Audit Office threatens to report finance ministry to EU Commission

The Audit Office on Monday said it would report the finance ministry to the EU Commission over the way it handled two contracts related to the Hermes airports concession agreements.

The office stated Cyprus’ attorney-general had “guided and/or subsequently covered up” for the finance ministry, which is accused of clinching agreements with EY and PwC worth over €250,000 without securing the necessary approval from the House finance committee.

The role of the two consulting firms was to help reach a compromise between the Republic and Hermes over the Larnaca and Paphos airports concession agreements, for an extra 5.5 years, with the mooted agreement lasting until November 2036.

Monday’s announcement kicked up the ongoing row a notch which escalated when on Saturday the finance ministry called on the attorney-general to investigate auditor-general Odysseas Michaelides for allegedly leaking false information and disclosing state secrets.

“These accusations are unsubstantiated and ridiculous,” the auditor-general retorted.

The finance ministry states that it had the green light from the attorney-general that the direct contracts with EY and PwC could go ahead. The deal with EY amounted to €80,000 and was struck on November 18, 2021.

A subsequent deal with PwC amounting to €191,238 was signed on July 14, 2022.

According to the Audit Office, however, there was no tender or open competition for either of the contracts. The PwC deal in particular due to its value should have been an EU-wide tender, according to the relevant legislation, it stated.

This did not happen, and the government signed a contract directly with the firms. “We will be filing a report to the European Commission for the illegal direct award of the contracts.”

Considering the attorney-general had agreed to the way the deal was carried out, he could not objectively examine the case, Michaelides said.

He also charged that the deals with EY and PwC were struck before the necessary approval from the House finance committee to release the state funds. The request for the approval for the first contract was submitted on December 1, 2021 with MPs granting it on December 7.

In the second case, despite the deal being clinched on July 14, 2022, the finance ministry requested MPs rubberstamp the funds two months later on September 8, and was never actually approved from the House finance committee.

“In neither of the two cases was the committee informed that the contracts for which fund approval were requested had already been signed.”

The Audit Office said that just because, according to the finance ministry, PwC decided not to ask for payment “does not fix the problem but actually makes it worse”.

The finance ministry’s statement on Saturday rubbished the claims, saying all procedures had been followed.

Responding to the finance ministry’s allegations that Michaelides leaked confidential information during a session at the House finance committee last year, the auditor deemed the accusation “ridiculous” highlighting he was asked by MPs to inform them over what was going on.

“In no way do we accuse the company, its executives or anyone else over corruption. As auditors, we are duty-bound to evaluate the risks so as to take them into consideration when carrying out the audit.”

In this case, the matter concerned a change to a concession agreement which yields €1.5 billion gross in income. This is a colossal amount.”