War of words over EU report findings

The Audit service and the Attorney General engaged in a war of words on Monday after the latter accused the former of lying about a European Commission communique that sided with Auditor-general Oydsseas Michaelides on the finance ministry’s decision, which awarded no-bid contracts connected to the Hermes airport concession agreement.

Although the EU failed to say that the action by the finance ministry was unlawful, they did say: “A direct award to a preselected economic operator remains the exception, applicable if only one undertaking is able to deliver within the technical and time constraints imposed by extreme urgency.”

Michaelides in his post claimed that in 2021 the then finance minister said he needed to have consultants hired on a matter that had been unresolved for months, which did not make the matter urgent in the case of the contracts.

Meanwhile, earlier Attorney-general George Savvides effectively accused the audit office of lying over the contents of a European Commission communique, which allegedly found the finance ministry had acted unlawfully when awarding no-bid contracts connected to the Hermes airport concession agreement.

Savvides said the audit office was carrying out an “inappropriate and deliberately orchestrated effort against the legal service, staffers and its leader, by manipulating, misrepresenting and misdirecting the public from objective and correct information.”

The version of events from the audit service was that the European Commission found that the finance ministry acted unlawfully when it decided to award consultancy contracts to Ernst & Young and PwC relating to the Hermes airport concession agreement.

Brussels sent a communique to the audit office, concerning a report filed by the latter two months ago, where it reported the finance ministry’s decision to clinch agreements with EY and PwC worth over €250,000 without securing the necessary funds approval from the House finance committee.

The audit office also alleged the attorney-general had “guided and/or subsequently covered up” for the finance ministry. This was because the attorney-general ruled the finance ministry was within its rights in the way it assigned the contracts.

In its statement, the audit office said the European Commission determined the finance ministry had acted unlawfully in the way it assigned the contracts and the attorney-general was mistaken to find it lawful.

“These events highlight the need to immediately promote suitable constitutional and other reforms so that there is a separation of the powers of the legal advisor of the state from those of the public prosecutor,” the audit office stressed.

“In many cases, the attorney-general demanded that we subordinate our independent audit opinion to his opinions as if we were a branch of the legal service, a position we have categorically rejected, explaining that, according to international auditing standards, the auditor is always responsible for his audit opinion, even if it is based on the opinion of experts such as legal advisors.”

This was an example where if the audit office had adopted the view of the attorney-general, “we would have expressed a mistaken audit opinion which would have harmed the integrity of our institution.”

Savvides countered this version of events, arguing that in fact the European Commission never said the AG was mistaken.

He also charged the audit office was “unacceptably misleading” the contents of the communique from the European Commission. He stated that nowhere in the letter did the Commission say – or even suggest – that the finance ministry decision was unlawful.

“The audit office statement misrepresents the European Commission’s response, withholds information and distorts the facts to the detriment of public information.”

Savvides suggested the whole debacle highlighted the auditor-general’s “unacceptable deviation from his role and once again, without reason, reported our country to European institutions.”

In September of 2022, Michaelides revealed to MPs that the finance ministry had signed the two consultancy contracts during a ‘dead’ parliamentary period, and at a time when no funds for this expenditure had been approved by the House.

Opposition MPs called the government action illegal. Moreover, the auditor-general said they amounted to no-bid contracts, in violation of public procurement rules.

Then in January of this year, the finance ministry said it had got the green light from the attorney-general that direct contracts with EY and PwC could go ahead. The deal with EY amounted to €95,000 and was struck on November 18, 2021.

A subsequent deal with PwC amounting to €191,000 was signed on July 14, 2022. The finance ministry meanwhile had called on the attorney-general to investigate the auditor-general for allegedly leaking false information and disclosing state secrets.

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.

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.

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