Rural Development Programme: EU funds also utilized in projects with little effect
PRESS RELEASE on Audit No. 14/26 – June 15, 2015
The Supreme Audit Office (SAO) scrutinized management of EU funds under the Rural Development Programme and aimed at achieving the objectives and sustainability of the projects under the Programme within the period from 2010 to 2013. The funds were distributed by the Ministry of Agriculture. Auditors selected and scrutinized 120 projects, which had utilized CZK 375 million in total.
Rural Development Programme is supposed to help modernize agricultural holds, boost entrepreneurship, develop tourism, and develop rural areas. By setting inappropriate rules the Ministry of Agriculture also enabled funding of projects, which did not serve such a purpose. For example, when scrutinizing 36 supported biomass boiler rooms, auditors revealed that 20 installations were situated in family houses, in spite the grant had originally been intended to support businesses. Moreover, after the compulsory period of five years after the projects had been implemented, beneficiaries sometimes sold these boilers worth hundreds of thousands of CZK for a symbolic price CZK 10.
The provisioning rules were set in a way that enabled the beneficiaries who implemented projects aimed at nature trails constructions to include other works in the projects, such as a lookout tower and a summer house. For example, with a project with allowances in the amount of CZK 1.3 million that originally aimed at a construction of a 190-metre nature trail, a lookout tower was constructed, which cost 87 % of the reimbursed amounts. The nature trail itself was hardly visible in the surroundings and there were no educative boards. The programming rules did not set price limits for using the allowance to procure accommodation beds and as a result these costs ranged from CZK 396,000 to CZK 1.4 million for one (!) bed. Auditors also revealed that allowances were used for other purposes, for example in case of a grant for constructions and technologies used in animal production, the Ministry also reimbursed a silage slab, which was not intended for animal production at all.
The Ministry of Agriculture was not provided with accurate and sufficient information about the Programme’s advances or efficiency, which could be used to evaluate the subsidies’ effectiveness so that the Ministry would adjust its strategies. External evaluating partners sometimes selected too small sample respondent groups to carry out evaluations – for example, in one case the external evaluator called 15 selected respondents and used their answers to evaluate consequences of a measure, which should have impacted 119,000 people and was planned funding from public budgets would amount to EUR 17 million.
Auditors concluded that the Ministry of Agriculture had ill-defined the programming rules as well as unrealistic objectives of the Programme and as a result, the objectives had to be adjusted at later stages. For example, one project aimed at creating 22,000 new job opportunities but in the end, the Ministry decreased the targeted number to one-tenth of the original number, i. e. to only 2,000 job vacancies.
The SAO also audited the State Agricultural Intervention Fund, which was the Paying Agency for the Programme. Auditors concluded that with audited projects, the control system provided by the Fund was only partially effective. For example, the Fund provided more than CZK 6 million to an applicant and did not terminate administration of the application, which did not comply with conditions for receiving the aid. The SAO notified the competent financial authorities of suspected infringements of budgetary discipline in the total amount of CZK 8.5 million.
Auditors also scrutinized beneficiaries under 34 selected projects and revealed that with two projects, the achievements were not fully maintained for the whole sustainable period. With one beneficiary, the State Agricultural Intervention Fund reimbursed costs of much more materials than were actually used during the construction as documented in the building documentation.
Communication Department
Supreme Audit Office