Bus company accuses audit boss of sloppiness in fuel probe (Update 2: adds response by auditor)

Nicosia bus company OSEL on Wednesday called the state audit office “sloppy” after Odysseas Michaelides as much as accused them of ripping off the state to the tune of €4 million over five years.

OSEL said Michaelides had not done his homework and it hoped the audit office had simply made a mistake and that the accusation was not due to other expediencies.

The auditor-general said the attorney-general’s office should be made aware of the issue of fuel supply to city bus-companies, in order to examine whether two of them defrauded the state out of €4 million over five years by overstating consumption.

In a letter to Transport Minister Marios Demetriades, dated February 29, the auditor-general said that data analysis revealed that the state may have lost out on €0.5 million annually by bulk-purchase discounts received from fuel suppliers by the bus companies, which they purportedly kept from themselves.

Meanwhile, Michaelides added in his report, checks conducted on reported fuel consumption showed significant decreases in 2015, compared with the year before, in two bus companies – Nicosia and Limassol. The drop, Michaelides suspected, is the result of placing meters on the buses in April 2015, which meant that reported fuel consumption could no longer be inflated.

According to Michaelides’ letter, following a public-tenders procedure organised by the state treasury, the six city-bus companies entered four-year agreements with fuel suppliers, which came into force in February 2015.

These agreements allow the bus companies a discount – 4.6 cents for five companies and 4.1 cents for the sixth – which, in turn, reduces the cost of the state’s contribution to the bus companies’ operation.

Considering the fact that 11 million litres of fuel are required annually, the cost reduction to the state adds up to some €0.5 million a year, Michaelides said.

Prior to this arrangement, he noted, the bus companies bought fuel without a regulated procedure, which meant they were able to benefit from bulk-purchase discounts they may have been offered, perhaps by buying cheaper fuel for their private buses, which are not covered by the agreement.

But in addition to this loophole, Michaelides also noted a suspicious drop in reported fuel consumption by the bus companies since the introduction of meters on the buses, which enable the authorities to distinguish whether the bus that has fuelled up belongs to the authorised fleet of city buses or not.

The counters were placed in April 2015, and reported data suggested that since their introduction, fuel consumption in the Nicosia and Limassol districts has fallen drastically, relative to the previous year, which may in turn suggest that the state had been defrauded via inflated reported consumption.

For example, Michaelides explained, Nicosia showed a 17 per cent decrease in fuel consumption during the period from April to December 2014 and 2015, while Limassol showed a 30 per cent drop.

With regard to the other districts, Michaelides said, further data analysis is required.

“We consider this issue extremely serious, and propose that you take the matter up with the attorney-general immediately, so that guidance on the handling of the matter can be obtained,” the auditor-general urged Demetriades.

But OSEL said it was them that had initially proposed  the installation of the meters on the buses as well as suggesting

the supply of fuel through a tender competition, proposals which were adopted by the then Transport Minister, the late Tassos Mitsopoulos.

OSEL said it was surprised to hear the Auditor -general’s comments on the reduction of fuel consumption in 2015 was due to more effective control as a result of using meters.

“The auditor-general’s office, wrongly and acting a sloppy manner, took into consideration only fuel consumption registered on the meters and ignored the fact that installing the meters took three months and during that time some OSEL buses were still being fueled with the use of cards… and this  difference was perceived as theft?” OSEL said.

The bus company said it had “easily spotted this difference” itself in an internal probe into the invoices.

The company said that they would hate to see this mistake by the audit off attributed to expediency.

In response, the auditor-general’s office said that they still believe that the issue should be brought before the attorney-general for instructions “as to the handling of the contractual aspect but also as to the possibility of investigating any criminal offences”.

The announcement also said that OSEL’s claims that it was upon their suggestion that fuel supply should be through a tender competition was “a figment of their imagination”, as it was in fact the suggestion by Michaelides himself back in 2013 when he was the head of the transport ministry’s audit service.

It added that the data used as regards fuel consumption were provided by the transport ministry.

In a statement, the transport ministry said it was conducting a detailed probe into the matter, “in accordance with the legally prescribed procedures and the contracts signed”.