bank as collateral to secure funding for the production in question.

“Finance ministry technocrats noted that this entailed serious dangers for the state,” the report said.

It also added that the scheme may not be compatible with EU law.

The audit service also found that one producer had a direct line to the finance minister, the scheme placed no restrictions on the participation of a foreign company in the production and no restrictions on the amount of money that ends up out of the country and the EU.

Most of the expenses incurred for the two productions that were completed ended up outside Cyprus and the EU, the report said.

“The benefit of the scheme for the Republic is not proportional to the funding footed by the state.”

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