Information on irregularity assessments initiated in connection with EU funding14 November 2007
During the past few weeks, many baseless accusations were made in connection with the use of EU funding. This is why the National Development Agency summarised the measures taken in the interest of the regular use of resources.
In the first three quarters of 2007, the National Development Agency reported 46 cases approved funding over 10 000 EUR to the European Anti-Fraud Office (OLAF), in which cases irregularity assessment was carried out. These assessments identified irregularity in 29 cases. The Agency ordered the repayment of 780 million HUF at the end of September to close these cases. In the case of a part of the irregularities committed, beneficiaries had already launched project implementation prior to the submission of their respective project, whist in other cases did not implement their project at all. Missing data in financial registries or non-compliance with the assistance contract were other typical errors. The Public Procurement Act was violated in many cases, or beneficiaries submitted false or incorrect statements, or tried to include items of expenditure not eligible for support. There are a few serious cases among the assessed cases, which, in accordance with the Criminal Code, qualify as acts of fraud. In some cases, the same proprietor owned the companies implementing the project and invoices were circulated between the companies owned by this proprietor, whilst in other case the beneficiary attempted to secure EU funding to repeatedly pay for an investment that had already been completed. In the case of one of the machinery procurements, the date of installation preceded the date of purchase by 6 months. Out of the 46 assessments reported to OLAF, irregularities were not committed in 13 cases; the assessment of 4 cases is still in progress.
During the past few weeks – following the quarterly close – irregularities arose and criminal action was suspected in the case of three specific funding matters on the basis of news presented in the media. Gordon Bajnai, Minister of Local Government and Regional Development, carried out an extraordinary assessment in all three cases and ordered on-the-spot checks. The following specific findings can be made on the basis of assessment results:
On the basis of the on-the-spot check of the application of Disco Magic Ltd., the grounds for suspicion of irregularity seem justified; consequently, the National Development Agency initiated the irregularity procedure on 29 October. The deadline date for completing the procedure is 45 days; the Agency will inform the public on the outcome of the procedure on 13 December. If suspicion of irregularity is justified at the end of the procedure, the owner of Disco Magic Ltd. may even have to repay the full amount of assistance.
Criminal proceedings were initiated against the local government of Döge on the grounds of official fraud in the matter of the school restoration investment. The settlement was approved funding of 225 million HUF from the regional operational framework in 2005. In accordance with regulations concerning the criminal proceeding, the attorney’s office is not authorised to disclose information on the inquiry. As regards this particular case, the Ministry of Local Government and Regional Development offered to help the district attorney of Szabolcs-Szatmár-Bereg County, concurrently to which the Minister ordered an on-the-spot check in order to identify whether EU funding has been appropriately used. NDA commissioned VÁTI Hungarian Public Non-profit Company for Regional Development and Town Planning to carry out on-the-spot checks, as well as itemised document-based control within the framework of the irregularity procedure. In the course of control, VÁTI confirmed that construction work had been completed, the amount specified in invoices issued corresponded to the costs of services performed on the basis of the contract; therefore, the local government spent the funding in a regular manner, i.e.: restoration was carried out in compliance with the assistance contract, pursuant to which it is possible to close and pay for the project. However, since the district attorney’s office initiated the investigation against an unknown accomplice, identifying whether the funding has been used in a regular manner is only possible once the proceeding is officially closed. Therefore, during the so-called follow-up period, both VÁTI and the National Development Agency will pay special attention to this particular investment.
As regards the contract concluded by Exist Ltd. and the Hungarian Office for Territorial and Regional Development for building a recreation park and sports field, which however does not concern EU funding, the Minster ordered a repeated on-the-spot check to be carried out, in addition to requesting information from the authority responsible for payment and control, i.e. the Hungarian State Treasury. The Treasury repeatedly identified that the enterprise undertook operations in compliance with legislation applicable at the time and performed commitments assumed in accordance with the contract concluded. Otherwise, experiences gained from project verification justify the need to make Hungarian funding procedures increasingly comply with the more rigorous EU rules of procedure.