Finance Ministry suspends EU fund license

The Czech Republic could lose billions of crowns in EU funding if it fails to prove spending thus far has been effective and transparent

Složité penězovody vedoucí z Bruselu do Česka formou dotací z evropských fondů se mohou lehce zadrhnout. Není ani vyloučeno, že by již vyplacené peníze mohly z Česka proudit zpátky do Bruselu. | na serveru Lidovky.cz | aktuální zprávy Složité penězovody vedoucí z Bruselu do Česka formou dotací z evropských fondů se mohou lehce zadrhnout. Není ani vyloučeno, že by již vyplacené peníze mohly z Česka proudit zpátky do Bruselu. | foto: © ČESKÁ POZICE, Jan KunderaČeská pozice
Složité penězovody vedoucí z Bruselu do Česka formou dotací z evropských fondů se mohou lehce zadrhnout. Není ani vyloučeno, že by již vyplacené peníze mohly z Česka proudit zpátky do Bruselu.

Within days the EU executive arm is to send a letter to Prague explaining why it is suspending funding for two operational projects in the Czech Republic in the areas of environment and regional development. Funding for business development and innovation, transport, and education is also in the balance.

The European Commission plans to inform the Czech government that it will suspend transfer of funds for two EU operational programs: the Environmental Operation Program (OPŽP) and the Northwest Regional Cohesion Council for the development of the northwest region of the Czech Republic.

Problems with the environmental operational program arose in connection with the corruption scandal over the State Environmental Fund (SFŽP) which cost former environment minister Pavil Drobil (Civic Democrats, ODS) his job. The Finance Ministry consequently suspended the license for payments to the Environmental Operation Program.

Finance ministry backs EU criticism

The Finance Ministry, which is responsible for distributing EU funds to the appropriate ministries or regional ‘These suspicions could influence the legitimacy and legality of spending on the whole operational program’administrations, says that the Environment Ministry still has not submitted a satisfactory response to questions as to whether suspected cases of fraud were uncovered during audits of spending on the Environmental Operation Program.      

“These suspicions could influence the legitimacy and legality of spending on the whole operational program, and therefore the Finance Ministry — as the distributing and certification body — is not in a position to be able to renew the license at the present time,” ministry spokesman Ondřej Jakob told Czech Position on Friday. “This means that in the meantime the Finance Ministry will not ask for the reimbursement from the structural funds of finances spent on this program.”

Jakob said that the Environment Ministry had promised to present the Finance Ministry with a plan for eradicating the shortcomings in the distribution of the environment funds by Friday, but the plan did not arrive. “As soon as [it comes], the Finance Ministry will assess whether all of its demands have been fulfilled. Once this happens, the license will be renewed,” Jakob said.

The Environment Ministry, however, claims to have been unaware about any impending sanctions.

“We’re surprised by the European Commission’s intention. It’s not clear to us who the reproach is addressed to, and we don’t see any reason for suspending payments for the environmental program,” Ministry of Environment spokeswoman, Michaela Jendeková, told Czech position in an email. Jendeková says that there were no specific complaints at the meeting of the executive and coordinating commission attended by officials from Brussels at the beginning of April.   

According to Jendeková, suspension of the license for payments does not directly affect EU grant recipients because projects which have been granted EU funding are guaranteed money from the state budget. However, if the Czech Republic fails to submit proof to Brussels that there was no wrongdoing, the government may be forced to return EU funds that have already been paid into the state coffers.

According to Czech Position’s information, the payment of EU funds amounting to around Kč 6 billion has been withheld. In the period 2007 -2013, the Czech Republic has the possibility to draw up to Kč 121 billion.  

Northwest could lose out      

The second program which stands to lose EU financing is the Northwest Regional Cohesion Council for the development of the Ústi nad Labem and Karlovy Vary regions in the northwest of the Czech Republic. From available information, it appears that Brussels decided to suspend funding for the program after police brought corruption charges at the end of March against the program’s director, Petr Kušnierz, and six others; Kušnierz and four others were remanded in custody.

Senator Jan Horník (Mayors and Independents), who was at the meeting at the beginning of April attended by EU officials from Brussels, confirmed that there was a heated debate about the Northwest Regional Cohesion Council: “I was sitting immediately next to a European Commission representative who carefully noted everything. Therefore, it’s not by chance that the payouts are to be suspended,” Horník said, adding that the situation in Ústi nad Labem and Karlovy Vary regions is bad, but the politicians have the tendency to play down the seriousness of problems.     

Future finding on the line 

Petr Zahradník, a specialist on EU funds with the Česká spořitelna bank, is convinced that the suspension of the cash flows from Brussels isn’t simply a reaction to the corruption scandals involving Kušnierz and co., and the State Environmental fund (SFŽP) but is also connected with the negative evaluation of the grants drawn by the Czech Republic between 2004 and 2006. Zahradník also points out that the European Commission is analyzing the system for financing in the budget period 2007 to 2013.

Brussels’ criticism of the current distribution of EU funds in the Czech Republic could fundamentally influence the amount of funds allocated to the country in the 2014–2010 EU budget period, Zahradník says. The EC is due to present the basic parameters of the next budget, including the volumes of finances for specific areas of spending, in June. “The Czech Republic receives some 7.8 percent of all the money for the 27 [member states], whereas Prague provides 1.8 percent of the total EU budget contributions,” Zahradník says.         

If the Czech Republic cannot properly justify why the larger budget contributors should put money into less developed regions, and also demonstrate that the funds are distributed efficiently and without machinations along the way, the country can expect to receive far less money from Brussels in the next budget period.   

Total funds the Czech Republic is entitled to draw in the 2007 – 2013 EU budget period

Transport Operational Program – Kč 150 billion
Environmental Operational Program – Kč 121 billion
Business and Innovation Operational Program – Kč 100 billion
Operational Program for Research and Development for Innovation – Kč  50  billion
Regional Operational Program Severozápad – Kč  18 billion