Ambiguous rules, allocations of subsidies without evaluating applications, as well as incorrectly set checks on beneficiaries.
Press release on audit number 20/23 – 6 December 2021
The SAO audited funds for food and material assistance to aid financially deprived persons and for reducing food waste. The auditors examined how the Ministry of Agriculture (MoA) distributed funds under the national subsidy programme1 to reduce food waste and promote the distribution of food to people in material deprivation. The auditors further focused on the Ministry of Labour and Social Affairs (MoLSA), which distributed European subsidies2 for food and material assistance provided to people at risk of poverty. The audit at the Ministry of Agriculture showed that the system of distribution of subsidies was accompanied by a number of weaknesses: objectives were missing, the impact of the allocation of funds was not evaluated by the Ministry, it did not evaluate aid applications and reimbursed beneficiaries who were not eligible for reimbursement. The MoLSA, particularly, did not assess the actual impact of the allocated funds.
The Ministry of Agriculture has paid subsidies to food banks and other beneficiaries for the collection and distribution of food since 2016, when it distributed CZK 22.5 million to applicants. The amount of subsidies paid increased every year and in 2019 the beneficiaries received as much as CZK 116.5 million. In total, the MoA distributed over CZK 209 million during this period.
However, the MoA did not set specific objectives and did not evaluate the impact of the distributed funds. It merely gathered information on the quantities of food distributed from food banks. The Ministry only kept statistics on the number of projects supported and the amount of money paid out. However, this does not indicate whether the money has been used in the best possible way.
The Ministry of Agriculture also failed to correctly set up the system of subsidy distribution. The rules were not clear — for example, what a subsidy can be used for. The beneficiaries were only able to fulfil the basic conditions, but the MoA did not evaluate the specific subsidy applications. The MoA had also incorrectly set the checks on beneficiaries.
Thus, the subsidy system, as it had been set up, resulted, for example, in the reimbursement of costs which should not have been reimbursed. For example, some beneficiaries purchased items that were not related to the collection and distribution of food — frying pans, barbecue briquettes, two bicycles worth CZK 38 000, a leather sofa and a coffee table for a total of approximately CZK 22 000 and so on. In addition, the MoA paid a subsidy for the purchase of a warehouse, which the beneficiary had bought for CZK 4.4 million. This was almost CZK 1.3 million more than the expert’s report stated. The total costs of the beneficiaries, which the MoA should not have recognised, amounted to CZK 11.3 million.
Currently, the administration of these national subsidies is managed by the State Agricultural Intervention Fund (SAIF). Some of the shortcomings described have been addressed in the 2022 subsidy rules. However, for example, there is still no clear indication of what a subsidy can be used for, and problems also remain in the evaluation of the benefits of the aid or in the control system.
In the case of the MoLSA, the inspectors found that the Ministry had set the conditions for food and material assistance in accordance with the requirements of the European Union. However, the MoLSA had prepared the system for evaluating the distributed money in such a way that it could not realistically evaluate what benefits the subsidies generated. Also, the MoLSA had no way of verifying whether food aid truly reached those in need — partner organisations decided who should receive food aid. In total, between 2014-2020, the MoLSA distributed CZK 390 million from the “Food and Basic Material Assistance Operational Programme”.
1] Programme 18 “Support of the activities of food banks and other humanitarian actors“.
2] “Food and Basic Material Assistance Operational Programme”.