The Agricultural Insurance Fund in Cyprus faces significant weaknesses in its processes, particularly regarding safeguards, according to a report by the Audit Office. The report, titled "Audit of Contribution and Compensation Processes of the Agricultural Insurance Fund' outlines areas where the Fund risks non-compliance with its governing legal framework.

A primary issue identified is the use of three separate software systems at various stages of the Fund’s procedures, which are not interconnected. This lack of integration increases the risk of errors and inefficiencies in data management.

The Audit Office recommends that the Department of Agriculture prioritize ensuring the lawful and regulated management of funds originating from the Republic of Cyprus and producers. It also urges improvements in administrative processes and enhancements to safeguards to mitigate operational risks.

The audit, covering activities in 2023, highlights the absence of clear legal definitions for certain key processes. For instance, the law and the Revised National Framework for State Aid do not specify a minimum cultivation area for mandatory annual contributions, leading to inconsistencies.

Some producers were found to submit inaccurate cultivation data to reduce contributions, while others failed to provide required documents. These cases are not handled uniformly across district agricultural offices, which follow differing policies on prepayments for producers who do not qualify for hectare-based subsidies.

Additionally, cross-checks between cultivation declarations and government records are insufficient, leaving room for unverified claims. The lack of preliminary administrative checks on damage declarations leads to wasted resources on field visits to ineligible claimants.

The report further identifies inadequate oversight mechanisms. Damage declarations are sometimes false or erroneous, resulting in unnecessary administrative costs without consequences for those responsible. Eligibility checks for damage claims are incomplete, raising the risk of compensating ineligible producers. Moreover, evaluators are appointed verbally without written authorizations and do not alternate or complete impartiality forms, increasing the likelihood of bias.

Procedures for collecting data through telephone surveys lack formal methodology, which undermines the reliability of results. Compensation calculations, performed using Excel sheets, carry a higher risk of errors, especially since cross-checks are not systematically recorded.

The audit emphasizes the limitations of software systems used by the Fund, including the BlueByte system for managing producer accounts and crop data. These systems lack automated safeguards, such as mechanisms to prevent exceeding compensation limits. Payment lists rely on data from the three non-integrated software systems, compounding the risk of errors in data entry and processing.

Delays of over a year in compensating eligible producers were noted, attributed partly to repeated administrative checks at various stages. This inefficiency affects the timely delivery of aid and increases operational burdens.

The audit also raises concerns about conflict of interest and impartiality. Members of the Appeals Committee do not complete declarations affirming impartiality, increasing the risk of biased participation in decision-making.