The implementation of the contract for the supply and installation of a new Banking Information System at the Housing Finance Corporation (HFC) remains impossible to date, according to the Audit Office, which has identified gaps and performance problems on the part of the subcontractor.

As Brief writes, the subcontractor’s contractual obligation was to complete and deliver the project by January 2021.

According to a special report by the Audit Office released today, problems have been identified throughout the project concerning the subcontractor’s performance, as well as deficiencies in the administrative functioning of the HFC.

These shortcomings arose due to the incomplete composition of the Board of Directors and the failure to appoint a General Manager—factors that decisively affected the timely adoption of corrective decisions.

Efforts to replace the subcontractor proved unsuccessful, ultimately forcing the HFC to resort to an “emergency solution”.

The failure to implement the new information system led the HFC to continue its dependence on the Cyprus Asset Management Company (KEDIPES) and necessitated the upgrading of the old system.

A cost comparison shows that the HFC has incurred additional expenses of at least €3.55 million for the period 2021–2025, corresponding to the first five years of the system’s expected operation. This amount does not include administrative costs or other related negative consequences.

According to the Audit Office, of particular importance is the finding that the contract modification approved in December 2024 materially altered the subject matter of the contract, in violation of the relevant legal provisions.

Instead of implementing a new information system, the contract was effectively limited to the utilisation of equipment and peripheral systems—an option which, in the view of the Audit Office, was not lawful.

The failure to terminate the contract deprived the HFC of the possibility of seizing the performance bond, valued at €452,350.

In addition, omissions were identified in securing timely approvals from the Central Committee for Changes and Claims regarding extensions and modifications, in breach of the applicable legislation.

According to the Audit Office, the failure to implement the new information system does not merely constitute a technical or contractual shortcoming, but an issue of strategic importance, as core IT systems in the banking sector form the backbone of credit institutions’ operations.

“The HFC, in general, is called upon to operate as a modern, sound, and competitive bank, capable of effectively supporting housing policy and the economy,” the report emphasises.

It is noted that the report has been forwarded to the Governor of the Central Bank, together with a separate letter containing specific additional observations.