SAO audited funds earmarked for transport infrastructure development projects

Press Release – February 21, 2011

From November 2009 to December 2010, auditors from the Supreme Audit Office (SAO) were performing audit operation No. 09/26 that aimed at financial resources drawn form regional operational programmes for transport infrastructure development projects implemented within the period 2007–2009. President of the SAO František Dohnal concluded: “Auditors found insufficiencies within the implementation systems of individual regional operational programmes. Nevertheless, the found insufficiencies do not perplex the utilisation of funds that are allocated form the EU.”

Among the audited bodies were Ministry of Regional Development, several beneficiaries of the subsidies, and regional councils of the following cohesion regions: South-east, South-west, Moravia-Silesia, North-east, North-west, Central Bohemia, and Central Moravia.

The system of issuing decisions on the funds’ allocation lacked a flexible approach. As a consequence, the funds provided by the Ministry for implementation of the regional operational programmes (ROP) were purposefully budgeted in higher amounts than it was necessary in the budgeting period. On average, regional councils of the cohesion regions utilised some 14 % of the allocated funds in 2007 and in 2008, only 9 % were utilized.

The Ministry of regional Development failed to establish, which of the issued methodology guides were the most binding upon the regional councils. Such a state makes it difficult for the National Coordination Authority to perform its duties as the central methodical authority within the implementation of the regional operational programmes.

Regional councils of the cohesion regions Central Moravia, South-west, Moravia-Silesia, and Central Bohemia violated the EU regulations when failed to provide the subsidy applicants with the exact and detailed information on applications and submissions of transport infrastructure development projects within the priority axes.

Auditors found serious insufficiencies of the project assessments with two regional councils. The Regional Council of Cohesion Region of Central Bohemia failed to assess the applied projects with a view to legal regulations for public support. Before 2009, the Council also failed to apply the monitoring criteria and provide assessment according to the proper financial management principles. Regional Council of Cohesion Region of South-west did not separate managing and monitoring functions of the subjects in four cases as they did not provide two independent evaluators of the submitted projects.

“The Czech laws omit the information, whether the subsidies should be provided by decisions on subsidies or through agreements. Nor are stipulated the basic conditions and terms of the documents. Regional councils usually set the terms in private agreements that were concluded according to the Commercial Code, which meant that apparently public legal issues were regulated by private agreements“, warned Dohnal.

The Regional Council of Cohesion Region of Central Bohemia failed to define monitoring indicators for some of the activities within the framework of the priority axe No. 1 of the Regional Operational Programme of Central Bohemia. Some indicators were not in keeping with the demand for a measurable progress that would relate to the starting situation and achieved goals. In the framework of Regional Operational Programme of Central Bohemia as well as Regional Operational Programme of North-east, applicants declared objectives, which were not applicable to the monitoring indicators.

Auditors also focused on the supervisory system, which had been applied before the subsidies were reimbursed to the final recipients. The Regional Council of Cohesion Region of Central Bohemia did not ensure separation of the approval and supervisory procedures. Auditors also revealed that internal regulations poorly defined the controlling methods and did not stipulate, which documents should be supervised within the fields of public support, public orders, and accounting.

“In several cases, auditors detected failures of the controlling systems, namely within the fields of public orders and realization of projects. Total unjust expenditures amounting over CZK 22 million were reimbursed to regional authorities, namely in tree cases in the Central Bohemian Region and in one case in the Vysočina Region. In this way, the budgetary regulations were violated on the parts of beneficiaries as well as the regional councils. The regional authority of Hradec Králové violated the budgetary rules when required the reimbursement of unjust expenses that amounted to CZK 400 thousand“, said Dohnal.

The auditing operation was included into 2009 Audit Plan of the SAO. Zdeněk Brandt, Member of the SAO Board, controlled the audit operation and prepared the audit conclusion as well.

Communication Department
Supreme Audit Office

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