Financial aid for the demolition of buildings in socially excluded areas: benefits were minor and money was spent on demolitions even outside excluded areas
Press release on audit No 19/22 – 10 August 2020
The Supreme Audit Office has examined state budget aid intended for the demolition of buildings in socially excluded areas. Within a special sub-programme, the Ministry of Regional Development (MoRD) allocated CZK 100 million to be spent on demolitions annually in the period 2016-2021. The SAO has examined a total of 23 demolitions amounting to over CZK 46 million. The audit revealed that the aid helped municipalities to get rid of unnecessary buildings and to revitalise the sites. However, the benefits of state aid in dealing with socially excluded areas were minor, moreover, the MoRD did not monitor the effects of the aid it had provided. In addition, aid allocated for demolitions was not linked to other measures of the Czech state dealing with socially excluded areas. Only a small number of municipalities had shown an interest in financial aid for demolitions.
The aid was intended to cover the demolition of buildings in municipalities with socially excluded areas and, where appropriate, to prevent such localities from arising in risk areas. However, the MoRD did not determine that the site chosen for demolition had to be located directly in a socially excluded area or at least in a neighbouring area. Of the 94 demolitions for which aid was allocated in the period 2016-2018, 37 demolitions took place in municipalities with no socially excluded areas whatsoever.
The MoRD also failed to monitor the impact of state aid on socially excluded areas. It was only interested in quantitative indicators for individual demolitions, such as the size of the revitalised area.
Moreover, the MoRD did not sufficiently define the conditions for the drawing of aid. Only buildings for accommodation or recreational purposes and accommodation establishments were meant to be demolished. However, in some cases, the MoRD provided financial support for the demolition of garages or farm buildings.
Each year, the MoRD allocated CZK 100 million for demolitions in socially excluded areas. However, between the years 2016 and 2018 only 38% of this amount was actually used. The reason for this was, on the one hand, a lack of interest in aid from the part of municipalities, on the other, an overvaluation of expected demolition prices. The actual prices were lower by around 60%. The MoRD did not address the low rate of the use of aid for demolitions, so the same amount of aid is planned for demolitions in the subsequent years.
According to the SAO, the MoRD’s control system had failed. For example, the MoRD did not check the procurement procedures on the part of the beneficiaries. However, procurement procedures are the only way to ensure the most favourable demolition price. The MoRD did not set a limit on costs or a maximum unit price.
SAO’s audit of public procurement procedures on the part of two beneficiaries found that, in the case of demolitions totalling CZK 9 million, conditions for allocating aid were breached by failing to award the contract in an open procedure. Therefore, the SAO notified the financial authorities of a suspected breach of budgetary discipline.
Supreme Audit Office