Lawsuits by contractors to the state, overpayments to public passenger transport companies, overcharges to drivers due to miscalculations during the late renewal of traffic fees, are some of the findings of the report of the Audit Service for the Ministry. of Transport, Communications and Works and the Department of Road Transport.
The control of the Audit Service concerned a sample of payments by the Administration of the Ministry. of Transport, Communications and Works (YMEE) and the Department of Road Transport (TOM), regarding the contracts of public passenger transport by buses, for the years 2022 and 2023, and for the receipts of the TOM.
In particular, five contractors of public passenger transport contracts have filed lawsuits against the state, claiming amounts of more than €59 million, for financial disputes in the period 2010-2020. EY speaks of financial risks for the state, since, despite the fact that a significant period of time has passed since the expiration of the 2010-2020 contracts, the TOM is still unable to quantify its total debt to the Contractors.
Furthermore, according to the EY report, until the date of completion of the audit (November 2024) the YMEE and the TOM had not yet implemented the mechanisms for monitoring the performance indicators provided for in the contracts. As a result, EY reports, the achievement of the objectives of providing quality public passenger transport is not monitored by the Contracting Authority, and there is a risk of loss of revenue for the state from the non-imposition of financial sanctions on the Contractors, in case of non-compliance with the performance indicators.
Furthermore, it is noted that the YMEE and the TOM imposed late or did not impose at all the penalties provided by the contracts for the late submission of data by the Contractors, as provided for in the contracts, resulting in the loss of revenue and, possibly, creating impressions of a biased attitude in favor of or against certain Contractors.
From the sample audit, errors were also found in parameters for calculating the amount of monthly state compensations paid to Contractors, leading to overpayments. Although the amounts of overpayments are not considered essential in relation to the total amount of the contracts, however, what is mainly highlighted is the impossibility of accurately calculating the amounts due. For example, for 2022 overpayments of €67,951 were detected in a sample of €22,444,204 payments out of €72,723,845 of the total payments, while in 2023 overpayments of €35,175 were detected in a sample of €10,124,351 out of a total of €79,230,892.
Until the date of completion of the audit, the calculation, by the TOM, of the actual amount that should be recovered from future payments in relation to the above errors was pending.
In addition, according to EY, the same person who carried out the calculations of the payments, at the same time participated in the committee which carried out checks on the calculations in question and made recommendations to the management regarding the payments to the Contractors of the contracts. "This resulted in an increased risk of undetected errors or omissions, as no separation of roles was implemented to ensure effective control of the correctness of payments," the report underlines.
In addition, EY underlines that the use of Excel for calculations of the amount of payments provides flexibility, but involves a high operational risk, which may lead to errors of overpayments or underpayments to Contractors.
Finally, with regard to the Tellyria contract, according to EY, there is no provision for imposing relevant sanctions on the Contractor for any delay in submitting required documents to the Contracting Authority. It is also noted that the specific Contractor did not submit financial statements and was late in submitting critical documents to the Contracting Authority, which was unable to impose any penalty to ensure their submission based on the terms of the contract.
Control of receipts of the TOM
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With regard to the control of the collections of the TOM, the audit highlighted weaknesses in the implementation of procedures and the operation of internal channels in relation to the collection in the District Offices (EG) of the TOM, as several of the relevant directives of the General Accounts Office are not followed or are followed only partially. EY underlines that the weaknesses listed in the report are gaps in the internal control system that cast doubt on the completeness, correctness and legality of the TOM's collections incorporated in the Republic's financial statements.
It was also found that the calculation of the charge by the IT system of TOM (TOMIS) for late payment of traffic fees is incorrect, as a result of which vehicle owners are overcharged. In particular, in all cases of late payment, the charge is calculated as a percentage of the annual fee, even in cases of renewal of the marketing authorization for a shorter period (e.g. three or six months). In EY's opinion, the relevant Law is clear and provides for the calculation as a percentage of the end of the period to which the late renewal relates.
Also, it is noted that the accounting department of TOM makes, on a monthly basis, efforts to reconcile the revenues as presented in the Integrated Administrative and Financial Information System (FIMAS), with the corresponding amounts presented in TOMIS. "Despite these efforts, the reconciliation process is not completed and at the end of the year there are still differences between the two systems in total collections, calling into question the correctness of the collections presented in the financial statements of the Republic of Cyprus", reports the Audit Office.
Audit Service Recommendations
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In order to address the above findings, EY proposes to use the latest published indicators from the Cyprus Statistical Service for the calculation of the state compensation to the Concessionaires. The indicators must correspond to the last day of the period covered by the payment certificate. Before any payment affected by the inflation adjustment, confirm the indicators from the official website of the Statistical Service. The aim is to avoid errors due to delayed or imperceptible changes in indicators.
Notes that the final amount of compensation, as derived from the correct published statistical index, must be compared with the actual amount of compensation paid to the Concessionaires and any difference of overpayment or underpayment settled as soon as possible.
Furthermore, in addition to the imposition of sanctions on the Concessionaires for specific violations of the terms of the contracts, the contracts also specify the imposition of sanctions based on Key Performance Indicators. Poor performance results in monetary penalties depending on the deviation and frequency. The TOM must speed up the evaluation process of the BDEs, so that it can proceed to impose the corresponding penalties on the Concessionaires in cases where they do not comply with the contractual BDEs in the contracts.
Also, for the use of Excel to calculate the monthly state compensation to the contractors, EY requests to consider either the possibility of developing separate software based and developed in the context of the new public passenger transport contracts, which will be used to calculate the monthly state compensation to the Concessionaires, or to lock the mathematical formulas, which are used in the existing software.
With regard to the Tuileries contract, EY proposes that strict recommendations be made to the Concessionaire and its contractual obligations be emphasized regarding the timely submission of specific reports within the prescribed time frames. In addition, the annual and monthly Government Contribution should be calculated exclusively based on the terms of the contract and all appropriate measures should be taken to ensure that the Concessionaire submits the minimum required data and does so within 15 days of the end of each reporting month.
Regarding the collections of the TOM, EY recommends that the TOM, in cooperation with the representative of the General Accountant in the Accounting and Financial Management Directorate of the YMEE, re-evaluate the procedure followed in order to promote the sound financial management of the TOM.
Regarding overcharges to drivers for late renewal of traffic fees, EY requests that the TOMIS information system be properly updated, so that the calculation of the charge is made on the basis determined by the legislation.
In addition to the above financial audits, two separate reports will soon follow, one on the actions of the TOM regarding road safety and one on the experience of citizens in using public buses.
