Ministry of Agriculture failed to assess impacts of rural development projects; the absorption of EU funds in the current programming period delayed

PRESS RELEASE on Audit No. 16/14 – March 6, 2017

The Supreme Audit Office (SAO) audited subsidies provided within the LEADER initiative in the 2007–2013 programming period for projects, which aimed at improving the quality of life in countryside through the involvement of local entities. Auditors scrutinized whether the Ministry of Agriculture had sufficiently supervised the projects and also aimed at project selection procedures, the administration, and subsidy awarding procedures performed by the State Agricultural Intervention Fund and local action groups (LAGs) that operated in various regions of the Czech Republic. Auditors concluded that administrative procedures were duplicated and lengthy. The Ministry failed to manage and analyse the impacts of individual projects. Under the LEADER initiative, rural development projects were subsidised by a total amount of CZK 4,000 million from both EU and state budget funds.

Auditors found major errors in the system of awarding the funds in the new programming period 2014–2020. Drawing of EU funds has been delayed due to a more complicated system of distribution of subsidies. In the first three years of the new budget period, no funds have been spent on community-led local development. The SAO warns of the risk that it might be impossible to draw all allocated funds before the end of the programming period.

Rural development projects aim at the support of needs of regional citizens and entrepreneurs. That is why the strategic planning, the administration, and project selection processes must involve the local action groups, which bring together local stakeholders in the public and private spheres. The subsidies were allocated to 112 LAGs, which were covering about two thirds of the Czech Republic's territory. There were differences among individual LAGs both in the numbers of subsidised projects and in the amounts of drawn funds. Within individual LAGs, there were from 27 to 97 final beneficiaries’ projects and allocated amounts ranged from CZK 12 million to CZK 89 million.

The Ministry of Agriculture failed to set the maximum amount of funds that the local action groups could divide. Consequently, the LAGs had difficulties to set their goals, which often failed to be specific, measurable and realistic. Some objectives were not met, while others were exceeding the original expectations by hundreds of percent. LAGs also made errors in the projects’ evaluation. The Ministry failed to carry out a sufficient supervision and lacked enough data to assess whether the subsidised projects actually fulfilled regional needs.

For the current programming period, local action groups have carried out the necessary harmonisation of processes, but the situation has not improved yet. Moreover, there are delays in the approval of local development strategies. Contrary to the previous programming period, LAGs must set priorities and goals in accordance with conditions, which are sometimes established under four different subsidy schemes.

Communication Department
Supreme Audit Office

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