CZK 84,000 million from EU funds used to support economy and promote innovations, but it is impossible to verify the success

PRESS RELEASE on Audit No. 16/01 – 19. 12. 2016

The Supreme Audit Office (SAO) performed an audit at the Ministry of Industry and Trade and scrutinized how the objectives of the Operational Programme Enterprise and Innovations had been set and how the Ministry had supervised the implementation processes. The Operational Programme was implemented from 2007 to 2015 and aimed at strengthening of the Czech economy’s competitiveness and promoting innovations in the industry and services sector. To implement the Operational Programme, the whole amount of CZK 84,000 million was drawn from the EU funds. Auditors selected and scrutinized 61 projects with the total subsidies amounting to CZK 1,100 million and concluded that it could not be evaluated what contribution the whole programme had for the Czech economy and whether it was effective, because the Ministry had set the global aim as well as some partial objectives in very general ways. In addition, the Ministry also failed to perform a sufficient control in every fifth project.

Auditors scrutinized six priority axes of the Operational Programme Enterprise and Innovations. Each priority axe focused on partial objectives in specific areas and aimed at development of new companies, efficient use of energy, innovations, and creating better conditions for business and enterprise and services. Two out of the programme's six set priorities were met, three were partly met and one failed to be met completely. The priorities completely met took up more than 40 percent of the amount of money in the operational programme.

Auditors concluded that partial objectives of the priority axes were only set in general terms and could not be measured. With the global aim of the Programme, the auditors provided a similar conclusion. As a result, it could not be evaluated what contribution the whole programme had for the Czech economy or whether it was effective.

The Ministry of Industry and Trade set binding indicators as a condition for drawing of subsidies for the individual projects but their fulfilment could not have served as a basis for the evaluation of real contributions of the projects. For example, at the Centre for Information Technology and Applied Computer Science of Slavicin in the Zlin region with a subsidy in the amount of CZK 30 million, the binding indicator was defined as construction of a centre covering a certain floor area. The remaining targets were not binding so the project did not lose the subsidy despite not having met the plan that five innovating companies be based in the centre, 35 new jobs be created and that the centre would cooperate with universities. However, auditors found out that there were no innovating companies in the centre, no new jobs were created, and no cooperation was done with universities. As these goals were not binding, the project did not lose the financial assistance. Auditors also found projects where money designated for raising energy effectiveness in industry went to hotels, a water park, schools and a clinic.

Some of the projects' results, for example the number of newly created jobs and raising of sales, served only as 'monitoring indicators', which were not binding the beneficiaries and were only used to evaluate the overall success of the Operational Programme. For the monitoring indicators, the Ministry of Industry and Trade relied only on the information given by the recipients. The NKU disclosed that in many cases, the data were incorrect. For example, auditors revealed that several times fewer jobs than the 48,000 jobs reported by the employers have been created. The beneficiaries reported about created jobs in duplicative ways and the Ministry did not verify the accuracy of reports. In one case, the recipient reported 51 created jobs to the Ministry, but in reality, only 18 jobs had been created. The Ministry uses data on job creation for the presentation of results of the whole Programme.

The whole amount of CZK 84,000 million has been drawn from the Operational Programme Enterprise and Innovations even when the Ministry of Industry and Trade accepted a sanction in the amount of CZK 3,700 million for failing to keep some of the conditions of the Programme. The Czech Republic had to pay the amount from the state budget but the money from the sanction has been transferred to new projects. Auditors also found big regional differences in how the applicants were successful when drawing the allocated funds and different share rates of successfully completed projects. For example, drawings overreached CZK 19,000 per one inhabitant in Brno, while the total sum was slightly above CZK 2,500 per one inhabitant in Cheb.

Communication Department
Supreme Audit Office

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