Auditor-general intends to freeze party funding in €2.6m dispute

The auditor-general has moved to block the payment of millions of euros in state funding to political parties, escalating a dispute over €2.6 million in public money that was paid illegally and has yet to be recovered.

In a letter sent on Wednesday to House speaker Annita Demetriou, auditor-general Andreas Papaconstantinou requested that the accounting office of parliament temporarily freeze state payments to political parties for 2026, amounting to €7 million.

The freeze is to remain in place until attorney-general George Savvides issues a formal opinion on whether the illegally paid €2.6 million should be offset against this year’s funding and deducted directly from the amounts due to the parties.

Papaconstantinou also formally asked the attorney-general for that opinion, warning that continued inaction risks the permanent loss of public funds.

The issue has been unresolved for five years, despite repeated findings by the audit service that the payments breached the law.

The timing is politically sensitive, as by the end of this week, the state is due to transfer a total of €12.7 million in funding related to parliament for 2026.

Of this sum, €6.7 million is earmarked for parliamentary parties and their youth organisations, while €5.6 million is allocated to cover the salaries and benefits of over 100 parliamentary associates employed by parties and members of parliament.

The release of funds comes as parties prepare for parliamentary elections scheduled for May, a campaign expected to be highly competitive amid the emergence of new political formations that threaten to erode the dominance of the traditional established parties.

Under the funding formula, 85 per cent of the €6.7 million allocated to parties is shared proportionally based on the results of the last parliamentary elections.

On this basis, the approximate allocations for 2026 are €1.98 million for Disy, €1.62 million for Akel, €890,000 for Diko, €591,000 for Elam, €587,000 for Edek, €546,000 for Dipa and €434,000 for the Ecologists’ Movement.

Youth organisations of parliamentary parties will receive a total of €314,640, comprising a flat €9,000 per organisation and a proportional distribution of the remaining €251,640 based on their parties’ electoral strength.

An additional €100,000 is allocated for activities abroad intended to promote the republic’s official positions on the Cyprus problem.

Although relatively small, the audit service has stressed that these funds are still public money and should be fully accounted for, even though parties are not currently required to submit detailed evidence of how this specific allocation is spent.

The largest single allocation, €5.6 million, covers the cost of employing parliamentary associates.

Existing legislation requires parties to submit audited accounts of their state funding to the House speaker within ten months of the end of each financial year.

At the centre of the controversy is the €2.6 million in state sponsorship that the audit service has ruled was paid illegally between 2018 and 2021.

Despite clear findings that the money should be returned, no effective steps have been taken to recover it.

The finance ministry, the legal service and parliament have spent years disputing who bears responsibility for initiating recovery proceedings.

In its most recent report on parliament, published last June, the audit service warned of a serious risk that the republic would permanently lose the funds if legal action is not taken promptly.

During the 2018 presidential election campaign, the state granted €2.5 million to all eight parliamentary parties for the 2018 presidential election campaign.

The funding was intended exclusively to cover election expenses.

According to the audit office, €2 million of that amount was never spent for that purpose and should have been returned to the public treasury.

Instead, parties retained the unspent funds and used them for operating expenses.

Following public criticism, the Anastasiades government subsequently incorporated the grant into the regular annual party subsidy, effectively increasing ongoing state funding by €2.5 million.

Based on a legal opinion by deputy attorney general Savvas Angelides, the finance ministry asked four parties to return a total of €577,511 that they had received without entitlement.

The amounts requested were €277,429 from the now dissolved citizens’ alliance, €251,203 from the Edek, €47,321 from Diko and €1,558 from Akel.

Once recovered, the funds were to be redistributed to the remaining five parties, with Dipa receiving €318,591, Elam €145,750, Edek €59,305, Disy €37,069 and to the ecologists, €16,796.

To date, only Akel has returned the money it was asked to repay.

Edek has said it is awaiting official clarification of the amount due.

Diko’s president, Nicolas Papadopoulos, has publicly refused to return the €47,321, insisting it was lawfully paid.

Citizens’ alliance however is in liquidation, with the state not listed among its creditors.

Despite a formal legal opinion confirming that parties are unlawfully retaining public funds, the legal service has not instructed the launch of criminal investigations against the parties or their legally responsible officers.

The auditor general’s intervention now places the matter squarely before the attorney general.