ICAEW.com works better with JavaScript enabled.

How the Cyprus Treasury is embracing ‘continuous accounting reform’

Author: ICAEW Insights

Published: 25 Aug 2022

The Treasury team in Cyprus is working through a number of projects to improve its processes and make its public financial management fit for a more complex future.

Cyprus is a small country. It feels the impacts of global events acutely, but it’s also nimble enough to respond to them. As the world becomes more complex, this could be a significant advantage.

“In my opinion, the public sector will always need to be in a continued state of reform,” says Cyprus Accountant General Rea Georgiou. “The speed of technological change is so rapid that we require both the private and the public sectors to be able to adapt fast.”

The Cyprus Treasury is going through the process of a major accounting reform at the moment, moving from cash to accruals accounting. It is in the process of implementing a new ERP system by 1 January 2023 and is working on a series of reforms to public procurement processes. “We believe that we can provide value-for-money services to the government and the citizens and ensure that all government’s priorities can be followed up in a professional manner,” says Georgiou.

The Cyprus central government operates as a single entity for financial reporting purposes, rather than having ministries or departments, like governments in other jurisdictions. As a result, government accounts are produced centrally within the Treasury.

“I strongly believe that accounting is an essential instrument of any government, and one that in our increasingly transparent and interconnected world has been even more vital than ever before,” says Georgiou. “So I believe that transition to accruals is long overdue for Cyprus.” 

The Treasury modernised its legal framework in 2014 to ensure it has a strong legal basis on which to build its reforms. From a procurement perspective, Cyprus spends around £500m a year, but is looking to streamline and modernise its processes.“We are building a professionalisation strategy for our procurement. We have a procurement system that is very effective, it’s been in place since 2009. Now, we have started the process of preparing for a new e-procurement system that will cover all the functions of public procurement. The objective is to complete this by 2026.”

The move from cash to accruals accounting is set to go live by January 2023, together with the ERP system. A critical element of this transformation is to employ more qualified accountants in the Treasury. It has recently appointed 26 new accountants to roles within the Treasury and another 15 are being brought on board.

“We appreciate more and more the significance of having experienced and well qualified professionals who can adapt easily to reform and take it a step further,” says Georgiou, a chartered accountant herself. “This is where the accounting profession can contribute the most. It has the expertise, the methodology, and the embedded culture to add value to the project.” 

The role of the finance function both at the Treasury headquarters and in-line ministries is expanding to include strategic planning and reporting, strong internal control systems and accounts maintenance. 

“We participate in the discussions within the European Union about the reforms, keeping it in line with IPSAS and the potential evolvement of EPSAS as the standards to be followed for preparing the financial statements,” says Marios Hadjidamianou, Head of the Accrual Accounting Project for the Cyprus Treasury. “This is a discussion that helps us to see what other countries have been doing all these years, and trying to adopt some of their best success. This is very important for us.” 

The Cyprus Treasury has a close relationship with accountants in the UK, including ICAEW. This partnership has helped to strengthen this process of adaptation within the Treasury. 

“Every three months, we have a call where we discuss our issues, how the UK has experienced these issues and how they found the solution to some of their accounting problems we faced,” says Hadjidamianou. “We’re extremely grateful to the support we have received from them all these years. 

It also helps to ensure that both parties have a common understanding of various accounting and reporting standards and how they should be implemented, says Hadjidamianou. I think it is vital for us to understand each other and make the proposals of standards that can be used by practitioners.”

This collaborative approach is another strength for Cyprus to draw on as global conditions become more challenging and fast-paced. With its new approach to its accounting function, it is well placed to respond to whatever challenge comes next.

Recommended content

Podcast icon
Insights Podcast

Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.

Find out more
A megaphone
Stay up to date

You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.

Sign up
Daily summaries
Three yellow pins planted into a surface in a row
News in brief

Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.

See more