Economy

Audit Service reports HFC banking system failure, €3.55M loss

By: SigmaLive English

Date:

Project dead despite heavy payments

A special Audit Service report details severe issues and major financial failure from the implementation of a new Banking Information System at the Housing Finance Corporation (HFC).

Contractually due by January 2021, the Housing Finance IT system failure never materialised despite significant payments to the contractor.

Contractor shortfalls and admin gaps

The report blames poor contractor performance alongside HFC administrative weaknesses, including an incomplete Board of Directors and prolonged absence of a General Director.

Auditor General notes these delays crippled timely decision-making and contract oversight.

€3.55M extra costs without upgrade

The Housing Finance IT system failure incurred at least €3.55 million in added costs for 2021–2025, mainly from ongoing reliance on KEDIPES and upgrading the outdated system, excluding administrative overheads.

A comparison in the report underscores the mounting financial burden.

Illegal 2024 contract overhaul

Auditors deem the December 2024 contract amendment unlawful, as it fundamentally altered the original scope in breach of public procurement law.

Instead of a new system, it shifted to exploiting equipment and peripherals, a change the report labels non-compliant.

Missed guarantees and approvals

Failure to terminate the contract forfeited HFC’s claim on a €452,350 performance bond.

Shortfalls also include missing approvals from the Central Changes and Requirements Committee.

Strategic blow to housing policy

The Auditor General frames the Housing Finance IT system failure as strategically critical, not mere technicality. Banking IT systems form the backbone of credit institutions, directly impacting HFC viability and housing policy delivery.

In plain terms, the Housing Finance Corporation (HFC) signed a contract in 2021 for a vital new IT system to manage banking operations, but it never got built despite big payments to the contractor.

Delays stemmed from the company’s poor work and HFC’s own issues like missing leaders, costing over €3.55 million extra in patches and old-system fixes. A later contract change was ruled illegal, and HFC lost a chance to claim a €450k bond – leaving them stuck with outdated tech that hampers housing loans and policy goals.

Also read: Audit Service: Cyprus left unprotected from drones for years

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