The failure of the housing finance agency to implement a new banking information system represents a serious strategic breakdown, auditor-general Andreas Papaconstantinou said on Tuesday.

He warned that prolonged delays, weak oversight and unlawful decisions have entrenched dependence on external providers, imposed heavy costs on the public purse and have left the organisation technologically exposed.

In a special audit report, Papaconstantinou admitted that the project, for completion by January 2021, had still not been delivered five years later, despite costing the public millions.

The contract, worth €10.2 million, was signed in January 2019 for the supply and installation of a new banking information system, with two years allocated for delivery and a further nine years for operation and maintenance.

The goal was to end the organisation’s dependence on the national asset management company, Kedipes, which to date has not been achieved.

According to the audit service, problems with a subcontractor, combined with serious administrative gaps at the housing finance agency, derailed the project early on.

Papaconstantinou inferred that the situation was worsened by the incomplete formation of the board of directors and the failure to appoint a general director.

“These weaknesses had a decisive impact on the timely adoption of corrective decisions,” he said.

Attempts to replace the subcontractor also failed, as a notice of termination was sent to the contractor in October 2023, almost three years after the original deadline, but the contract was never terminated.

Instead, in December 2024, the agency approved an amendment that fundamentally changed the contract’s scope.

“Instead of implementing a new information system, the contract was essentially limited to the use of equipment and peripheral systems,” Papaconstantinou lamented.

“In our view, this choice was not lawful.”

The audit found the amendment violated public procurement law, as it substantially altered the subject matter of the contract.

It also said required approvals for extensions and changes were either delayed or obtained after the fact, in breach of existing rules.

Between 2021 and 2025, the failure to deliver the new system forced the organisation to continue relying on Kedipes and to upgrade its old software, at an additional cost of at least €3.55 million.

Administrative costs and wider consequences were not included in that figure.

By December 2023, payments to Kedipes for IT infrastructure had already reached about €5.19 million.

An extension of the agreement added a further €1.94 million for 2024 and 2025.

Another extension, approved in December 2025, will cost €1.23 million to cover 2026, after the agency admitted it had still failed to achieve technological independence.

The decision not to terminate the original contract also carried a direct loss.

Papaconstantinou said it deprived the organisation of the right to seize a performance guarantee worth €452,350.

Beyond the balance sheet, the audit highlighted the impact on customers.

Without a modern system, the housing finance agency has been unable to offer basic banking services.

Credit cards, electronic banking and ATMs remain unavailable.

“These weaknesses are substantial,” the audit service concluded, “given that the institution operates in a highly competitive environment.”

Papaconstantinou remarked that the agency is meant to function as “a modern, healthy and competitive bank, capable of effectively supporting housing policy and the economy” yet warned that its current state falls far short of that aim.

The report has been sent to the central bank governor, along with a separate letter outlining additional concerns.