The extensive subsidy system is costly and difficult to manage. The administration of European programmes from 2014 to 2020 cost almost CZK 30 billion
EU report 2023 – Report on the financial management of European Union funds in the Czech Republic (27 November 2023)
Today, the SAO publishes its 16th report on the financial management of EU funds in the Czech Republic - the EU Report. It assesses how the Czech Republic manages the EU budget subsidies for various projects. The fact that this is not a small amount of money is evidenced by the fact that, for example, in the 2014-2020 programming period (OP14+) alone, beneficiaries of subsidies had drawn CZK 579 billion allocated by the Partnership Agreement by the end of March 2023. According to the SAO, the relatively broad scope of all public support is a major problem. For example, 273 subsidy titles were co-financed from EU sources in the 2007 to 2013 programming period and 188 titles in the 2014 to 2020 period. Such an extensive system is very costly and inherently increases the risk of unsystematic support. The cost of administering programmes co-financed by the European Structural and Investment Funds for 2014-2020 was estimated by the SAO at almost CZK 30 billion.
"The system of subsidies is complicated, excessive and, as a result, difficult to manage. The more complex the subsidy system is, the more difficult it is to ensure the meaningfulness and mutual synergy of the provided support and to reduce the administrative burden that subsidy recipients often pass on to the 'subsidy business' companies," commented Miloslav Kala, President of the SAO, on the findings of the EU report.
The European Commission also published a study some time ago, in which it highlighted the administrative costs of the seven-year period of OP14+. For the Czech Republic, the Commission quantified the expected labour intensity for the programme period as a whole at 34,300 full-time staff. These activities were generally carried out by highly qualified civil servants, which placed considerable demands on financial resources. "According to this study, the administrative costs of reallocating one million euros, i.e more than 25 million crowns, were calculated at almost 750,000 crowns in the Czech Republic," said SAO President Miloslav Kala.
The Commission estimates that administration costs could be reduced by a quarter. For example, grant administrators should aim for a single structure for the administration of all the grants they provide. In fact, some authorities in the Czech Republic administer both national and 'European' subsidies, essentially 'operating' parallel administrative structures.
The "EU Report 2023" is based on 14 audits approved between 1 April 2022 and 31 March 2023, representing approximately one third of all audit reports approved by the SAO Board each year. This high proportion shows that the audit of funds related to the EU budget is a long-term priority for the SAO. In that time, the SAO audited almost 100 institutions and made a total of 427 audit findings. These were dominated by breaches of rules and contractual conditions (32.79%), ineffectiveness, wastefulness, inefficiency (32.55%) and breaches of legal and sub-legal standards such as laws, decrees and government regulations (23.19%).
According to the findings of the auditors, deficiencies related to ineligible expenditure or errors in public procurement are decreasing, but deficiencies in the management and control system are becoming more important: compared to six years ago, these deficiencies have more than doubled from 20.3% to 43.1%. Auditors repeatedly point out that programme objectives are poorly set and inappropriate monitoring indicators are used. Although the Czech Republic has learned over time to draw subsidies quickly and smoothly in terms of achieving adequate "value for money", the SAO still finds cases where the actual benefits of the support are at least questionable.
Communication Department
Supreme Audit Office