Ministry of Agriculture spent CZK 1,400 million on food propagation campaigns during six years; Indian massages reimbursed as well

PRESS RELEASE on Audit No. 13/36 – August 11, 2014

The Supreme Audit Office (SAO) scrutinized communication campaigns, which promoted the labels Klasa, Regional food, and Wines from Moravia, wines from Bohemia during the audited period 2008–2013. The food propagation campaigns cost CZK 1,500 million in total and were funded by the Ministry of Agriculture, the State Agricultural Intervention Fund, and the Wine Fund of the Czech Republic. Out of the total amount, the Ministry of Agriculture provided CZK 1,400 million. The SAO scrutinized costs of communication campaigns, which had amounted to CZK 1,300 million.

The biggest problem seems to be the fact that objectives and goals were not defined specifically so initial and finishing figures could not be compared during the evaluation phase. That is why it is hard to assess, how much the communication campaigns actually helped to reach the goals. The Ministry of Agriculture, the State Agricultural Intervention Fund nor the Wine Fund researched the campaigns’ impacts. In the last three years, the food labels’ support cost CZK 750 million, while for the Klasa and Regional Food labels, the Ministry and the State Agricultural Intervention Fund paid CZK 215 million annually. In case of these food labels, it is not clear how and whether the campaigns fulfilled the objectives.

Other problems were found in tenders that had been organized to select agencies for the communication campaigns. For example, the Ministry of Agriculture and the State Agricultural Intervention Fund awarded six above-the-threshold public contracts and 108 contracts with estimated prices below the threshold in the period 2009–2011, which should have supported the labels Klasa and Regional Food. With all six above-the-threshold contracts, the Ministry and the Fund violated the Act on Public Contracts as the awarding procedures were not transparent. Out of the 108 below-the-threshold orders, 78 were ordered directly from one particular supplier – that is without competitions of several candidates.

With some projects supporting the labels Klasa and Regional Food in the period 2009–2013, the State Agricultural Intervention Fund reimbursed works worth CZK 96.3 million in total. But the invoiced works were often not finished or had not started at all and some works were beyond the agreements or were not included in the projects’ subject matters. For example, the Fund paid commission fees to an agency and bonuses to a sub-contractor in the total amount of CZK 840,000 but these were not mentioned in the original agreement. The Fund also paid CZK 171,000 for three excursions for journalists in spite the excursions were only remotely related to the Klasa label propagation. During an excursion to a dairy, the participants also visited spa and got Indian massages. Last but not least, among the project’s outputs were articles, which did not mention the Klasa label at all.

In the period 2006–2009, the Wine Fund of the Czech Republic failed to fulfil its duty as a public contracting authority and did not organize public tenders for communication campaigns, which promoted the label Wines from Moravia, wines from Bohemia. The propagation campaign cost nearly CZK 198 million, out of which the Fund paid CZK 42 million without having concluded any written agreements.

Investment and promotion measures in wine-making industry have recently been scrutinized by the European Court of Auditors (ECA). The audit examined the questions posed in its title, “Is the EU investment and promotion support to the wine sector well managed and are its results on the competitiveness of EU wines demonstrated?”, and aimed at beneficiaries in Austria, France, Italy, Portugal, and Spain. ECA’s Special Report No. 9/2014 exemplified a case of a French beneficiary who reimbursed EUR 3,400 for “informational excursions for journalists and exporters” but the amount was actually coincident with the cost of three tickets to the French Open tennis tournament.

Communication Department
Supreme Audit Office

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