Auditing operation No. 04/01
Funds spent on the River Systems Revitalisation Programme
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as „SAO“) for the year 2004 under No. 04/01. The auditing operation was managed and audit conclusion drawn up by Mr Zdeněk Brandt, the Member of the SAO.
The aim of the audit was to examine the management of the State Budget funds earmarked for the River Systems Revitalisation Programme.
The audited period covered the years 1999 to 2003 as well as previous periods in case of relevant connections.
The audited bodies were the Ministry of the Environment (hereinafter referred to as „ME“), the Agency for Nature Conservation and Landscape Protection of the Czech Republic, the Administration of Protected Landscape Areas of the Czech Republic, the Agricultural Water Management Authority and over thirty selected beneficiaries.
The audit detected shortcomings in the conceptual, management and control work of the ME which are partly to blame for allowing State Budget funds earmarked for the Programme (a total of over CZK 1.5 billion) to be in some cases used inefficiently and not entirely economically.
During 2003 the ME demanded a substantial increase in the Programme’s budget. Although the ME subsequently transferred a part of this increase, amounting to CZK 40 million, to another programme dealing with its investment needs, the resources were not fully used in the final phase. The ME justified the failure to use all the funds and the transfer of finance on the grounds of the municipalities’ abandonment of the originally planned wastewater and sewerage purification plants. The relatively short amount of time between the increase in the Programme’s budget and the subsequent transfer of a substantial part of the funds to another programme can lead to the conclusion that there were shortcomings in the ME’s management work when balancing the Programme’s financial requirements. The amount drawn in 2002 was also less than the adjusted budget.
The approved documentation from 2003, like the previous programme documents, set absolutely unrealistic aims for the Programme. The ME drew up an analysis requiring allowance for a need to achieve an ideal state of eco-system stability in the countryside. The ME referred to this analysis in the documents as the programme’s substantive aims or the key technical and economic parameters of sub-programmes. Neither the approved documentation nor any other documents contain an estimate of realistic substantive aims corresponding to the capacity of the State Budget and other constraints and problems that arise during revitalisation of the countryside’s water system. The ME did not specify gradual or partial aims that could be assessed at the end of the five years the Programme was so far designed to run.
Most of the Programme funds were spent on „supporting revitalisation of the landscape retention capability“; using finances planned for other purposes and sub-programmes that did not arouse sufficient interest among applicants. As part of this area of support, fishponds and water reservoirs were renovated or new ones built. The ME failed to deal with this disproportion between individual purposes (sub-programmes), even though the disproportion has been known for a long time.
The revitalisation studies that the ME finances and denotes as a fundamental document affecting decision-making on involvement in the Programme are not put to full use. Most applications are lodged for fishponds and reservoirs. These are local actions that are usually out of line with the objectives of the studies. The only effort to find a comprehensive solution for a larger territory, based on a prepared study, has so far come solely from the investors, which are state organisations.
During the phase of drawing up themes for actions and conceiving the investment objective, the defence of the intended project is often supported by generalised formulations. It is then difficult to clearly and accurately assess the results achieved by the revitalisation, i.e. the state of affairs actually achieved when compared to the desired state. As a rule, the final evaluation of the action focuses on assessing the action in technical construction terms. That does not touch on the question of achieving the objective that State Budget support was substantiated by, e.g. the development or conservation of valuable components of ecosystems. The ME failed to draw up a methodology for assessing the expected revitalisation effect or the results achieved by the action. It did not draw up principles for the ex post monitoring, including responsibility for performing the monitoring.
In the audited period, the ME drew up a number of evaluations of the Programme, but these focus mainly on analysing the drawing of finance. None of the materials contains an assessment of the efficiency, effectiveness and economy of the use of the provided subsidies or a quantification of the results achieved.
The audit of beneficiaries (investors) found a number of shortcomings. For example, they had not settled ownership relations in respect of the land that was affected by revitalisation even by the time of the SAO’s audit. They violated the act on public procurement, disregarded the conditions specified by a decision of the ME (deadlines, co-participation in the form of own finance, compliance with approved documentation). After the supported action was completed, they performed adjustments that reduced the revitalisation effect the action was included in the Programme for. In particular, owners frequently tried to evade the terms restricting the commercial use of fishponds.
One weighty finding of the audit at investors was that the activities such as tenders for contractors, contractual agreements with contractors and the actual performance of the action, including invoicing, were not always performed in a manner allowing the effectiveness and economy of the use of finances to be assessed and checked. Activities and supplies were not always properly divided up; evaluations of activities and supplies, award statements and fact-finding protocols were either absent or insufficient; and invoicing was found to be inconsistent with reality, in terms of both facts and times.
Most closely involved in the investor control system are centres of the Agency for Nature Conservation and Landscape Protection of the Czech Republic; staff of this Agency, or regional advisory bodies, usually performed several inspections of actions during their implementation and always performed the final audit. The ME proved that its specialist departments performed an audit. The vast majority of Tax Offices (representing the territorial organisational units of the first stage) that were so requested during final evaluation of actions did check that the terms of the Decision were complied with.
Given the quantity and gravity of the shortcomings found among support applicants, it is necessary that the ME perform analyses to improve the efficiency of the control system for the subsidies, including the control of the use of works and compliance with conditions after construction work has been completed. Monitoring of compliance with the terms of operation of works was not performed rigorously during most of the audited period.