Supporting entrepreneurship for competitiveness: the European Commission has suspended the payment of funds for a year and a half due to errors..

Press release on audit No 19/01 – 11 November 2019

The Supreme Audit Office (SAO) focused its attention on funds for technical assistance allocated from the Operational Programme Enterprise and Innovations for Competitiveness (OPEIC)1. The majority of these funds are provided by the European Union and the Ministry of Industry and Trade (MoIT) uses them to manage OPEIC. The funds are mainly used for the salaries of the staff managing the programme, which represents about 75% of the allocated CZK 3.8 billion. Moreover, they are also used for promotion, education, checks, analyses, and so on. The implementation of the OPEIC stalled and the programme in this respect took the last place in comparison to other operational programmes. The SAO also informed the Tax Office of a suspected breach of budgetary discipline amounting to CZK 1.3 million by using funds for educational events which were in fact social events.

The OPEIC is the third most important operational programme in terms of volume of money, with nearly CZK 112 billion allocated to the Czech Republic for the 2014-2020 programming period. However, the use of these funds stalled. At the end of the first quarter of 2019, the MoIT decided to allocate almost CZK 57 billion, which represented roughly 54% of all appropriated funds. The beneficiaries received less than CZK 23 billion in total, i.e., around 22% of available funds. In terms of drawdown of funding, the OPEIC therefore occupies the last place in comparison with the other nine OPs. Due to a high rate of project errors (14%), in April 2018, the European Commission decided to suspend payments from the OPEIC for the following year and a half.

The technical assistance should be used to manage the programme effectively and thus ensure a low error rate. The SAO was interested how the MoIT fulfilled the objectives of the assistance. The MoIT defined a portfolio of indicators according to which those objectives could be evaluated, but the actual results and benefits could not be evaluated based on the portfolio. In addition to this, the Ministry did not fulfil a number of sub-indicators that it had set for itself. For example, one of the indicators was the number of inspections to be carried out by the MoIT during the programming period, which was set to 2 400, but only 366 inspections were carried out by the end of 2018, i.e., halfway through the implementation period. The MoIT also failed to stabilise staff carrying out the administration of the programme and its projects, as planned. The problematic progress of the OPEIC is a result of these shortcomings.

For the audit, the SAO has also selected a sample of projects amounting to almost CZK 60 million. The auditors have found that the MoIT paid over CZK 1.2 million for three so-called “annual seminars” of an educational nature. In fact, these were social events for staff managing the OPEIC – they were held after working hours, lasted until the night, and the expenditures associated with these events were spent on reservations at restaurants and clubs, on catering services, DJ production, photo booths, and so on. Expenditures on educational activities and lecturers were nil. The SAO assessed the use of funds for such events as a possible breach of budgetary discipline and notified the relevant tax authority. “The use of public resources for parties instead of education is inadmissible and is a typical example of ineligible expenditure”, stated the Member of the SAO Jan Kinšt, who was in charge of the audit.

In the case of the other audited technical assistance projects, the SAO did not find any major shortcomings.

1] The programme Enterprise and Innovations for Competitiveness is aimed at enhancing the innovation performance of enterprises, at capitalizing on the results of industrial research, and at the development of small and medium-sized enterprises (SMEs).

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