Developing a new provisioning methodology: the informational system worth CZK 872 million found too complicated and fragile, rules unenforceable

PRESS RELEASE on Audit No. 16/12 – June 12, 2017

The Supreme Audit Office (SAO) performed an audit at the Ministry of Regional Development and aimed at the project of developing a new methodology for provisioning EU subsidies, which was developed in the period from 2011 to 2016. The new methodology should have improved the management of EU funds, increase the transparency, and decrease the administration burden related to the provisioning process. An efficient tool for application of the new methodology was supposed to be the monitoring informational system called “MS2014+”, which would make it possible for the users to submit their applications for subsidies electronically. By August 2016, the Ministry had spent CZK 880 million on the new methodology development project, including CZK 872 million paid for the MS2014+.

At the end of 2016, the Czech Republic had spent 3.6 % of more than CZK 600,000 million allocated from EU funds within the new programming period 2014–2020. Auditors concluded that the lengthy process of evaluating and approving projects has an adverse effect on EU funds’ absorption. At the end of 2016, it took an average 198 days to approve a project, in spite the provider was obliged to make the decision “without undue delays”.

The new provisioning methodology should have been among measures ensuring better U funds’ absorption in the Czech Republic. However, rules for the EU subsidies’ provision (written on some 2,500 pages) are not unified or enforceable and there is no authority to monitor their observance. The exempt from the rural development programme regulations that the Ministry of Agriculture required and obtained at governmental level is among several factors contributing to the concept’s inconsistency.

Auditors aimed at the MS2014+ monitoring system and revealed many errors. The system was found too complicated because of many specific demands by individual users. Auditors criticized the instability of MS2014+ system: On average, it failed 1.5 times a day in the period from June 2015 to April 2016. For example, the lodging of applications for subsidies from the OPEIC1 was suspended for two months due to the system’s failure in September 2015. There were also frequent error messages, slow responses and freezes on the system. In view of the fact that the EU funds’ absorption is lagging behind in the new programming period 2014–2020, we should expect more demands for increased stability of the system with rising data amounts. In terms of quality, the system has not always provided comparable and reliable data.

The financing of the system is another problem because the EU was supposed to finance 85 % of its creation, but in the end its contribution was cut to 57 percent – for instance, due to disallowed ineligible expenditures or problems with public procurements. The final share of the EU's funding can change even more, depending on the decisions of the Office for the Protection of Competition and Police of the Czech Republic, which are investigating some of the tenders.

Communication Department
Supreme Audit Office

1] Operational Programme Enterprise and Innovations for Competitiveness.

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