Newsroom
A long-delayed technology project at the Housing Finance Corporation (HFC) has resulted in significant additional costs and prolonged dependence on external systems, according to findings presented by the Audit Office to Parliament’s Audit Committee.
The project concerns the introduction of a new Banking Information System (BIS), originally intended to modernise HFC operations and be fully operational by January 2021. Instead, the system is now scheduled for completion in 2027, turning a two-year contract into an eight-year undertaking.
Auditor General Andreas Papaconstantinou told the Committee that the organisation failed to respond effectively when problems emerged, despite clear warning signs. As a result, the HFC continued relying on services provided by the Cyprus Asset Management Company (KEDIPES) while upgrading its legacy system, a choice that led to additional expenditure of at least €3.55 million between 2021 and 2025. This estimate excludes administrative expenses and other indirect consequences.
The contract for the BIS was signed in January 2019 with a total value of €10.24 million, covering implementation and nine years of operation and maintenance. Although the delivery period was set at 24 months, the Audit Office found that serious delays arose due to poor performance by a subcontractor and weaknesses in HFC’s internal administration and decision-making processes.
By the end of 2024, the HFC had paid approximately €3.45 million, or 64% of the implementation value, to the contractor. HFC officials told the Committee that these payments corresponded to hardware and auxiliary systems received, even though the core banking software had not been delivered.
An analysis by the Audit Office showed that had the new system been in place on time, total costs up to 2025 would have amounted to €8.83 million. Instead, actual and projected costs reached €12.38 million, producing an excess burden of at least €3.55 million over five years.
Governance gaps were highlighted as a central factor in the delay. During 2021 and 2022, when corrective action was deemed necessary, the HFC Board of Directors was not fully constituted and unable to convene. The absence of a General Manager between October 2021 and March 2023 further complicated the organisation’s ability to manage the contract and take decisive action. The Audit Office also pointed to three management changes over a short period, which disrupted continuity.
Problems with a key subcontractor became evident as early as March 2021, particularly in relation to the central banking software component of the BIS. Although the Board requested a replacement of the subcontractor in April 2021, the attempt did not succeed and the project remained stalled.
It was not until October 2023, nearly three years after the original deadline, that the HFC issued a formal warning to the contractor, signalling possible contract termination. This step led instead to negotiations that culminated in a substantial amendment to the agreement.
The Audit Office described this amendment, approved in December 2024, as irregular and contrary to public procurement rules. The revised contract effectively abandoned the delivery of a full banking information system and limited the contractor’s role to the use of equipment and peripheral services. According to the Auditor General, this altered the core subject of the contract, with the removed software component representing about 69% of its overall value, including maintenance and operation.
The failure to terminate the contract also meant that the HFC forfeited the option of claiming a performance bond worth €452,350. In addition, the Audit Office identified breaches of procedure relating to delayed or retrospective approvals from the Central Committee for Changes and Requirements (CCCR) for contract extensions and modifications.
Despite these findings, current HFC leadership told the Committee that implementation has now resumed. Board Chairman Dimitris Koursaros said the organisation expects to complete the system by 2027, including services such as electronic banking. General Manager Christoforos Kaplanis noted that in 2026 the existing system would be transferred from KEDIPES to the HFC, acknowledging its limitations but stressing that institutional independence would be achieved ahead of full deployment.
The Audit Office stated that cooperation with the current management was constructive and that discussions had taken place on corrective measures, while emphasising that the case illustrates how prolonged governance failures can translate into higher public costs and delayed delivery of critical systems.
