Agreements that have been concluded at the expense of the State are found in a report by the Audit Service (EA) regarding the audit of the financial statements for the years 2015 and 2016 and the compliance audit of the Municipality of Larnaca for the years in question. Some of these agreements concern the Mackenzie area and Athens Avenue.
The findings of the exhibition
The EY report states that on 4.12.2012 two lease contracts concerning the Mackenzie area, for the period 1.1.2013 to 31.12.2015, were signed between the Ministry of the Interior, in its capacity as Custodian of Turkish Cypriot Properties, and the Municipality Larnaca, which includes 14 leisure centers, 3 vacant lots, a facility building lot and a parking lot. The Minister of the Interior, in a meeting held on 7.4.2015, informed the Mayor that he had decided, from 31.12.2015, to cancel the lease concerning the premises of the restaurants, with the aim that these businesses would go to refugee beneficiaries and/or companies , of which more than 51% belong to refugees.
During the above meeting, the representative of the Legal Service stated that condition 5 of the lease agreement, according to which the Municipality of Larnaca has the right to sublet/sublet, the right to use, without the prior permission and/or approval of the Lessor, causes contradictions. He also stated that condition 12(a) of the lease agreement, between the Municipality of Larnaca and the sub-lessees, according to which the sub-lessee has the right to enter into a sub-lease agreement with any third party, and that the sub-lessee shall be entitled to sell the business which will be conducted within the premises or the air of the business, with specific conditions set by the Municipality of Larnaca is unacceptable.
Based on the above, EY notes that it expressed the opinion that the subletting right granted to the sublessees by the Municipality allows them, as well as the sublessees, to profit at the expense of the interests of the public.
It is added that during the audit it was established that, although the Municipality paid the above rents to the State, nevertheless the majority of the owners of said leases did not pay any amount to the Municipality. It was also established that a number of owners/managers of leisure centers made additions and/or conversions to existing properties, as well as illegal occupations/interventions in public spaces and green spaces, without the Municipality, which had the responsibility of removing the illegalities, to take any action.
Furthermore, mismanagement of a bequest for the benefit of the Municipality of Larnaca and a long pending investigation of the matter by the Police were found. At the same time, it is reported that the property of the Municipality on Athens Street is being exploited by a private company to the detriment of the interests of the Municipality which tolerates the perpetuation of the situation without taking measures. It is pointed out that the Municipality illegally undertook the repayment of a private theater loan without even ensuring the transfer of ownership of the theater to its name.
The Municipality, it is noted, entered into an agreement with a private company for the sale to it of municipal property on Athens Avenue (former Municipal Building), so that the company could develop it with its neighboring plot. EY emphasizes that it expressed reservations that the agreement would leave the Municipality exposed. “Indeed, the Municipality remains locked in a problematic agreement to this day,” the report states.
In addition, the Municipal Services did not impose professional license rights on the greater number of legal entities, whose registered office and/or their operations are managed by law and/or accounting/auditing offices and/or secretarial services offices, the which have their headquarters within the boundaries of the Municipality. When, following EY recommendations, these rights were imposed for the years 2020 and 2021, they concerned 9,232 and 10,162 companies for a total amount of €2,758,355 and €3,045,755, respectively.
The report states that it found weaknesses, on the part of the Municipality, in the management/implementation of specific projects, both during the study stage and during their execution stage, resulting in a delay in their completion. The measures taken by Municipality, for the Contractors' compliance/response with their obligations, were not always appropriate and/or efficient. In some cases, the Municipality did not deal with the issues of delays in a timely manner, while failing to send all the necessary warnings to the Contractors to indicate to them the slow pace at which they were carrying out the work.
In January 2020, the Municipality signed a contract for the purchase of three used garbage trucks for the amount of €126,000+VAT. From the control carried out by EY during their delivery/receipt, it was found that the waste capacity in volume was 10% less than the minimum required and, by extension, essential specification, in the tender documents. The said vehicles were finally received in July 2020 with a deduction of €1,890+VAT (1.50% of the contract value), in violation of the provisions of the relevant legislation, which gives the Contracting Authorities the possibility of receiving supplies at a reduced price, provided that the deviations they present are not material in relation to the specifications or terms of the contract. Also, although one of the three vehicles was delivered with a delay, for which, based on the contract, a deduction of the maximum amount of the delay clause of €1,500 should have been imposed, no corresponding deduction was made from the Contractor's payment.< /p>
It is underlined that for all the above findings of the Audit Service, the necessary recommendations were made.
The conclusions of the Audit Service
“Despite the improvement that has been noted, weaknesses are still observed in the proper and efficient operation of the services of the Municipality of Larnaca”, says the EY report, pointing out that weaknesses were found in the management of the Municipality's contracts, resulting in delays in their timely completion. Also, weaknesses were observed, in terms of taking the appropriate measures, for the Contractors to comply with their contractual obligations.
It is emphasized that specific decisions of the Municipality have caused problems in the assignment and implementation of projects, such as in the cases of evaluation of tenders, as well as the taking of appropriate measures for the successful execution and timely completion of the works. In addition, non-compliance of the Municipality with certain provisions of the relevant Laws, Regulations and Circulars on public contracts was found.
General recommendations
The report of the Audit Service states that it recommends the proper application of the Laws and Regulations and the adoption of targeted procedures by the Municipality, with the aim of implementing its recommendations, as well as the adoption by the Municipal Council of specific measures to improve public accountability on its part.
The Municipality, in the context of the proper monitoring of project management, is recommended to take all appropriate measures for their smooth and successful implementation, both in terms of their timely completion and quality execution, based on the provisions of the relevant contracts.
Also, when drawing up the tender documents, the Municipality is recommended to properly weigh all the data and to act with a view to ensuring a satisfactory breadth of participation and and the development of healthy competition, for the benefit of the public interest, the report concludes.
