The discussion on the reform of the Audit Office, aimed at modernising the institution of the Auditor-General, begins today before the House Legal Affairs Committee. The reform was deemed necessary following the controversial tenure of Odysseas Michaelides as Auditor-General, which ended abruptly with his dismissal.
According to the bill submitted to parliament by the Ministry of Justice, there will never again be an Auditor-General without oversight. Specifically, the bill provides for the creation of an Audit Council, which, with the powers granted to it, will be able to supervise the Auditor-General and his reports. Members of the Audit Council will be appointed by the Council of Ministers and will have the authority to review, and therefore challenge, the findings of the Auditor-General.
The former and the current
On 4 September 2024, the Cabinet decided to reform the Audit Office by establishing the Audit Council. The very next day, the Audit Office under Michaelides issued a statement claiming the move was “an attempt to silence the Auditor-General,” adding:
“The term ‘modernisation’ is used by the government for communication purposes. To modernise means to make something old current. The Cyprus model is globally one of the most widespread and successful, followed by most EU countries and others with a long tradition of external government auditing, such as the US, Canada, Australia, the UK, Israel, and many others. Sweden had an Audit Council but changed it in 2020 to a model like Cyprus’. Therefore, what is being attempted is not modernisation but regression aimed at muzzling the Auditor-General and the Audit Office.”
The same concerns appear to be shared by the current Auditor-General, Andreas Papaconstantinou, who believes that the model promoted by the Christodoulides government, namely the creation of an Audit Council with the proposed powers, directly undermines the authority and independence of the Auditor-General. His position before parliament today is eagerly awaited.
Support, but with conditions
It should be noted that in statements after his swearing-in on 2 October 2024, Papaconstantinou supported reform of the Audit Office, but not in a way that undermines its independence. He said:
“We agreed with the President that the Audit Office must also be modernised, to help colleagues do their work properly. The Audit Office must remain independent and its independence must be strengthened, with access to data, so it can do its job effectively.”
With the creation of the Audit Council, however, critics argue independence is weakened, since supervisors are effectively imposed on the Auditor-General.
Appointment of members
Under the Justice Ministry bill, the Audit Council will consist of three members appointed by the Cabinet, following a recommendation by an Advisory Board. Members must be Cypriot citizens of the highest moral standing. Two of them must have recognised academic qualifications and/or experience in economics, accounting, auditing, or related fields. The third must be a lawyer eligible for appointment as a Supreme Court judge. Each member will serve a five-year term, non-renewable. Remuneration and terms will be set at the time of appointment and fixed for the full term. Members will work full time and cannot engage in other employment or paid/unpaid activities.
The Advisory Board will recommend five candidates to the Cabinet and will be composed of the director-general of the Finance Ministry, the president of the Cyprus Bar Association, and the president of the Institute of Certified Public Accountants of Cyprus.
Powers of the Council
The Audit Council will have, among others, the following responsibilities:
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Submitting measures to the Auditor-General deemed necessary for implementing the annual programme and policies of the Audit Office.
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Monitoring the implementation of the annual programme and submitting relevant proposals.
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Recommending the preparation of interim reports.
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Reviewing draft interim or annual reports of the Auditor-General and issuing recommendations.
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Requesting documents and data from the Auditor-General necessary to exercise its powers.
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Preparing an annual report on its work, which may be published after consultation with the Auditor-General.
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Informing the Auditor-General of matters under consideration; the Auditor-General may attend meetings without voting rights. Decisions will be taken by simple majority.
Eight-year term
The reform bill also introduces:
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Financial independence of the Audit Office, allowing it to draft its own budget without executive involvement.
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An eight-year term limit for both the Auditor-General and Deputy Auditor-General, non-renewable unless they reach 68 years of age earlier, in which case they retire at 68. Dismissal procedures will follow the model applied to Supreme Court judges.
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A transitional provision allowing current officeholders to remain under their existing appointment terms until their tenure expires.
