AUDIT OFFICE - RISK OF LOSING MILLIONS FROM THE RECOVERY FUND - RoC NEAR THE BOTTOM OF THE EU FOR TIMELY DISBURSEMENTS - Filenews 19/3 by Eleftheria Paizanou
The initial planning of the National Recovery Plan, which Cyprus submitted to Brussels in 2021, was overoptimistic and with weaknesses, as the Audit Office finds in its report on the implementation of the Recovery Plan of the Republic.
At the same time, it finds that the Cyprus plan included a disproportionately large number of milestones and targets in relation to the size of Cyprus and the amount allocated to it. In fact, he emphasizes that the description of the milestones and goals was very detailed and several of the goals very specific, which created difficulties in the implementation, in the monitoring of their implementation and in the coordination by the coordinating authority, which also addressed staffing issues.
"Taking into account the fact that several projects were included in the Plan while they were not mature and the fact that the risks of non-timely implementation were not properly assessed, resulting in unrealistic timetables, as well as the incomplete administrative adequacy of some implementing bodies, it became necessary to repeatedly amend the Plan", adds the Audit Office.
How much would he receive and how much will he get
Cyprus would initially receive an amount of €1.2 billion. (€1.02 billion in sponsorship and €200.32 million from a loan facility) from the European Union's Recovery and Resilience Facility, which was established to support member states to deal with the economic and social impact of the coronavirus pandemic. Previously, it was supposed to implement, by August 2026, a total of 133 measures related to investments and reforms.
According to the Audit Office, until August last year, i.e. about a year before the completion of the Recovery Mechanism, the Republic of Cyprus absorbed 56% of European funds, corresponding to an amount of €567.7 million. (The amount includes the pre-financing of €151.67 million). This ranks Cyprus, according to data received in January this year by the Service from the monitoring platform of the EU Mechanism, in 20th place out of all 27 member states, in terms of the absorption rate of non-receivable financial support. Despite the low level of absorption of European funding, the Directorate-General for Development is optimistic that a high absorption rate will be achieved by August 2026.
The non-utilization of the loan and the removal of the GSI
At the same time, Cyprus, according to the Audit Office, did not use the €200.32 million loan, which was linked to the fulfilment of seven measures. According to the Agency's findings, Cyprus did not submit any request to receive the loan, as, based on the last amendment to the plan last summer, the Cypriot authorities removed six measures from the Cypriot plan. Among the measures removed was the Cyprus-Greece electricity interconnection project GSI (formerly EuroAsia), for which Cyprus would receive €100 million.
As pointed out, the implementation of the project is not feasible within the Recovery Plan, as the work has not yet begun. At the same time, he notes that the amount of €26 million. that has already been disbursed will be offset against the next instalments of the sponsorship that will be disbursed in the country.
However, the Audit Office emphasizes that borrowing through the Recovery Mechanism, on more favourable terms than borrowing from the markets and the European Investment Bank, should be used. As noted in the report, "the power cable project was included in the "project fiche" with a list of 13 indicative risks, with the concluding comment that the risk of non-implementation is very low (grade two) and that none of the technical risks are sufficient non-implementation. However, the project is not being implemented."
€50 million will be lost.
At the same time, it indicates that, due to the non-implementation of a series of measures, the Republic is in danger of losing part of the sponsorship. The European Commission is likely to suspend funding in relation to the green tax reform, with the amount of the loss reaching €50 million. The Commission, according to the report, indicated that, if Cyprus does not implement this measure within the Recovery Plan, in addition to the fact that the cut off of the sponsorship will be permanent, this will also create a negative image for Cyprus as a partner in terms of fulfilling its obligations towards the EU.
Insufficient assessment was made
According to the Audit Office's conclusions, weaknesses related to the inclusion in the Plan of projects that were not mature, the inadequate assessment of the risks of non-implementation and the setting of unrealistic timelines led to five amendments to the Plan to reduce the risks of not reaching milestones. This, he emphasizes, has brought about, among other things, the transfer of additional milestones and targets to the already large number planned to be completed in recent quarters.
Maybe they won't have time
Based on the Agency's findings, despite the five amendments, the risk of non-full absorption of the amount allocated to Cyprus, in case of non-implementation of all milestones by the end of August, has not been fully eliminated. In conclusion, he emphasizes that, during the process of submitting and selecting public investment projects for inclusion in the Plan, a correct and thorough evaluation was not carried out, which ensures, to the extent possible, its smooth and successful implementation.
