**Audit Office Criticizes Scholarship Approvals by Cyprus State Scholarships Foundation**
The Audit Office of Cyprus has issued a critical report regarding the practices of the Cyprus State Scholarships Foundation (IKYK), highlighting significant governance issues stemming from the approval of scholarships without securing the necessary funding. This report, released on Wednesday, covers the period from 2019 to 2024 and raises concerns over financial commitments that have surpassed the foundation's available budget.
According to the findings, the foundation's board has been increasing the number of scholarships and modifying eligibility criteria without ensuring that adequate budget appropriations were in place. This lack of financial foresight has led to long-term implications for the foundation, which relies heavily on government grants that constitute 99.9% of its income.
The report notes a surge in scholarship applications, with a record 1,942 submissions for the 2023-2024 academic year. This increase prompted the foundation to award scholarships to all eligible applicants under its excellence programme, resulting in commitments to an additional 344 students without the necessary funding secured beforehand. Initially, the finance ministry rejected the foundation's request for additional funding, but after negotiations and public discussions, supplementary funding was eventually approved. However, this funding only covers the first year of studies, leaving the foundation with ongoing financial obligations to these students until they complete their degrees.
The Audit Office pointed out that the foundation's own scholarship scheme stipulates that meeting eligibility criteria does not guarantee an award if funds are exhausted. Awards should be allocated based on applicants' rankings, and the pressure to award scholarships beyond the available budget is deemed poor practice.
While the Audit Office acknowledged the board's intentions to support as many students as possible, it emphasized the need for future decisions with financial implications to be based on thorough planning and prior agreement with the finance ministry.
In addition to financial governance issues, the report identified significant weaknesses in the foundation's internal controls. An audit of a random sample of 23 scholarship applications revealed that five cases had been incorrectly scored due to human error or flaws in the foundation's electronic assessment system. Notably, a configuration error led to two eligible applicants being denied scholarships, with no corrective action taken afterward. Furthermore, the lack of a secondary review process for application assessments increases the risk of errors, as evidenced by five of the 20 appeals examined being upheld due to incorrect initial assessments.
The Audit Office also noted inadequate separation of duties among staff and deficiencies in internal control procedures. In light of these findings, the report recommended the establishment of a targeted excellence scholarship programme that would provide more substantial funding in strategic fields aligned with Cyprus' long-term development needs. It suggested that scholarship recipients could be required to return to Cyprus after their studies or contribute to the country through research and education.
Additionally, the report proposed examining the potential merger of the State Scholarships Foundation with the government’s grants and benefits service. Such a merger could simplify procedures for students and parents, reduce administrative duplication, and enhance the management of public funds. The finance ministry has expressed intentions to conduct a feasibility study regarding this merger.
The Audit Office also hinted at the possibility of publishing a separate report concerning the lease of a building that was later donated to the foundation, a matter not covered in the current audit.
As the foundation navigates these challenges, the Audit Office's recommendations aim to enhance governance, financial planning, and operational efficiency, ultimately ensuring that scholarship funds are managed effectively to support the educational aspirations of students in Cyprus.