Subsidies for the promotion of agricultural products: one recipient ignored the winning tender price, others selected companies without tendering

Press release on Audit No. 21/15 of 27 June 2022

The SAO examined the state and European Union funds earmarked for the promotion of agricultural products and foodstuffs between 2016 and 2020 worth a total of CZK 1.4 billion. The Ministry of Agriculture (MoA), the State Agricultural Intervention Fund (SAIF) and selected beneficiaries, among others, the Agrarian Chamber of the Czech Republic and the Food Chamber of the Czech Republic, were audited. The auditors found serious shortcomings in promotion programmes co-financed by the EU, which received CZK 268 million from European subsidies. The deficiencies mainly related to public procurement in which the beneficiaries selected suppliers without a tendering procedure or concluded a contract at a higher than the winning tendered price. The MoA then erred in how it distributed subsidies to non-governmental non-profit organisations. The system of evaluation of grant applications was non-transparent, the MoA also neither defined the conditions for selecting suppliers nor set limits for eligible expenditure.

The Agrarian Chamber selected a service supplier for a three-year programme “White Plus” to support the consumption of milk and dairy products worth CZK 11 million without open competition, although it was its duty to announce the contract. Instead, it directly approached three agencies. Furthermore, the SAIF, which was responsible for the administration of the programme, did not detect this fault. Although the Food Chamber of the Czech Republic launched a public contract under the programme “Quality from Europe — tastes with a story”, it concluded the contract with the winner of the tender with the price being CZK 10.8 million higher than the winning bid, even though the winning price should not have been exceeded, as follows from the tender documentation.

In 2016 and 2017, the MoA set up a non-transparent system for the evaluation of grant applications for grants to non-state non-profit organisations, did not define more detailed conditions for the selection of suppliers and did not set limits for certain types of eligible expenditure that applicants could claim for reimbursement under the subsidy. This practice changed significantly only in 2018 on the basis of the SAO’s recommendations from the previous 2015 audit.

The MoA also under-evaluated the benefits of national subsidies for non-governmental non-profit organisations. It also did not require the beneficiaries to submit relevant supporting documents during the final billing. Without them, however, it is not possible to verify whether the beneficiary complied with the conditions for drawing the subsidy, in particular whether the expenditure of the beneficiaries was linked to the project. In the audited years, the MoA distributed CZK 124 million on subsidies to non-governmental non-profit organisations.

When auditing the marketing support for quality labels KLASA, Regional Food and BIO, it turned out that both the SAIF and the MoA responded to the SAO’s recommendations from the 2013 audit conclusions. They took corrective measures to prevent a recurrence of serious problems found in 2013. Between 2016 and 2020 an amount of more than CZK 1 billion went to this support from the budget of the Czech Republic.

Communication Department
Supreme Audit Office

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