Almost CZK 16 billion for rural development: impact of the support cannot be assessed, projects supported without specific objectives, incorrect data in reports from beneficiaries

PRESS RELEASE ON AUDIT NO 23/06 – 18 March 2024

The Supreme Audit Office (SAO) focused on the state and EU funds spent on the Rural Development Programme 2014-2020. It audited selected measures for which a total of CZK 15.7 billion had been paid out by September 2023. These funds were mainly used to support investments by agricultural enterprises and to support non-agricultural activities and agri-tourism. It also audited 20 projects of six selected beneficiaries. However, it is not possible to assess how this support contributed to rural development. Neither the Ministry of Agriculture (MoA) nor the State Agricultural Intervention Fund (SAIF), as the provider of the subsidies, required the beneficiaries to set specific and measurable objectives for their projects, which the support was intended to achieve. The so-called monitoring reports are supposed to be used to evaluate the project. The SAO found that the beneficiaries often provided incorrect data in these reports and that SAIF did not work with these reports at all. It only checked whether they were submitted by the deadline. While the beneficiary risked a sanction for not submitting the report, there was no sanction for incorrect information.

The audit showed that the MoA did not define the objectives of the programme in a specific and measurable way to assess the benefits of the support provided for rural development. The MoA has essentially abandoned the identification of such benefits even at the level of individual projects. The data required in subsidy applications and monitoring reports are not linked to each other and it is therefore difficult to verify whether a project has achieved the intended objective for which it was selected for support.

While the situation was better in the case of support for investments in agricultural enterprises, and in five of the seven projects audited it was clear and verifiable how these investments contributed, for example, to higher farm productivity or to the care of livestock, the opposite was the case in thirteen projects supporting non-agricultural activities and agri-tourism. None of them was assessed by the SAO auditors without reservation. The beneficiaries did not set specific and measurable objectives to assess the effectiveness of these projects, nor did they significantly achieve the expected economic results from the non-agricultural activity for which they had received support. The SAIF also approved to support projects for which too general objectives were already stated in the subsidy application, such as 'the satisfaction of citizens and visitors to the village will be achieved...' or 'the potential of the countryside and the rural environment will be exploited...the quality of life in rural areas will be improved'.

The SAO auditors were surprised by the number of errors in the monitoring reports. Erroneous data were found in half of the 20 projects audited, and in some cases the incorrect data were quite obvious. For example, beneficiaries did not report sales for the project but for the whole enterprise; in another case, they stated that they had not generated any sales from the non-agricultural activities for which they had received subsidies, although the SAO audit showed that they had. The SAIF did not check the content of the reports at all and therefore did not request their revision. The SAO auditors were even told by officials of the SAIF that they did not use the data in their activities at all. They only checked whether the reports were submitted by the deadline. And while the failure to submit the report exposed the beneficiary to the risk of a penalty, incorrect data did not. Such monitoring not only fails to fulfil its purpose but is, in effect, an unnecessary administrative burden.

The SAO also considers a significant shortcoming that, in three cases, neither SAIF nor the MoA reported to the prosecuting authorities facts which suggested that the applicant had committed a criminal offence. This obligation is imposed on them by law. These cases concerned lodged appeals against the refusal to grant a subsidy. The SAO audited a sample of 15 projects and found out that in four cases the materials intended for the review of the decision not to grant a subsidy contained a description of facts suggesting that a criminal offence had been committed. The MoA and the SAIF were both demonstrably in possession of this information. Nevertheless, the SAIF filed only one criminal complaint.

Communication Department
Supreme Audit Office

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