The SAO audited funds earmarked for improving competitiveness of agriculture and forestry under the Rural Development Programme
Press Release – November 15, 2011
The audit aimed at state budget funds and financial resources from the European Union provided for implementation of projects in the area of improvement of competitiveness in agriculture and forestry of the Czech Republic (Axes No. I of the Rural Development Programme for period 2007–2013) and scrutinized whether the funds had been utilized in agreement with the pre-set conditions.
By the end of 2010, the allocation from the Programme reached over CZK 7.1 milliard. The auditors scrutinized projects, which utilized more than CZK 4.6 milliard in total by the end of 2010. The audit aimed at 36 applicants and 66 projects with the amount of expenditures totalling to CZK 337,068,247 (7.3 %).
The audit findings indicated that the Ministry of Agriculture, as the managing authority of the Programme, had set up project selection criteria that were too general and with no relationship to the specific projects and with almost no connection to the project results.
The monitoring indicators chosen by the Ministry did not allow the quality and result of implemented projects to be assessed, thereby also preventing assessment of the fulfilment of the objectives of the entire Programme. The output and result indicators were set up rather as economic or statistical indicators and did not allow verification of the effectiveness and efficiency of the expended resources.
The audit conclusion stated that the Ministry of Agriculture had not dealt with the shortcomings of the internal control system for an extended period of time, namely methodological findings and preliminary audits, nor did it conduct public administration reviews at the State Agricultural Intervention Fund.
The shortcomings that the SAO discovered with respect to the State Agricultural Intervention Fund or at the Ministry of Agriculture consisted in the incorrect setup of project selection criteria, insufficiently conducted administrative reviews of projects (especially in the area of public procurement audits), and eligible expenditure audits.
As a result, the State Agricultural Intervention Fund illegitimately paid out CZK 7.4 million to three beneficiaries. The State Agricultural Intervention Fund also incorrectly assessed the admissibility of seven projects purposively divided up by three applicants in order to obtain higher subsidies, did not terminate their administration and paid out almost CZK 59 million to these projects illegitimately, thereby breaching the budgetary discipline.
In spite of the shortcomings mentioned above, the SAO describes the implementation systems of the audited projects as basically functional and effective. However, several serious shortcomings were revealed at the State Agricultural Intervention Fund, especially in the area of the administration of applications and verifying the expenditures’ admissibility and eligibility. But such shortcomings do not jeopardize the EU funds management in the Czech Republic.
The auditing period was performed from December 2010 to July 2011. The audited period extended from 2008 till half of 2010; where relevant, the preceding period and the period until the auditing operation’s completion were also scrutinized. The audited bodies were the Ministry of Agriculture, the State Agricultural Intervention Fund, and 36 selected subsidy recipients. The auditing operation was included into 2010 Audit Plan of the SAO under No. 10/28. Jiří Kalivoda, Member of the SAO Board, managed the operation and prepared the audit conclusion as well.
Communication Department
Supreme Audit Office