By George Psyllides
PRIVATE auditors have expressed doubt the electricity authority (EAC) could be considered a going concern and have asked its board to draft a credible plan to tackle the problem, according to the auditor-general’s 2012 report on the semi-state company.
Among other issues, Chrystalla Georghadji highlighted the EAC’s cash flow problem, the overdue electricity bills and the handsome employee allowances.
The auditor-general said she had been informed by the company’s director at the end of May that “following a preliminary examination of the EAC cash flow, private auditors expressed doubt whether the EAC can be considered a going concern and have asked the board to prepare and submit a credible plan to tackle the problem.”
Georghadji said she agreed with the proposal.
The auditor-general said the company should have expedited the process of streamlining its structure in a bid to cut operating costs and improve its financial situation.
In her view, “no substantive measures had been put in place to restructure/rationalise the organisation while actions that had taken place were rather circumstantial and achieving the undertaking is questionable.”
Georghadji said the company had drafted a new voluntary retirement scheme, which has not been approved by the finance ministry and parliament thus any spending had no legal basis.
According to the report, the compensation provided by the plan “are especially high and much higher than the additional compensation afforded to EAC employees today.
“In our view, the plan is not realistic and provokes the people’s sense of justice,” the auditor-general said.
The plan appeared to ignore the EAC’s cash flow problems, the dire economic situation in general, and the fact that civil servants who retired early received no additional benefits.
The report said that at the end of 2012 EAC was owed €57.2 million in arrears from the sale of electricity.
In the first three months of this year, the amount rose to €77.2 million.
Georghadji said the EAC has the right to cut power to consumers who owe money but it failed to do so in cases where bills remained unpaid systematically.
And the EAC has not yet cut any of the numerous allowances afforded to staff as was the case in the central government.
The organisation’s chairman said the allowances were being reviewed in cooperation with the unions.
Wastefulness was also observed at the semi-state telecommunications company CyTA.
The auditor-general said certain funds in the regular budget had been exceeded repeatedly and covered by transfers from other funds.
This raised questions regarding the degree of monitoring of the budget and whether the budgeted amounts represented CyTA’s real needs, Georghadji said.
CyTA had overshot 12 items in 2012 by €13.2 million.
A report will be prepared and submitted to parliament detailing the cases where and why certain funds had been exceeded, the report said.
Case in point was the early retirement fund.
The finance ministry had released €2.0 million but CyTA ended up paying €3.91 million – the balance covered by transferring funds.
Other notable extras were €3.6 million paid for the purchase of programmes for Cytavision – the company’s television arm – €1.5 million for water and electricity, and €1.6 million for advertising and promotion.
A further €3.4 million above budget was paid for equipment.
Overtime pay dropped in 2012 compared with 2011 – €3.92 million versus €4.75.
However, it was again observed that many CyTA staff systematically put in many extra hours and in some cases their overtime pay exceeded 100 per cent of their gross revenues.
AKEL wants state to look at options other than SGO sell-off
OPPOSITION AKEL yesterday released a draft finance ministry report outlining steps that need to be taken towards privatisation.
The draft report listing a number of recommendations to Cabinet demonstrates the government’s “stubborn refusal to consider other proposals and alternative choices so that it can safeguard the national wealth,” AKEL’s deputy parliamentary spokesman Stavros Evagorou (pictured) said.
AKEL – which was in government when Cyprus first agreed to possible privatisations – said President Nicos Anastasiades was breaking his electoral pledge not to privatise profit-making semi-governmental organisations (SGOs).
Anastasiades did promise to prevent privatisations if Cyprus’ bailout was low enough to ensure a sustainable public debt and had even visited one SGO and pledged he would not agree to privatisations. Although Cyprus’ €10 billion bailout is considered sustainable, the finance ministry’s report makes it clear to those who still had a doubt that privatisations will take place.
AKEL seized the opportunity to urge the government to consider alternatives, such as allowing SGOs to find the necessary funds themselves, despite the fact that Cyprus itself was forced to seek a loan from the troika of lenders because no one else would lend to the country.
Under the Memorandum of Understanding (MoU) agreed with the troika, privatisations are meant to eventually fetch €1.4 billion. The finance ministry has recommended to Cabinet to hire specialised independent consultants to prepare a framework for privatisations. The electricity authority, ports authority and other semi-state bodies may all be privatised with the finance ministry warning that because of tight timeframes, actions need to be swift and relevant bodies need to collaborate closely.
Evagorou said that sticking with the MoU would entail “many ills” for Cyprus but did not offer an alternative.
