The Ministry of Industry and Trade has failed to address their added value in promoting ICT projects, the main objective was drawdown of EU funds.

Press release on audit No 18/29 – 21 October 2019

The Supreme Audit Office scrutinized the aid aimed at the ICT sector, which was distributed by the Ministry of Industry and Trade (MoIT) in two programming periods from operational programmes “Entrepreneurship and Innovation” and “Entrepreneurship and innovation for competitiveness”. Since 2007, the MoIT has received 727 projects for more CZK 7.3 billion, of which over 5 billion was financed from the EU budget. At the time of the preparation of the operational programmes, the state assumed that the public funding would contribute to the development of the ICT sector in the Czech Republic and help the competitiveness of Czech companies. However, the share of added value of this sector to GDP had been growing over the years, regardless of the aid granted. In addition, the MoIT assessed the success and efficiency of the programmes, in particular according to whether they were successful at drawing their allocated funds and not according to what benefits they brought.

Appropriations under the operational programmes were primarily to be allocated to SMEs, e.g., for the development of data centres, new ICT solutions, or centres for shared services. The subsidies were intended to provide Czech companies with a better position on the market. But in many cases, large multinational corporations based outside the EU also benefited from public funds. Thanks to the subsidies, these corporations saved costs for their projects. Almost 12 thousand new jobs were created through the aid, however, the labour market was experiencing a significant long-term shortage of IT professionals. Moreover, the promotion of employment was not a priority objective for either of the operational programmes.

Promotion of competitiveness in ICT is based on the “Europe 2020” strategy. The impact of the aid on the competitiveness was assessed by the (MoIT) according to the value added of IT services to GDP. This was continuously growing between 2011 and 2017, but independently of the aid granted. This is not indicative of the impact of the supported projects.

The Ministry of Industry and Trade, the CzechInvest Agency, and the Business and Innovation Agency assessed the success of the programmes in particular according to the volume of resources used. This also corresponded to the approach to the project selection and review. The aid was allocated also to projects which had not been recommended by the evaluation committee. In addition, the recipients provided unrealistic data and the check of the projects was mainly of a formal and inconsistent nature.

For example, the subsidy worth more than CZK 31 million was allocated for purchase of second-hand aircraft and a construction of a hangar, which were supposed to be used by the company for the extension of the services provided for the certified replacement of aircraft engines. The reimbursement of the project took place despite the fact that it was not clear whether the purchased airplane had been used for the project’s needs. Moreover, the project had changed in the final phase and no longer anticipated the purchase of additional equipment needed for the replacement of the engines.

The subsidy was also distributed to a project of a data centre, with more than CZK 1 million being allocated to the purchase of a mobile camera, a professional drone, or a digital reflex camera. However, the MoIT had not identified the need for such equipment before.

Communication Department
Supreme Audit Office

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