A scathing report from the Audit Office of the Republic of Cyprus has shed light on serious irregularities in the handling of the "National eWallet of Cyprus" project by the Deputy Ministry of Research, Innovation, and Digital Policy. The report exposes conflicts of interest, opaque procedures, and arbitrary decisions, all of which have left the ministry and public sector vulnerable to legal and financial risks.

The report reveals that the Deputy Ministry bypassed formal tender procedures, opting instead for direct, verbal assignments to a specific team without conducting any cost assessments or securing official approvals. This lack of formal process, combined with the absence of transparency, placed the ministry at odds with established procurement regulations and jeopardized the credibility of public administration.

Among the most alarming revelations is that the ministry's project coordinator, responsible for overseeing and organizing the eWallet initiative, had close family ties to a member of the private team contracted for the project. Despite this conflict of interest being known to senior officials, no steps were taken to ensure impartiality, a clear violation of both ethical standards and good governance principles.

The former Director-General of the ministry approved two memorandums related to the project. One approved a budget of €6.01 million (plus VAT) for a public tender, while the second approved a negotiation process with the Cyprus Telecommunications Authority (Cyta) and private entities involved in the project. However, the report highlights that these decisions were influenced by the project coordinator, who had a direct conflict of interest.

At one point, the ministry attempted to push through a proposal to the eWallet Steering Committee for direct award approval, which was withdrawn at the last moment. The proposal had been handed to an uninvolved official with no knowledge of the project, raising suspicions of manipulation.

The Deputy Ministry’s actions have potentially exposed the public sector to financial and legal repercussions. The private consortium that had been tasked with developing the eWallet is now demanding €816,044 plus VAT in unpaid fees for work allegedly completed without any official contract in place. Furthermore, the Audit Office report warns that the total cost of the project could exceed €1.5 million, with Cyprus potentially facing legal battles over unpaid dues.

The Audit Office has called on the Deputy Ministry to adhere to public procurement laws and involve more stakeholders and experts in the decision-making process to ensure transparency and objectivity. The report emphasizes the need for a clear strategy for data security and regulatory compliance, which should be incorporated into all future projects. Additionally, the ministry is urged to ensure that all future contracts include stringent requirements for data protection and the proper use of digital resources.

The report has been submitted to the Anti-Corruption Authority to investigate potential abuse of power by former Deputy Minister Kyriakos Kokkinos, former Directors-General, and other public officials involved in the project. The Audit Office believes the Republic of Cyprus may suffer damages exceeding €1.5 million due to mishandling and potential corruption within the ministry.

This revelation marks yet another instance of mismanagement in Cyprus' digital transformation efforts, casting a shadow over the future of the eWallet project, which was intended to provide citizens with digital access to public services via mobile devices. Whether these reforms will be implemented and accountability will follow remains to be seen.