EU REPORT 2016 - nku.cz · EU REPORT 2016, Opening message from the president 5 Opening message...

AUGUST 2016

EU REPORT 2016REPORT ON THE EU FINANCIAL MANAGEMENT

IN THE CZECH REPUBLIC

Czech Republic | Supreme Audit Office | EU REPORT 2016

Supreme Audit OfficeJankovcova 2170 04 Prague 7tel.: +420 233 045 111fax: +420 220 808 094www.nku.cz

1EU REPORT 2016

Opening message from the president of the Supreme Audit Office ................ 5

European Union Programming Period 2014–2020 .......................................... 9

A. Goals of the European Union ............................................................. 9

A.1 Europe 2020 policy ................................................................................................ 9

A.1.1 KeyprioritiesandflagshipinitiativesofEurope 2020 ............................................... 10

A.2 EU budget expenditure for Multiannual Financial Framework 2014-2020 ....................................................................................... 11

A.3 European structural and investment funds for period 2014–2020 ........................ 13

A.3.1 BudgetedallocationsforEUMemberStates ............................................................ 15

A.3.2 EUMemberStates’programmesinthe2014-2020programmingperiod ................ 16

B. Goals of the Czech Republic ............................................................. 21

B.1 Goals of the Czech Republic related to Europe 2020 ............................................ 21

B.2 Preparation for the 2014-2020 programming period in the CR ............................. 23

B.2.1 NationalDevelopmentPriorities ............................................................................... 23

B.2.2 PartnershipAgreementandtheCR’stotalallocation ............................................... 24

B.2.3 Programmes,theirfinancialframeworksandimplementationstructure ................. 27

B.3 Risks for the 2014–2020 programming period ..................................................... 30

B.3.1 RisksidentifiedbytheSupremeAuditOffice ............................................................ 30

B.3.2 AuditBodyoftheCR:Assessmentofthe2007-2013programmingperiod ............. 33

Report on the Financial Management of EU Finances in the Czech Republic for 2015 ..................................................................... 37

Summary of Section II.................................................................................. 37

CONTENTS

2 EU REPORT 2016

C. General information ........................................................................ 41

C.1 Current developments in the management of EU finances .................................. 41

C.1.1 CoordinatedEUeconomicpolicymeasures .............................................................. 41

C.1.2 ImplementationoftheConvergenceProgrammeoftheCzechRepublic ................. 42

C.1.3 AnnualreportsoftheEuropeanCourtofAuditorsforthefinancialyear2014 ........ 44

C.1.4 CurrentdevelopmentsintheprotectionoftheEU’sfinancialinterests ................... 46

C.2 European Union budget and its relation to the Czech Republic ............................ 49

C.2.1 EuropeanUnionbudgetrevenues ............................................................................ 49

C.2.2 EuropeanUnionbudgetexpenditure ........................................................................ 51

C.2.3 TheEUbudgetinrelationtotheCR .......................................................................... 53

D. Sector matters ................................................................................. 57

D.1 European Union budget revenues ....................................................................... 57

D.1.1 CurrentdevelopmentsinbudgetrevenuesintheCR ............................................... 57

D.1.2 EuropeanUnionregulationsinthefieldofMemberStates’revenues ..................... 58

D.1.3 CurrentdevelopmentsinthelegislationonrevenuesintheCR ............................... 62

D.1.4 Auditworkinthefieldofrevenuesin2015 .............................................................. 63

D.1.5 ECAauditworkinthefieldofrevenues .................................................................... 65

D.1.6 ProtectionoftheEU’sfinancialinterestsandthefightagainstfraud ....................... 66

D.2 EU Economic, Social and Territorial Cohesion Policy ............................................ 68

D.2.1 CurrentdevelopmentsinCohesion Policy ................................................................. 68

D.2.2 TheSAO’sauditworkinthefieldofCohesion Policy intheperiodunderscrutiny ..................................................................................... 73

D.2.3 AnnualreportsandopinionsoftheAuditBody ........................................................ 80

D.2.4 AuditworkbyEUauthoritiesintheCR ..................................................................... 81

D.3 EU Common Agricultural Policy and Common Fisheries Policy ............................. 84

D.3.1 CurrentdevelopmentsinCommonAgriculturalPolicy ............................................. 84

D.3.2 TheSAO’sauditworkinthefieldoftheCAPintheperiodunderscrutiny ............... 91

D.3.3 CurrentdevelopmentsinCommonFisheriesPolicy ................................................. 93

D.3.4 AuditworkbytheEUauthoritiesinfieldoftheCAPandCFP .................................. 95

D.4 Other EU financial instruments and expenditure ................................................. 98

D.4.1 OtherFinancialInstrumentsintheEUbudgetfor2014 ........................................... 98

3EU REPORT 2016

D.4.2 OtherEUfinancialinstrumentsandexpenditureintheCRin2014 ....................... 100

D.4.3 TheSAO’sauditworkinthefieldofotherEUfinancialinstruments ...................... 101

D.4.4 EUauthorities’auditworkinthefieldofotherEUfinancialinstruments .............. 104

E. Other activities related to the EU’s financial management ..............105

E.1 Legal matters .................................................................................................... 105

E.1.1 SAOrecommendationsconcerningchangestothelegalenvironment .................. 105

E.1.2 Application,implementationandtranspositionofEUlawintheCR ...................... 107

E.2 Accounting for and reporting EU finances in the CR ........................................... 114

E.3 International activities of the SAO ..................................................................... 116

F. Sources and references ..................................................................119

Web sites used: .........................................................................................130

Appendices ................................................................................................131

Appendix 1 –Timetableofthesubmissionofthepartnershipagreements andprogrammesofMemberStatesandtheir approvalbytheCommission ............................................................................ 132

Appendix 2–CurrentstateoffulfilmentofexanteconditionalitiesintheCR asof31March2016 ........................................................................................ 134

Appendix 3–FocusofprogrammesfinancedfromEUstructuraland investmentfunds ............................................................................................. 136

Appendix 4–Sourcesandcausesofnegativephenomenainthe2007-2013 programmingperiodasidentifiedbytheAuditBody ...................................... 140

Appendix 5–OverviewofEuropeanCommission´sauditandfact-finding missionsintheCzechRepublicin2014and2015 ............................................ 144

Appendix 6–OverviewofauditmissionsoftheEuropeanCourtofAuditors in2014and2015 ............................................................................................. 145

Appendix 7–FlowchartofthepermissionprocessforinvestmentprojectsintheCR andsummaryoftheamendmentoftheActonEIA ........................................ 147

Appendix 8–OverviewoftheSAOauditspublishedintheSAOBulletins–Issues2/2015 and3/2016whichwerefocusedpartlyorcompletelyonEUfunds ................ 151

4 EU REPORT 2016

Editor’s note:

TheeditorialdeadlineforEU Report 2016 wassetat15April2016.TheinformationandnumericaloverviewstakenfromCzechsourcesreflectthesituationin2015,possiblywithdatafromthestartof2016.TheinformationonactivitieslinkedtothemanagementandauditoftheEuropeanUnion (EU)budgetbytherelevantauthoritiesand institutionscovers2014and2015.Withafewexceptions,thelatestavailabledataofficiallypublishedbytheEuropeanCommission(“theCommission”)andotherEUinstitutionsinannualreportsandstatisticaloverviewsapplytothefinancialyear2014.TheresultsofSupremeAuditOffice(SAO)auditscomprisefindings fromauditconclusionsapprovedintheperiodfrom1April2015to31March2016(theMonitoredperiod).

5EUREPORT2016,Openingmessagefromthepresident

Opening message from the president of the Supreme Audit OfficeDearreaders,

IampresentingaregularreportoftheSupremeAuditOfficeonthefinancialmanagementoftheEUfunds.Thepreviousissuessoughtanswerstoquestionsrelatedtoourten-yearmembershipintheEUanditsbenefitstoourcitizens,andhowweusedtheopportunitywhichthemembershipprovides,wherewemademistakes,andwhataddedvaluetheEUfundsbrought.

Thisissuestrivestocomparethecurrentprogrammingperiod2014–2020withthepastperiod.Wedescribehowwelearntfrompastmistakes,andhowwepreparedourselvesforthenewprogrammingperiod.

Twoyearsofthenewprogrammingperiod2014-2020havepassed.Howdowedo?WedrawdownEuropeansubsidieswithdelays,manytimesjustbecauseofanexception,andclearandmeasurableobjectives,whichwewould like to reachwith thehelpof EU funds, aremissingagain.

DrawdownofEuropeanfundshasbeendelayedwhichisinourconditionsunprecedented.Thereishardlysomethingtoadd,aswehadenormousdifficultieswithdrawdownofEUfundsalreadyintheprogrammingperiod2007-2013.

Whilealloperationalprogrammes,withoneexception,whereapprovedattheendof2007,attheendof2014therewasnoapprovedoperationalprogramme.ThemostsignificantdifferencebetweenthetwoprogrammingperiodswasfoundbyourauditorsintheOperationalProgrammeTransport.Whereasattheendof2008theprogrammedemonstratedthehighestrateofamountsbasedonlegalprovisionsforsubsidydrawdown,attheendof2015,i.e.comparabletimepointinthecurrentprogrammingperiod,themanagingauthorityhasnotapprovedasingleprojectyet.

Forthatmatter,itisexactlytheOperationalProgrammeTransport whichisendangeredthemostbythedisagreementbetweenCzechandEuropeanlegalprovisionsintheareaofenvironmentalimpactassessment(EIA).RemissnessofCzechpoliticiansandofficials,andthefeelingthat,intheend,itcanbealwaysrectifiedbynegotiatinginBrussels,resultedinasituationthatevenaftertenyears,theappropriatedirectivewasnotproperlytransposed intotheCzechlegalsystem.DespiteofthepartialsuccessofdeliberationswiththeEuropeanCommission,thereisagreatriskthatthefundsearmarkedforlargeinfrastructuralprojectswillnotbedrawnintime.

NotonlytheSAO,butalsotheEuropeanCourtofAuditors(ECA),hasrepeatedlypointedoutthattheEUobjectivesarenotreflectedincleareroperationalobjectivesat lowerlevels,andtheirbenefitscannotbeassessed.Recently,theECAforexamplestatedthatthesupportedprojectshadnotproperlysetindicatorswhichcouldhelptoassesswhethertheprojectbroughtexpectedresults and impacts. Czech response?Managing authorities have repeatedly questioned andchallengedthesefindingsdespitethefactthatseveralprojectsdidnotandwillnotbringanyresults.

LookingattheEuropetoday,onemayfeelanxious.TheBritishdecisiontoleavetheEUwasashock. Itwouldbeadvisabletobecomeawareofthefactthatourdeedsalsocontributedto“Brexit”.Ourindifferentandmanytimescarelessapproachtobillions,whichareatourdisposalthankstoEuropeantaxpayers,isthebenchmarkaccordingtowhichcitizensassesstheEU.Itisdifficulttobeproudofamembershipinacommunitywhichdoesnotfulfilitsobjectives,worksinaslowpaceandponderously,andmoreoverpoursmoneydownthedrain.Suchimpressioncannotbechangedbyanyamountof resources forpromotionof theEU,noteventhemostpassionatespeechesoftheleaders.

EUREPORT2016,Openingmessagefromthepresident6

It isourtasktosteerintherightdirection, learnfrompast lessons,andbecomeresponsible.Theprojectsshouldhavemostimportantlymeaningfulandmeasurableobjectivewhichreallyfulfilsthepolicywhichissupposedtobeendorsedbythegivensubsidy.ItisthebestwayhowtoexpressoursupportandrespecttotheEuropeanproject.

MiloslavKala, PresidentoftheSAO

7EUREPORT2016,Listofabbreviations

List of abbreviations7thRFP SeventhResearchFramework

ProgrammeAB AuditBody(Division52ofthe

MinistryofFinance)Agreement Partnership Agreement for

the 2014-2020 Programming PeriodCAP Common Agricultural PolicyCAS CzechAccountingStandardCC ContactCommitteeCCCTB CommonConsolidatedCorporate

TaxBaseCF Cohesion FundCFP Common Fisheries PolicyCJEU CourtofJusticeoftheEuropean

UnionCMO CommonMarketOrganisationCohesionPolicy

EU Economic, Social and Territorial Cohesion Policy

Commission EuropeanCommission

Council CounciloftheEuropeanUnionCNB CzechNationalBankCR CzechRepublicCSO CzechStatisticalOfficeDAS statementofassurance(Déclaration

d’assurance)EAFRD European Agricultural Fund for

Rural DevelopmentEAGF European Agricultural Guarantee

FundEBF External Borders Fund 2007-2013EC EuropeanCommunitiesECA EuropeanCourtofAuditorsEIA EnvironmentalImpactAssessmentERDF European Regional Development

FundEMFF European Maritime and Fisheries

FundEP EuropeanParliamentERF EuropeanRefugeeFund2008-2013ESF European Social FundESIF EuropeanStructuralandInvestment

Funds

EU EuropeanUnionEUSFEuropeanUnionSolidarityFund

GDP grossdomesticproductGNI grossnationalincomeGrowthsurvey2015

Annualgrowthsurvey2015IB intermediatebodyINTERREGCR-PR

INTERREG V-A – Czech Republic – Poland

IOP Integrated OPIROP Integrated Regional Operational

ProgrammeIS InformationsystemMS2014+ESIFundsInformationSystemLPIS LandParcelIdentificationSystemMA managingauthorityMCS managementandcontrolsystemMFF MultiannualFinancialFrameworkMFF14+

MultiannualFinancialFramework2014-2020

MfRD MinistryforRegionalDevelopmentMoA MinistryofAgricultureMoD MinistryofTransportMoE MinistryoftheEnvironmentMoEYS MinistryofEducation,Youthand

SportsMoF MinistryofFinanceMoIT MinistryofIndustryandTradeMoLSA MinistryofLabourandSocialAffairsMonitoredperiod

Periodfrom1April2015to31March2016

NCA NationalCoordinatingAuthorityNIEPP National Infrastructure for

Electronic Public ProcurementNSRF NationalStrategicReference

FrameworksOFI OtherfinancialinstrumentoftheEUOLAF EuropeanAnti-FraudOfficeOP operationalprogrammeOPE07+ OPEnvironment (2007-2013

programmingperiod)OPEC OPEducation for Competitiveness

8 EUREPORT2016,Listofabbreviations

OPEIC OPEnterprise and Innovation for Competitiveness

OPF07+ OPFisheries 2007–2013OPF14+ OPFisheries 2014–2020OPHRE OPHuman Resources and

EmploymentOPP GP OP Prague – Growth PoleOPRDI OPResearch and Development for

InnovationOPT07+ OPTransport (2007-2013

programmingperiod)OPT14+ OPTransport (2014-2020

programmingperiod)OUS organisationalunitofthestatePCA PayingandCertifyingAgencyPMG PraguemunicipalgovernmentR&D researchanddevelopmentRDP Rural Development Programme RDP07+Rural Development Programme for

2007–2013Report 2016

Report on the CR 2016RDP14+ Rural Development Programme for

2014–2020ROP regionaloperationalprogramme

ROPSW Regional Operational Programme NUTS II South-West

SAI supremeauditinstitutionSAIF StateAgriculturalInterventionFundSAO SupremeAuditOfficeSAPS SingleAreaPaymentSchemeSF structuralfundsSLO StateLandOfficeSolidarityprogramme

Solidarity and Management of Migration Flows generalprogramme

TAXE SpecialCommitteeonTaxRulingsandOtherMeasuresSimilarinNatureorEffect

TEN-T Trans-EuropeanTransportNetworkTFEU Treaty on the Functioning of the

European Union VAT valueaddedtax

YEI YouthEmploymentInitiative

EU Member StatesAT AustriaBE BelgiumBG BulgariaCY CyprusCZ CzechRepublicDE GermanyDK DenmarkEE EstoniaEL GreeceES SpainFI FinlandFR FranceHR CroatiaHU Hungary

IE IrelandIT ItalyLT LithuaniaLU LuxembourgLV LatviaMT MaltaNL TheNetherlandsPL PolandPT PortugalRO RomaniaSE SwedenSI SloveniaSK SlovakiaUKUnitedKingdom

9EUREPORT2016,ReportontheEUFinancialManagementintheCR

» Section I

European Union Programming Period 2014–2020

A. Goals of the European Union

A.1 Europe 2020 policy

OneoftheEU’slong-termgoalsisstableeconomicgrowthwithahighrateofemployment.Toachieve this, theCommissiondevised the ten-yearEurope 20201 strategy,which it started toactivelyimplementinconjunctionwithMemberStatesin2010.Inadditiontothegoalmentionedabove,thisstrategyshouldhelpresolvethedeficienciesensuingfromthelong-termeconomiccrisisandput inplacetherightconditionsforstrengthening the three basic priorities of the strategy: smart growth, sustainable growth, inclusive growth.

Europe 2020 containedfive headline targets which the EU seeks to achieve by 2020. Thesetargetsaretobeachievedthroughseven flagship initiatives (seesubheadingA.1.1)thatallowtheEUauthoritiesandthe internalauthoritiesofMemberStatestocombinetheirefforts. Inaddition,theEUusesotherinstrumentssuchastheEuropeansinglemarket,theEUbudgetandtheEUcommonforeign-policyprogrammetoachievethedefinedpriorities.

5 headline targets which the EU seeks to achieve by 2020

Employment

Employment level at least 75% of the 20-64 year-olds to be employed

Research, development,

innovation

3% of the EU's GDP to be invested in R&Dand improve conditions in this area.

the rates of early school leaving below 10%reach 40% of 30-34–year-olds completing third level education.

Fight againstpoverty and

social exclusion

at least20 million less

living in poverty and social exclusion

or on the verge of povertyand threatened by social

exclusion.

greenhouse gas emissions 20% lower than 1990

20% of energy from renewables 20% increase in energy efficiency.

Education

Climate change and sustainable

energy resources

(women, young, old, legal immigrants and under-skilled persons).

1 Commissioncommunication:EUROPE 2020 A strategy for smart, sustainable and inclusive growth,COM(2010)2020,finalwordingof3March2010.

10 EUREPORT2016,ReportontheEUFinancialManagementintheCR

TheimplementationandmonitoringofEurope 2020 takesplaceinthecontextofthe“Europeansemester”(seesubheadingC.1.1).

InMarch2014theCommissionissuedacommunication2inwhichitevaluatedthestrategyfouryearsafteritsadoption.Amonthlaterapublicconsultationwaslaunchedasabasisforreviewingthestrategyatthehalf-waypoint.

A.1.1 Key priorities and flagship initiatives of Europe 2020

InlinewiththegoalsofEurope 2020,theEUdefinednewsourcesofgrowthandjobs,describingthemindetailinsevenflagshipinitiativesdividedintothreekeypriorities:

Smart growth – economic growth based on knowledge and innovation

- TheobjectiveistoimprovetheEUinthefollowingareas:• education• researchandinnovation• thedigitalsociety

- Three flagship initiatives weresetoutinthisarea:1. A Digital Agenda for Europe(goal:tocreateaDigitalSingleMarketbasedonfastand

ultrafastinternetandinteroperableapplications).2. Innovation Union (goal: to re-focus researchanddevelopmentand innovationpolicy

onthechallengesfacingoursociety,i.e.climatechange,energyandresourceefficiency,healthanddemographicchange,andtostrengtheneverylinkintheinnovationchain,from“bluesky”researchtocommercialisation).

3. Youth on the Move (goal:toenablestudentsandtraineestostudyabroad,toprepareyoungpeoplefortherequirementsofthejobmarket,toenhancetheperformanceandinternationalattractivenessofEuropeanuniversities,andtoraisetheoverallqualityofalllevelsofeducationandtraining).

Sustainable growth–amoreresource-efficient,competitiveandgreenereconomy

- Theobjectiveis:• tocreateamorecompetitive,low-carboneconomy;• toprotecttheenvironment;• toexploitEurope’sleadershipintheracetodevelopnewgreentechnologies;• torollouthigh-performanceandsmartelectricitygrids;• toexploitEU-scalenetworks;• toenhancethebusinessenvironment,especiallyforsmallandmedium-sizedenterprises

(SMEs);• toenableconsumerstomakethebestpossibledecisionsbasedonsufficientinformation;

- Two flagship initiatives weresetoutinthisarea:1. Resource-efficient Europe (goal: to support the shift to a low-carbon economy that

isefficient inthewayitusesallresources–reducingcarbondioxide(CO2)emissions,greaterenergysecurityandenhancingresourceefficiency).

2. An Industrial Policy for the Globalisation Era(goal:toestablishanindustrialpolicythatsupportsenterprisesintheconditionsofglobalisation,helpstackletheeconomiccrisisandhelpsinthetransitiontoalow-carboneconomy).

2 CommunicationoftheCommissiontotheEuropeanParliament,Council,EuropeanEconomicandSocialCommitteeandtheCommitteeoftheRegions:Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth,COM(2014)130,finalwordingof5March2014.

http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/priorities/smart-growth/index_cs.htm


Inclusive growth–aneconomywithhighlevelsofemploymentdeliveringeconomic,socialandterritorialcohesion

- Theobjectiveis:• toincreasetherateofemploymentinEurope(creatinghigh-qualityjobs,inparticularfor

vulnerablegroups);• toinvestineducationandtheacquisitionofprofessionalqualifications;• tomoderniselabourmarketsandsocialsecuritysystems;• toensureeveryonebenefitsfromeconomicgrowth.

- Two flagship initiatives weresetoutinthisarea:

1. An Agenda for New Skills and Jobs (goal: to help people acquire new skills andsuccessfullyretrainforworkinadifferentfieldandtomoderniselabourmarketsinordertoincreaseemployment,reduceunemployment,improveproductivityandensuresocialsystemsaresustainable).

2. European Platform against Poverty (goal: to ensure economic, social and territorialcohesion, to guarantee compliance with the fundamental rights of persons living inpovertyandsocialexclusion,andtoacquirefinancesthathelppeopleintegrateintothelocalcommunity,acquireprofessionalqualifications,findajobandgainentitlementtosocialbenefits).

A.2 EU budget expenditure for Multiannual Financial Framework 2014-2020

Preparationsforthe2014-2020programmingperiodbeganatEUlevelbackin2010.InJunethefollowingyeartheCommissionpresentedtheMultiannualFinancialFrameworkfor2014-2020(MFF14+), i.e.thedraftEUbudgetforthisperiod.Thisproposaldidnotgarnerthenecessarysupport inEuropean institutions,however,and the talks leadingup to itsdefinitiveapprovaldraggedonuntilNovember2013.NegotiationsonnewlegislationtoimplementEU economic, social and territorial cohesion policy (cohesionpolicy)intheyears2014-2020alsolastedovertwoyears, specifically from6October2011 to20November2013,with some implementingregulationsstillbeingissuedbytheCommissionduring2015.

Multiannual(usuallyseven-year)FinancialFrameworkslaydownthemaximumannualamounts(“ceilings”)theEUmayspendonthemostimportantpoliticalfields(“headings”).MultiannualFinancialFrameworkstranslatethepoliticalprioritiesdefinedbytheEUanditsMemberStatesintofinancialandlegaltimelimits.Consequently,itisnottheEUbudget,butaplanningtoolandaguaranteeofthepredictabilityofEUspending.

ThestartofMFF14+ broughtachangeinthestructureoftheexpendituresideoftheEUbudget: - Heading 1: Smart and Inclusive Growth comprises two subheadings, namely 1a

Competitiveness for jobs and growth (whichincludesresearch,innovationandtechnologicaldevelopment, lifelong learning, support for SMEs and the development of transport,energyanddigitalnetworksformakingthepopulationofEuropebetterconnected)and1bEconomic, social and territorial cohesion (comprisesresourcesearmarkedforbuildingnewinfrastructure,foreducationalprogrammesandcross-bordercooperation;theseresourcesareinvestedwithaviewtoenhancingeconomic,socialandterritorialcohesionandboostingthegrowthanddevelopmentofregionsthatlagbehind).

- Heading 2: Sustainable Growth: Natural Resources comprises finances earmarked foragricultureandfoodproduction,ruraldevelopment,fisheriesandenvironmentalprotection.

- Heading 3: Security and Citizenshipcoversspendingonthefightagainstterrorismandcrime,


onmanagingmigration flows and creating a single asylum system, and on EU consumerprotectionandthepromotionofEuropeanculture.

- Heading 4: Global EuropefinancesspendingontheEU’sexternalaction,i.e.EUcross-borderactivities,EUenlargement,bilateralrelations,humanitarianaidanddevelopmentaid.

- Heading 5: Administration mainlycoversthepayofEUemployeesandthemanagementofEUinstitutions’buildings.

- Heading 6: Compensations comprise compensatory payments to new Member States(MFF14+containsonlypaymentstoCroatia,whichjoinedtheEUin2013).

Special Instruments and the European Development Fund (EDF)3 stand outside theMFF14+structure.

The value of MFF14+ as a whole is €1,082.56 billion. Thebiggest headinginfinancialtermsisSmart and Inclusive Growth at €508.92 billion (47.01% of the total value of MFF14+),followedby Sustainable Growth: Natural Resources at €420.03 billion (38.80% of the total value of MFF14+).TheremainingfourheadingsoftheEUbudgetaremuchsmallerintermsoffinancialvolume.Togethertheyaccountforjust14.19%ofMFF14+expenditure,i.e.€153.6billion.

Thefollowinggraphshowsthestructureof theEUbudget’sexpendituresideunderMFF14+,brokendownbyheadings.

Graph 1 – Financial values (€ billions) of expenditure headings and their share (in %) of the EU budget for MFF14+

1a Competitiveness for growth and employment (jobs)142.131b Economic, social and territorial cohesion

366.79

2 Sustainable growth: natural resources 420.03

3 Security and citizenship17.73

4 Global Europe66.26

5 Administration69.59

6 Compensations 0.03

38.80 %

33.88 %

13.13 %

6.43 %

6.12 %

1.64 %

MFF14+ Value

€1 082.56 billion

Source: Multiannual financial framework 2014–2020 and EU budget 2014 — The figures,Commission2013.

Asmentionedabove,MFF14+doesnotcoverfundingforeitherspecial instrumentsortheEDF. Thefollowingtablesetsoutthefinancestobereleasedoutoftheaforesaidsourcesintheyears2014-2020.

3 ThefundisintendedtoprovidedevelopmentcooperationandaidtoACPcountries(African,CaribbeanandPacific).


Table 1 – Finances for special instruments and the EDF in the years 2014-2020 (€ millions at current prices)

Resource TotalEmergency Aid Reserve 2209European Globalisation Adjustment Fund 1 183European Union Solidarity Fund 3945Flexibility instrument 3 716Special instruments - total 11 053

EDF 30 506Source: Multiannual financial framework 2014–2020 and EU budget 2014 — The figures,Commission2013.

A.3 European structural and investment funds for period 2014 - 2020

InMFF14+ a total of €453,850.17 million was earmarked for the European structural and investment funds (ESI Funds) (includingaperformancereserve4).Regulation(EU)No1303/2013of the European Parliament and of the Council of 17December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 isthecommonprovisionsregulationgoverningtheESIfunds.TheESIFundsarealsogovernedbyotherEUlegislation.Wereferencethemainonesintherelevantfootnotes.

Theearmarkedfinancesweredividedamongthefollowingfunds:

European Regional Development Fund (ERDF)5

TheERDFfocusesinvestmentsonseveralkeypriorityareas:innovationandresearch,thedigitalagenda,supportforSMEsandthelow-carboneconomy.TheERDFresourcesallocatedtotheseprioritiesdependonthecategoryofregion(i.e.itslevelofdevelopment).Furthermore,someERDFresourcesmustbechannelledspecificallytowardslow-carboneconomyarea.

4 Theperformancereserveissetat5-7%ofthefinancesallocatedtoeachpriorityaxisofaprogramme.TheperformancereserveisapprovedandallocatedbytheCommissionifagivenprogrammereachesits“milestones”(i.e.therequiredlevelofachievementofmonitoringindicators)by1December2018.FormoredetailsseeArticles20-22ofRegulation(EU)No1303/2013oftheEPandoftheCouncilof17December2013andtheimplementingCommissionRegulation(EU)No215/2014of7March2014.

5 Regulation(EU)No1301/2013oftheEPandoftheCouncilof17December2013on the European Regional Development Fund and on specific provisions concerning the Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006 andRegulation(EU)No1299/2013oftheEPandoftheCouncilof17December2013onspecificprovisionsforthesupportfromtheEuropeanRegionalDevelopmentFundtotheEuropeanterritorialcooperationgoal.


European Agricultural Fund for Rural Development (EAFRD)6

TheEAFRDisafinancialinstrumentforsupportingruraldevelopment,whichfallsundertheEU Common Agricultural Policy (CAP)andispartoftheESIFunds.EAFRDfinancesareusedtomakeagricultureandforestrymorecompetitive,toamelioratetheenvironmentandthecountrysideorqualityof lifeinruralareasandtodiversifytheruraleconomy.IntheCzechRepublic(CR),projectscontainedintheRural Development Programme for the Years 2014-2020 (RDP14+)arepaidoutoftheEAFRD.

European Social Fund (ESF)7

TheESFisthemainEuropeaninstrumentforsupportingjobs.IthelpspeoplegetbetterjobsandensuresfairerjobopportunitiesforallEUcitizens.TheEU’sprioritiesintheareacoveredbytheESFaretoboosttheadaptabilityofworkers,improveaccesstoemployment(vocationaltrainingandlifelonglearning)andhelppeoplefromdisadvantagedgroupsgetjobs.

Cohesion Fund (CF)8

TheCohesion Fund isaimedatMemberStateswhoseGrossNationalIncome(GNI)perinhabitantis lessthan90%oftheEUaverage. Itaimstoreduceeconomicandsocialdisparitiesandtopromotesustainabledevelopment.Forthe2014-2020period,theCFconcernsBulgaria,Croatia,Cyprus, the Czech Republic (CR), Estonia, Greece, Hungary, Latvia, Lithuania,Malta, Poland,Portugal, Romania, Slovakia and Slovenia. TheCohesion Fund contributes to trans-Europeantransportnetworks(TEN-T)andenvironmentalprojects.

European Maritime and Fisheries Fund (EMFF)9

TheEMFFisdesignedtofundprojectslinkedtotheEU’scommonfisheriespolicy(CFP)forthe2014-2020 period. It helps fisherman transition to sustainable fishing and keep aquaculturecompetitive;itsupportscoastalcommunitiesindiversifyingtheireconomies;itfinancesprojectsthatimprovequalityoflifeinEuropeancoastalareasandcreatenewjobs;anditmakesiteasierfortargetgroupstoaccessfinancing.

Youth Employment Initiative (YEI)10

The aimof the YEI is to provide extra support to youngpeople agedbelow25 and living inregionswhereyouthunemploymentwashigherthan25%in2012.TheYEI’stotalbudgetis€6.4billion,withhalfofthatsumcomingfromtheESF.

Thefollowinggraphpresentsanoverviewofthevolumeoffinances11allocatedtotheESIFundsforMFF14+.

6 Regulation(EU)No1305/2013oftheEPandoftheCouncilof17December2013on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 andRegulation(EU)No1306/2013oftheEPandoftheCouncilof17December2013onthefinancing,managementandmonitoringofthecommonagriculturalpolicyandrepealingCouncilRegulations(EEC)No352/78,(EC)No165/94,(EC)No2799/98,(EC)No814/2000,(EC)No1290/2005and(EC)No485/2008.

7 Regulation(EU)No1304/2013oftheEPandoftheCouncilof17December2013on the European Social Fund and repealing Council Regulation (EC) No 1081/2006.

8 Regulation(EU)No1300/2013oftheEPandoftheCouncilof17December2013on the Cohesion Fund and repealing Council Regulation (EC) No 1084/2006.

9 Regulation(EU)No508/2014oftheEPandoftheCouncilof15May2014on the European Maritime and Fisheries Fund and repealing Council Regulations (EC) No 2328/2003, (EC) No 861/2006, (EC) No 1198/2006 and (EC) No 791/2007 and Regulation (EU) No 1255/2011 of the European Parliament and of the Council.

10 Regulation(EU)No2015/779oftheEPandoftheCouncilof20May2015amending Regulation (EU) No 1304/2013, as regards an additional initial prefinancing amount paid to operational programmes supported by the Youth Employment Initiative.

11 FinancesoftheEuropean Agricultural Guarantee Fund(notoneoftheESIFunds)earmarkedforclaim-basedpaymentstofarmersarenotincludedinthevolumeoffinances.


Graph 2 – Volumes of finances (€ millions) allocated to ESI Funds for MFF14+ and their relative sizes (%)

ERDF196 357.12

EAFRD98 723.65

ESF86 412.35

CF63 396.51

EMFF5 749.33

YEI *3 211.21

43.26 %

21.75 %

19.04 %

13.97 %

1.27 %0.71 %

ESI Funds Total

€453 850.17 million

Source:Commission,2016.

NB:*Thesamevolumeoffinances(i.e.approx.€3,211million)isearmarkedfortheYEIintheESF.

A.3.1 Budgeted allocations for EU Member States

The Commission signed partnership agreements with Member States for the 2014-2020programmingperiod,layingdowntheirframeworkallocationsfortheentirenewMFF.12Thesizeoftheallocationcouldbechangedaftertheagreementwassigned,whichwasalsothecasefortheCR.

OutofthetotalallocationtoESIFundsforthe2014-2020programmingperiod,i.e.€453,850.17million, almost €355,126.52 million is channelled into operational programmes (OPs) andEuropean Territorial Cooperation programmes, with almost €98,723.65 going to ruraldevelopmentprogrammes(RDPs).

Theillustrationonpage18showshowthetotalsupportfromtheESIFundsforthe2014-2020programmingperiod(includingtheperformancereserve)isdividedbetweenEUMemberStatesandalsocompares the levelsof this support in termsof their respectivepopulations (colourscale).ItalsoshowshowtheallocationwasdistributedamongOPs(barterritorialcooperationprogrammes)andRDPsinindividualMemberStates.

12 SeesubheadingB.2formoredetailedinformationaboutthePartnershipAgreementandallocationfortheCR.


less than 500 501 – 1 000 1 001 – 2 000 2 001 – 3 000 more than 3 000

Division of allocation between individual member states per capita in € for MFF14+

POLAND

77 3988 598

FRANCE

15 35111 385

GREATBRITAIN

11 2175 200

SPAIN

29 1048 598

ROMANIA

22 7108 128

AUSTRIA

9853 938

PORTUGAL

21 7354 058

GREECE

15 6644 718

GERMANY

18 4899 384

ITALY

32 32410 444

CYPRUS

742132

NETHERLANDS

1 116607

DENMARK

622629

BELGIUM

2 062648

SLOVENIA

3 037838

LATVIA

6 7731 613

SLOVAKIA

13 7841 545

LITHUANIA

4 5581 076

SWEDEN

1 8841 764

CROATIA

8 7162 026

IRELAND

1 1672 191

CZECHREPUBLIC

21 6742 306

BULGARIA

7 5112 367

FINLAND

1 3792 380

HUNGARY

21 5833 431

ESTONIA

3 636823

MALTALUXEMBOURG

40101

73197

Allocation from ESI funds for individual member states for MFF14+

9.00 % and morePoland (€85 996 mil.)Italy (€42 768 mil.)

6.00 % – 8.99 %Spain (€37 401 mil.)Romania (€30 838 mil.)Germany (€27 873 mili.)

4.00 % – 5.99 %France (€26 736 mil.)Portugal (€25 739 mil.)Hungary (€25 014 mil.)Czech Republic (€23 980 mil.)Greece (€20 382 mil.)

2.00 % – 3.99 %Great Britain (€16 417 mil.)Slovakia (€15 329 mil.)Croatia (€10 742 mil.)Bulgaria (€9 878 mil.)

0.80 % – 1.99 %Lithuania (€8 386 mil.)Latvia (€5 634 mil.)Austria (€4 923 mil.)Estonia (€4 459 mil.)Slovenia (€3 875 mil.)Finland (€3 759 mil.)Sweden (€3 647 mil.)

0.00 % – 0.79 %Ireland (€3 358 mil.)Belgium (€2 710 mil.)Netherlands (€1 723 mil.)Denmark (€1 251 mil.)Cyprus (€874 mil.)Malta (€828 mil.)Luxembourg (€140 mil.)

Division of allocation between individual member states in € millions

OPs allocation RDP allocation

Source:Commission,https://cohesiondata.ec.europa.eu/,2016andEurostat,2016.

NB:TheillustrationdoesnotshowtheamountofmoneyearmarkedforEuropean Territorial Cooperation programmes(totalling more than €9,136 million). The group of programmes covers finances earmarked for cross-bordercooperationprogrammes,amongotherthings.Inthisarea,CzechentitiesmanagetheINTERREG V-A Czech Republic – Poland cross-bordercooperationprogramme.

A.3.2 EU Member States’ programmes in the 2014-2020 programming period

FinancesfromtheESIFundsaredistributedwithinMemberStatesviaOPsandRDPs.Territorialcooperation programmes are also supported from the same source (specifically from the

https://cohesiondata.ec.europa.eu/


ERDF).TheCommissionapprovedthefirstprogrammingdocuments, includingtheallocation,inmid2014,butthisprocesswasstillongoingwithcertainMemberStatesinDecember201513 (Appendix1).TheprogrammingdocumentssubmittedbytheCRweregraduallyapprovedbytheCommissionbetweenDecember2014andJune2015.TheCRrankedamongtheEUMemberStates that fulfilled the necessary conditions in the shortest time. Despite this fact, whencomparedtothe2007-2013programmingperiodtheCR’spreparednesstodrawdowntheEUfinancesallocatedtoitwasapprox.sixmonthsbehind.

ThefollowinggraphicshowshowthetotalMFF14+allocationisdividedupinMemberStatesbetweenOPs(redscale)andRDPs(greenscale),indicatingthenumbersoftheseprogrammes.Thegraphicdoesnotincludeterritorialcooperationprogrammes.

Division of allocation from OPs and RDP for the programming period 2014–2020

LuxembourgSloveniaEstoniaLatviaLithuaniaDenmarkCyprusAustriaFinlandCroatiaMaltaIrelandNetherlandsRomaniaBelgiumSlovakiaHungaryBulgariaCzech Republic

2222233333446788899

39.563 036.713 635.534 558.076 772.83

621.59742.12985.31

1 378.858 715.90

730.621 167.391 116.16

22 709.532 062.49

13 784.1021 583.21

7 510.8621 674.33

SwedenGreat BritainPortugalGreecePoland

1213131923

1 883.6711 217.4221 735.0315 664.0377 397.68

Germany 33 18 489.06FranceSpain

4146

15 351.1629 103.57

Italy 52 32 323.52

Operational Programmes (€ million)

MaltaLuxembourgCyprusNetherlandsDenmarkEstoniaSloveniaLatviaSlovakiaLithuaniaSwedenCroatiaIrelandCzech RepublicBulgariaHungaryAustriaGreeceRomaniaPolandBelgiumFinlandPortugalGreat Britain

111111111111111111112234

97.33100.57132.24607.31629.40823.34837.85

1 075.601 545.271 613.091 763.572 026.222 190.592 305.672 366.723 430.663 937.554 718.298 128.008 598.28

647.802 380.414 057.795 199.67

GermanySpain

1417

9 383.818 297.39

ItalyFrance

2329

10 444.3811 384.84

Rural Development Programmes (€ million)

Source:Commission,https://cohesiondata.ec.europa.eu/,2016.

The next graphic compares the average allocation to Cohesion Policy OPs14 (bar territorialcooperationprogrammes)ineveryMemberStateinthe2007-2013and2014-2020programmingperiods.ThecolourscaleshowsthepercentagechangeinthenumberofOPsintheindividualMemberStatesbetweenthetwoperiods.TheactualnumbersofOPsinindividualcountriesintheseprogrammingperiodsareshowninthebottompartofthegraphic.

13 AnnexIVTiming of submission and adoption of partnership agreements and programmesofCommissionCommunicationInvestinginjobsandgrowth–maximisingthecontributionofEuropeanInvestmentandStructuralFunds,COM(2015)639,finalwording,14December2015.

14 ThegraphicdoesnotcovertheCAPandCommon Fisheries Policy.



POLAND

3 4943 169

FRANCE

369374

SPAIN

621770

ROMANIA

3 7572 568

AUSTRIA

489120

PORTUGAL

1 7791 536

GREECE

8491 444

GERMANY

571708

ITALY

623433

CYPRUS

351306

NETHERLANDS

203332

DENMARK

207255

BELGIUM

289206

SLOVENIA

3 0121 367

LATVIA

4 4181 500

SLOVAKIA

1 9671 136

LITHUANIA

6 7091 694

SWEDEN

160203

CROATIA

4 2320

IRELAND

340250

CZECHREPUBLIC

2 7051 547

BULGARIA

928953

FINLAND

652228

HUNGARY

3 0781 661

ESTONIA

3 5351 134

MALTALUXEMBOURG

2025

236420

Average allocation to OPs in individual member states (€ million)

Programmingperiod2007–2013

Programmingperiod2014–2020

Change in the number of OPs in individual programming periods in %

Number of OPs in individual programming periods

1 až 20 % 21 až 40 % 41 až 60 % 61 až 80 % 81 až 100 %

-1 až -20 %0 %

-21 až -40 % -41 až -60 % -61 až -80 % -81 až -100 %

GREAT

915450

BRITAIN

AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK Total2007–2013 10 10 7 2 17 36 2 3 45 7 36 14 - 15 3 66 4 2 3 2 5 21 14 7 8 3 10 22 3742014–2020 2 7 8 2 8 32 2 1 45 2 40 18 2 7 3 51 1 2 1 3 5 22 12 6 11 1 7 12 313

Source: Cohesion Policy 2007-13, National Strategic Reference Frameworks, Office for Official Publications of theEuropeanCommunities,January2007,https://cohesiondata.ec.europa.eu/,Commission,2016.

ThegraphicshowsthatthenumberofOPsonlyincreasedinsixMemberStates,withanincreaseofmorethanonein justthreeofthem(threemoreOPsinSweden,fourmoreinFranceandGreece).ThetotalnumberofOPsintheEuropeanUnionfellby63forthenewprogrammingperiod,however,i.e.byalmost17%.TherewasaparticularlymarkedfallinthenumberofOPsinItaly(15fewer),GreatBritain(10fewer),intheCR(9fewer)andinHungaryandAustria(8fewer).



Itisalsointerestingthatalmostall“new”memberstates(withtheexceptionofBulgaria,andalsoCyprusandMaltawhosesize,however,meanstheyhaveaminimaloverallallocation)andPortugaloptedforthepathofarelativelylargevolumeofallocatedfinancesperOP(€1.78-6.71billion),whereasOPsinotherMemberStateshaveamuchsmallerallocationonaverage(€0.02-0.93billion).

OnereasonforthisisthattheEUurgedthatMemberStatespreparingforthenewprogrammingperiod shouldmainly strive to simplify administration and reduce red tape for beneficiaries.ThatiswhytheCR,forexample,madeseveralchanges15designedtoreducetheadministrativeburden.OneofthesewastocutthenumberofOPs,thusalsoreducingthenumberofmanagingauthorities(MAs)andintermediatebodies(IBs).

15 ResolutionoftheGovernmentoftheCzechRepublicNo.867of28November2012.



B. Goals of the Czech Republic

B.1 Goals of the Czech Republic related to Europe 2020

At thesametimeas theEurope2020strategy was being approved, at its June2010sessionthe European Council called on Member States to define their national goals. At nationallevel, the planning of objectives designed to deliver smart, sustainable and inclusive growthandacompetitiveEuropetakesplaceviawhatareknownasnationalreformprogrammes.TheimplementationofEurope 2020 iscoordinatedwithMemberStates’economicpolicieswithinthe frameworkof the European semester,which resulted in theEurope 2020 strategybeinginterlinkedwiththeStability and Growth Pact16.

TheCzechgovernmentfirsttackledthequestionofhowtotransposethecommitmentsbasedon themain targets ofEurope 2020 (see subheading A.1) in June 201017, when it approvedpartialnationalgoals,butinviewoftheapproachingparliamentaryelectionsitleftittothenewgovernmenttoconcretisecertaincommitments.ThenewgovernmentdealtwiththeissueofnationalgoalsinApril201118,whenitapprovedtheNational Reform Programme of the Czech Republic 2011,whichwasgiventheintroductorytitleofInvesting in European Competitiveness: the Contribution of the Czech Republic to the Europe 2020 Strategy. In this programmingmaterialtheCzechgovernmentidentifiedthefollowingspecificnationalgoals,alignedwiththemaindirectionsofEurope 2020andtacklingtheprincipalobstaclesidentifiedashinderingtheachievementofcommongoals:

6 national goals for the CR within the Strategy Europa 2020

Employment

Research,Development

andInnovation

public expenditure for science, research, development and innovation in the CR on the levelof 1% of GDP.

Fighting poverty

Business environment

fundamentally contribute to achievement of the indicative

goal set at the EU level of 20%;make further steps to improve

the quality of the environment.

administrative burden of enterpreneurs of 30% compared to 2005.

maintaining the border of the number of threatened by poverty in material

deprivation or living in households without an employed person

to the year 2020 at 2008 levels.

the number of threatened by poverty, material deprivation or living

in households without an employed person by 30,000 persons.

overall employment level 20-64 years old to 75%;

employment level among women 20-64 years old to 65%;

employment level among older people 55-64 years old to 55%;

level of unemployment among young people 15-24 years old a one-third compared to 2010;

unemployment level with low qualifications a one-fourth compared to 2010.

reach the ratio of students prematurely leaving educational institutions of 5.5%;reach the ratio of university-educated people between the ages of 30 and 34 of 32%.

Education

Climate change and sustainable energy resources

Some of the goals, especially those linked to energy efficiency, were originally defined asindicative,withoutanyquantitativetargets.Thegovernmentjustifiedthisbyclaimingadetailedandrealisticanalysisofthenationaleconomy’scapacityforenergysavingswasrequiredintermsofthelong-termsustainabilityofitscompetitivenessandinconnectionwiththeadoptionofanewstateenergyconcept.16 ThePactwasadoptedbyresolutionattheAmsterdammeetingoftheEuropeanCouncilontheStabilityand

GrowthPactof17June1997(OfficialJournalC236of2August1997).Itwassubsequentlymodifiedrepeatedly(mostrecentlyin2015).

17 ResolutionoftheGovernmentoftheCzechRepublicNo.434of7June2010.18 ResolutionoftheGovernmentoftheCzechRepublicNo.314of27April2011.


In the course of the first half of the ten-year period for achieving the Europe 2020 targets,the indicativenationalgoalsof theCRwereconcretisedandsomeothernationalgoalswereincreased,partlybecause theywouldbeachievedbefore the targetyear2020.TheNational Reform Programme of the Czech Republic for 201519 states that the target concerning theproportionofpeopleleavingschoolearlyhasbeenreached.Thisproportionalreadyamountedto5.4% in2013 (the2020 targetwas5.5%). In thecaseof thenationalgoalof reducing thenumberofpeopleatriskofpovertyandexclusion,in2015theCRsetagoalforreducingtheoverallnumberofat-riskpeopleby100,000,astheoriginalgoal(cuttingthenumberby30,000)hadbeenachievedin2013.

Thecurrentstateofprogresstowardsthenationalgoalsismadeclearbythefollowingoverview.

Table 2 – Progress towards the Czech Republic’s Europe 2020 targets2021

Area National target Benchmark value (reference year)

Current state of progress (year)

Employment Increasingtherateofemploymentamongpersonsaged20-64to75%

70.4 % (2010)

75.1 % (3Q2015)

Fightingpovertyandsocialexclusion

Reducingthenumberofpeopleatriskofpovertyormaterialdeprivationorlivinginhouseholdswithverylowworkintensityby100,000comparedto2008

1,566,000 (2008)

1,532,000 reductionof34,000

persons (2014)

Education

Ensuringatleast32%ofthepopulationaged30-34hastertiaryeducation

20.4 % (2010) 30.1 % (2015)

Reducingthenumberofpersonsleavingeducationearlyto5.5%

4.9 % (2010) 6.2 % (2015)

Research,developmentandinnovation

Increasingpublicspendingonscience,research,developmentandinnovationto1%ofGDP

0.62 % (2010)

0.64 %(2014) (2 %whenprivatesectorexpenditure

isincluded)

Climateandenergypolicy20

Reducinggreenhousegasemissions–maximumpermissibleincreaseinnon-EUETSemissionsby9%21

+1.3 % (2005) -0.9 %(2012)

Increasingtheproportionofgrossfinalenergyconsumptionderivedfromrenewables(to13%)andtheshareofrenewablesintransport(to10%)

6.0 % 0.1 % (2005)

13.9 % (2013) 5.6 %(2012)

Increasingenergyefficiency–saving47.78PJ(13.27TWh)infinalenergyconsumption – Notcurrently

quantifiable

Source: National Reform Programme of the Czech Republic for 2015; Country Report Czech Republic 2016, Eurostat,Commissionwebsite,2016.

The development curves of progress towards the implementation of Europe 2020 in theCR and forecasts for the development of the CR’s economy in the medium-term outlook

19 NationalReformProgrammeoftheCzechRepublicfor2015drawnupbytheOfficeoftheGovernmentoftheCzechRepublicandapprovedbythegovernmentoftheCRon29April2015.

20 ThereductioningreenhousegasemissionsandimprovementinenergyefficiencyaredefinedbyDirective2009/28/EConthepromotionoftheuseofenergyfromrenewablesourcesandamendingandsubsequentlyrepealingDirectives2001/77/ECand2003/30/ECandbyDirective2012/27/EUonenergyefficiency.ThegoalofcuttinggreenhousegasemissionsoutsidetheemissioncreditstradingschemeisdefinedbyDecision406/2009/EContheeffortofMemberStatestoreducetheirgreenhousegasemissionstomeettheCommunity’sgreenhousegasemissionreductioncommitmentsupto2020.

21 The EU Emissions Trading System–aninternationalsystemforgreenhousegasemissioncreditstrading.


drawn up by Eurostat22 make it a reasonable assumption that the CR will not only achieveits national goals for employment, poverty fight and social inclusion, but will significantlyexceed them. In addition, the national goal for tertiary education,whichwas set at a lowerlevel thantheEUgoal, shouldbeachievedbefore2020. In theseareas theCRcouldachievethe percentage targets set in the Europe 2020 strategy for the EU as a whole. The targetpercentage share of gross national product (GDP) set aside for expenditure on science,researchandinnovationcanalsobeachieved,especiallyifprivatesectorspendingisincludedinthetotal, in linewiththeCommission’sdefinitionofthis indicator. In2014theCRattaineda relatively good standing in this indicator compared to other EU Member States (9th23

place)andtheCommissionworkingdocumentpublishedastheCountryReportCzechRepublic2016projectsthattheGDPpercentage in2020willbe2.9%, justbelowtheEUtarget(3%ofGDP). In energy efficiency, the Czech economy, which is still relatively energy-intensive and carbon-intensive,registeredafallingtrendinfinalenergyconsumptionbetween2005and2013.Ifthistrendcontinuesandothersourcesoffinancingaresecured24,itisarealisticassumptionthat the CR could also achieve its guideline national goals in this area, in compliance withthenationalenergyefficiencyactionplan.TheCR’soutlookforapproachingtheEU’sdefinedtargetof20%ofenergysources fromrenewables (national targetsetat13% in2020) isalso veryfavourable,asrenewablesalreadyaccountedfor13.9%ofgrossfinalenergyconsumption25 in2013.

B.2 Preparation for the 2014-2020 programming period in the CR

IntheCzechRepublicthespringboardforstepsleadinguptothenewprogrammingperiod2014-2020wasadocumententitledDraft Summary Focus of the Future EU Cohesion Policy in 2013 in the Czech Republic,whichtheCzechgovernmentnoted26inAugust2011.ThisdocumentalsocontainstheNationalDevelopmentPriorities(NDPs)forsupportfromESIFundsafter2013.

B.2.1 National Development Priorities

ThebasisoftheNDPsisanoverviewofmacroeconomicconditionsintheCR.TheMinistryforRegionalDevelopment(MfRD)basedtheprioritiesonanalysesoftheCR’scompetitivenessanddevelopmentrequirementsandonstrategicdocumentsonbothEuropeanandnationallevel.

Thecommongoalof theseNDPswas to steer theprogrammingprocess for theperiodafter2013towardsareasthataretoputinplacetherightconditionsintheCRforthecreationofahigh-qualitybusinessenvironmentandaninclusivesocietywhereallgroupsofthepopulationcanfullyrealisethemselves.TheNationalDevelopmentPrioritieswerenotdecisiveforthefocusofindividualOPs,however,whichwerecreatedsubsequentlywithaviewtofulfillingtheNDPs.

FiveNDPsweredefinedanddividedfurtherintoseparatethematicareas:

- Boosting the economy’s competitiveness

The aim of this priority is to support the CR’s economic growth founded on the pillars of aknowledgeeconomy,theexpansionofenterpriseactivitiesandaqualifiedandflexibleworkforcewiththehelpofthefollowing:

22 EurostatisastatisticalofficeortheEuropeanUnion.ItisanorganisationalunitoftheCommissionatalevelofDirectoratGeneral.

23 SWD(2016)73,finalwordingof26February2016.24 SeetheSAOauditconclusionfromauditno.15/02–Financial resources provided by the state to promote

energy savings.25 Grossfinalenergyconsumptionisthetotalvolumeofenergycommoditiestransferedtoallentitiesincluding

energyandheatconsumptionusedforgenerationofenergy,andalsoincludingenergyandheatlossesduringthedistribution.

26 ResolutionoftheGovernmentoftheCzechRepublicNo.650of31August2011.


• Enterprisesupport.• Promotinggrowthbasedoninnovationandtheresearchanddevelopment.• Afunctioninglabourmarketasaprerequisiteforacompetitiveeconomy.• Improvingthestandardofeducation.

- Developing backbone infrastructure

The primary aim is to create effectively functioning transport, information, energy andenvironmentalinfrastructurethatwillimproveboththeeconomy’scompetitivenessandthepopulation’squalityoflifewiththehelpofthefollowing:

• Supportingcompetitivenessbyimprovingtransportinfrastructure.• Developingelectroniccommunicationsinfrastructure.• Improvingenergynetworks.• Developingenvironmentalinfrastructure.

- Improving the quality and effectiveness of public administration.

The aim of the priority is to provide high-quality services to citizens and help build acompetitive economy based on enterprise and innovation through properly functioninginstitutionswiththehelpofthefollowing:

• Improvingthelegislativeandregulatoryenvironment.• Supportingtheoptimisationofprocessesinpublicadministration.• Creatinganddevelopingstandardsforpublicservices.• Launchingandexpandingthedigitisationoftheagendasofpublicadministration.• Improvingqualificationsinpublicadministration.

- Supporting social inclusion, the fight against poverty and the healthcare system

Themainaimistoreducesocialexclusion(especiallyamongvulnerablepopulationgroups)on the labour market (women, youth, elderly, legal immigrants and people with lowqualification),andimprovinglifestylesandthehealthofthepopulationwiththehelpofthefollowing:

• Supportingsocialinclusionandthefightagainstpoverty.• Supportingthehealthcaresystem.

- Integrated territorial development

ThemaintaskistoensurethebalanceddevelopmentofareasoftheCR,helplessenregionaldifferencesandenabletheexploitationofpotentialforboostingtheregions’competitivenessandterritorialdevelopment,withconsiderationforthequalityoftheenvironmentwiththehelpofthefollowing:

• Boostingregionalcompetitiveness.• Promotingterritorialcohesion.• Improvingthequalityoftheenvironment.

B.2.2 Partnership Agreement and the CR’s total allocation

ThepreparationandsigningofpartnershipagreementsbetweenEUMemberStatesand theCommissionisanewessentialconditionenshrinedinArticles14-17ofChapterIIofRegulation(EU)No1303/2013oftheEuropeanParliamentandoftheCouncil,whichformsthebasiclegalframeworkforthe2014-2020programmingperiod.ThesigningofapartnershipagreementisanecessaryconditionforutilisingsupportfromESIFunds.

Preparation of the agreement adoption in the Czech Republic was commenced in 2011. The MfRD was entrusted with negotiating the text of the Partnership Agreement for the


2014-2020 Programming Period27 (theAgreement)withtheCommission.TheCzechgovernmentdiscussed and noted the draft Partnership Agreement in June 201328 and sent it to the Commission for informal assessment. InOctober 2013 theMfRD received the Commission’scommentsonthedraftAgreement,whichwerethendealtwith.TheCzechgovernmentapprovedthefinalwordingoftheAgreement29inApril2014andtheCommissionsignedtheAgreementon26August2014.

Asumof€23.84billionwasallocatedtotheCzechRepublicforworkingtowardsthecommonobjectives of Europe 2020 and the national objectives formulated in the National ReformProgramme. One integral part of the document is the ex ante conditionalities, which is apackage of measures set by the Commission that have to be implemented before the CRcanutilisefinances from theESI Funds. Theex ante conditionalities aredivided into generalconditions that cut across programmes (e.g. non-discrimination, equal opportunities, publictenders,environmentalimpactassessments(EIAs))andthematicconditions,whicharespecified within a specific programme (e.g. effective public administration, energy, education, orresearch and development). TheMAs of individual programmes play a fundamental role inthe implementationof ex ante conditionalities, as it is theywho identify anddetermine the relevantexanteconditionalitiesforagivenprogrammeandalsoforagivenpriorityaxisorEUpriorityoftheprogrammes,withintheindividualESIFundsprogrammes.

The Agreement states that the Czech Republic sees the creation of the concept of ex anteconditionalities as a step towards making the interventions from ESI Funds more effective,as this strengthens the link between the financing of interventions under Cohesion Policyand the execution of reforms, legislative changes or the adoption of strategic documents.These requirementsof theCommissiondonot always simply correspond to the institutionalarrangements, legislativeenvironmentorprocesses requiring interdepartmental coordinationintheCzechRepublic.Forthatreasonthefulfilmentoftheexanteconditionalitiesisawaitedinvaryingtimeframes.ThesearealsoreasonswhycertainexanteconditionalitiesoftheCzechRepublicareperceivedasrisky.

Besidestherisksassociatedwithmakingchangesinthelegislationorinthereforms,theongoingtranspositionandimplementationprocessofsomeofthedirectivescanbegenerallyconsideredasasignificantrisk.Mostof theexanteconditionalitiesarealsofocusedontheexistenceofstrategicdocuments.Theriskconcerningstrategicdocumentsliesinthetimingoftheirapproval,intheirsufficientcontentcoverageoftherequirementsarisingfromtheexanteconditionalities,theirapplicationfortheentire2014-2020periodetc.Allrisksareaddressedthroughmeasuresproposedintheactionplansforpartiallyfulfilledorunfulfilledexanteconditionalities.

Article 19(2) of Regulation (EU) 1303/2013 of the European Parliament and of the Councilprovidesthatallexanteconditionalitiesmustbe fulfilledby31December2016at the latestandtheCommissionmustbeinformedoftheirfulfilmentatthelatestintheannualreportonimplementationoftheprogrammesfortheERDF,ESFandCFandintheannualimplementationreportfortheEAFRDandEMFFbythedeadlineestablishedintheFund-specificrulesin2017.

ThecurrentstateoffulfilmentoftheconditionalitiesispresentedinAppendix2.

TheAgreementcoversCohesionPolicyOPs (objective30 Investing inGrowthandEmploymentand theobjectiveEuropeanTerritorialCooperation), the CAP Rural Development Programme andtheOPundertheEUCommonFisheriesPolicy(CFP).

27 TheAgreementisastrategicdocumentlayingdowngoalsandprioritiesfortheeffectiveuseoftheESIFundswithaviewtoimplementingtheEurope2020strategybymeansofdefinednationalpriorities.

28 ResolutionoftheGovernmentoftheCzechRepublicNo.447of12June2013.29 ResolutionoftheGovernmentoftheCzechRepublicNo.242of9April2014.30 TheAgreementdoesnotcontaindetailedinformationonprogrammes.Matterslinkedtotheworkingof

individualprogrammesaresetoutingreaterdetailintheactualprogrammingdocuments.


In the context of theAgreement, five areas of concernwhere the CRmustmake significantimprovementsareidentified.Theareasofconcernwereelaboratedintospecificdevelopmentneeds in these areas, with eight funding priorities based on these development needs andelaboratedintowhatareknownasexpectedresults.

In total, 10 programmes31 with a direct link to achieving the goals (expected results) of theAgreementweredefinedforthe2014-2020programmingperiod.Theemphasisintheutilisationof support is placed on results, which are monitored by means of indicators and financialindicatorsandevaluatedusing theEvaluationPlan inaccordancewith the3Eprinciple32.Thefulfilmentoftheprogrammes’definedgoalsisbasedontheperformanceofmanagedactivitiesthroughspecificoperations,projectsandinterventions.Thefollowingdiagramshowsthelinksbetweenthevariouslevelsintermsofobjectivesandmanagement.

Diagram 1 – Structure of the implementation of the Europe 2020 Strategy in terms of objectives and management

EU2020

PartnershipAgreement

Programmes

Operation/Project

Processes/instruments Processes/instruments

ASSE

SSM

ENT O

F ACH

IEVEM

ENT

OF OBJ

ECTIV

ES

STRATEGIC MANAGEM

ENT

Source: Partnership Agreement Management and Coordination Rules in the 2014-2020 Programming Period,MfRD,January2016.

As the programming documents for some programmes were not approved until long aftertheAgreementwas signed (the lastprogrammewasapproved in June2015, i.e. tenmonthsafter theAgreementwassigned), itwasessential tobring themall intoalignment.ThatwasdonebyatechnicalrevisionoftheAgreement,themainoutcomeofwhichwasthatthetotalallocationwasraisedto€23.98 billion33. Byagreementbetweenthetwosides,thisrevisiondidnotapplytoSection2.3Assessment of the fulfilment of ex ante conditionalitiesandAnnex5.1Assessment of the fulfilment of ex ante conditionalities.ThetechnicalrevisionoftheAgreementwasdiscussedby theCzechRepublicon20November2015.TheCommissionconfirmed theupdatedAgreementon13April2016.

BesidestheAgreement,inthe2014-2020programmingperiodtheCRcanalsoutilisefinances

31 InadditiontothetenprogrammesnamedintheAgreement,entitiesintheCRcanalsoutilisefinancesunderterritorialcooperationprogrammes.Inthecaseofoneofthese,INTERREG V-A Czech Republic – Poland,theMfRDisthemanagingauthority.

32 Economy,Efficiency,Effectiveness.33 TheRDP14+allocationwasincreasedbyover€135millionbymeansofachangetoAnnex1ofCommission

Regulation1378/2014of17October2014amendingAnnexItoRegulation(EU)No1305/2013oftheEPandoftheCouncil(seesubheadingA.3).AnnexNo1containsaBreakdown of Union Support for Rural Development (2014 to 2020).


allocated by the Commission for 11 territorial cooperation programmes34. The managingauthorityisanentitybasedintheCR(MfRD)inonlyoneoftheseprogrammes,however.Thisis the INTERREG V-A Czech Republic – Poland (INTERREG CR-PR) cross-border cooperationprogramme,whichcandrawonalmost€0.23billion.

B.2.3 Programmes, their financial frameworks and implementation structure

Compared to the preceding programming period, the 2014-2020 programming period hassignificantly fewer programmes managed by the CR (see subheading A.3.2) under sharedmanagementwiththeCommission.Inparticular,sevenregionaloperationalprogrammes(ROPs)ended and one new programme (Integrated Regional Operational Programme – IROP) wasestablished;thenumberofOPsforthecapital,Prague,wasreducedfromtwotoone,namelyOP Prague – Growth Pole (OPPGP). Inthefieldofresearchanddevelopmentandeducation,whichcomesundertheauthorityoftheMinistryofEducation,YouthandSports(MoEYS),thenumberofOPswasalsoreducedfromtwotoone(OPRDE).TheESIFunds,however,alsofinancemeasuresfromRDP14+,OPFisheries 2014-2020 (OPF14+)andprojectsundertheINTERREG CR-PR territorialcooperationprogramme.

ProgrammingdocumentswereapprovedbytheCzechgovernmentinJuneandJuly2014andwerethenofficiallysenttotheCommission,therebyinitiatingtheprocessofformalnegotiationsontheirfinalwording.TheCommissionraisedcommentswhichtheCzechsideactedon.TheCommission gradually approved each programme, completing the approval process in June2015.The followingtablegivesanoverviewof theapprovedprogrammes for the2014-2020programmingperiodtobeimplementedintheCR,alongwiththefinancingESIFunds,MAandrespectiveallocation.

Table 3 – Programmes financed out of ESI Funds in the 2014-2020 programming period and managed by Czech authorities

Programme title Date of Commission´s approval

Financed from ESI

funds

Managing authority

Allocation (€ million)

OPTransport 11May2015 ERDF,CF MoT 4695.77

IntegratedRegionalOperationalProgramme 4June2015 ERDF MfRD 4640.70

OPEnterpriseandInnovationforCompetitiveness 29April2015 ERDF MoIT 4331.06

OPResearch,DevelopmentandEducation 13May2015 ERDF,ESF MoEYS 2 768.06

OPEnvironment 30April2015 ERDF,CF MoE 2636.59

RuralDevelpmentProgramme2014–2020 18May2015 EAFRD MoA 2 305.67

OPEmployment 6May2015 ESF,YEI MoLSA 2145.74

OPTechnicalAssistance 11June2015 CF MfRD 223.70

OPPrague–GrowthPoleCR 11June2015 ERDF,ESF PMG 201.59

OPFisheries2014–2020 4June2015 EMFF MoA 31.11

INTERREGV-ACzechRepublic-Poland 23June2015 ERDF MfRD 226.22

CR allocation total 24 206.21

Sources: Partnership Agreement for the 2014–2020 Programming Period;approvedprogrammingdocuments.

34 EuropeanTerritorialCooperationcoversthefollowingareas:- cross-bordercooperation(INTERREGV-A)–outofatotalnumberof88programmes,entitiesfromtheCR

candrawdownEUbudgetfundinginfiveprogrammes(CR–Poland,CR–Saxony,CR–Bavaria,CR–AustriaandCR–Slovakia);

- transnationalcooperation(INTERREGV-B)–theCRiscoveredbytwoofthetotalof15programmes(Interreg CENTRAL EUROPE and InterregDANUBE)and

- interregionalcooperation(INTERREGV-C)–theCRiscoveredbyallfourprogrammes(INTERREG EUROPE,URBACT III,ESPON 2020andINTERRACT III).


MoredetailedinformationabouttheobjectivesandfocusofprogrammesfinancedoutoftheESIFundsandanoverviewoftheimplementingauthoritiescanbefoundinAppendix3.

Implementation structure

TheCzechgovernmentan implementationstructure for thepreparationand implementationof support fromtheESIFunds throughprogrammes.Thestructure is shown in the followingdiagram.

Diagram 2 – Implementation structure of programmes financed out of ESI Funds in the 2014-2020 programming period

MfRD

National Coordinating Authority

Paying and Certifying

Agency

Programmes´ Managing Authorities Audit Body

Holder of

Integrated Territorial

Investment (ITI)

Intermediate Bodies

State Agricultural Intervention

Fund (Paying agency

for the Rural Development

Programme for the period 2014-2020 accredited

by the MoF)

Ministry of Finance

Ministry of Finance

Ministry for Regional

Development

INTERREG V-A Czech Republic - Poland

Centre for Regional Development

Integrated Regional OP

OP Technical Assistance

Ministry of Labour and

Social AffairsOP Employment

Ministry of Education, Youth and

Sports

OP Research, Development and

Education

Ministry of Industry and

Trade

OP Enterprise and Innovation for

Competitiveness

Enterprise and Innovation Agency(since 1 June 2016)

CzechInvest (until 31 May 2016)

Ministry of Traffic OP Transport

State Fund for Transport

Infrastructure

Ministry of the Environment OP Environment

State Environmental Fund of the CR

Nature Conservation Agency of the CR

Prague Municipality Government

OP Prague - CR Growth Pole

Ministry of Agriculture

OP Fisheries2014–2020

State Agricultural Intervention Fund

Rural Development Programme 2014–2020

BDO CA s.r.o.(Certifying body established by

the MoF)

Source: Partnership Agreement for the 2014–2020 Programming Period;approvedprogrammes.


ItisclearfromthediagramthattheMinistryofFinancecarriesouttheroleofAuditBody(AB)35 andPayingandCertifyingAgency(PCA)36;theMfRDcarriesouttheroleofNationalCoordinatingAuthority(NCA)37.ThediagramalsoshowstheMAsandIBsoftheprogrammesandthepayingagencies.

Concept of a single methodological environment

Theneedtoensurecoordinationandproper,effectiveandefficientmanagementatalllevelsoftheutilisationofESIFundsintheCRledtothesettingofcommonrulesforallentitiesinvolvedinimplementingtheAgreement.Themainpurposeofthe“singlemethodologicalenvironment”is tohelpput inplaceaneffective, transparentandenforceable systemofmanagementandcontrolofsupportprovision.WorkingwiththeMoFandrepresentativesoftheimplementationstructure,theNCAputtogetherasetofmethodologicaldocumentsrelatingtothekeyareasoftheESIFundsimplementation38.Thesemethodologicaldocumentsandrecommendationsweregradually approvedby theCzech government from2013,mainly in the formof governmentresolutions,whichmake thembinding (theentities coveredby the resolutions arebound tocomplywiththem;complianceisrecommendedforterritorialcorporations).

AstheRDP14+implementationsystemdiffersconsiderablyfromthatoftheotherprogrammes(intermsofbothimplementingentitiesandtheirfunctionsandtheadministrationandcontrolof the provided support), the single methodological environment comprising the MfRD’smethodological instructions are not binding on theMinistry of Agriculture (MoA) and StateAgricultural Intervention Fund (SAIF), merely recommended. The MoA and SAIF implementRDP14+inlinewithamethodologicaldocumententitledProcedures Linked to the Preparation, Management, Implementation, Monitoring and Assessment of the Rural Development Programme for the Years 2014 to 2020,whichwasapprovedbytheCzechgovernment39.TheMfRD,asthesinglemethodologicalenvironmentauthority,helpeddrawupthisdocumenttoentiretheruleswerebasicallythesameacrossallprogrammes.

The operational programme Fisheries 2014-2020 is included in the single methodologicalenvironment,andtheinstructionsissuedbytheMfRDandMoFare,withcertainexemptions,bindingonitsimplementation.

MS2014+ ESI Funds information system

AnewinformationsystemcalledMS2014+isusedtomonitortheuseoffinancialaidfromtheESIFundsandassesstheimplementationofOPsatnationallevelforthe2014-2020programmingperiod.ThisinformationsystemprovidesasingledatabaseforsharinginformationlinkedtothepreparationandimplementationoftheAgreement.ThesystemshoulddirectlyadministerandmonitorallsupportprovidedfromtheEUbudgetinthe2014-2020programmingperiodapartfromsubsidiesforagricultureandfisheries.

Subsidies from RDP14+ and OP F14+ are administered (from the receipt of applications to35 TheAuditBodyisanauthorityresponsibleforensuringtheperformanceofauditstochecktheeffective

workingofprogrammes’managementandcontrolsystemsandforcarryingoutactivitiesinaccordancewiththeGeneralRegulation.IntheCzechRepublicthisroleisfulfilledbytheMinistryofFinanceanditsdivision52–AuditBody.

36 ThePayingandCertifyingAuthorityoftheCRforcohesionpolicyistheMinistryofFinanceanditsdivision55–NationalFund.ThePCAistheauthorityresponsiblefortheoverallfinancialmanagementoffinancesprovidedtotheCzechRepublicoutoftheEUbudgetandforcertifyingexpenditureinaccordancewithArticle126ofRegulation(EU)No1303/2013oftheEuropeanParliamentandoftheCouncil.

37 TheNationalCoordinatingAuthorityisthecentralmethodologicalandcoordinatingauthorityfortheimplementationofprogrammesco-financedoutoftheESIFundsintheCzechRepublicinthe2014-2020programmingperiod.InthisfielditistheCommission’spartnerintheCR;itseestothemanagementoftheAgreementatnationallevel;itistheadministratoroftheMS2014+monitoringsystem;anditisthemethodologicalauthorityinthefieldofimplementationandthecentralauthorityforpublicity.TheNCAispartoftheMfRD.

38 Allapprovedmethodologicaldocumentsareaccessibleat www.dotaceEU.cz.39 ResolutionoftheGovernmentoftheCzechRepublicNo.540of8July2015.

http://www.dotaceEU.cz


the payment of subsidies and data reporting) in the SAIF information system (SAIF IS). DatatransmissionbetweenSAIFISandMS2014+willtakeplaceviaaninterfacebetweenthesetwosystems40. Informationprovidedby theMinistryofAgriculture reveals thatdata transmissionbetweenthetwosystemscurrentlydisplaysometeethingproblems.

B.3 Risks for the 2014–2020 programming period

B.3.1 Risks identified by the Supreme Audit Office

Basedontheresultsofitsauditworkandanalyses,theSupremeAuditOfficeidentifiedanumberofrisksthatmayberepeatedinsomeforminthe2014-2020programmingperiod.

General risks:

- complicatedprogrammestrategies;

- highdiversityandfragmentationofprogrammegoals;

- complicatedprogrammingdocuments;

- deficiencies in informationsystemsformanagingprogrammesandassessingtheprogressmade;

- deficientlegislation–shortcomingsinthetranspositionofEUregulations(seesubheadingE.1.2fordetails),legaluncertaintyetc.;

- highfluctuationinemployeesresponsibleformanagingESIFundsprogrammes;

- complicatedandconfusing“territorialdimension”system;largenumberofinstrumentsandentities involved in territorial development; risk of uncoordinated cooperation betweentheseentitiesandriskofincorrectandunfairdecision-makingontheselectionandfinancingofterritorialdevelopmentprojects;riskofdualadministration;

- errorsinthedesignandworkingofcontrolsystems;

- shortcomings in the design of the irregularities management system and gaps in thepenalisationsystem;

- frequentchangestotheconditionsandrulesforsubsidyprovision(givingrisetoariskoferrorsintheadministrationandimplementationofprojects,incomprehensiblerules);

- failuretofulfiltheexanteconditionalitiesdefinedbytheAgreement(seechapterB.2.2.).

Risks of project-managed measures:

- incorrectassessmentandselectionofprojects;lackofemphasisonqualitativeassessmentofprojectsandassessmentoftheneedforprojectsandtheirpan-societalorregionalbenefits;

- insufficientlydefinedgoalsofprogrammesandmeasures–goalsnotdefined inSMART41 terms;

- errorsinthedesignofmonitoringsystems(missingindicators,indicatorsprovidinginsufficientfactualinformationorhardtomeasure),insufficientmonitoringandevaluationofprogresstowardsthegoalsofmeasuresandprogrammes;

- insufficientdrawdownlinkedtotheriskoffallingshortofmilestonesattheendof2018andthustheriskthatperformancereserveswillnotbeattained;

40 InformationonthedesignanduseoftheMoA,orSAIF,informationsystemformanagingandmonitoringRDP14+of18March2016.

41 SMARTgoalsarespecific,measurable,attainable,realisticandtime-related.


- failuretoutilisethefirstcallsallocation–thereisariskthatattheendoftheprogrammingperiodfulldrawdownwilltakeprecedenceoverthequalityofprojectsandtheeffectivenessandefficiencyoftheprovidedsupport;

- controlworkdonebyprogramme implementationbodiesdoesnot sufficiently target theproportionatenessandeconomyofspendingandthebenefitsandoutcomesofprojects;

- insufficientabsorptioncapacityinsomeprojectmeasuresasaresultoferroneousestimatesofactualrequirements.

Risks in CAP entitlement-based support (RDP flat-rate measures and direct payments)

- theeffectofthenewconditionsandadministrativeproceduresfortheprovisionofdirectpaymentsandRDPflat-ratemeasures,inparticularthestatus,definitionandcontrolofthefulfilmentoftheactivefarmercondition,greening42conditionsetc.;

- shortcomings in the information system of Records of the Use of Agricultural Land – inparticulardiscrepanciesbetweenregisteredareasizesandtheactualstate;

- administrativedifficultyandcomplexityofthecontrolsystem,causingdelaysintheprovisionofsubsidies;

- non-compliancewiththe“mandatoryrequirements”forfarmingandwith“goodagriculturalandenvironmentalstate”bybeneficiariesinthecontextofthesystemofconditionalityforclaim-basedsupport.

Based on information on the preparation of the 2014-2020 programming period availablefrom the Commission’s databases, on analysis of data in the information systems of theSAO,MoF andMfRD andonmaterials submitted for sessions of theCzech government, theSAOhas identified twopotentially significant risk areas.Oneof these risks is that theerrorswhentheprogrammingperiodwasbeing launched,whichresulted inanoveralldelay in theimplementationofprogrammes,willberepeated;theotheristheproblemwithofficiallyvalidopinionsonenvironmentalimpactassessmentsissuedaccordingtoregulationsthatdonotmeettherequirementsoftheEUlegislation.

Risk of repetition of errors at the start of the programming period

EUMemberStatessignedpartnershipagreementsbetweenJuneandDecember2014.ThefirstagreementssignedwerewithPoland,Germany,DenmarkandGreece.SpainandIrelandwerethelasttosign.TheAgreementfortheCzechRepublicwasdefinitivelysignedbytheCommissionon26August2014,aroundtheaverageforMemberStates.

Thefirstprogrammesforthe2014-2020programmingperiodwereapprovedbytheCommissionforLithuania,FinlandandtheNetherlands.ThelastprogrammeswereapprovedforItalyandSpain.TheCRwasaroundtheMemberStatesaverage inthecaseofprogrammeapprovalaswell.

Appendix1containsatimetableshowingwhenpartnershipagreementsweresubmittedandadoptedinEUMemberStates.

Inthe2007-2013programmingperiodtheCR’soperationalprogrammeswereapprovedfromOctober43toDecember442007,i.e.mostofthemonlyattheendofthefirstyearofimplementation.Theslowstartoftheprogrammeimplementationprocess(interaliadelayedlegislation,frequent

42 Compliancewithfarmingtechniquesfavourabletotheclimateandtheenvironment.43 ThefirstOPfromthe2007-2013programmingperiod(OPEducation for Competitiveness)wasapprovedbythe

Commissionon12October2007.44 ThelastOPfromthe2007-2013programmingperiod(OPTechnical Assistance)wasapprovedbythe

Commissionon27December2007.TheexceptionwasOPResearchandDevelopmentforInnovation,whichwasonlyapprovedbytheCommissionon1October2008.


rulechanges, long intervalsbetweenthesubmissionofapplicationsandprovisionofsupportetc.)wasoneofthereasonswhytheallocatedresourceswerenotfullydrawndownattheendofthisprogrammingperiod.

Thesituationwasrepeatedinthenewprogrammingperiod2014-2020,withprogrammesnotapproveduntilthemiddleofthesecondyearoftheprogrammingperiod.RegardlessofthefactthattheCR’sprogrammeswereapprovedatasimilartimeasotherMemberStates’,theCzechRepublicshouldthereforeavoidrepeatingtheerrorsfromthepreviousprogrammingperiodandshouldingoodtimedefinesuitableacceleratorymeasurestoensurealltheallocatedfinancesareutilised.45Furthermore,milestoneswereputinplacefortheyear2018andMemberStatesmustachievethesemilestonesinordernottolosepartoftheallocation.InthecaseoftheCRthiscouldinvolveasmuchasCZK38.7billion,i.e.6%ofthetotalallocationofCZK648.2billion.

Diagram 3 – Approval of programmes in the CR in the 2007-2013 and 2014-2020 programming periods

2007 2008

2007

–201

320

14–2

020

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

2014 20151 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

First OPapproved

Last OPapproved

Period of signing the principal documents

NSRF* **

Agreement

* National Strategic Reference Framework CR 2007–2013.** OP RDI is an exception as it was approved by the Commission on 1 October 2008.

Source:Annex IV Timing of submission and adoption of partnership agreements and programmes of CommissionCommunication Investing in jobs and growth – maximising the contribution of European Investment and Structural Funds,COM(2015)639,finalwording,14December2015;SAO,2016.

Risk linked to insufficient transposition of EU law on EIAs

AbsentorinsufficientorincorrectimplementationandapplicationofEUlawisaseriouscategoryofrisksforthestate’sfinancialmanagement(seesubheadingE.1.2).

OneofthebiggestandmostseriousrisksinthiscategorycurrentlyjeopardisingtheutilisationoffinancesfromESIFundsisthelegislationgoverningenvironmentalimpactassessments.InthiscasetheCzechRepublicfailedfor10yearstoproperlytransposetherelevantEUdirectivesintoCzechlaw.

AnamendmentofActNo.100/2001Coll.,onenvironmentalimpactassessment,onlyenteredintoeffecton1April2015throughActNo.39/2015Coll.,whichproperlyeffectedthetransposition.

Transitory provisions imposed an obligation, starting on the effective date, to check everyopinionissuedpriortotheeffectivedateofActNo.39/2015Coll.intermsofcompliancewiththerequirementsofthelegalregulationstransposingDirective2011/92/EUoftheEPandoftheCouncilofthe13December2011onassessmentofinfluenceofpublicandprivateinterestsontheenvironment.Ifanopinionisnotcompliantwiththedirective,anewenvironmentalimpactassessmentmusttakeplace.Thiswilltakearound300daysinanidealsituation.

45 AtthetimeoftheeditorialdeadlineofEU Report 2016theMfRDwaspreparingtheAnnualReportontheImplementationofthePartnershipAgreementinthe2014-2020ProgrammingPeriodfor2015,whichcoversprogrammeriskmanagement,fordiscussionbythegovernment.


ThegovernmentistryingtonegotiateanexemptionwiththeCommission,butthismatterhadnotbeenresolvedbytheeditorialdeadlineofEU Report 2016.YettheCzechRepublichadatleastoneyeartobringpastopinionsissuedinEIAsintolinewiththeapplicableregulations.

AnewEIAcoulddelaytheimplementationofcertainobjectivesthatcouldbeimportantintermsoftheEuropeanornationalpriorities;instead,lessimportantobjectiveswillbefinanced.Themost debated objectives are transport construction projects, including those addressing theTEN-TasaEuropeanpriority.Delayswillincreasethecostofimplementationandfurtherlosseswillresultfromtheimpactsoftheseobjectivesarrivinglater.

B.3.2 Audit Body of the CR: Assessment of the 2007-2013 programming period

WhendrawingupthisreporttheSupremeAuditOfficeaskedforcooperationfromrepresentatives

of the MoF’s Audit Body division, so that itcouldassesstheirexperienceswithauditsfromthepreviousprogrammingperiod inorder todefine risk areas for the new programmingperiod2014-2020.ThetextwrittenbytheABispresentedinthefollowingsubheading.

The comprehensive reorganisation of theAudit Body done in 2012 put in place thefundamental conditions for the AB, now apart of the MoF’s organisational structureas Division 52, to devote itself effectivelyto its core mission, i.e. the function of anindependent audit authority for programmesfinanced out of the ESI Funds, the EuropeanEconomicAreaandtheNorwegianfunds,theAsylum, Migration and Integration Fund andtheInternal Security Fund.

TheessenceoftheAB’sworkistoplanandcarryout audits of the utilisation of finances fromthesourceslistedaboveandtocoordinateandcooperatewiththeauditorsoftheCommissionandotherconcernedauthorities.

The audit work is done independently of allactivities of state administration authoritiesandofalllegalandnaturalpersonsinvolvedinthemanagement,controlanduseoffinancesfromEuropeanfunds.

In the 2007-2013 programming period theAB’s principal activities focused on assessingthe functionality and effectiveness of themanagement and control systems of OPs(systemaudits)andauditingoperations.

The audits of operations sought to verifythe accuracy of the reported expenditure,compliancewith EU and Czech law, whetherthe relevant monitoring indicators werefulfilledandwhethertheprescribedpublicity

ruleswerefollowed.

To illustrate, in 2015 alone the Audit Bodyconducted723plannedaudits of operations,sevensystemaudits inthecontextofvariousOPs, four exceptionally comprehensive auditinvestigationsattherequestoftheCommissionand15otheraudit investigationsdoneonanadhocbasisofftheauditplan.

When carrying out their audit work duringthe2007-2013programmingperiod, theAB’sauditors were often exposed to situationswhere they identified risks and subsequentlyformulated theirfindingsbasedon situationsor states of affairs that displayed similarsymptoms.

As a rule, these symptoms shared the samereason (independent of the audit subject oraudited OP), the same type of risk differingonlyinthedegreeofexposureandthegravityof thepotential impact– fromconsequencesthat could be eliminated fairly easily orresolvedbyproposingafinancialcorrectiontoconsequencesofconsiderablesignificancethatcouldcausetheCRsubstantialharmorresultinafailuretofullyutilisethemoneyavailablefrom European funds. Another frequentcommon feature was the fact that themaincauses of negativephenomena tended to becloselylinkedandsynergetic.

The following Ishikawa diagram shows theareas most frequently dogged by negativeinfluences in the 2007-2013 programmingperiodaccording to theABauditors’ findingsandtheircauses.


Diagram 4 – Areas and most common causes of errors in the 2007-2013 programming period

Inconsistency in legal interpretation

Too many acts, decrees

EU funds are not own funds

Errorrepetition

Insufficient number of auditors

Insufficient erudition of auditors

Low coverage of audited area

Beneficiaries approach

Methodology of provider Human resourcesof provider

EU/CR legislation

Low-quality of ex-ante audits

Low-quality of procedures/processes

Unknowingness of methodology, legislation

Bureaucratic demands of methodology

Source:AB,April2016.

Theareas identifiedas thesourcesandmostcommoncausesofnegativephenomenathattendtobethesubjectoffindingswithahighor intermediate degree of seriousness arepresentedinAppendix4.

The factors influencing the likelihood ofthe shortcomings from the 2007-2013

programming period being repeated, theirmutual interaction and the relationshipbetweenthedysfunctionalcontrolenvironmentandtheriskoffailingtoutilisefundingfullyaresetoutinthefollowingdiagram.

Diagram 5 – Factors influencing the risk of shortcomings from previous periods being repeated

Repetition of errors from the period 2007-2013 in the period 2014-2020

Danger of incomplete drawdown

Methodology Legislation Human Resources Beneficiary

Inflexible financing

Complicated rules

Insufficient consultancy

and awareness

Amendments of acts, decrees and methods

Different interpretation

in time

Complicated legal

environment

Shortage of auditors

Low errudition of auditors

Lack of quality assurance

Complexity of project

Ex-ante financing

Indebtedness Complicated

administration

Ine�cient and dysfunctional environment

Source:AB,April2016.


To conclude, it is fair to say that the biggestproblems which the Audit Body repeatedlyencountered in its work during the 2007-2013programmingperiodandwerereflectedin audit findings in almost all audit reportswereshortcomingsonthepartofcontractingauthoritiesduring(public)procurement.

Almost 50% of all detected shortcomingsand almost 75% of all identified ineligibleexpenditure are linked to the publicprocurementprocess.

In most of the identified cases, deficienciesof this type were caused by a lack ofdue professional care on the part of theorganisationsholdingpublictendersand/orbyviolationsofActNo.137/2006Coll.,onpublicprocurement, either through ignorance ornegligence.

As these are shortcomings of the same typeandwiththesamecauses,theyarehighlylikelytoberepeatedinthe2014-2020programmingperiod.

If we want to avoid the problems of thepreviousprogrammingperiodinthenewone,effortsmustbemadetoensurethattheareasflaggedupas thesourcesandmostcommoncausesofnegativephenomenaareasrisk-free

aspossible.Inpractice,thatmeansminimisingthe potential causes and entirely eliminatingthe impact of potential problems, or at leastlesseningtheimpacttoanacceptablelevel.

In the new programming period it will benecessary to place constant emphasis ondevising and modernising the tools formanaging, remedying and eliminatingirregularities, conflicts of interest, corruptconductandfraud.

The Audit Body has little capacity to restrictnegativephenomenaitself,i.e.merelythroughtheperformanceofauditwork,mainlybecausetheAB’swork isdoneexpost (afterfinancesarepaidoutfromtheEUbudget)andnotexante,whichisessentiallyamoreeffectiveformofcontrol.

Although the textmakesclear somepossiblewaystoincorporatepreventivemeasuresintotheAB’swork,preventivemeasuresundertakeninisolation,withoutthecooperationofotherbodiesoftheimplementationstructure,haveaminimalchanceofsuccessinpractice.

Success will only come from effectivecooperationbetweenalltheentitiesinvolved.



Section II

Report on the Financial Management of EU Finances in the Czech Republic for 2015

Summary of Section IIGeneral information

- Thestartof2015sawthebeginningoftheEuropean semester,primarilyrepresentingtheoutcome of theCommission’s assessment of current progress in the implementation ofstructuralreformsinMemberStatesin2014.TheCommissionidentifiedthree main pillars ofeconomicandsocialpolicyfor2015tospeedupthegrowthofnationaleconomiesandtheEUasawhole:

• coordinated support for investment (investmentplanforEurope);• a renewed commitment to structural reforms (puttinginplacetherightconditionsfor

long-terminvestment);• responsible fiscal policies (long-termcontroloverbudgetdeficitsanddebtlevels).

- TheCzech Republic submittedits2015 national reform programme anditsmedium-termconvergence programme for 2015-2018 to the Commission for assessment and to theCouncilforrecommendationsfor2016.TheCouncil recommendations ontheconvergenceprogramme of the CR are aimed at fiscal correction, cost-effective healthcare, a simplertax system, thefightagainst corruption, reducing the taxburdenofphysicalpersonsandtertiaryeducationreform.InFebruary2016theCommission declared that the CR had made progress towardsfulfillingtherecommendationsfor2015andjudgedthecountrytobeontracktoachieveitsnationalstrategiesinthecontextofEurope 2020.

- TheEuropean Court of Auditors (ECA),astheEU’sexternalauditor, issuedstatementsonthebudgetforthe2014financialyear,issuinga positive statement on the reliability of the EU’s financial statements. Its statementonthelegalityandaccuracy of revenues was also positive, but its statement on payments, as in previous years, wasnegative,asitfoundthattheyweremateriallyaffectedbyerrors.

- In2014theCzech Republic continuedtoberigorousinsubmittingreportsofirregularitiesto the OLAF46. The Czech authorities reported a total of 1,074 irregularities concerningexpenditureworthover€330 million. 42 of these cases concernedsuspicion of fraud worthatotalofalmost€37 million. Nosuspicionof fraud was reported intherevenuesarea.

- The 2014 EU budget comprised revenues totalling over €143.9 billion and expenditure totallingover€138.7 billion. The CzechRepublicdrewdownalmost €4.4billionfrom the EU budget (with more than 70% going into cohesion policy) and contributedmore than €1.5 billion to the EU budget. The netposition for 2014 was just under €2.9billion, less than in 2012 and 2013. By contrast, the net position for 2015 (according to MoF data from 2016) reached a record high of almost €5.6billion.

46 Officeeuropéendelutteantifraude.

»


Sector matters

European Union budget revenues - Intheyears2014and2015theCzech Republic adoptedandexecuteda number of measures

to implement the national reform programme,e.g.anorganisationcalled“Tax Cobra”wassetuptocombattaxfraud;anact on electronic sales recordswaspassed;adraftactontaxongamblinggameswasputintothelegislativeprocess;andathree-yearplanforgradually increasing of tax rates on tobacco productswasadopted.

- In2015severalimportantchangestotheactonvalueaddedtax(VAT)were adopted;anact on excise duties ,andAct No. 307/2012 Coll., on compulsory labelling of liquor.

- Intheperiodunderscrutiny,i.e.fromApril2015toMarch2016,theSupreme Audit Office published two audit conclusions from audits targeting the administration of taxes.

- In the audit of the administration of VAT the Office stated that the effect of the new mechanisms of the act on VAT did not materialise to the extent that the VAT gap (thedifference between expected and actually collected revenues) was reduced. In fact, tax evasion increasingtheVATgapgrew from CZK 92 to 105 billion from2011to2013.

- In its audit of excise dutiestheSAOfocusedonexcise duty on liquor and excise duty on tobacco products. Itstatedthatsomenewmeasurestocombatunregisteredanduntaxedliquorintroducedattheendof2013orafter2013arenotentirelyeffective.

Economic, social and territorial cohesion policy

- In 2015 the drawdown of finances for cohesion policy measures sped up considerably,with 21% of the total allocation for the 2007-2013 programming period drawn down inthatyearalone.According to theNCA’sestimate fromJanuary2016,a totalofCZK29.8-34.1billion, i.e.4%of the total allocation for theentire2007-2013programmingperiod,couldremainunutilised(i.e.financesnotdrawndownin2013and2014).Theoverallresultcouldstillbepositivelyinfluencedbycertainnewapproaches(e.g.retrospectivesupportforselectedprojects);ontheotherhand,intense concentration on drawdown brings a risk that insufficient consideration is given to economy, efficiency and effectiveness.

- Intotal,almost€453.9billionisearmarkedintheEUbudgetforfinancingtheESI Fundsinthe2014-2020programmingperiod,with€24.2 billion ofthatamount set aside for the CR (approx.CZK648.2billion).

- In 2015 the OP managing authorities issued the first calls and started to receive the first applications for the new programming period. Compared to the start of the 2007-2013programmingperiodtheapprovalofOPsforthe2014-2020periodwasdelayed,thusinturndelayingtheprocessofimplementingmeasuresbyaboutsixmonths.Ontheotherhand,then+2rulewillbereplacedbyn+3,sothetimelimitforutilisingtheannualallocationwillbeoneyearlonger.

- The Supreme Audit Office published audit conclusions from 12 audits conducted in theperiodunderscrutinyandfocusingontheimplementationofcohesionpolicymeasures.Asinpreviousyears,theauditsdetectederrorsintheselectionofprojectsforfinancing,thesettingofuncheckableobjectives,errorsinthemonitoringofprogresstowardsgoals,failuretoachievethegoalsofprojectsandprogrammes,errors inpublicprocurement, ineligibleexpenditureandshortcomingsinthecontrolsystem.The measures to remedy these errors have therefore long been inadequate.

- The SAO’s findingsbasicallycorrespond to the findings of other audit bodies.Forexample:

• in 2015 the Audit Body issued an opinionwith reservation on themanagement andcontrolsystemsof10OPs;


• in2014theEuropean Court of Auditors estimatedan error rate far above the 2% limit in the following headings:

- Competitiveness for Growth and Employmentand,- Economic, social and territorial cohesion.

EU Common Agricultural Policy and Common Fisheries Policy

- In 2015overCZK 33 billion waspaidoutintheCRundertheCAP,whichisroughlyCZK4.4billionlessthanin2014.UndertheCFPmorethanCZK 208 million waspaidout,i.e.CZK130millionmorethaninthepreviousyear.

- The CR’s drawdown of the CAP and CFP allocation for 2007-2013 for was successful. Asof31December2015,morethan99%oftheallocationundertheRural Development Programme for the Years 2007-2013 (RDP07+)wasdrawndownand92%inthecaseofOP Fisheries 2007-2013 (OPF07+).

- In 2015 the MoA, or SAIF, commenced the receipt of applications under the new 2014-2020 programming period.FarmersreceivedbothsubsidiesforRDPflat-ratemeasuresanddirectpaymentsin2015.NofinanceshadbeendrawndownfromtheallocationforRDP14+projectmeasuresandfromtheallocationforOPF14+bytheendofJanuary2016.

- TheSupremeAuditOfficeconductedtwo auditstargetingtheCAPin2015:

• Thefirstaudit concerned RDP07+ investment projects andscrutinisedthemanagementand achievement of the objectives of the programmeandwhether selectedprojectsachievedtheirgoalsandweresustainable.TheSAOfoundthattherulesputinplacetogoverntheprovisionofsubsidiesmadeitpossibletofinanceprojectsinanuneconomicalandinefficientmannerandthatprojectsdidnotalwayscontributetoruraldevelopmentand agriculture. TheMoA also had difficulty setting and achieving the objectives ofRDP07+:inparticular,itsetunrealistictargetsfortheoutputsandoutcomesofcertainmeasuresordidnotsetanytargetsatall.

• The SAO also completed anaudit scrutinising land consolidation co-financed out of RDP07+. TheSAOfoundtheperformanceoflandconsolidationtobeveryslowandoflimitedscope,whichendangerstheverypurposeandgoalsoflandconsolidation.TheMoA failed to assess the effectiveness of the land consolidation undertaken, mainlybecauseofabadlydesignedsystemofindicatorsformonitoringandevaluatingprogresstowardsthegoals.

Other EU financial instruments and expenditure - Other financial instruments (OFI)mainlycomprisethegroupofCommunity programmes,

whosefinancestheCommissionallocates,barafewexceptions,bypublictenderdirectlytoapplicants,whohavetosucceedin internationalcompetition.Othersourcesforfinancingexpenditure are special-purpose funds for implementing migration and asylum policyunder the general programme entitled Solidarity and Management of Migration Flows (Solidarityprogramme)andtheEuropean Union Solidarity Fund (EUSF),intendedtofinanceexpenditurelinkedtorespondingtonaturaldisasters.

- Entities from the CR receivedmorethan€170 millionin2014,amarkedimprovementoverpreviousyears.Thatrepresentsapercapitasumof€16.32.

- The SAO completed two audits targeting the use of OFI resources in the period underscrutiny:

• InApril2015theSAOpublishedtheauditconclusionfroman audit of finances provided to the CR from the EUSF todealwiththeconsequencesofcatastrophicfloodingthathit the CR in 2010.The audit showed that the administrationof the CR’s applications


forsupporttookarelativelylongtime(upto14months)andthebindingmethodologyforimplementingtheassistancedidnotcategoricallydefineeligibleexpenditureinthevariouslevelsofprojectdocumentationforinfrastructurerepair.

• Thesecondauditwasdevotedtothe financing of migration and asylum policy goals undertheSolidarityprogramme. Theauditresultsshowedthatthereliabilityofthesystemfortrackingmonitoringindicatorsatprojectlevelwaslow,becausethebeneficiariesdidnotkeepdataonthedateofbirthoftheirclients,whichwasessentialforanysubsequentverificationofaforeignnational’sidentityandresidencestatusininformationsystems.TheSAOalsodetectedineligibleexpenditure.Intheaudit,thecontrolsystemwasratedonlypartiallyeffectiveeventhoughtherateofineligibleexpendituredidnotexceedthedefinedthresholdof2%ofthevolumeofscrutinisedfinances.

Other activities related to the EU’s financial management

Legal matters - In2015theSAOsubmittedspecificcommentsto57draft legal regulations for assessment

in the interdepartmental consulting process. Most of the SAO´s comments, stemming primarily from audit findings, weretakenintoconsiderationbythelegislator.

- Regarding deficiencies in the transposition of EU law the CR does not deviate from the average ofMember States in termsof either the transposition deficit or thenumber of proceedings against the CR for breaches of EU law. Onesignificantrisk for the financing of majortransportprojectsin particular, financed from the ESI Funds, is the fact that in the time between joining the EU and 2015 (10 years) the CR failed to properly transpose the EU directive on environmental impact assessment. SatisfyingtherequirementsoftheEIAdirectivewas included by the Commission among the exanteconditionalitiesthat the CR must fulfil before it can utilise EU budget finances for the 2014-2020 period also after 2016.Witheffectfrom1April2015 the problem of transposing the EU EIA directive was resolvedby the adoption of Act No. 39/2015 Coll. Bringing past assessments (issued under thepreviousActNo.244/1992Coll.)intolinewiththerequirementsoftheEU’svaliddirectiveswilltake6to18months,whichcouldleadtodelaysinthestartofmajortransportprojects.AtthetimeofeditorialdeadlineofEU Report 2016theCzechRepublicwasnegotiatingwiththeCommissiononwaystosimplifythisprocess.

Accounting for and reporting EU finances in the CR - Accounting for and reporting EU finances in the CR wasunclearinpreviousyears,asCzech

accounting standard no. 703 did not precisely define the role of organisational components of the state in theprovisionof transfers.Thisambiguity resulting in reporteddatabeingincomparablewaseliminatedasof1January2015.The SAO’s audit work revealed certainother systemic risks concerning the accounting for and reporting of finances providedfromtheEUbudgetthatcouldundermine the informational value of data summarised in the areas of the state’s accounting consolidation (firstfortheyear2015),accounting for preliminary payments fromabroadandaccounting for receivables from pre-financing.

International activities of the SAO - In 2015 the SAOwent aheadwith its broad range of activities, including participating in

coordinated audits, holding seminars, its work in working groups and representation ininternationalorganisationsand,lastbutnotleast,initsday-to-daysharingofinformationforexternalpubliccontrolwithothercountries’supremeauditinstitutions.

- Themost important international event in2015heldat theSAO´sheadquarterswas theofficialvisit of ECA president VítorCaldeiratotheCR.InadditiontohisworkingprogrammeattheSAO,hemetwiththepresident of the republic and the prime minister and attended a session of the Committee on Budgetary Control of the Chamber of Deputies of Parliament.


C. General information

C.1 Current developments in the management of EU finances

C.1.1 Coordinated EU economic policy measures

TheEuropean semester47,atoolforimplementingreformsatthelevelofMemberStatesandtheentireEU,commencedforthefirstquarterof2015withthepublicationoftheAnnual Growth Survey 201548 (GrowthSurvey2015).InittheCommissionpublishedtheresultofitsexaminationofthestateofpublicfinances inMemberStatesfor2014andtheresultof itsassessmentofcurrentprogressintheimplementationofstructuralreforms.

The Commission stated that, despite the considerable efforts to overcome the financial andeconomiccrisis, therevival intheEuropeaneconomyin2014wasnotasstrongashadbeenexpectedin2013.Economicgrowthbegantoslowdownandasocialcrisisaccompaniedbyhighunemployment emerged. Therewere considerable differencesbetweenMember States, andrighting themacroeconomic imbalancewas hamperedby lowwork productivity, inadequateinvestmentandhighstructuralunemployment.TheCommissionwentontosaythat,giventhedifferencesbetweenMemberStates,thepublicauthorities’approachtotacklingeconomicandsocialdifferencesatalllevelswouldhavetodiffer,thoughitwouldremainpartofacommon,integratedapproach.

IntheGrowthSurvey2015theCommissiondefinedthree main pillars of economic and social policy for 2015: - A coordinated boost to investment – theCommissionputforwardanInvestmentPlanfor

Europethatshouldmobiliseatleast€315billionofadditionalpublicandprivateinvestmentintheyears2015-2017(theEuropean Fund for Strategic Investmentswassetup)andimprovetheoverallinvestmentenvironment.

- A renewed commitment to structural reforms – thisisessentialforcountriestogrowoutofdebtandtostimulatethecreationofjobs.Supportingeconomicgrowthandjobcreationinareaslikeservices,energy,telecomsandthedigitaleconomyisdependentoninimprovingconditionsforbusiness.Thatmeanscutting“redtape”andadoptinglegislationtocreateasuitableregulatoryenvironmentforlong-terminvestment.

- Pursuing fiscal responsibility – despiteconsiderableprogressinfiscalconsolidation,MemberStates still need to secure long term control over deficit and debt levels. They shouldencouragedomesticdemand,withaparticularemphasisonmakinginvestmentexpendituremore efficient andmaking the tax systemmore supportive of investment. Fundamentalmeasuresshouldbeadoptedtopreventtaxfraudandevasion.TheframeworkformulatedintheStability and Growth Pactanditsupdates,knownas“packs”,istobeusedtodeliverlong-termgrowthinthecontextofsustainablepublicfinances.

InApril2015theCzechgovernmentapprovedtheNationalReformProgrammefor201549and

47 TheEU’spoliticaltimetableaccordingtowhichMemberStatesnegotiateontheirbudgetaryandeconomicplans.WithinitsframeworktheCommissionmonitorswhetherMemberStatesareworkingonmeasurestoimplementtheEurope 2020growthstrategy,amongotherthings.

48 CommunicationoftheCommissiontotheEuropeanParliament,theCouncil,theEuropeanCentralBank,theEuropeanEconomicandSocialCommittee,theCommitteeoftheRegionsandtheEuropeanInvestmentBank:Annual Growth Survey 2015,COM(2014)902,finalwordingof28November2014.

49 NationalReformProgrammeoftheCzechRepublicdrawnupbytheOfficeoftheGovernmentoftheCzechRepublicandapprovedbythegovernmentoftheCRon29April2015.


theConvergenceProgrammeoftheCzechRepublic50for2015-2018,whichitsubmittedjointlyto the Commission on 30 April 2015.Based on the Commission’s assessment51 issued in thecontextoftheEuropeansemester,theCouncil issuedrecommendations52onbothdocumentssimultaneously. Having assessed the convergence programme and taking into account theCommission’sforecast,theCouncilstatedthatitwasoftheopinionthattheCRshouldbroadlycomplywiththeprovisionsoftheStability and Growth Pact(i.e.totalgovernmentsectordeficitand the public debt to GDP ratio). The Council discussed the Convergence Programme andreflecteditsopinioninthefollowingrecommendations for 2015-2016:

- Achieveafiscaladjustment53of0.5%ofGDPin2016.Furtherimprovethecost-effectivenessandgovernanceofthehealthcaresector.

- Fight tax evasion, simplify the tax system and implement the anti-corruption plan, takemeasurestoincreasethetransparencyandefficiencyofpublicprocurement,inparticularbyestablishingacentralregisterofpubliccontractsandstrengtheningguidanceandsupervision.

- Reducethehighleveloftaxationleviedonlow-incomeearners,byshiftingtaxationtootherareas.Furtherimprovetheavailabilityofaffordablechildcare.

- Adoptthehighereducationreform.Ensureadequatetrainingforteachers,supportpoorlyperforming schools and take measures to increase participation among disadvantagedchildren,includingRoma.

C.1.2 Implementation of the Convergence Programme of the Czech Republic

InFebruary2016Commissionstaffpublishedaworkingdocument54(2016Report)assessingtheCR’seconomyinthelightoftheAnnualGrowthSurvey.The2016ReportstatesthattheCRhasexperiencedastrongeconomicreboundinthelasttwoyearstoemergefromaprolongedperiodoflowgrowthaftertheglobalfinancialcrisis.The2016Reportalsocharacterisestheresultsofstructuralreformsleadingtoamoremoderneconomyandassessesthefollowingtwoareas:

Economic situation and outlook

- Growth in gross domestic product – realGDPgrowthin2015isestimatedat4.5%55,withpublic investment expected to have grown strongly on the back of increased drawing offundsavailableunderthepreviousprogrammingperiod2007-2013.Thegovernmentdeficitshouldfallbelow1.6%andgovernmentdebtwillbesignificantlylowerthan60%ofGDP56. RealGDPgrowthshouldreach2.3%in2016whiletheunderlyingdynamicsoftheeconomyremainstrong,andin2017realGDPgrowthshouldreach2.7%,drivenbygreaterinvestmentandincreasinghouseholdconsumption.57

50 ConvergenceProgrammeoftheCzechRepublic,April2015,drawnupbytheMoFandapprovedbygovernmentoftheCRresolutionno.319of29April2015.

51 CountryReportCzechRepublic2015,CommissionstaffworkingdocumentSWD(2015)23,finalwordingof26February2015.

52 Councilrecommendationof14July2015ontheNationalReformProgrammeoftheCzechRepublicfor2015anddeliveringaCouncilopinionontheConvergenceProgrammeoftheCzechRepublic,2015,OfficialJournalC272/09,18August2015,p.32.

53 Reducegovernmentdebt.54 CountryReportCzechRepublic2016,CommissionstaffworkingdocumentSWD(2016)73,finalwordingof26

February2016.55 TheCzechNationalBankestimatedGDPgrowthin2015atasmuchas4.7%(https://www.cnb.cz/cs/menova_

politika/prognoza/index.html?cnb_css=true#HDP).56 AssessmentoftheFulfilmentoftheMaastrichtConvergenceCriteriaandDegreeofEconomicAlignmentofthe

CzechRepublicwiththeEuroArea,whichdefinesthemaximumgovernmentdeficitas3%andthemaximumgovernmentdebtas60%ofGDP.AccordingtoMoFfigurespublishedon1April2016,thegovernmentdeficitfor2015wasCZK18.7billion,i.e.0.4%ofGDP.ThegovernmentdeficitwasCZK1,836billion,i.e.41.1%ofGDP.

57 TheCzechNationalBankestimatedGDPgrowthin2.7%in2016and3.0%in2017(https://www.cnb.cz/cs/menova_politika/prognoza/index.html?cnb_css=true#HDP).

https://www.cnb.cz/cs/menova_politika/prognoza/index.html?cnb_css=true%23HDP





- Investment – after previous reductions in the context of fiscal consolidation, investmentreboundedin2014,risingbyoverCZK25.5billion(0.6%ofGDP),andin2015investmentshouldamounttoCZK64.0billion(1.4%ofGDP).Thatisexpectedtobefollowedbyafallin public investment causedby a slowdown in thedrawdownof EU funds,while privateinvestmentremainsbuoyant,sototalinvestmentgrowthwillbezero.

- Inflation – theoutlookfor2015envisagedafurtherfallininflationto0.3%,mainlyasaresultoffallingenergyprices.Therateofinflationisexpectedtomoveclosertothe2%inflationtargetoftheCzechNationalBank(CNB)in2017.

- Labour market–unemploymentfellto4.9%inthe3rdquarterof2015,oneofthelowestratesofallMemberStates.Long-termunemploymentandyouthunemploymentarealsobelowtheEUaverage.

- Financial sector – thebankingsectorisverystable.Thebankshavesteadilyincreasedtheircapitalbuffersandshownahighabilitytowithstandliquidityshocks.Creditflowsacceleratedin2015,withtotalbanklendingincreasingby8.1%year-on-year,drivenbystronggrowthinhousingloans.

- Public finances – the2016Reportenvisagesafallinthegovernmentdeficitto1.6%ofGDPin2015onthebackofimprovedtaxcollectionandto1.1%in2016asaresultoftheexpecteddeclineinpublicinvestmentspending.ThegovernmentdebttoGDPratiowillcontinuetofallinthecomingyears.However,theupwardtrendinspendingonhealthcareandpensionsinconnectionwithpopulationageingisariskforthelong-termsustainabilityofpublicfinances.

Structural issues

- Tax system and tax burden – taxevasion,especiallyinVAT,wasratedasrelativelyhigh,albeitlowerthaninothercountriesintheregion.Thecostoftaxcompliancealsoremainedhigh,eventhoughthisisoneoftheprioritiesofthegovernment’sprogramme.The2016ReportstatesthattheCzechgovernmentplanstointroduceVATcontrolstatements58,recordingallVATtransactions,atthestartof2016andelectronicevidenceofsalesinthecourseoftheyearasnewweaponsinthefightagainsttaxevasion.Taxationonlabourremainedrelativelyhighin2015anddiversificationintootherareas(realestatetaxes,consumptiontaxes)wasminimal.

- Fiscal framework and long-term fiscal sustainability–theReport2016ratestheCR’sfiscalframeworkasweakandflagsupthedelayinthereformofpublicfinances59,whichhadnotbeenratifiedbyparliamentwhenthereportwaspublished.Accordingtotheanalysis,theCRisexposedtoamediumriskintermsofthelong-termsustainabilityofpublicfinances,as stability is jeopardisedby theexpected increase inpublic spendingonhealthcareandpensions in connection with population ageing. The governance and cost-effectivenessof healthcare also needs addressing by increasing the proportion of outpatient servicescomparedtoinpatientcare.

- Labour market and education – the2016Report states that the labourmarket situationcontinuestoimproveandtherateofemploymenthasrisenconstantlyforfiveyears.Inthethirdquarterof2015itreached75.1%(20-64agegroup),wellabovetheEUaverage(70.6%).Lowwageandlabourcostsgrowthhasaidedcompetitiveness.The2016Reportgoesontosay that stable growthwill require increasedeconomic activity amongunderrepresentedgroups,suchasthelow-skilled,youngworkers,Romaandmotherswithyoungchildren.In2014 theCR recorded the lowest level of people at riskof povertyor social exclusion inthewhole EU (14.8%versus theEuropeanaverageof 24.4%). Educational outcomesandtheemployabilityofschool-leaversaregenerallygood.Theearlyschool-leavingrateisalsoamongthelowestintheEU(5.5%in2014).Onepersistingproblemisthelowattractiveness

58 Establishedwitheffectfrom1January2016byActNo.360/2014Coll.,amendingActNo.235/2004Coll.,onvalueaddedtax.

59 WithinthemeaningofCouncilDirective2011/85/EUof8November2011on requirements for budgetary frameworks of the Member States,MemberStateswererequiredtoensurethatthelegalandadministrativeregulationsnecessaryforcompliancewiththisdirectivewereinplaceby31December2013.


oftheteachingprofession,mainlyduetolowpay.ExpenditureontertiaryeducationisamongthelowestintheEU,however(0.6%ofGDPin2013).ThetertiaryeducationattainmentrateintheCRstoodat28.2%in2014,comparedwithanEUaverageof37.9%.

- Competitiveness – theCR’scompetitivenesshas improved,asevidencedbyan increasedshareoftheexportmarketin2014,mostlyingoodsandlessinservices.Czechexportsaredominatedbyhigh-techproducts(especiallyautomobiles),andtheCRishighlyintegratedinto global supply chains. The 2016 Report states that public procurement procedureshavesofarnotbeencompliantwithEUbestpractice,buttransparencyimprovedaftertheContractsRegisterActwaspassed60.The2016Reportanalysesnegativeinfluencesonthebusinessenvironment,withvariousadministrativeandregulatorybarriersamongthemostsignificant.Thelowqualityofpublicadministration,withproblemfactorssuchasgovernmentbureaucracyandcorruption,alsoplaysamajorrole.Ontheotherhand,the2016Reportpointstopositiveresultsconsistingintheimplementationofmeasuresoftheanti-corruptionplanfrom2015,theCivilServiceAct61anditsimplementingregulationsenteringintoeffect,andtheadoptionoftheContractsRegisterAct.AnewPublicProcurementAct62transposingtheapplicableEUlegislation63isalsobeingdrawnup.

- Long-term growth drivers and resource efficiency – research and development (R&D)intensityhas increasedsignificantly inrecentyears,mainly throughfunding fromforeign-ownedfirmsandEUfunds. In2014 it reached2%ofGDP(which isalsotheEUaverage),withanincreaseto2.9%expectedin2020(EUtargetof3%).However,uncertaintyremainsover the sustainability of public spending on R&D infrastructure. In terms of the resultsachievedbytheR&Dsystem,theCRisratedamoderateinnovatorandoutcomesintermsofpatentsfiledareweak.GovernancereformoftheR&Dsystemiscontinuing.ComparedtotheEU,theCzechRepublicstillhasshortcomingsintransportinfrastructure,especiallytheroadnetwork,thoughincreasedinvestmentinrecentyearsisgraduallyclosingthegap.Theenergyandcarbonintensityoftheeconomyremainshigh.

Overall, the2016Report states that theCRhasmadesomeprogress inaddressing the2015country-specificConvergenceProgrammerecommendations.ThereportgoesontostatethattheCRhasreachedthedefinednationaltargetsinthecontextoftheEurope 2020 strategyorismakinggoodprogresstowardsitstargetsonemployment,R&Dinvestment,tertiaryeducationandreducingearlyschoolleaving.

C.1.3 Annual reports of the European Court of Auditors for the financial year 2014

InlinewiththeTreaty on the Functioning of the European Union (TFEU)64andtheregulationonthefinancial rulesof theEUgeneralbudget65, theECA,as theEU’sexternalauditor,adoptedannualreportsforthe2014financialyearat itssessionof10September2015.Thesereports,alongwiththeresponsesoftherelevantauthoritiestotheECA’scomments,arethebasisonwhichtheEuropeanParliament(“EP”)issuesastatementconfirmingthattheCommissionhasproperlydischargeditsdutiesinimplementingthebudget.

60 ActNo.340/2015Coll.,onspecialconditionsoftheeffectivenessofcertaincontracts,thepublishingofsuchcontractsandaregisterofcontracts(ActontheRegisterofContracts)of24November2015(validfrom14December2015,effectivefrom1July2016).

61 ActNo.234/2014Coll.,onthecivilservice,of1October2014(validfrom6November2014,effectivefrom1January2015).

62 ActNo.134/2016Coll.,onpublicprocurement,promulgatedaftertheeditorialdeadlineofEUReport2016.63 Directive2014/24/EUoftheEuropeanParliamentandoftheCouncilof26February2014onpublic

procurementandrepealingDirective2004/18/EC.64 Article287(1)and(4)oftheconsolidatedversionoftheTreatyontheFunctioningoftheEU,OfficialJournalof

theEU,C115of9May2008.65 Articles148(1)and162(1)ofRegulation(EU,Euratom)No966/2012oftheEuropeanParliamentandofthe

Councilof25October2012.


ThecoreoftheAnnual Report on the Implementation of the Budget66istheECA’sstatementofassurance(DAS)concerningthereliabilityoftheEU’sannualfinancialaccountsandstatementsonthelegalityandaccuracyoftheoperationsunderpinningtheseaccounts.

Basedonitsaudit,theECAissuedanopinionstating“that the EU accounts for 2014 are a faithful representation, in all material respects, of the European Union’s financial situation as of 31 December 2014 and that the results of its activities, its cash flows and changes in net assets for the year are in compliance with the Financial Regulation and with the accounting rules based on internationally recognised public-sector accounting standards”.

As regards the legality and accuracy of revenues, the ECA declared that “the revenues underpinning the financial statements for the financial year 2014 are legal and accurate in all material respects”.

As in previous years, the ECA issued a negative statement on the legality and accuracy ofpayments,as“the payments underpinning the financial statements for the financial year 2014 are materially affected by errors”.TheECAestimatedthatthetotalerrorrateinthisareawas4.4%.

IntheAnnual Report on the Implementation of the Budget for 2014 theECAalteredthestructureof expenditure headings in linewithMFF14+. The following table summarises the results ofauditedoperationsandtheoverallassessmentofthedegreetowhichthevariousareasoftheMFFaremateriallyaffectedbyerror.

Table 4 – Summary of the results of the audit of accuracy of operations for 2014 and assessment of the error rate in expenditure headings6768

Annual report heading Basic audited file

Number of tested payments

Total estimated error rate (%)

Error frequency67

Affected by principal

(material) error rate

Competitiveness for Growth and Employment 13.0 160 5.6 48 yes

Economic, Social and Territorial Cohesion 55.7 331 5.7 41 yes

Sustainable growth-natural resources 57.5 359 3.6 49 yes

Global Europe 7.4 172 2.7 43 yes

Administration 8.8 129 0.5 20 no

Other68 2.1 - - - -

Total audited payments 144.5 1 151 4.4 - yes

Total audited revenues 143.9 55 0.0 0 no

Source: ECA Annual Report on the Implementation of the BudgetfortheFinancialYear2014,ECA2015.

66 TheOfficialJournaloftheEuropeanUnionof10November2015,PartIVNotices from European Union institutions, bodies, offices and agencies,C373/3.

67 Errorfrequencystateshowbigportionoftheauditedsampleisaffectedbyquantifiableornon-quantifibleerrors.

68 ForexampleheadingMffSecurityandCitizenshiporCompensations,alsoinstrumentsoutsidethisframeworkasSFEUorEuropeanFundforGlobalisationAdjustment.


Forthepurposeofyear-on-yearcomparison,theECAreclassifiedthetotalestimatederrorratesfor2013tomatchthenewbudgetheadingsstructure.Thisreclassificationalsotookintoaccountthenewapproachtoquantificationofpublicprocurementerrors.

Year-on-year comparisonof audit results shows that theestimatederror rateof theauditedpaymentsasawholefellslightlyfrom2013to2014fromthereclassifiedvalueof4.5%to4.4%.IntheMFFheadingNatural Resourcestheerrorratefell(from4.4%to3.6%),withthesametrendevident inEconomic, Social and Territorial Cohesion (from5.9% to 5.7%) andAdministration (1.1%to0.5%).Conversely,thetotalestimatederrorratesinCompetitivenessandGlobal Europe increased (from 4.0% to 5.6% and from 2.1% to 2.7% respectively). According to the ECA’sanalysis,thebiggestfactorinthetotalestimatederrorrateisfindingslinkedtotheclaimingofineligibleexpenditureandseriouserrorsinpublicprocurement.Inaddition,over-declarationsoflandareasbyfarmersalsocontributedtotheerrorratein2014.

C.1.4 Current developments in the protection of the EU’s financial interests

InJuly2015theCommissionpublisheditsannualreportfor2014onmeasurestoprotecttheEU’sfinancialinterestsandcombatfraud.69TheCommissionsubmitsthisreportincollaborationwithMemberStatestotheEPandCouncileveryyearwithinthemeaningofArticle325oftheTFEU.ThereportinformsaboutmeasurestakenbytheCommissionandMemberStatesinthefightagainstfraudandotherunlawfulconductharmingtheEU’sfinancialinterestsandpresentstheresultsachievedintheyearinquestion.Italsosetsoutconclusionsandrecommendationsbasedontheanalysesdone.

TheCommissionregardsthecompletionof thepriorityactionsof itsmulti-annualAnti-FraudStrategy(CAFS)70asthegreatestachievementof2014,asallCommissionservicesandagenciesnowhaveananti-fraudstrategyinplace.TheEuropeanParliamentandtheCouncildiscussedtwoproposedregulationstoreinforceandincreasetheefficiencyofcriminallawregardingtheprotectionoftheEU’sfinancialinterests.Onewasadraftdirectiveonthefightagainstfraudbymeansofcriminallaw,whichshouldremoveloopholesinMemberStates’anti-fraudlegislationthat impede theeffectiveprosecutionof fraudsters. Theotherwasadraft regulationon theestablishment of a European Public Prosecutor’s Office, under which European prosecutorswould operate at the decentralised level, i.e. in individual Member States. Besides theseregulations,amendmentsweremade in2014to thepublicprocurementdirectiveandpublicutilitiesdirectivewithaviewtoenhancingthetransparencyofprocessesandintroducingnewobligationsforcontractingorganisationsinordertocurbirregularities.

Accordingtothedataintheannualreport,in2014MemberStatesreporteda total of 16,473 irregularities 71(bothfraudulentandnon-fraudulent)totheCommission,orOLAF,with a total financial impact of €3.24 billion, of whichmore than €2.26 billion concerned expenditure (correspondingto1.8%oftotalpayments)andapprox. €0.98 billion concerned revenues (4.46%ofselectedgrosstotaltraditionalownresources).Comparedto2013,thenumberofirregularitiesdetectedincreasedby48%andthecorrespondingfinancialamountssawanincreaseof36%.Ofthenumbergivenabove,fraudulent irregularities (i.e.suspectedfraudandestablishedfraud)accountedfora total of 1,649 cases involving €538.2 million (coveringbothexpenditureandrevenue). Incomparisonwith2013, thenumberof fraudulent irregularities reported in2014increasedby2%,whiletheirfinancialimpactincreasedby68%.Theincreaseinthetotalnumberofreportedcasesoffraudwasdrivenbyfraudintherevenuessector72,whileaslightfallwas

69 ReportfromtheCommissiontotheEuropeanParliamentandtheCouncil:Protection of the European Union’s financial interests – Fight against Fraud 2014 Annual Report,COM(2015)386,finalwordingof31July2015.

70 CommissionAnti-FraudStrategy,CommunicationfromtheCommissiontotheEuropeanParliament,theCouncil,theEuropeanEconomicandSocialCommittee,andtheCommitteeoftheRegionsandtheCourtofAuditorsOn the Commission Anti-fraud Strategy,COM(2011)376,finalwordingof24June2011.

71 MemberStateshaveadutytoreporttotheCommissionanysuspicionoffraudandallirregularitiesexceeding€10,000fromEUsources.

72 In201440%ofcasesoffraudweredetectedbycustomsinspectionsand36%bycontrolworkdonebyanti-fraudunits.


registeredintheexpendituresector.Boththerevenueandexpendituresectorscontributedtotheincreasedfinancialimpact(year-on-yearincreasesof190%and50%respectively).

MemberStates,whichmanageapprox.80%ofEUbudgetspendingundersharedmanagement,report both fraudulent and non-fraudulent irregularities via the Irregularity ManagementSystem(IMS)73.IrregularitiesconcerningdirectexpendituremanagedbytheCommissionunderdirectmanagementofthebudgetarereportedviatheCommission’sABACaccountingsystem74. Compared to 2013 the total numberof irregularities reported inABAC fell slightly, but theirfinancialimpactincreasedslightly.

ThefollowingtableNo.5showsthenumbersandaggregateamountsofthereportedirregularities,brokendownbyexpenditureareasandrevenues.

Table 5 – Numbers and amounts of cases of suspicion of fraud and non-fraudulent irregularities reported by EU Member States in 2014 and the amounts involved

Budget sector (expenditure/revenues)

Number of fraud

suspicions

Volume of fraud suspicion (€ million)

Number of other

irregularities

Volume of other irregularities

(€ million)

Nat

ural

reso

urce

s

Agriculture (market support and direct payments)

EU 166 48.5 1 162 108.0

out of which CR 4 0.3 48 2.6

Rural developmentEU 335 13.7 2 112 120.2

out of which CR * * * *

FisheriesEU 11 2.1 91 6.6


OtherEU 7 4.3 53 2.7

out of which CR * * * *

Cohesion Policy 2007–2013 and 2000–2006

EU 306 274.2 4977 1 561.3

out of which CR 38 36.4 982 290.8

Pre accession assistance 2007–2013 and 2000–2006

EU 31 14.5 140 9.2


Direct expenditure EU 83 4.7 1814 96.1

Total expenditureEU 939 362.0 10 349 1 904.1

out of which CR 42 36.7 1 032 293.5

Total revenuesEU 710 176.2 4 475 802.4


TotalEU 1 649 538.2 14 824 2 706.5

out of which CR 42 36.7 1 115 305.1

Source:ReportfromtheCommissiontotheEuropeanParliamentandtheCouncil:Protection of the European Union’s financial interests – Fight against Fraud 2014 Annual Report

NB: *ThefigureisnotquantifiedbyMemberStateinthereport.

73 IrregularitiesManagementSystem.74 AccrualBasedAccounting.


Theannualreportremarksontheoveralltrendinfraudulentirregularitiesbetween2010and2014.The total number of reported cases of fraud fell significantly between 2010 and 2011, but the constantly upward trend was confirmed in the following years. The 2014 level was still below the 2010 starting point, however. The related financial impacts fell gradually between 2010 and 2013, with a sharp reverse only coming in 2014. In this case, too, however, 2014 remained below the 2010 level.

Dataonsuspicionsoffraudreportedfor2014viatheAnti-FraudCoordinationServices(AFCOS)ofindividualMemberStatesaregiveninannex1oftheannualreport.75Theoverviewrevealsthatduring 2014 the CR reported 42 cases of suspicion of fraud affecting expenditure with a total impact of €36,668,091, but no cases of suspicion of fraud affecting revenues.Comparedto2013,thenumberofreportedcasesconcerningexpendituregrewonlyslightly,butthefinancialimpactwasalmostthreetimeshigher.Cohesionpolicywasthekeyareainboththenumberofreportedcasesandthequantifiedfinancialimpact.

Annex2oftheannualreport,whichcontainsdataonirregularitiesthatwerenotreportedassuspectedfraud,showsthatin 2014 the CR reported 1,032 irregularities affecting expenditure with a total impact of €293,508,822,withcohesionpolicyagainbeingthepredominantareainboththenumberofcasesandthetotalreportedfinancialimpact.Thenumberofreportednon-fraudulentirregularitiesandtheirfinancialimpactweredownslightlycomparedto2013.

AccordingtodataobtainedfromtheMoF76,thefollowingfourMAsfeaturedmoststronglyinthetotalnumberof1,074 irregularitiesreportedfor2014andintheirrelatedfinancialimpactsamountingto€330,176,913intheCR: - TheMinistry of Education, Youth and Sports (MoEYS) as the managing authority of OP

Research and Development for Innovation (OPRDI)andOPEducation for Competitiveness (OPEC)reportedatotalof387irregularitiesamountingto€67,218,954.

- TheMinistryofLabourandSocialAffairs(MoLSA)asthemanagingauthorityofOPHuman Resources and Employment (OPHRE)reported106irregularitiesamountingto€62,343,109.

- TheMinistryofIndustryandTrade(MoIT)asthemanagingauthorityofOPEnterprise and Innovationreported101irregularitiesamountingto€16,015,772.

- TheMinistryofEnvironment(MoE)asthemanagingauthorityofOPEnvironment (OPE07+)reported67irregularitiesamountingto€15,122,410.

TheseMAsaccountedforalmost66%ofallreportedirregularitiesandapprox.44%ofthetotalfinancialimpact.

Thefollowinggraphicgivesaclearoverviewofthenumbersoffraudulentandnon-fraudulentirregularitiesreportedfortheCRasawholein2014andtheirfinancialimpacts.

75 Anti-FraudCoordinatingStructure.CoordinatingservicesweresetupinallMemberStatesin2014.76 TheroleofAFCOScentralcontactpointintheCRfulfilsMoF,respectivelyitsunit6901.


ROP

Moravia

5 505

ROP Central Bohemia

38 444

ROP North-West

33 034 ROPNorth-East6 703

ROP Moravia - Silesia8 193

ROP South-West

32 110

ROP South-East

8 411

MoE15 122

MoA2 892

MoEYS

67 219MoLSA

62 343

MoIT

16 016

MfRD

16 926

PMG2 752

Other14 424

Central

ROP CentralMoravia

42ROP CentralBohemia

36

ROP North-West23

ROP North-East

63

ROP Moravia-Silesia23

ROP South-West

33

ROP South-East

41MoE67

MoA

54

MoEYS

387MoLSA

106

MoIT

101MfRD

46

PMG

38 MoT

Other

11

3

Number of irregularities reported in the CR in 2014 Amounts related to number of irregularities reportedin the CR in 2014 (€ thousands)

MoT 81

Source: MoF–AFCOS,February2016.

C.2 European Union budget and its relation to the Czech Republic

C.2.1 European Union budget revenues

WhiletheexpendituresideoftheEUexperiencedcertainchangesinthenewMFF(seesubheadingA.2),therewasminimalmodificationoftherevenuesidein2014.Revenuesmainlyderivefromown resources,whichaccount forover92%of all EUbudget revenues.Own resources77 aredividedintotraditional own resources78 (whichMemberStatescollectonbehalfoftheEUandthenpayintotheEUbudget)andtheVAT-based resource79andtheGNI-basedresource,whicharefinancedoutofMemberStates’nationalbudgets.Othersourcesareother revenues80andthebudget surplusfromthepreviousyear.

77 Traditionalownresourcesarecustomsdutiescollectedonproductsimportedfromnon-EUstatesandalsoagriculturalandsugarlevies.Memberstatespay75%ofthefundsthusacquiredintotheEuropeanUnionbudget,keepingtheresttocoverthecostsassociatedwithcollectingthefunds.

78 TheVAT-basedresourcederivesfromauniformrateof0.3%leviedontheharmonisedVATbaseofeachMemberState.TheVATbasetobetaxediscappedat50%ofGNIforeachMemberState.

79 TheGNI-basedresourceisavariableresource.ItisusedtosettlethedifferencebetweenrevenuesandexpenditureintheEUbudgetsothatthebudgetasawholeisbalanced.AsinglepercentagerateisappliedtoallMemberStates.In2014thisratewasmorethan0.70%.

80 Otherrevenuescomprisee.g.revenuesfromfinesimposedforbreachesofcompetitionrulesorotherregulations,incometaxesandotheremployeecontributionsfromemployeesofEUinstitutionsorcontributionstoEUprogrammesfromnon-memberstates.


Graph 3 – Structure of the EU budget and shares of the individual sources of financing in 2014

Traditional own resources11.41 %

VAT based resource12.27 %

GNI based resource68.69 %

Other resources6.93 %Surplus from previous year

0.70 %

EU budget revenuesin 2014

€143.94 billion

Source: EU Budget 2014 – Financial Report,Commission2015.

Revenues fromthesourcesbasedonVATandGNIare influencedbycorrection mechanisms underwhichcertainMemberStatescontributereducedpaymentstotheEUbudgetfromthesesources. Themain reasons for this reduction is to compensate for a pronounced budgetaryimbalance between payments into the EU budget81 and revenues from the EU budget andcertainMemberStates’non-participationinselectedEUpolicies82.ThecostsofthesemeasuresarebornebyotherMemberStatesaccordingtotheirshareoftheGNIoftheEUasawhole,withtheburdenoffinancingthismechanismreducedforcertainMemberStates83.

The following graph shows the structure of EU budget revenues byMember State, makingallowanceforcorrectionmechanisms.

81 In2014onlytheUKrebateworthalmost€6.07billionwasappliedinthisarea.82 Denmark’s,Ireland’sandtheUK’spaymentsarereducedinconnectionwiththeirrefusaltoparticipatein

certainareasoflegalandsecuritycooperation.Thetotalvalueofthisreductionin2014wasalmost€58.67million.

83 ForAustria,Germany,theNetherlandsandSweden,thefinancingoftheUKrebatewasreducedtoonequarteroftheirshare.TheremainingthreequartersoftheirshareiscoveredbytheotherMemberStatesaccordingtotheratiooftheirGNItotheGNIoftheEuropeanUnionasawhole.


Graph 4 – Member states’ contributions to the EU budget in 2014 (with close-up section) (€ million)

0

5 000

10 000

15 000

20 000

25 000

30 000

DE FR IT UK ES NL BE SE PL AT DK EL FI PT IE CZ RO HU SK BG HR SI LT LV LU EE CY MT

Zdroje z HND a mechanismy Zdroje z DPH Tradiční vlastní zdroje

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

EL FI PT IE CZ RO HU SK BG HR SI LT LV LU EE CY MT

Source: EU

C.2.2 European Union budget expenditure

EU budget expenditure is used to cover the needs of the EU’s policies and defray the costsassociated with the working of European institutions. EU expenditure in 2014 was almost €138.7 billion (including contributions to EFTA84 worth €284million). This amount does notincludeassigned revenues85 worthalmost€3.8billion,however.

ThefollowinggraphshowsthestructureoftheEUbudget’sexpenditureside86inthefinancialyear2014,brokendownbybudgetheadings.

84 EuropeanFreeTradeAssociation.85 Assignedrevenueisrevenue(underthetermsofArticle43ofRegulation(EU)No1306/2013oftheEuropean

ParliamentandoftheCouncilof17December2013)arisingfromfinancialcorrectionsaccordingtodecisionsonfinancialstatementsanddecisionsonconformityapproval.fromirregularitiesandfrommilklevies.TherevenueisassignedtofinanceexpenditureoftheEuropean Agricultural Guarantee Fund.

86 MoredetailedinformationonthestructureoftheexpendituresideoftheEUbudgetisgiveninsubheadingA.2.

GNIresourcesandmechanisms VATbasedresources Traditionalownresources


Graph 5 – Share of expenditure headings in the EU budget in 2014

Inteligent growth and inclusive growth support

47.77 %

Sustainable growth: natural resources

39.71 %

Security and citizenship1.20 %

Global Europe4.98 %

Administration6.01 %

Compensations0.02 %

Special instruments0.31 %

EU budget expendituresin 2014

€138.72 billion


Asthegraphshows,thetwolargestheadings(Smart Growth and Inclusive GrowthandSustainable Growth: Natural Resources)togetheraccountforalmost87.48%ofallEUbudgetspending,asumofover€121.3billion.Unlikeinpreviousyears,theSpecial Instrumentsheadingisreportedseparately(seesubheadingA.2).

Graph 6 – Drawdown from the EU budget in Member States in 2014 (with close-up section) (€ million)

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

PL FR ES DE IT EL BE UK HU RO PT CZ BG NL LT LU SE SK IE AT DK SI LV FI EE HR CY MT

Inteligent growth and inclusive growth support Sustainable growth: natural resources Security and citizenship Administration

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

CZ BG NL LT LU SE SK IE AT DK SI LV FI EE HR CY MT



C.2.3 The EU budget in relation to the CR

AllMemberStatescontributetotheEUbudgetandhavetherighttoutilisefinancesfromEUfunds.Inkeepingwithtradition,theCRmainlydrawsdownfinancesundercohesionpolicyandtheCAP.

Contributions of the CR to the EU budget

From2004,whentheCRjoinedtheEU,totheendof2014theCR’scontributionstotheEUbudgetexceeded€14.4billion,withthecumulativecontributionforthe2007-2013programmingperiodaloneamountingto€10.3billion.

Graph 7 – Overview of Czech contributions to the EU budget (€ million) and year-on-year changes (%) in the years 2007 to 2014

1 167,0

1 396,0 1 374,1

1 497,7

1 682,5

1 594,1 1 616,6

1 506,7

2007 2008 2009 2010 2011 2012 2013 2014

12.7 %

-1.6 %

-5.3 % -6.8 %

19.6 %

9.0 %12.3 %

1.4 %

2012 Year-on-year change

1 167.0

1 396.0 1 374.1

1 497.7

1 682.5

1 594.1 1 616.6

1 506.7

Source: EU budget 2014 – Financial ReportandpreviousreportsontheEUbudget,Commission2008–2015.

In 2014 the CR’s contribution to the EU budget was in excess of €1.5 billion.TheCR’scontributionfell year-on-year by almost €110.0million, a fall of 6.8%,while the total contributions of allMemberStatesdecreasedonaveragebyjust4.9%.ThegreaterdecreaseintheCR’scontributionscomparedtotheEuropeanaverageisnotcausedbytheCzecheconomy’sbadperformance.ItisaconsequenceoftheweakeningCzechkoruna,apolicytheCNBadoptedinNovember2013intheformofdirectinterventionsontheforeignexchangemarket.ThroughthispolicytheCNBhassincekeptthekorunaexchangeratecloseto27.00CZK/€,i.e.approx.1.00CZK/€(justunder4%)belowtheexchangeratebeforethestartoftheinterventions.

ThefollowinggraphshowsthestructureoftheCR’scontributionstotheEUbudgetin2014inpercentageterms.


Graph 8 – Structure of Czech contributions to the EU budget in 2014

Traditional own resources13.13 %

VAT based resource12.20 %

GNI based resource67.89 %

Correction mechanisms6.78 %

Czech contributionto the EU budget in 2014

€1 506.7 million


The CR’s revenues from the EU budget

Between2004andtheendof2014theCzechRepublic receivedalmost€30.6billion in totalfrom the EU budget, almost €23.0 billion of that coming during the 2007-2013 period. ThedevelopmentovertheindividualyearsandyearlychangesareshowninGraph9.

Graph 9 – CR’s revenues from the EU budget (€ million) and year-on-year changes (%) in the years 2007 to 2014

Year-on-year change

1 721,0

2 441,1

2 948,6

3 415,6

3 029,1

4 529,5

4 893,1

4 377,2

2007 2008 2009 2010 2011 2012 2013 2014

29.4 %

1 721.0

2 441.1

2 948.6 3 029.1

4 529.5

4 893.1

4 377.2

3 415.6

-11.3 % -10.5 %

41.8 %

41.8 %

20.8 %

15.8 %

2011

8.0 %

Source: EU budget 2014 – Financial ReportandpreviousreportsontheEUbudget,Commission2008–2015.


In2014theCR’stotalrevenuesfromtheEUbudgetstoodatalmost€4.4billion,ayear-on-yearfallofapprox.10%.Thefallneednothavebeensomarked.TheCR’srevenuescouldhavebeenmorethan€0.3billionhigher,buttheCR’sfailuretocomplywiththen+3rule in2014ledtotheCommissiondecommittingthatamountinlinewithCouncilRegulation(EC)No1083/2006(GeneralRegulation).

ThefollowinggraphshowsthepercentagestructureoftheCR’srevenuesfromtheEUbudgetin2014

Graph 10 – Structure of the CR’s revenues from the EU budget in 2014

0.35 %

0.28 %

0.36 %

0.00 %

Administration

Security and citizenship

Special instruments

Global Europe

CR´s revenues from the EU budgetin 2014

€4 377.2 million

Inteligentní růst a růst podporující začlenění

72,09 %

Udržitelný růst: přírodní zdroje26,92 %

Inteligent growth and inclusive growth support

Sustainable growth: natural resources.

.


Graph10showsclearlythattheCR’sbiggestrevenuefromtheEUbudgetcomesfromtheSmartandInclusiveGrowthheading,whichfundsEconomic, Territorial and Social Cohesion Policy.In2014thefigurewasalmost€3.16billion.

ThesecondmostimportantpolicyintermsofthefinancesacquiredistheCommon Agricultural Policy (fundedoutoftheheadingSustainable Growth: Natural Resources),whichaccountedforalmost€1.18billion.

Finances obtained under these two policies again accounted for over 99% of the CR’s totaldrawdownfromtheEU.

Net position of the CR in the EU

SincejoiningtheEUtheCRhasbeenanet beneficiary, i.e. it isoneofthoseMemberStateswhoserevenuesfromtheEUbudgetexceeditscontributions.Intotal,the CR’s net position for 2004-2014 amounted to almost €16.15 billion,theequivalentofalmostCZK444.66billion87.

In2014theCR’snetpositionwas€2.87billion,ayear-on-yearfallofover12%andessentiallyareturntothenetpositionin2012.ThisfallwasmainlycausedbythelargequantityofpaymentapplicationsnotdefrayedbytheCommissionthataccumulatedattheendof2014(theybecamearevenueof2015andhadasignificantimpactonthe2015netposition)andthedropinrevenuesthatwaslinkedtoautomaticdecommittingbytheCommissiontothetuneof€0.31billion.

87 TheCNB’smonthlycumulativeaverageoftheforeignexchangemarketrateforJanuarytoDecember2014wasusedfortheconversion:27.533CZK/€.


Graph11,whichisbasedonofficialCommissionsourcesforthe2004–2014period,illustratestheevolutionoftheCR’snetposition(administrativeexpenditurenotexcluded).Thelastcolumninthegraphshowsthenetpositionfor2015accordingtodatafromtheMoF.

Graph 11 – Net position of the CR 2004-2014 (with the MoF figure for 2015) (€ million)

250.584.7

294.7

554.0

1 045.1

1 574.5

1 917.9

1 346.6

2 935.4

3 276.5

2 870.5

5 563.9

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: EU budget 2014 – Financial ReportandpreviousreportsontheEUbudget,Commission2005–2015;MoFdatafor2015publishedinFebruary2016.

InFebruary2016theMoFpublisheddata88showingthattheCR’snetpositionforthe2015financialyearhadreachedarecordlevelofalmost€5.6billion89.ThesedatahadnotbeenpublishedbytheCommissionbytheEU Report 2016 printdeadline,butit isareasonableassumptionthattheofficialEUdatawillnotdiffersignificantlyfromtheMoFfigures.Thatwouldmeanthatthe cumulative net position of the Czech Republic for 2004-2015 exceeded €21.7 billion.

AccordingtothesameMoFreport,totalrevenuesfromtheEUbudgetwereCZK193.7billion(€7.1billion)in2015,withtotalcontributionstotheEUbudgetamountingtoCZK41.9billion(€1.5 billion). The CR’s pronounced positive balance relative to the EU budget was mainlydrivenby the increaseddrawdown fromtheStructural Funds (SF)90 andCF in the2007-2013programmingperiod. This increasewasmainly linked to the accelerationof drawdown fromthesefundsastheendofthedrawdownperiodapproached.

88 ThepressreleaseentitledNet Position of the Czech Republic Relative to the EU Budget for 2015waspublishedon9February2016athttp://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2016/cista-pozice-ceske-republiky-vuci-rozpoc-23947.


90 Intheprogrammingperiod2007-2013,ERDF,ESFandEMFFbelongedamongstructuralfunds.

http://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2016/cista-pozice-ceske-republiky-vuci-rozpoc-23947


D. Sector matters

D.1 European Union budget revenues

D.1.1 Current developments in budget revenues in the CR

In response to the recommendations issued by the Council of the European Union91 onprogrammingdocumentsfor2014,theCzechRepublicimplementedthefollowingmeasuresin2014and2015:

- The “Tax Cobra” 92 became a new control and methodological work mechanism in theadministration of tax from 2014. This unit reinforces cooperation between the financialadministration,thecustomsadministrationandthepoliceandalsointernationalcooperationinthefieldoftax.Accordingtotheresultstodate,theunithasmainlyworkedinconsumertaxesandVAT,whereithadrescuedapprox.CZK4.1billionforthestatebudgetbytheendof2015,accordingtofigurespublishedbytheMoF.

- Witheffectfrom2015,theVATreversechargemechanismwasextendedtothesupplyofcertaingoodsandtheprovisionofselectedserviceswithahighriskoftaxfraud.

- With effect from 2016, itwasmade obligatory for VAT payers to electronically send theFinancialAdministrationoftheCRcontrolstatements,listingtaxablesupplytransactionsandtheprovidersandthecustomersofsuchsupply,togetherwiththeirtaxreturns.Bytallyingthesetworeports,thetaxadministrationshouldbeabletoexertgreatercontrolovertheeligibilityofexcessiveVATdeductionsandreducethelevelofVATevasion.

- Asamechanismforpreventingtaxevasion,theintroductionofelectronicevidenceofsalesbegan its journey through the legislativeprocess in2015.Knownasonline sales reports,theseareimmediatelyreportedtotheFinancialAdministrationoftheCRelectronically.

- Toreducethehightaxburdenon labour,thepossibilityofclaimingadiscountonnaturalpersons’ income tax was reintroduced, including for working pensioners, in 2014 and agradualincreaseintaxreliefforasecondandsubsequentchildwasintroducedin2015.

- Toincreasetheratioofindirecttaxation,adraftactontaxongamblinggameswasputbeforeparliamentandin2015athree-yearplanforthegradualincreasingoftaxratesontobaccoproducts(from2016)wasadopted.

- Since 2015 the capping of flat-rate expenditure allowances for the self-employed fordeductionfromnaturalpersons’incometaxhasbeeninplace.

On 26 February 2015Commission staff published theCountry Report Czech Republic 201593,whichanalysed theCR’seconomy in2014andassessed it in the lightof theAnnualGrowthSurvey2015.TheCommissionstaffstatedthat theexistingfiscal frameworkdoesnotalwaysdeliver sustainable and effective fiscal outcomes. Overall, however, the CR displayed limitedprogressinfulfillingtherecommendationsfrom2014.

91 Councilrecommendationof8July2014ontheNationalReformProgrammeoftheCzechRepublicfor2014anddeliveringaCouncilopinionontheConvergenceProgrammeoftheCzechRepublic,2014,EUOfficialJournal2014/C247/03,29July2014.

92 “TaxCobra”isajointteamoftheCorruptionDetectionandFinancialCrimeUnit(aunitofthePoliceoftheCR),theGeneralFinancialDirectorateandtheGeneralDirectorateofCustoms.

93 Country Report Czech Republic 2015,CommissionstaffworkingdocumentSWD(2015)23,finalwordingof26February2015.


The Council based its recommendations94 regarding the CR’s programming documents for 2015 on the Commission staff’s analysis. The Council identified tax evasion andmaking taxcollection less costly and time-consuming for both taxpayers and the tax authorities as theprincipaltasks.TheCouncilstatedthatthecostoftaxcollectionremainedveryhighandthatthe taxsystemwouldbebenefitedbyunifying the taxbases fornaturalpersons’ incometaxandcontributionstohealthandsocialsecurity.TheCouncilalsostatedthatthechangestotax returns and the use of pre-filled forms were unsystematic and that the taxation on labourremainedhighintheCR.Themeasureseffectivefrom2015reducethetaxonlabourtoacertainextentbutonlyforcertaingroups;theiroverallimpactwillbelimited.Butpropertytaxesandgreentaxesarelow,offeringroomforashiftinthetaxburden.ForthatreasontheCouncilmadethefollowingtax-relatedrecommendationsfor2015and2016:

- fighttaxevasion,simplifythetaxsystemandimplementtheanti-corruptionplan;

- reducethehighleveloftaxationleviedonlow-incomeearnersbyshiftingtaxationtootherareas.

TheCommissiondeclaredsimilarprioritiesfortheentireEU’sfiscalpolicyinitscommunication95 regarding the Annual Growth Survey 2016. According to the Commission, it is important tomaketaxationsystemsmoreeffectiveandfairer,i.e.toputinplaceeffectivegrowth-friendlytaxsystems(interaliabyshiftingtaxesawayfromlabour),tacklethepreferentialtaxtreatmentofdebtandfocusonreducingaggressivetaxplanningandfightingtaxfraudandevasion.

D.1.2 European Union regulations in the field of Member States’ revenues

Own resources contributions

ThesizeofownresourcescontributionstobepaidbyindividualMemberStatesisdefinedbytheEUbudgetforthegivenfinancialyear.

Contributionsbasedon theapproved legislation for theown resources system for the2014-2020periodwillnotbesetuntiltheratificationprocessisfinished(envisagedduring2016);also,MemberStates’contributionspaidinsince1January2014willberecalculatedaccordingtothislegislation.Thisinvolvesthefollowinglegislation:96

- CouncilDecisionof26May2014onthesystemofownresourcesoftheEU(2014/335/EU,Euratom);

- CouncilRegulation(EU,Euratom)No608/2014of26May2014layingdownimplementingmeasuresforthesystemofownresourcesoftheEU;

- Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods andprocedureformakingavailablethetraditional,VATandGNI-basedownresourcesandonthemeasurestomeetcashrequirements.

In September 2015 the Commission proposed an amendment97 of Council Regulation No609/2014 inwhich itproposeda revisionof theprocedure forcalculatingthe interestonamounts made available belatedly, a procedure for the annual adjustment of the VAT and

94 Councilrecommendationof14July2015ontheNationalReformProgrammeoftheCzechRepublicfor2015anddeliveringaCouncilopinionontheConvergenceProgrammeoftheCzechRepublic,2015,EUOfficialJournal(2015/C272/09),18August2015,p.32.

95 CommunicationoftheCommissiontotheEuropeanParliament,theCouncil,theEuropeanCentralBank,theEuropeanEconomicandSocialCommittee,theCommitteeoftheRegionsandtheEuropeanInvestmentBank:Annual Growth Survey 2016, Strengthening the recovery and fostering convergence,COM(2015)690,26November2015.

96 FormoredetailsseeEU Report 2015.97 ProposalforacouncilregulationamendingCouncilRegulation(EU,Euratom)No609/2014of2015May447,14

onthemethodsandprocedureformakingavailablethetraditional,VATandGNI-basedownresourcesandonthemeasurestomeetcashrequirements,COM(2015)447,14September2015.


GNI-basedownresourcesandfurtherclarificationandimprovementoftheexistingprocedureasregardsaccountsforownresources.

In December 2015 the ECA issued an opinion98 on this proposal inwhich, as in its previousopinions99, it expressed dissatisfaction with the complexity and insufficient transparency ofthe system of own resources. The ECA also stated that the proposed modifications do not significantlychangethesysteminplace,buttheyshouldimprovethecurrentsituationasregardstheprocessofmakingavailabletheamountsrequested.

TheCouncilendedtheprocessoftherevisionofRegulationNo609/2014byissuingRegulationNo804/2016,adoptedon21May2016.

According to an EP report100, the loss of VAT revenue in the member states caused by non-compliancewiththetaxregulationsorbynon-collectionoftaxreached€177billion.TheEPthereforedefinedthreepriorityareasthatshouldcontributetoimprovedcollectionofrevenuesintheEU: - boostingthebenefitsoftheinternalmarketthroughtaxationpolicy;

- fightingtaxfraud,taxevasionandaggressivetaxplanningandtaxhavens;and

- promotingviabletaxcoordinationforalong-term,growth-orientedeconomicpolicy.

TheEuropeanParliamentalsocalledontheCommissionto initiateachangeoftheoutdatedsystemandputforwardconcreteproposalsforfightingtaxfraudandtaxevasion.

Reverse charge mechanism

TheMinistry of Finance regards the reverse chargemechanismasoneof themost effective toolsinthefightagainstVATevasion,andforthatreasonitadvocateswiderapplicationatEUlevel101. However, in 2015 the Commission recommended that the CR should focus insteadon improving the functioningof the taxadministrationand informationexchangewithotherMemberStates.ItsawrisksfortheinternalmarketfromwiderapplicationofthereversechargemechanismandexpressedconcernsaboutthepossibleimpactonneighbouringMemberStates.

According to the effective EU legislation, the reverse charge mechanism is considered anunconventional toolwhoseuse ispermittedonly forcertaincommodities indomesticsupplyandinthefollowingcases: - forcertaincategoriesofgoodsandservicesexplicitlylistedintheVATDirective102;

- underanindividualexemptiongrantedbytheCouncilandsolelywithintheframeworkoftheprescribedprocedurefurthertoarequestfromaMemberState,wherebythepermissionisgrantedforalimitedperiodof2-3years;

- foratemporaryperiodof9monthsunderthe“rapidreactionmechanism”inthecaseofsuddenandextensivefraud.

In2011and2012,whentherapidreactionmechanismwasbeingdiscussed,GermanyandGreatBritainsoughttobringaboutan“optionalreversechargemechanism”,i.e.aweakeningoftheCommission’sroleindecidingonthegrantingofindividualexemptions.TheCommissiondidnotsupporttheintroductionofthereversechargemechanismacrosstheboard,however.

In June 2015 Bulgaria, the CR, Austria and Slovakia requested permission to extend the use of the reverse charge mechanism to all supplies of goods or services worth over 98 OpinionNo.7/2015ontheproposalforacouncilregulationamendingCouncilRegulation(EU,Euratom)

No609/2014onthemethodsandprocedureformakingavailablethetraditional,VATandGNI-basedownresourcesandonthemeasurestomeetcashrequirements,11November2015.

99 ECAOpinionsNos.7/2014,2/2012,2/2008and2/2006.100 AnnualTaxReport(2014/2144(INI),3March2015.101 InformationonprocedurewhenpromotingtheCR’sinitiativeforwiderapplicationofthereversecharge

mechanism,ref.no.MF-2150/2015/25-1,MoF.102 CouncilDirective2006/112/ECof28November2006onthecommonsystemofvalueaddedtax.


€10,000withaviewtomakecombatingfraudmoreefficient.TheCommission103rejectedtherequestwithreferencetothejurisprudenceoftheEuropeanCourtofJustice.TheCommissiongaveasimilarjustification104whenitrejectedItaly’srequestforpermissiontousethereversechargemechanismforsuppliesto“largeretailers”,i.e.hypermarkets,supermarketsanddiscountstores.

The Commission takes a very reserved attitude to the question of the wider or blanket application of the reverse charge mechanism both in the short term (permitting individualderogationsforMemberStates)andinthelongterminthecontextofworkonthedefinitive VATsystemintheEU.

Tax on legal persons

In June 2015 the Commission issued a communication105 to the EP and the Council stating thatthecurrentrulesforcorporatetaxationnolongerfitthemoderncontext.Certaincompaniesareexploitingthissituationtoartificiallyshiftprofitstothelowesttaxjurisdictionsandminimisetheir overall tax contribution. At the sametime, other companies are still subject to doubletaxation of their income by more than one Member State Complex and intransparent tax rulesareinefficient.

InthiscommunicationtheCommissionproposedanactionplanoffivekeyareaswithaviewtore-establishingthelinkbetweentaxationandwhereeconomicactivitytakesplace,creatinga competitive and growth-friendly corporate tax environment for the EU and protecting the singlemarket.Thisactionplansetsoutthefollowingmeasurestocreateamorecoordinatedcorporatetaxenvironment: - EstablishingaCommonConsolidatedCorporateTaxBase (CCCTB),which theCommission

proposed(asoptional)in2011106.Theactionplanproposesmakingitmandatory,atleastformultinationals.TheCommissiongoesontoproposeastep-by-stepapproachtoagreeingonthedifferentelementsoftheCCCTB,withtheemphasisonsecuringthecommontaxbase.

- Ensuringeffectivetaxationwhereprofitsaregenerated, improvingtheEUtransferpricingframework107andlinkingpreferentialregimestowherevalueisgenerated.

- Adoptingadditionalmeasuresforabettertaxenvironmentforbusiness,e.g.enablingcross-borderlossoffsetuntilfullCCCTBconsolidationisintroducedandimprovingdoubletaxationdisputeresolutionmechanisms.

- Improving tax transparency, e.g. ensuring a more common approach to third-country non-cooperativetaxjurisdictionsortheoptionofcountry-by-countryreporting.

- Improving coordination between Member States on tax audits and reforming the Code of Conduct for Business Taxation Group andthePlatform on Tax Good Governance.

Information exchange in the field of taxation

InDecember2015theCouncilissuedadirective108amendingDirective2011/16/EUasregardsmandatory exchange of information in the field of taxation. The problems caused by cross-border tax avoidance, aggressive tax planning and harmful tax competition reduceMemberStates’ tax revenues. The Council declared that efficient exchange of information in respect

103 CommunicationfromtheCommissiontotheCouncilinaccordancewithArticle395ofCouncilDirective2006/112/EC,COM(2015)538,28October2015.

104 CommunicationfromtheCommissiontotheCouncilinaccordancewithArticle395ofCouncilDirective2006/112/EC,COM(2015)214,22May2015.

105 CommunicationfromtheCommissiontotheEuropeanParliamentandtheCouncil–AFairandEfficientCorporateTaxSystemintheEuropeanUnion:5KeyAreasforAction,COM(2015)302,17June2015.

106 ProposalforaCouncilDirectiveonaCommonConsolidatedCorporateTaxBase(CCCTB),COM(2011)121/4,16March2011.

107 Transferpricesarepricesusedinthetransferofgoodsorprovisionofservicesbetweencompanies.108 CouncilDirective(EU)2015/2376of8December2015amendingDirective2011/16/EUasregardsmandatory

automaticexchangeofinformationinthefieldoftaxation,EUOfficialJournalL332,18December2015,p.1.


of advance cross-border rulings and advance pricing arrangements is hindered by several importantpracticaldifficulties,suchasthediscretionpermittedtotheissuingMemberStatetodecidewhichotherMemberStatesshouldbe informed.Thenewdirective requiresMemberStatestoautomaticallyexchangeinformationaboutadvancecross-borderrulings109andadvancepricingarrangements110.

Thenewrules shouldapply from January2017.MemberStates receiving tax informationwillbe able to request additional information where necessary. Every six months, national taxauthoritieswillhavetosendallotherMemberStatesabriefreportonallcross-bordertaxrulingsthey issued. The Commissionwill operate a secure central directory to store the exchangedinformation.

For the new legal framework to function, in December 2015 the Commission issued animplementingregulation111layingdownrulesforstandardformsandcomputerisedformatsandpracticalmeasuresfortheexchangeofinformationamongMemberStates.

Changes in tax on tobacco products

InApril2014theEPandtheCounciladoptedtheTobaccoProductsDirective112.Thisdirectivebrought a substantial change in the duties of manufacturers, importers and distributors oftobaccoproductsandrelatedproducts.Ithasbroughtasignificantharmonisationoftherulesfor manufacture, sale and presentation of these products. Now these measures also apply to electronic cigarettes and their refill containers and to herbal cigarettes. If a product falls into various categories with different obligations, the stricter obligations apply. An approvalprocessbeforetheseproductsareplacedonthemarkethasbeenintroduced.

One particularly important change is the obligation imposed on Member States to ensureall tobacco products are marked with a unique identifier. In order to ensure the integrity of the unique identifier, itmust be irremovably printed or affixed, indelible and not hiddenor interrupted in any form, including through tax stamps or pricemarks, or by the openingof thepacket. Theunique identifiermustmake itpossible todetermineall thedetails, frommanufacturetosaletothefirstretailoutlet(e.g.machineusedinmanufacture,actualshipmentrouteincludingallwarehousesused,dateofshipment,destination,identityofallbuyersetc.).

Member States must ensure that selected data are accessible in electronic form by means of a link to the unique identifier. Member States must enact the legal and administrativeregulationsnecessaryforcompliancewiththisdirectiveby20May2016.

InMay2015theCouncildrewupaproposalforadecision113makingtheProtocol to Eliminate Illicit Trade in Tobacco Products to the World Health Organisation’s Framework Convention on Tobacco Control partofEUlaw.Accordingtotheexplanatorymemorandumtothisproposal,it isestimatedthatmorethan€10billion is lost inrevenuesannuallytotheEUandMember

109 Ataxrulingisakindofpledgeataxauthoritygivesataxpayerregardingthemannerinwhichcertaintaxmatterswillberesolvedinaparticularcase.

110 Apreliminaryassessmentoftransferpricingisakindoftaxrulingwhichataxauthorityissuesinordertospecifymethodsandotherimportantelementsforsettingpricesthataretobeusedinthetransferofgoodsorprovisionofservicesbetweencompanies.

111 CommissionImplementingRegulation(EU)2015/2378of15December2015layingdowndetailedrulesforimplementingcertainprovisionsofCouncilDirective2011/16/EUonadministrativecooperationinthefieldoftaxationandrepealingImplementingRegulation(EU)No1156/2012,EUOfficialJournalL332,18December2015.

112 Directive2014/40/EUoftheEuropeanParliamentandoftheCouncilof3April2014ontheapproximationofthelaws,regulationsandadministrativeprovisionsoftheMemberStatesconcerningthemanufacture,presentationandsaleoftobaccoandrelatedproductsandrepealingDirective2001/37/EC,EUOfficialJournal,L127,29April2014.

113 ProposalforaCouncilDecisionof4May2015ontheconclusionoftheProtocol to Eliminate Illicit Trade in Tobacco ProductstotheWorldHealthOrganisation’sFrameworkConventiononTobaccoControl,insofarastheprovisionsoftheProtocolwhichdonotfallunderTitleVofPartIIIoftheTreaty on the Functioning of the European Unionareconcerned,COM(2015194,finalwording2015/0101(NLE).


States.TheProtocolconsistsofcoreprovisionsonthecontrolofthesupplychainoftobaccoproductsandofequipmentformanufacturingthoseproducts.

Register of economic operators and tax warehouses

Anamended implementing regulation114of theCommissionon theoperationofa registerofeconomicoperatorsandtaxwarehouseshasbeeneffectivesinceFebruary2015.Theinformationcontained in thenational registers concerningeconomicoperatorsengaged inmovingexcisegoodsunderdutysuspensionarrangementsistobeautomaticallyexchangedthroughacentralregisterofeconomicoperators.TheCentralRegister is tobeoperatedby theCommissionasprovidedforinArticle19(4)ofRegulation(EU)No389/2012.

Mandatory information exchange between tax administrators

In November 2015 the Council repealed the directive115 on taxation of savings income thatfrom2005hadallowedtaxadministratorsbetteraccesstoinformationonprivatesavers.Thedecisiontorepealthisdirectivecameaftermeasurespreventingtaxevasionwerereinforced.InDecember2014 theCouncil adoptedadirective116 amending theprovisionsonmandatoryautomaticexchangeofinformationbetweentaxadministrators.Thisdirectivewidensthescopeofthisexchangetoincludeinterest,dividendsandothertypesofincomethatwerenotcoveredunderthepreviousdirective.Thedirectiveenteredintoeffecton1January2016.

D.1.3 Current developments in the legislation on revenues in the CR

Changes to the Act on VAT

Since1January2015,theActonVAT117wasamendedtoincludeasecondreducedVATrateof10%applicabletomedicines,booksandirreplaceablechildren’snutrition118.

Agovernmentresolution119extendedthereversechargemechanismtothefollowinggoods: - transfersofemissionscreditsfrom1January2015;

- cerealsandtechnicalcrops(maizeonly),selectedmetals,mobiletelephones,notebooksandtablets,integratedcircuitsandvideo-gameconsolesfrom1April2015;

- othercerealsandtechnicalcropsfrom1July2015;

- sugarbeetfrom1September2015.

An amendment of the Act on VAT requiring VAT payers to submit control statements120 hasbeeneffectivesince1January2016.ControlstatementsmustbesubmittedbyallVATpayerswhoreceivedtaxabledomesticsupplyorclaimedaVATdeductioninthegivenyear.Theymustbe submitted electronically to the electronic address of the submissions office published by the taxadministrator, ina formatandstructureprescribedby the taxadministratorand inamannerenablingremoteaccess.Legalpersonsmustsubmitcontrolstatementsonamonthly

114 CommissionImplementingRegulation(EU)2015/272of19February2015amendingImplementingRegulation(EU)No612/2013ontheoperationoftheregisterofeconomicoperatorsandtaxwarehouses,relatedstatisticsandreportingpursuanttoCouncilRegulation(EU)No389/2012onadministrativecooperationinthefieldofexciseduties,OfficialJournalL47,20February2015.

115 CouncilDirective2003/48/ECof3June2003ontaxationofsavingsincomeintheformofinterestpayments,OfficialJournalL157,26June2003.

116 CouncilDirective2014/107/EUof9December2014amendingDirective2011/16/EUasregardsmandatoryautomaticexchangeofinformationinthefieldoftaxation,OfficialJournalL359,16December2014.

117 ActNo.235/2004Coll.,onvalueaddedtax.118 ActNo.262/2014Coll.,amendingActNo.235/2004Coll.,onvalueaddedtax,asamended,andotherrelated

acts.119Governmentregulationno.361/2014,onthestipulationofthesupplyofgoodsorprovisionofservicesforthe

useofthereversechargemechanism,22December2014.120 ActNo.360/2014Coll.,amendingActNo.235/2004Coll.,onvalueaddedtax,asamended,andotherrelated

acts.


basis(eveniftheypayVATquarterly);naturalpersonsmonthlyorquarterly,dependingonthelengthofthetaxableperiod.Thismeasurewasintroducedinordertoimprovetaxcollectionandasaneffectiveandflexibletoolforcombatingtaxfraud.TheexpertestimateoftheincreaseintaxrevenuesfollowingtheintroductionofthismeasureisCZK5-10billionperannum.

ThisamendmentalsoscrappedtheexemptionfromtheelectronicformofVATreturnsubmissionfor natural persons whose turnover in the previous 12 calendar months did not exceed CZK6million.Consequently,allVATpayersnowhavetosubmitVATreturnsinelectronicformonly.

Witheffect from1 January2016 the reversechargemechanismwasextended to the supplyof real estate to a payer, if thepayer supplying the itemof real estate applied tax pursuant toSection56(5)oftheActonVAT.

Changes in the Act on Consumer Taxes

AnamendmentoftheActonConsumerTaxes121effectivefrom1January2015hasfundamentallyaltered permission proceedings, placing the emphasis on the applicant’s reliability, non-indebtedness and economic stability122. With effect from 1 July 2015, taxpayers haveadditional obligations when handling raw tobacco, which is now subject to supervision bythecustomsauthorities.Apersonwarehousingrawtobaccomustapplyforregistration,keep records and report the handling of raw tobacco. A new tax on raw tobacco has also beenestablished. Another change is a new, stricter definition of the equipment required in a taxwarehouseforwarehousingmineraloils.

The amendment of the Act on Consumer Taxes also introduced a gradual increase in excise dutyoncigarettesandother tobaccoproductsbasedonanapproved three-yearplan123. Therates increasedforthefirsttimeasof1January2016andwillrisefurtheratthestartofthefollowing two years. In consequence of the need to fulfil the requirement of the Council Directiveregardingtheminimumtaxoncigarettes,theincreaseinexcisedutyoncigarettesin2016isapprox.CZK3.00perpack,tobefollowedin2017and2018byincreasesofCZK0.90 to1.00andCZK1.20perpackrespectively.

Since 1 January 2015 an amendment of Act No. 307/2012 Coll., on the obligatory labellingof liquor, hasmade it necessary to report information on the quantity and identification ofliquorinconsumerpacksputintofreetaxcirculation.Therearedetailedrulesonthetypeof information to be reported and the reporting time (the day after the liquor is put into freecirculation).Thedepositfortheliquorlabellerwasalsoincreased.

Witheffectfrom1July2015,theoptionofapplyingfora50%reductioninthebasicdepositforthedistributionofpropellantswas incorporated intoActNo.311/2006Coll.,on fuels.This isconditionalonthelegallyrequiredminimumandmaximumvolumeoffuels,fulfilmentoftheregistrationconditionsandtheapplicant’sreliabilityandeconomicstability.

D.1.4 Audit work in the field of revenues in 2015

In2015theSupremeAuditOfficecompletedtwoauditstargetingtheadministrationoftaxes:anauditoftheadministrationofvalueaddedtax124andanauditoftheadministrationofexciseduties125.

121 ActNo.353/2003Coll.,onexciseduties.122 ActNo.157/2015Coll.,amendingActNo.353/2003Coll.,onexciseduties,asamended,andActNo.311/2006

Coll.,onfuelsandfuelfillingstationsandamendingcertainrelatedacts,asamended.123 ActNo.315/2015Coll.,amendingActNo.353/2003Coll.,onexciseduties,asamended.124 Auditno.14/17–Value added tax administration and the impacts of legislative amendments for the state

budget revenues.TheresultsofthisauditweredescribedindetailinEU Report 2015. 125 Auditno.14/28–Spirit and tobacco excise tax administration and administration of revenues from the sales of

tobacco duty stamps, including the management of these duty stamps.


IntheauditofVATadministrationtheSAOfoundthatthenewmechanismsaddedtotheActonVATwithaviewtorestrictingtaxevasionwerenotsufficientlyeffectiveintheyears2011to2013toreducetheVATgap126.Onthecontrary,theleveloftaxevasionrosetoavalueofaroundCZK100billionintheseyears.ThefollowingwereamongthenewmechanismstheSAOscrutinised:publishingofbankaccountsusedforeconomicactivity;reversechargemechanism;decisionsonpayerunreliability; suretyof recipientof taxable supply; specialmethod for securing tax;andensuringpaymentfornon-dueorasyetunspecifiedtax.Themethodologicalandtechnicalpreparation of new measures was negatively influenced, for example, by the fact that theamendmentsof theActonVATentered intoeffecta fewdaysafter theywereadopted.Theintroductionofthereversechargemechanismforselectedcommoditieshadapositiveimpacton reducing tax evasion. Inadequate control reduced the effectiveness of this mechanism,however.Bytheendof2014thefinancialadministrationhadonlypublished156unreliableVATpayers,sotheobjectivesoftheunreliablepayermechanismwerenotachieved.Thefinancialadministrationputinplacesoftconditionsforusingthemechanism,onlytighteningthecriteriafordesignatinganentityasanunreliablepayerfrom1January2015sothatadditionallynon-monetaryviolationsofobligations linkedtotaxadministrationcouldbepenalised. InJanuary2016thefinancialadministrationhadpublishedtheidentitiesof3,701unreliableVATpayers.Themechanismofsuretybytherecipientoftaxablesupplywasonlyutilisedbythefinancialauthorities in 16 cases in the years 2011 to 2014. TheGeneral Financial Directorate did notputinplacetherightconditionsforwideruseofthismechanism.Theintroductionofaspecialprovisiononensuringpaymenttowards taxnotyetdueornotyetspecified in the formofa“securityorder”undertheActonVATprovedtobeamoreeffectivetoolinthefightagainsttaxevasion.

InitsauditoftheadministrationofexcisedutiestheSAOfocusedonexcisedutyonliquorandexcisedutyontobaccoandtobaccoproducts.TheSAOfoundthatdeficienciesinthelegislation,inthecustomsoffices’controlwork,inthecustomsadministration’sinternalcontrolandinthemethodologicalandsupervisoryworkoftheGeneralDirectorateofCustomsmadeitpossibletoevadeconsumertaxesonliquorandtobaccoproductsupto2013.AccordingtocalculationsbytheGeneralDirectorateofCustoms),taxloopholesmeantthatthecollectionofexcisedutiesonliquorfellshortbyapprox.CZK1-2billionperannum.Thepre-stockingoftobaccoproductsandtheirsaleatthe“old”rateofexcisedutycausedstatebudgetrevenuestobereducedbyapprox.CZK1.4billionintotalintheyears2012to2014.ThelegislationonthedistributionoftobaccoproductsintheeventofachangeinthetaxratewasunsystematicuntiltheActonConsumerTaxeswasamendedwitheffect from1December2014.After the“methanolaffair”,positivechangesweremadetothelegislationgoverningrecordsofthehandlingofliquor,thetaxationofliquorandtheworkofthecustomsadministration.Somenewmeasurestocombat“illegalliquor”rolledoutafter2013arenotentirelyeffective,however:

a) Control strips aremeant to fulfil the function of tax designation and guarantee safealcoholicbeverages.Althoughthenewspecimencontrolstripsfulfilthefunctionoftaxdesignation,itisstillimpossibleforconsumersortaxadministratorstocheckwhetheranalcoholicbeverage is labelledwithacontrol strip thatwasreportedasdestroyed,stolenorlost,i.e.whetherthebeveragewasmadefromuntaxedalcohol.

Thenewcontrolstrip’sfulfilmentoftheconsumerprotectionfunctionislimited,astaxsubjectsarenotobligedtokeeprecordsoftheuniquecodesofallcontrolstripsandthe control strips registerdoesnot state themanufacturerof thealcoholicbeveragebuttheentitythatorderedthecontrolstrip.Althoughtheactintroducedpenaltiesfordisproportionatedestructionor lossofcontrolstrips,a legalentity isnotguiltyofanadministrativeoffence if it canprove that it dideverything that could reasonablybedemandedofittopreventtheviolationofthelegalobligation.

126 TheVATgapisthedifferencebetweenexpectedVATrevenuesandtheamountthestateauthoritiesactuallycollected.


b) Introducingablanketobligationtofitplaceswherespiritsarelabelledwithmonitoringapparatuswasmeanttoenhancesupervisionovertheproductionandlabellingofspiritsandcutthecostoftaxadministrationbyeliminatingtheneedforataxadministratortobepermanentlypresentatthetaxsubject.Thisobligationdidnotdelivertheexpectedeffectfortheadministrationofexcisedutyonliquor,however.TheSAOalsofoundthatatleastinsixauditedcustomsofficestherecordingsfrommonitoringapparatusarehardtousebecauseofinsufficientdatatransmissionfunctionality.

c) Includingsellingliquoramonglicensedtradeswasmeanttobringclaritytothebusinessenvironmentandmaketheadministrationofexcisedutyonliquormoreeffective.TheSAOfoundthatthecustomsauthoritiesdidnothaveacompleteoverviewoflegalpointsofsaleofspiritsatthetimeoftheaudit.

Onelong-termtaskofthefinancialandcustomsadministrationoftheCRisthefightagainsttaxevasion,whichisreflectedintheintroductionofnumerousnewobligationsfortaxpayers.IntheSAO’sopinion,however,therehasbeennocomprehensiveassessmentoftheeffectivenessof these changes taking into account both direct and indirect costs and the deadweighteffect.Thenegativesituationpersistswherebytaxadministration isburdeneddownbythepaperworkofprocessingtaxstatementsandinformationtechnologiesarenotfullyexploited,eventhoughconsiderableamountshavebeeninvestedinthem.

D.1.5 ECA audit work in the field of revenues

Special Report No. 24/2015127

TheECA’sSpecialReportlookedathowsuccessfullytheEUisinthefightagainstintra-CommunityVATfraud.Itstatedthatthesystemisnotsufficientlyeffectiveandcertainmeasuresshouldbestrengthenedorappliedmoreconsistently.TheEUlosesbillionsofeurointaxrevenueseveryyearasaresultoforganisedcrime.Theintra-CommunityVATsystemisoftenabusedin“missingtrader”intra-Communityfraud128.TheupshotisalossofrevenueforthecountryinquestionandtheEU.

Basedonitsfindings,theECAmadethefollowingrecommendations:

- coordinateeffortstoestablishacommonsystemforestimatingthesizeofintra-CommunityVATfraud;

- theCommission shouldmonitor thetimelinessofMember States’ responses to requestsfor information, the reliability ofVIES129 and the speed atwhichmultilateral controls areperformed;

- introduceacommonriskanalysisandtakestepstoaddressthedeficiencies intheuseofEurofisc130;

- Member States shouldempower theCommission tonegotiateon cooperationwithnon-memberstates;

- theCommissionshouldproposetoamendtheVATdirectivewithaviewtoachievingfurtherharmonisationofMemberStates’VATreportingrequirementsforintra-Communitysuppliesofgoodsandservices;

127 ECASpecialReportNo.24/2015–Tackling intra-Community VAT fraud: More action.128MisssingTraderIntra-CommunityFraud–MTIC.129 VIESisanelectronicsystemenablingtransferofinformationrelatedtoVATregistrationwithinEU.Itsupplies

thememberstateadministrationwithinformationaboutgoodsregistration. 130MemberStatesexchangeoperationalinformationoncross-borderfraudandothermattersviatheEurofisc

network.


- MemberStatesshouldensuretheircustomsauthoritiessenddataonimportsundercustomsprocedure42131tothetaxauthorities.

- The Commission should encourage Member States to better coordinate their policieson reverse charges. TheCommissiondid not accept this recommendation, but given theproblemswiththefrequentapplicationofthereversechargemechanismitwilldealwiththisissueaspartofaVATactionplan.

- TheECAratedthereversechargeasausefultooltofightagainstVATfraudprovidedthatallMemberStatesapplyitconsistentlyinhigh-risksectors.

- SelectedEUauthorities(OLAFandEuropol132)shouldhaveaccesstoVIESandEurofiscdataandVATshouldbeincludedwithinthescopeofthedirectiveonthefightagainstfraud(thePIFdirective)andtheEuropeanPublicProsecutor’sOfficeregulation.

TheECA’sfindingsmostlycorrespondtothefindingsfrompreviousSAOauditsorinternationalauditsdoneincollaborationwiththeBRH133.

D.1.6 Protection of the EU’s financial interests and the fight against fraud

TheCommissionandMemberStatesaretryingtopushthroughstrictrulesagainsttaxevasionandtaxavoidanceonaninternationalfootingaswell.Thisislinkedtoaprojecttoreformulatetherulesagainsttaxavoidancebyinternationalcompanies.

On 12 February 2015 the European Parliament issued a decision134 on setting up a specialcommitteeontaxrulingsandothermeasuressimilarinnatureoreffect(TAXE).ItwasgiventhetaskofexamininghowEUlegalregulationsonstateaidandtaxesareimplementedinrelationtotaxrulingsandsimilarmeasuresbyMemberStates.Thespecialcommitteehad45membersanditstermofofficewassixmonths.ThecommitteewassetupfollowingtheLuxLeaksscandal,inwhichmore than500private taxarrangementsweresignedbetween theLuxembourg taxadministrationandmorethan300multinationalsbetween2002and2010withaviewtoradicallyreducingtheirtaxpayments.

BasedontheTAXEcommittee’swork,inNovember2015theEPadoptedaresolution135ontaxrulings,reachingtheconclusionthatMemberStatesdidnotcomplywiththerelevantprovisionsoftheTFEUanddidnotfulfiltheobligationslaiddowninDirective2011/16/EU136.Theresultsof TAXE’sworkand theestimateputon theEU’s losses (€160-190billion) fromcorporationsavoiding their tax obligations showed that legislativemeasures needed to be introduced atEUleveltoimprovethetransparency,coordinationandconvergenceoftaxpoliciesasregardscorporationtax.

Inthelightofthesefacts,theEPmaderecommendations137totheCommission,askingittoputforwardatleastonelegislativeproposalreflectingtherecommendationslistedabovebyJune2016.

131 Custommeasures42isaregimewhichaneconomicentitycanuseincaseswhentheVATisnotpaidasthegoodsaretransportedintoadifferentmemberstate.

132 AbbreviationfromEuropeanPoliceOfficewhichfightsorganizedcrimeattheEUlevel.133 SupremeauditinstitutionoftheFederalRepublicofGermany(Bundesrechnungshof).134 EuropeanParliamentdecisionof12February2015onsettingupaspecialcommitteeontaxrulingsandother

measuressimilarinnatureoreffect,itspowers,numericalstrengthandtermofoffice(2015/2566(RSO)).135 EuropeanParliamentresolutionof25November2015ontaxrulingsandothermeasuressimilarinnatureor

effect(2015/2066(INI)).136 CouncilDirective2011/16/EUof15February2011onadministrativecooperationinthefieldoftaxationand

repealingDirective77/799/EEC,OfficialJournalL64,11March2011.137 Report with recommendations to the Commission on bringing transparency, coordination and convergence to

Corporate Tax policies in the Union(2015/2010(INL)),2December2015.

http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2015/2066(INI)


Regardingtransparencyitrecommendedthefollowing:

- introducemandatoryandpublicreportingbymultinationalsinallsectorsontheiractivitiesinindividualcountries;

- introduceavoluntaryFair Tax Payerlabelforcompaniesusingpropertaxpractices;

- create a harmonisedmethodology for estimating corporations’ tax gaps and publish theestimateddirectandindirecttaxgaptwiceayear;

- submitalegislativeproposalforwhistleblowerprotection.

Regardingcoordinationitrecommendedthefollowing:

- submitalegislativeproposalestablishingacommonconsolidatedcorporationtaxbaseandestablishitbytheendof2017atthelatest;

- submitadraftamendmentofDirective2011/16/EUtomaketaxauditsandcontrolsmoreeffective;

- submitaproposalfortheestablishmentofacommonEuropeanTaxIdentificationNumber(ETIN).

Regardingconvergenceitrecommendedthefollowing:

- submit, incollaborationwiththeOECD138andUN139,aproposalunderwhichstrictcriteriawouldbesetfordefining“taxhavens”;

- submitbysummer2016aproposalforestablishingawithholdingtaxorameasureofsimilareffecttopreventuntaxedprofitsflowingoutoftheEU.

On2December2015 theEP setupanew special committee140 on tax rulings (TAXE2). Thiscommitteewill followuptheworkof thepreviouscommittee, focusingon theCommission’sactivitiesinthefieldsofstateaidandtax,onMemberStates’implementationofthetaxlegislationandonaggressivetaxplanning.ThenewcommitteewillalsotakeacloserlookathowMemberStatesandEUinstitutionsarefollowingthefirstcommittee’srecommendations.

InMay2015theCommitteeonEconomicandMonetaryAffairsoftheEPissuedanopinion141 inwhichitcalledonMemberStatestoagreeswiftlytoaCCCTBandcallsontheCommissiontoproposechangestoEUcompanylawtoeffectivelybanshellcompaniesandsimilarentities.

In July2015 theCommission issued its annual reporton theprotectionof theEU’sfinancialinterests142. The Commission stated in the report that significant progresswasmade on therevenuesideofthebudgetin2014toprotecttheEU’sfinancialinterests.AdatabaseongoodsenteringtheEU,transitingtheEUandleavingtheEUhasbeencreated.MemberStateshaveactively continued to implement the action plan on stepping up the fight against cigarettesmuggling.Additionallyin2014,aEurofisc projecttoanalysecross-borderfraudnetworktookplace.Aprojectgroupwassetuptogatherbestpracticefromnationaltaxadministrationsinelectroniccommerce.

138 OrganisationforEconomicCo-operationandDevelopment.139UnitedNations.140 EuropeanParliamentdecisionof2December2015onsettingupaspecialcommitteeontaxrulingsand

othermeasuressimilarinnatureoreffect(TAXE2),itspowers,numericalstrengthandtermofoffice(2015/3005(RSO)).

141OpinionoftheCommitteeonEconomicandCurrencyAffairsfortheCommitteeonDevelopmentonTax avoidance and tax evasion as challenges for governance, social protection and development in developing countries(2015/2058(INI)),8May2015.

142 CommissionReporttotheEuropeanParliamentandtheCouncilProtection of the European Union’s financial interests – Fight against Fraud 2014 Annual Report,COM(2015)386,31July2015.

http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2015/3005(RSO)


TheHercule III143 programmewas successfully launched and financed technical assistance toMemberStatesinitsfirstyear.ThetechnicalassistancemeasuresincludedthepurchaseofX-rayscannersdeployedattheEU’sexternalborderstoexaminecontainers,trucksandothervehicles.Thescannershelpedtodetectsubstantialamountsofsmuggledandcounterfeitcigarettesandtobaccoandalsorevealedthepresenceofliquor,drugsandarms.144TopicsdiscussedatameetingoftheAdvisoryCommitteeforCoordinationofFraudPrevention(COCOLAF)includedthemaindevelopmentsregardingthefightagainstillicittradeintobaccoproducts,andthereportingofirregularitiesinrelationtotheuseofEUfundsinFF14+.

D.2 EU Economic, Social and Territorial Cohesion Policy

D.2.1 Current developments in Cohesion Policy

Drawdown of the 2007–2013 programming period allocation

More than €347 billion was earmarked for financing cohesion policy in the 2007-2013programmingperiodforallMemberStates.ThatwasroughlyathirdoftheEuropeanbudgetforthisseven-yearbudgetaryperiod.TheCzechRepubliccouldutilisealmost€26.7billionofthatsumviathreefunds145.AstheEUtookonacommitmenttofundatmost85%ofexpenditureonactivitiesdoneaspartofcohesionpolicy,theCRhadtocontributeatleastafurther15%,i.e.approx.€4billion.ThetotalallocationfromtheEUbudgetforcohesionpolicyminustheamountnotutilisedfrom2013and2014andnotincludingtheallocationfor146OperationalProgrammeCross-BorderCooperationCzechRepublic–Poland2007-2013(OP CR-Poland) wasapprox.CZK676.3billion,accordingtofigurespublishedbytheMfRDinthequarterlymonitoringreportfor4Q2015.147

Diagram 6 – Utilisation of financial resources from EU funds

Call of interest

MA/IB Applicant/beneficiary - MA/IB MA - PCA PCA – Commission

End of the whole projectEnd of project phase

Submission of application for mid-term orfinal payment by the beneficiary to MA/IB

Approval of payment application to MA/IB

Refund from the EC to state budget

PROJECT ASSESSMENT

AND SELECTIONREALISATION

Project approval(contract signed and decision declared)

Submission of project applicationProject selection

REIMBURSEMENTREFUND TO STATE BUDGET

REFUND FROM THE ECCERTIFICATION

Refund of overall application from the PCASubmission of funds for certification to PCA

Certification of expenditures and submission to the EC

Inclusion of application for payment into overall application and its submission to PCA

Reimbursement of funds to beneficiary(mid-term or final payment)

Source:NCA,March2016

143 Regulation(EU)No250/2014oftheEuropeanParliamentandoftheCouncilof26February2014.144 EstablishedbyCommissionDecision94/140/EC,wordingof25February2005.145 TheEFRDfocusesonthemodernisationandstrengtheningoftheeconomy.TheESFsupportsactivitiesinthe

fieldofemploymentandhumanresourcesdevelopment.TheCFsupportsinvestmentprojectstargetinglarge-scaletransportinfrastructure,environmentalconservationandenergyefficiencyandrenewables.

146 Inconnectionwiththefailuretocomplywiththen+2/n+3ruleswithinthemeaningofCouncilRegulation(EC)No1083/2006theCommissiondecommitted€411millionfor2013and€309millionfor2014;intotalthatistheequivalentofapprox.CZK19.9billion.

147QuarterlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,NCA,1February2016.


ThefollowinggraphshowstheratiobetweenthefinancespaidoutbytheCommissionandtheCR’s total allocation in individual years. The relativefigurespresentedbyCommission148 staffincludespendingonRDP07+andOPF07+comparedtotheEUaverage,aswellasfinancespaidoutforcohesionpolicymeasures(theoverwhelminglydominantcomponent).ExpenditurethusdefinedisfinancedoutofESIFundsinthe2014-2020programmingperiod.

Graph 12 – Rate of drawdown of finances from EU funds in the 2007-2013 programming period

2007 2008 2009 2010 2011 2012 2013 2014 2015

1 %

4 %

12 %

21 %

7 %

8 %

14 %

11 %

6 %

Czech Republic EU average

Taken from: Country Report Czech Republic 2016,Commissionstaffworkingdocument,26February2016.

Asthegraphshows,inthefirstyearsofthe2007-2013programmingperiodtheCR,likeotherMemberStates,drewdownminimal funds. From2009 to theendof2014,however, theCRlagged a long way behind the EU average in utilising the allocation. The worst year in thatregardwas2011,whenthecertificationofexpenditureonprojectswassuspended followingunsatisfactoryresultsfromauditsbytheEU’sauditauthorities.Whiletherateofdrawdown(theratiobetweenthemoneyactuallypaidoutandthetotalEUallocation) inmostEUcountriespeakedin2013and2014,theCRdidnotachieveitshighestrateofdrawdownuntilthefinalyearoftheprogrammingperiod.

Article56oftheGeneralRegulation149providesthatexpenditure,includingformajorprojects,iseligibleuntil31December2015.Atthestartof2015theCRstillhadroughlyonethirdofthe2007-2013allocationtodrawdown.Bytheendof2015applicationsforinterimpayments(certified expenditure) amounting to almost80% of the allocation hadbeen sent to theCommission,accordingtodatafromtheMoF(PCA).150

ThedevelopmentofdrawdownrelativetothetotalCRallocationforcohesionpolicyisevident148 Country Report Czech Republic 2015,CommissionstaffworkingdocumentSWD(2016)73,finalwordingof26

February2016.149 CouncilRegulation(EC)No1083/2006of11July2006layingdowngeneralprovisionsontheEuropean Regional

Development Fund, the European Social Fund andtheCohesionFundandrepealingRegulation(EC)No.1260/1999.

150 AccordingtoinformationfromthePCA,notallcertifiedexpenditurewasclaimedfromtheCommission.Financesexceeding95%oftheallocationforindividualOPswillonlybeclaimedaspartofthefinalpaymentapplicationinMarch2017.


fromthegraph,whichshowsbothfinances paid out to beneficiaries andfinances charged in summary applications senttothePCA.

Graph 13 – Overview of finances from the total cohesion policy allocation paid and charged in individual years of the 2007-2013 programming period (%)

8.6

26.2

38.6

52.0

63.7

72.4

80.0

94.2

2.9

11.4

17.4

29.8

47.7

68.7

75.1

87.7

2009 2010 2011 2012 2013 2014 half of 2015 2015

Finances paid out to beneficiaries from the total allocation Finances certified by the Commission/charged by the PCA from the total allocation

Source:NCA–Briefoverviewsofdrawdownfor2011-2015;MonthlyMonitoringReportontheStateofImplementationoftheStructuralFunds,theCohesionFundandNationalCo-financinginthe2007-2013ProgrammingPeriod,years2008-2010.

NB:Thegraphdoesnotshowthevaluesofpaidandchargedsumsin2007and2008becausetheyweresolow.ThegraphdoesnotshowdrawdownunderOPCR-Poland.

InJanuary2016themanagingauthoritiesestimatedthattheamountoftheallocationnotutilisedcouldreachCZK26.4-28.0billionfortheprogrammingperiodasawhole.AccordingtotheNCA’sestimate,atotalofCZK29.8-34.1billioncouldbeunutilised.Theestimatesoftheshortfall indrawdownoftheallocationasmadebythemanagingauthoritiesandNCAincludefinancesnotutilisedin2013and2014,bywhichtheallocationwasreduced.TheNCA’sestimateofunusedfundsrepresentsaround4%ofthetotalallocationfortheentire2007-2013programmingperiod.Theamountofpotentialunutilisedfinancesfellduring2015asmajorprojectsaffectedbytheEIAissue(seesubheadingB.3.1),whichhasasignificantimpactonthedrawdownshortfall,wereapproved.

AccordingtoNCAfigures151from6April2016,thelowestratesoffinancespaidtobeneficiarieswere found in OP RDI under the authority of theMoEYS, ROPMoravia-Silesia under the authority of the relevant cohesion region regional council, the Integrated Operational Programme(IOP)undertheauthorityoftheMfRD,andOPPrague–AdaptabilityundertheauthorityoftheCityofPrague.Bycontrast,thebestresultswereachievedbyOPEnterprise and Innovation(OPEI)undertheauthorityoftheMoIT,ROPSouth-West(ROPSW)undertheauthorityoftherelevantcohesionregionregionalcouncilandOPE07+undertheauthorityoftheMoE.

151 Source: MSC2007–monitoringsystemforthe2007-2013programmingperiod.


MorepreciseinformationabouttherateofdrawdownunderindividualOPswillonlybeavailableoncethelastsummaryapplicationsaresenttothePCA,i.e.attheendofthefirsthalfof2016.Themaximum EU funds drawdown ratewill be specified evenmore precisely once the lastinterimpaymentapplicationsaresenttotheCommission–thedeadlineis31August2016.

The resultant drawdown could in future be impacted by the findings of audits done bythe Commission, ECA or AB, possibly leading to corrections, and other unresolved or newdiscrepanciesatprojectlevel.Thefinalvaluesofdrawdownunderindividualprogrammeswillnotbeavailableuntil2017at theearliest,andmost likely laterasa resultofactiontaken inresponsetoauditsandidentifieddiscrepancies.

2014–2020 programming period allocation

InadditiontotheCFandformerSFwhichfinancecohesionpolicyprogrammes,theESIFundsalsoincludetheEAFRD,outofwhichsupportforRDP14+programmemeasuresarefinanced.Forthatreasonthedatapresentedinthispointalsoincludeinformationgoingbeyondthecohesionpolicyframework.

Atotalof€453.85billionispreparedintheEUbudgetforfinancingtheESIFundsinthe2014-2020programmingperiod.Of thatamount, theenvisagedsum for theCR is€23.98billion152 (seesubheadingsB.2.2andB.2.3),whichistheequivalentofroughlyCZK648.16billion153whichincludestheperformancereserveof6%(seesubheadingA.3).

Graph 14 – Finances allocated from individual ESI Funds for the CR for MFF14+

ERDF49.79 %

CF26.11 %

ESF14.30 %

EAFRD9.63 %

EMFF0.13 %

YEI0.04 %

€11.94 billion€6.26 billion

€3.43 billion

€2.31 billion

ESI Funds allocations for CR in the MFF14+

€23.98 billion

Source: TechnicalrevisionofthePartnership Agreement for the 2014-2020 Programming Period of13April2016.NB:TheEMFFallocationisapprox.€31.11millionandtheYEIallocation€13.60million.

ThegraphdoesnotincludetheINTERREGCR-PRallocation.

152 NotIncludingtheallocationforINTERREGCR-PR.153 TheconversionusedMfRDdatacontainedintheQuarterly Report on the Implementation of the ESI Funds in

the Czech Republic in the 2014-2020 Programming Period,exchangerateof27.029CZK/€fromJanuary2016.


Comparedtothepreviousprogrammingperiodtherewereseveralchanges inthedrawdownsystem.Themainonesinclude: - reductioninthetotalnumberofprogrammes(seesubheadingB.2.3);

- reductioninthenumberofintermediatebodies;

- establishmentofasingleMS2014+monitoringsystem;

- establishmentofasinglemethodologicalenvironmenttoensurethesamerulesgoverntheentireESIFundsimplementationsystem;

- reducedpaperworkresultingfromthecomputerisationoftheOPsagenda;

- increaseduseofsimplifiedexpenditurereportingmethods;

- theintroductionofaterritorialdimensionandtheinvolvementofmunicipalities,townsandpartnersintheimplementationofintegratedterritorialdevelopmentinstruments,includingtheearmarkingofacertainminimumshareoftheallocationofcertainprogrammestotheterritorialdimension.

Fulfilment of the ex ante conditionalities (see subheading B.2.2) is one key precondition foreffectivedrawdownfromtheESIFunds.IftheCommissionregardstheirfulfilmentasinadequate,thiscouldresultintheaffectedpartoftheprogrammenotbeinglaunchedoritsinterimpaymentsbeingsuspended.ThesystemformanagingallinterimpaymentsatnationalleveliscoordinatedbytheNCA.

ThemostfinancesfromtheEUbudgetareearmarkedintheCRforprojectsunderOPTransport (OPT14+),IROPandOPEnterprise and Innovation for Competitiveness (OPEIC).

AccordingtoNCAfigures154asof31March2016,legaldocumentsontheprovisionofsupporttotallingCZK33.1billion,i.e.5.4%ofthetotalallocation,hadbeensignedsincethestartofthe2014-2020programmingperiod.CZK8.4billionofthatsumhadbeenpaidtobeneficiaries(i.e.1.4%oftheallocation)andapplicationsworthCZK6.2billionhadbeensenttotheCommissionfor payment (1.0% of the allocation). Payment of the first finances began very slowly, eventhoughthisisalreadythethirdyearofimplementationofthe2014-2020programmingperiod.

Graph 15 – State of drawdown under the Agreement as at the end of March 2016 (CZK billion)

Total Agreement* allocation

State of funds in legal provisions on aid provision/transfer**

38.9

16.0

648.2609.3

33.1 (5.4 %)

Main Agreement allocation, Performance reserve which programmes reach by fulfilment of milestones in 2018. **state of funds in legal provisions on aid provision/transfer is related to the main programme allocation.

Amount growth in the first quarter of 2016.

*Total allocation consists of main allocation and performance reserve:

Source: MS2014+andSAIFIS,dataasat31March2016.

154 Source:MSC2014+andSAIFIS.

http://www.strukturalni-fondy.cz/cs/Jak-na-projekt/Elektronicka-zadost


AsattheendofMarch2016itwastheRDP14+thatwasmostsuccessful,with40,708legaldocumentsontheprovisionofflat-ratemeasuresupportworthalmostCZK7.0billionsigned.OPEmploymentwasanothersuccessfulprogramme,with162legaldocumentsworthalmostCZK17.2billionsigned.Bycontrast,nolegaldocumentonsupportprovisionhadbeensignedforasingleprojectinOPT14+,OPPGPandOPF14+.

Table 6 – Number and volume of calls and signed legal documents by programme (EU contribution) as at 31 March 2016

Programme period 2014-2020Approved calls of interest

Project with legal provisions on aid provision/

aid

Number CZK billions Number** CZK billions

OP Enterprise and Innovation for Competitiveness 40 26.7 15 0.9

OP Research, Development and Education 19 42.8 6 2.6

OP Employment 46 48.0 162 17.2

OP Transport 4 70.9 0 0.0

OP Environment 20 22.7 14 3.0

Integrated Regional Operational Programme 33 64.0 13 0.5

OP Prague – Growth Pole CR 10 2.5 0 0.0

OP Technical Assistance 3 7.2 50 1.9

Rural Development Programme 2014–2020* 3 3.5 40708 7.0

OP Fisheries 2014–2020 4 0.2 0 0.0

INTERREG V-A Czech Republic - Poland 4 0.1 0 0.0

Total 186 288.6 40 968 33.1

Source:Quarterly Report on the Implementation of the ESI Funds in the Czech Republic in the 2014-2020 Programming Period, 1Q 2016.datageneratedon1April2016.

NB:*InthecaseofRDP14+,applicationsforsixflat-ratemeasureswerereceivedin2015inadditiontothesevencallsforprojectmeasures. **Flat-ratemeasures(commitmentsfrompreviousyears)tobeimplementedundertheRDPareincludedinthetotalnumberofprojectswithalegaldocumentregardingtheprovision/transferofsupport.

D.2.2 The SAO’s audit work in the field of Cohesion Policy in the period under scrutiny

TheSupremeAuditOfficepublished in theSAO Bulletin theaudit conclusionsof12audits155 completedintheperiodunderscrutinyandtargeting,exclusivelyoratleastpartially,drawdown

155 Auditsnos.14/15 – Fundsspentontheprojectsandmeasuresforsupportandfulfilmentofefficientpublicadministrationincludingsavingsofexpendituresimplementation;14/22 – Fundsearmarkedfortheinfrastructureofuniversityeducation;14/24–EUandstatebudgetfundsprovidedforsettlementofexpendituresofnationalprojectswithintheOperationalProgrammeEducationforCompetitiveness;14/32 – FundsearmarkedfortheconstructionoflineAofthePragueunderground;14/37–Statebudget,EUbudgetfundsandotherfundsacquiredfromabroad;15/02–Statebudgetfundsprovidedforsupportofenergysavings;15/03–FundsearmarkedforprojectsrelatedtointroductionofelectronicpublicadministrationunderthesupervisionoftheMinistryoftheInterior;15/04–Fundsearmarkedfortheinfrastructureoftheproject“Pilsen–Europeanculturalcapital2015”undertheRegionalOperationalProgrammeofCohesionRegionSouth-Westforperiod2007–2013;15/06 – StatebudgetfundsandEUstructuralfundsearmarkedforfinancingofoperationalprogrammeswithrespecttoprojectssustainability;15/10–FundsspentontheNationalInfrastructureforElectronicPublicProcurementanditsutilisationforpurchaseofselectedcommodities;15/14–FundsearmarkedformodernisationofIII.andIV.transitrailwaycorridor;15/18–Fundsearmarkedforhousingsupport.


from European funds under cohesion policy. These audits mostly assessed the legality andaccuracyof transactionsonaselectedsampleofprojects; insomecasestheeffectivenessofOPs’managementandcontrolsystemswasalsojudged.Someoftheauditswereperformanceaudits156orfinancialaudits157.

Compared to 2014 therewas an increase in the number of errors in expenditure eligibility,the selection of contractors and the conclusion of contracts with contractors. Conversely, aslightfallinerrorrateswasfoundwhenthecontrolsystemwasscrutinised.TheSAOidentifiedshortcomingsinboththemanagingauthoritiesofOPsandsupportbeneficiaries.

Graph 16 – Nature and frequency of errors found by the SAO in cohesion policy

18

13

12

8

5 5

4

Ineligible expenditure

Project objectives

Public procurement

Other Monitoring Selection and assessment

Control system

Source: analysisoferrorsintheSAO’sauditconclusions.

Expenditure eligibility

Most common errors: - drawdown and use of finances in contravention of the law or OP rules;

- claiming and paying of ineligible expenditure (amounts claimed for payment in invoices were not properly documented, conflict with the expenditure eligibility rules detected etc.).

- Auditno.14/15(OPHREandIOP)–InthesevenauditedprojectsoftheMinistryoftheInterior(MoI)andMinistryofIndustryandTrade(MoIT)publicmoneywasnotspenteffectively,asitwasnotusedtocoveressentialrequirements,i.e.requirementsnecessaryforfulfillingthepurposeoftheproject.TheSAOjudgedthisconducttobeabreachofbudgetarydisciplineinvolving a total of over CZK 226million. In one OP HRE project, for example, theMoIapprovedbillingandacceptedorpaidinvoicesforactivitieswhichwerenotdemonstrablyperformedanddocumentedorwhosefactualcontentwasnotclear;moreover,theoutputsoftheseservicesdidnotmatchtheproject’sgoalsintermsofeitherqualityorcontent.

156 Auditsnos.15/10and14/15.157 Auditno.14/37.


-- Auditno.14/22(OPRDI)–Ofthesevenselectedprojects, therewasonedetectedcaseofasuspicionof irregularitiesandbreachofbudgetarydisciplineowingtothereportingofineligibleexpenditureworthCZK221,000andfailuretocomplywiththetargetvalueofindicators.

InonecasethebeneficiarydidnotcomplywiththeActonAccounting.

- Auditno.14/24(OPEC)–TheprovidedfinanceswerenotalwaysdrawndownandutilisedincompliancewiththelawandOPrules:shortcomingswereidentifiedinallthreescrutinisedprojects158.Aspartof“indirectcosts”,forexample,thecostofbuyingfurnitureandfittingswaspaidincontraventionofthetermsofRegulation(EC)1081/2006oftheEPandoftheCouncil.Aspartofdirectcosts,projection technology thatwasevidentlynotused in theprojectasitwasstillstoredinitsunopenedoriginalpackagingwhentheprojectended,waspaidfor, forexample.Similarfindingsconcernedtheacquisitionoffurniturethatwasnotrequiredfortheimplementationoftheproject.Inaddition,trainees’accommodationandtravelexpensesondayswhennotrainingwastakingplacewerepaid.ThevalueofinefficientanduneconomicalexpenditurewasputatalmostCZK19million.

- Asupportbeneficiary(theFurtherEducationFund)wasnotfoundedbyitsfounder(MoLSA)onthebasisofaspecial legalregulation,astheActNo219/2000Coll.,onStatePropertyoftheCRanditsconductinlegalmattersrequires.TheCommissionmaythereforefindthebeneficiaryineligibleforsupportunderOPECandallitsexpendituretodatemaybejudgedineligible.

- Auditno.15/02(OPEI,OPEIC,OPE07+)–IneligibleexpendituretotallingCZK2,033,000wasdetectedintwoauditedprojects. Inthefirstcase(OPE07+)thiswaspaymentforprojectdocumentation connectedonlypartiallywith theproject; in the second case (OPEI) thiswasmoneyallegedlysetasideforeliminatingfuturedefectsarisingwhenoperatingboilertechnology.

- Auditno.15/10(IOP,National Infrastructure for Electronic Public Procurement–NIEPP)–InthecaseofoneprojecttheMfRDperformedactivitiesinconflictwiththecallandactivitiesthatwerejudgedtobeuneconomical. Inaddition,theMfRDdidnotcomplywiththeActNo 320/2001 Coll., on Financial Control, as it did not adhere to the prescribed approvalprocedures in the case of preliminary control before and after the occurrence of thecommitment.

Compliance with defined goals and project sustainability

Most common errors: - in some projects the use of the generated outputs during the sustainablity period is not

sufficiently guaranteed, despite the high cost of obtaining these outputs;

- contrary to expectations, funding is not found for implementing project goals during the project’s sustainability period.

- Auditno.14/15(OPHREandIOP)–MonitoringoftheauditedprojectswasnottiedtothegoalsoftheSmart Administration strategy.Intheprojectapplicationstheprojectimplementerswerenotrequiredtospecifywhichgoalofthestrategytheprojectwassupposedtocontributeto.Theprojectswerelinkedtothestrategygoalsretrospectively.Theseprojects’monitoringindicatorswerechosenincompliancewiththeOPHRErulesbutweremerelyformalandprovidedno informationaboutthequalitativesideoftheprojects inconnectionwiththeachievementoftheprojects’goalsandthegoalsoftheSmart Administration strategy.Sevenoftheeightauditedprojectsdidnotachievethedefinedgoal.

158 Thisinvolvedthefollowingprojects:Trainees in Companies,NationalSystemofQualifications2andKeys for Life.


- Auditno.14/24(OPEC)–Inthecaseofsomeprojects,theuseofthegeneratedoutputsafterthecompletionofprojectactivitiesisnotsufficientlyguaranteed,despitetheirsystemicnatureandhighcost.

IntheTrainees in Companies projecttheMoEYSdidnotprovideanyguaranteesdetailingconcretesourcesofthefundingnecessaryforfurtherutilisationoftheoutputs,outcomesandactivitiesoftheperformedtraining.

TheSupremeAuditOfficeconsiderstheCZK800millionofpublicmoneyprovidedunderthisnationalprojectforone-offpilottestingactivitiestobedisproportionate.

-- Auditno.15/06 (OPRDI,OPEC, IOP)– Itwas found thataproject forbuildingamulti-purposesportsfacilityforthegeneralpublicsupportedoutoftheIOPdidnotcomplywiththe project goal during its sustainability period. Even though the supportwas providedsolelyforaleisurefacilitythatwasmeanttobeusedbythepublic,therenovatedmulti-purposefacilitywasmainlyusedbytheprojectpartnerandorganisedgroups,whilepublicaccesswasrestricted.

Duringthesustainabilityperiod,scienceandresearchcentresbuiltwithOPRDIfinancesfailedtogarnerfundingforcontractualresearchandinternationalgrantsinlinewiththeoriginalexpectations.

ShortcomingsintheuseofprojectoutcomesduringthesustainabilityperiodweredetectedinstatisticalresearchprojectsoftheMfRDtargetingselectedtourismsegmentsas,contrarytotheprojectgoal,thepublicdidnothaveaccesstopartofthecreateddatabase.

- Auditno.15/10(IOP)–ForassessingandmonitoringoneprojecttheMfRDchoseamonitoringindicatorthatprovidedminimalinformationregardingthedefinedprojectgoalsandthusdidnotenablemonitoringoftheprogressmade.Moreover,theMfRDreportedthemonitoringindicatoronthebasisofunrealisticdata,sotheactualdegreeoffulfilmentofthestipulatedobjectives in linewith thebinding IOPdocumentsandconditionsunderwhich the fundswereprovidedcouldnotbequantifiedinthisway.TheMfRDdidnotachievethemonitoringindicator’stargetvaluebythecompletionoftheprojectandfurthermoredidnotachievethedefinedprojectgoals.

Public procurement and concluding contracts with contractors

Most common errors: - lack of transparency when assessing bids;

- wrongful use of negotiated procedure without publication;

- violation of the principles of non-discrimination and equal treatment;

- conclusion of contracts not conforming to the draft presented in the bid;

- changes to the subject of the contract during award procedures.

- Auditno.14/15(OPHREandIOP)–Beneficiaries(fromOPHRE)floutedtheActNo137/2006Coll.,onPublicProcurementprimarilybynotholdingawardproceduresincaseswherethelawclearlyrequiresthem.Inaddition,therewasalackoftransparencyintheassessmentofbids (OPHREand IOP)or contractswereconcluded thatdidnot conform to thedraftpresentedinthebid.

TheSAOalsodetectedtheuseoffundsincontraventionoftheconcludedcontractforajobofwork.

- Audit no. 14/24 (OP EC) – In the case of an above-the-threshold public contract for“Innovation of the National System of Qualifications Information System”, a breach of


budgetarydisciplineinvolvingoverCZK10millionwasdetected,astheassessmentcriteriaforselectingthecontractorweredefinedinamannercontrarytothetransparencyprinciple.

Inthecaseofapubliccontractfor“PurchaseofPrintedandOnlineAdvertising”intheTrainees in Companiesproject,abreachofbudgetarydisciplineinvolvingalmostCZK1.8millionwasdetected:thefailuretoprolongthelegaltimelimitforbidsconstitutedaviolationoftheActonPublicProcurement.

- Auditno.15/04(ROPSW)–Onebeneficiarywasfoundtodisplaysignificantdeficienciesinthedesignofassessmentcriteriaforselectingcontractors;inseveralothercasesbeneficiariesdidnotcomplywithlegaltimelimits.

- Auditno.15/10 (IOP,NIEPP)–The contractingorganisationcommitted serious violationsoftheActonPublicProcurement:amongotherthings,itfailedtostipulatetheanticipatedvalueof thepublic contact in linewith the law;when assessingbids frombidders it didnotproceedtransparently;and itusednegotiatedprocedurewithoutpublicationwithoutjustificationandallowedsubstantialchangesintherightsandobligationsunderthecontract,violatingtheprinciplesofequaltreatmentandnon-discrimination.

- Auditno.15/14(OPT07+)–InthecaseofsixconstructionprojectstheRailwayInfrastructureAdministration, state enterprise (RIA), commenced the award procedure at a timewhenbuildingpermissionhadyetnotbeenissuedorevenappliedfor.Thatgaverisetocaseswherethevalidbuildingpermitsstipulatedcertainbindingconditionsthatwerenotcontainedinthetenderdocumentation.Thatfrequentlyledtochangesinthevaliddocuments(e.g.projectsorsignedcontracts).AccordingtotheRIA,thereasonforthiswasanendeavourtoacceleratetheconstructionwork,butinrealitynoaccelerationtookplace,barafewexceptions.

- Auditno.15/14(OPT07+)–Inthecaseofoneconstructionproject,afailuretodefineworkcorrectlymeantthattheRIAhadtorepeattheawardproceduretoselectacontractorforadditionalbuildingworkwithanexpectedvalueofCZK2.4million.Consequently,theawardprocedurecommencedinOctober2013wasonlycompletedinJune2014.Thatwasoneofthereasonswhytheconstructionprojectcompletiondeadlinewasputbackoneyear.

Miscellaneous

Most common errors: - violation of the principles of economy, efficiency and effectiveness (3E principles);

- deficiencies in accounting and reporting;

- frequent changes to the defined rules;

- insufficient absorption capacity.

- Audit no. 14/15 (OPOPHRE and IOP) – In the case of one project (supported fromOPHRE)theMoIapprovedbillingandacceptedorpaidinvoicesforactivitieswhichwerenotdemonstrablyperformedanddocumentedorwhosefactualcontentwasnotclearandhadnolinktotheprojectgoal.

- Auditno.15/04(ROPSW)–Theprojects’definedparametersgaveinsufficientinformationforassessingefficiencyandeconomy.Themanagingauthoritydidnotuserealisticunitpricesfortheprojects’parameters(e.g.m2ofbuildingarea)todefinethesizeofthesubsidy,sotheprovidedsubsidyamountswerebadlyoutoflinewiththeprojects’budgetsandpavedthewayforuneconomicalspending.

- Audit no. 14/22 (OP RDI) – Although the MoEYS set very detailed rules for supportbeneficiaries,itoftenchangedtherules.ThechangesincreasedtheadministrativeburdenonprojectmanagementforbothbeneficiariesandMoEYSstaff.


- Auditno.14/24(OPEC)–TheMoLSAdidnotassesstheeconomy,efficiencyandeffectivenessofmoneyspentontheTrainees in Companies project.

Althoughtheallocationwasreducedinpriorityaxes3and4ofOPECduringitsimplementation,theMoEYSfailedtofilltheholeinCZKbillionsofplannedexpenditurewithothersuitableprojects.Theamountallocatedtopriorityaxes3and4onthebasisofanincorrectestimatewasalmosthalvedfromthestartofimplementationto2013.

- Auditno.14/37(OPRDI,OPEC,RDP07+)–Financialflowsandthemethodsforidentifyingaccountingcaseswerenotuniformamongtheauditees.Toa largeextentthedifferenceswere linkedtothedifferentwaysentitieswere involved infinancialflows. If intermediatebodieswereinvolved,forexample,thereweremorefrequentproblemsdocumentingthedatanecessaryforenteringcertainitemsintheaccountingoftheauditedministry.

Theauditidentifiedcertainneworpersistingsystemicrisks.Thesewereriskslinkedtotheaccounting of conditional receivables from pre-financing, balance-sheet receivables frompre-financing, blanket corrections (financial corrections) and preliminary payments. Theaudit described problems linked to the reporting of foreign resources financed throughtheinvolvementofthereservefundanddrewattentiontothelowfactualcontentoftheinformationpublishedabouttheactualcostoftheEU’sexpenditurepolicies intheCzechRepublic.

Auditno.15/10(IOP,NIEPP)–TheMfRDdidnotincludecostslinkedtocopyrightsupervision,trainingandSWandHWpurchasing inthebookvalueofthe“NationalElectronicTool”159 informationsystemasset,sothedifferencebetweentheactualvalueoftheassetandthevaluesetdownbytheMfRDinaccount013–SoftwarewasmorethanCZK169million.

Monitoring and achieving the defined goals of programmes

Most common errors: - the actual benefit of projects was not monitored;

- no monitoring indicators were set for measuring the outcomes of projects during their sustainability period.

- Audit no. 15/10 (IOP) – In the case of the project Setup of integrated component forconnectionofNIEPP systems to ISBR160,thebeneficiaryusedamonitoringindicatorthatdidnotproviderelevantinformationformonitoringtheprojectgoalof“ensuringcurrentanduniforminformationonentitiesintheaffectedNIEPPsystems”,whichwasonereasonwhythebeneficiarydidnotmonitor this project goal properly anddidnot assess thedegreetowhichitwasfulfilled.Inaddition,theSAOjudgedthefailuretoachievethevalueofthechosenmonitoringindicator“Number of Non-editing Agenda Information Systems Connected to the Basic Registers”asabreachoftheconditions.

- Auditno.14/22(OPRDI)–Thesupportimprovedtheinfrastructureofuniversities.InadditiontoimprovingthestateofinfrastructuretheMoEYSsetonegeneralgoal–puttinginplacetherightconditionsforincreasedandimprovedstaffingforresearch,development,innovationandpracticalwork.However,theMfRDdidnotmonitortheprojects’actualbenefitforthequalityofhumanresourcesforresearch,developmentandinnovation.

- Auditno.14/24 (OPEC)–TheSAOrated themanagementandcontrol systematMoEYSlevelaspartiallyeffective.Therewasonlyalimitedpossibilityforassessinghowtheauditedprojectscontributedtoachievingobjectivesatthe levelofpriorityaxes3and4ofOPECbecauserelevantmonitoringindicatorsdidnotexist.

159NationalElectronicToolisaninformationsystemdesignedforregistrationofpublicprocurementforcommoditieswhicharedifficulttostandardize.

160 InformationSystemofBasicRegisters.


- Audit no. 14/32 (OP T07+) – TheMinistry of Transport (MoT) defined the project goalswithoutspecifyingfactualcontentandtiming;itdidnotspecifyhowindicatorsweretobemeasured; and it paidno attention to theproject’s cost-effectivenessor the impact thatpostponingthecompletiondeadlinesofcertainrelatedprojectswouldhaveonachievingthegoalsoftheprojectitself.Consequently,theMoTfailedtoputinplacetherightconditionsforobjectiveassessmentoftheeffectivenessandefficiencyofsupportfortheconstructionofthePraguemetro.

- Auditno.15/06(OPRDI,OPEC,IOP)–TheMoEYSdidnotsufficientlybindOPRDIsupportbeneficiaries to ensure the sustainability of scientific research centres, as it defined nomandatory monitoring indicators for measuring the outcomes of projects during thesustainabilityperiod.

The MoEYS has no information on how many new jobs in science and research weredemonstrablycreated.

Project assessment and selection system

Most common errors: - when assessing projects managing authorities did not take into account the sustainability

aspect,

- managing authorities did not ensure that the final overall assessment contained information linked to assessment of the proportionateness and economy of projects.

- Auditno.14/15(OPRDIandIOP)–TheselectionandassessmentofSmart Administration projectsfollowedtheOPRDIandIOPrules,buttheselectionprocesswasnotcategoricallylinkedtothegoalsoftheSmart Administration strategy.

- Auditno.14/22–OPRDI–TheMoEYSdidnothaveacompleteoverviewofthestateandutilisationofexistingdevices,apparatusandtechnologiesinindividualuniversitiesthatcouldbeusedtoassessuniversities’applicationsforsupportfortheacquisitionofnewequipment.

- Audit no. 14/24 (OP EC) – The MoEYS did not ensure that the drawn up substantiveassessmentsofnationalprojectswascompleteandcontainedinformationinthefinaloverallassessmentlinkedtotheassessmentoftheprojects’proportionatenessandeconomy.WhenassessingnationalprojectstheMoEYSdidnottakeintoaccountthesustainabilityaspect.

- Audit no. 15/04 (ROP SW) – In some substantive assessments of projects there was nojustificationforthescoresallottedbytheassessors.Significantdifferenceswerefoundintheallocationofpointsbydifferentassessors.Thefindingsindicatedthattheprojectswerenotassessedobjectively.

Control system

Most common errors: - irregularities in the performance of administrative verifications and on-the-spot

verifications by ministries and in the planning of control work.

- Audit no. 14/24 (OP EC) - TheMoEYS committed errorswhenperforming administrativeverifications and on-the-spot verifications, as it failed to detect public procurementshortcomings and ineligible expenditure (almost CZK 19million in total). As the subsidyprovider,theMoLSAcompletelyfailedtocheckonthefinancesitprovidedtosupporttheTrainees in Companies project.

- Auditno.15/06(OPRDI,OPEC,IOP)–DuringthesustainabilityperiodtheMoEYSdidnotperformanymonitoringandcontrolofscientificcentresfundedunderOPRDI.


WhenplanningsustainabilitychecksunderOPECandOPRDIitdidnotperformsuitableriskanalysisforselectingprojectsamplesforsustainabilitychecksanddidnotevendrawupanyspecificproceduresforthesechecks.

Progress in the adoption of corrective measures linked to the SAO’s findings in the field of structural policy

InthecaseofalltheSAO’sauditconclusionsdiscussedbytheCzechgovernmentappropriatemeasurestoremedythedetectedshortcomingswereadoptedandthegovernmentinstructedtheresponsibleentities(ministries)toexecutethemeasures.161 IntheSAO’sestimate,85%to95%ofthecorrectivemeasureswereimplemented.TheSAOwillconductfollow-upauditstocheckwhethertheshortcomingshaveactuallybeenremedied.

Regardingthediscussionoftheauditconclusionfromauditno.14/32,theSAOhadfundamentalcommentstomakeonthematerialtheMoTput intoexternalconsultation.AmeetingwasthereforeheldbetweenanSAOmember, theaudit coordinatorand representativesof theMoT,atwhichcorrectivemeasurestheSAOconsiderssufficientwereagreedon.

InsomecasesauditeesdonotagreewiththeSAO’sfindings.ItisveryhardtoresolvefundamentaldisagreementsinthesubsequentmeetingsheldbytheCzechgovernmenttodiscusstheauditconclusion. The previous period involved the audit conclusions from audits nos. 14/24 and15/06,whenagreementsonthescopeofcorrectivemeasurestobeadoptedwereonlyreachedafterseveralworkingmeetings.

Inauditno.15/06theSAOregardedthefactthattheoutputsandoutcomesofcostlyprojectswerenotfullyutilisedasaseriouserrorinthedrawdownofEuropeanfinances.TheMoEYSwas guilty of ineffective spending of publicmoney to the tune of CZK 242million in totalunder three systemic projects. Although theMoEYS did not agreewith the SAO’s opiniononthecontentiousutilisationof the implementedprojects, itadoptedcorrectivemeasuresfor the followingprogrammingperiod consisting in a fundamental change tohowprojectsfor implementation are assessed and approved. According to the ministry, projects withcontentiouspurposesandimpactsshouldnolongertakeplace.

D.2.3 Annual reports and opinions of the Audit Body

InaccordancewithArticle123ofRegulation(EU)1303/2013oftheEPandoftheCounciltheAudit Body began its audit work for the 2014-2020 programming period with “designationaudits”162.AccordingtoinformationprovidedbytheABinMarch2016,nodesignationaudithadbeencompletedwithafinalreportandpronouncementbythatdate.MostofthedesignationauditswereatvariousstagesofprogressinMarch2016.Inonecaseamanagingauthorityhadnotyetrequestedanaudit.TherateofprogressindesignationauditsdifferedfromtheoriginalexpectationspartlybecauseoftheinfluenceoftheCommission:mostnotablyitsrequirementsfor theperiodnecessary forapprovingprogrammesand issuing the implementing legislationandmethodologicalinstructionsfordesigningtherelatedmanagementandcontrolsystemsandsomeCommissionrequirementsforchangesinentitiesintheimplementationstructure.

Anotherfactorwasthedegreeofreadinessofsomeprogrammemanagingauthorities,meaningthetimenecessaryforbringingtheirmanagementdocumentationintolinewithlegislationoftheEuropeanUnionandCzechRepublicandthesinglemethodologicalenvironmentfor2014-2020. Inaddition, thedegreeof readinessof thePCAand, inparticular, thereadinessof theMS2014+monitoringsystemforperformingdesignationauditsplayedasignificantrole.

161 Theseweretheauditconclusionsofauditsnos.14/15,14/22,14/32,14/37and15/02.162 BasedonCzechgovernmentresolutionno.612of21July2014,theAuditBodyforthe2014-2020programming

periodwasestablishedasanindependentauditentityverifyingmanagingandcertifyingauthorities.


ItisareasonableassumptionthatthereportsfromdesignationauditsandtheresultsofthePCAauditandauditoftheMS2014+monitoringsystemwillbesenttotheCommissionduringthethirdquarterof2016.

In the assessments of the OPs’ management and control systems from the 2007-2013programmingperioditwasstatedthatthesesystemsimprovedin2015overthepreviousyear.Anopinionwithreservationwas issued for tenOPs. Ineverycasethereservationconcernedinsufficient management control (Article 60(b) of Council Regulation (EC) 1083/2006 and Article 13(2) of Commission Regulation 1828/2006); in one case the reservation also concerned insufficient risk prevention and risk management. Inaddition,thenegativeassessmentoftheadministrationofpublicprocurementand ineligibilityofexpenditurecontinuestoapply.OnepositivedeclaredbytheAuditBodyisthatmeasuresbasedonrecommendationsfromtheauditsarebeingadoptedtoremedythesituation.

TheremainingnineOPsweresignedoffwithoutreservation(in2014onlyfiveOPsreceivedanopinionwithoutreservation).

Table 7 - Results of the assessment of programmes’ management and control systems for the 2007-2013 programming period by the Audit Body for 2015

Programmes in period 2007–2013 Opinion Error rate (%)

OP Technical Assistance Withreservation 16.20

ROP Central Moravia Withreservation 9.25

ROP South-West Withreservation 5.45

OP Prague-Competitiveness Withreservation 4.03

OP Fisheries 2007–2013 Withreservation 3.66

ROP Central Bohemia Withreservation 2.84

OP Environment Withreservation 2.62

ROP North-West Withreservation 2.61

OP Enterprise and innovation Withreservation 2.29

Intergrated Operational Programme Withreservation 1.69

ROP South-East Withoutreservation 1.39

OP Education for Competitiveness Withoutreservation 1.12

OP Prague - Adaptability Withoutreservation 0.74

OP Human Resources and Employment Withoutreservation 0.68

OP Cross-border Cooperation Czech Republic - Poland 2007–2013 Withoutreservation 0.63

ROP North-East Withoutreservation 0.57

OP Transport Withoutreservation 0.38

OP Research and Development for Innovation Withoutreservation 0.16

ROP Moravia-Silesia Withoutreservation 0.04

Source:Annual reports and opinions of the Audit Body for 2015 issued pursuant to Article 62(1)(d)(ii) of CouncilRegulation(EC)1083/2006andArticle18(2)ofCommissionRegulation(EC)1828/2006.

D.2.4 Audit work by EU authorities in the CR

ECA Annual Report on the Implementation of the Budget for 2014

In the Competitiveness for Growth and Jobs and Economic, Social and Territorial Cohesion chapters of its Annual Report on the Implementation of the Budget the European Court ofAuditorspresentedauditfindingsthatcorrespondtothefindingsofauditsdonebytheSAOin


thefieldofstructuralpolicyintheCR.TheECAalsogaveexamplesofseriousfailings.Someofthesearepresentedintheboxes163below.

Competitiveness for Growth and Jobs chapter

BasedonthequantifieddeficienciestheECAestimatedtheerrorratein2014at5.6%,anincreaseof1.6ofpercentagepointover2013.InthefieldofresearchandinnovationtheECAidentifiedincorrectlycalculatedpersonnelcostsandotherineligibledirectcosts,suchasunsubstantiatedtravelexpensesorequipmentcosts.Italsofoundineligibleindirectcostsbasedonerroneousoverheadratesorincludingineligiblecostcategoriesnotlinkedtotheproject.

Example: significant errors in costs declared for reimbursement by an SME in a research and innovation project linked to the Seventh Research Framework Programme (7th RFP)

The ECA found that costs of €764,000 declared by an SME working with 16 partners onrenewableenergyprojectfinancedoutofthe7thRFPwerealmostentirelyineligible.TheSMEownerchargedanhourlyratewellabovetheratesetintheCommissionguidelines.TheECAalsodetectedsub-contractingcostswhichwereneitheraneligible componentof costsnorprocuredbymeansofatenderingprocedure.Thedeclaredindirectcostsincludedineligibleitems,werebasedonestimatesandcouldnotbereconciledwiththebeneficiary’saccountingrecords.

Economic, social and territorial cohesion policy chapter

OnthebasisofthequantifiederrorstheEuropeanCourtofAuditorsestimatedthetotalerrorrateat5.7%164.Inthiscasetherewasaslightfallintheerrorrateof0.2ofpercentagepointcomparedto2013.Fortheemploymentandsocialaffairspolicyareatheproportionoftransactionswithpublicprocurementproceduresismuchlowerthanforregionalandurbanpolicyarea.Errorsinthispolicyareaweremainlyineligibleexpenditures.

Errors concerning Cohesion policy as a whole stemmedmainly from breaches of the publicprocurementrules,whichrepresentedalmosthalftheestimatederrorrate.Thesewasfollowedbyineligibleexpenditure,infringementsofthestateaidrulesandselectionofineligibleprojects.Examples of serious failures to comply with public procurement rules included first of allunjustifieddirectawardofcontracts,additionalbuildingworksorservices,unlawfulexclusionofbiddersandcasesofconflictofinterestsanddiscriminatoryselectioncriteria.

Example: unjustified direct award of a public contract for building work

InoneprojectrelatedtothereconstructionandupgradeofamotorwaysectionofaTEN-Troadnetwork,thecontractingauthoritynegotiateddirectlyacontractwithonecompanywithoutapriorcallforcompetition.ThisproceduredoesnotcomplywitheithertheEUrulesorthenational legislationonpublicprocurementandthedeclaredexpenditureforthiscontract isthusineligible.

Ineligible expenditure is another leading cause of errors. This includes expenditure declaredoutside the eligibility period, overcharged salaries, costs not related to the project, non-compliancewithnationaleligibilityrulesandrevenuegeneratedbytheprojectbutnotdeducted.

Example: ineligible expenditures declared

In an ERDF project paid out in the Czech Republic related to the extension and reconstruction of a tramway track some of the invoices declared for co-financing were incurred and paid before the project’s eligibility start date. Asimilar casewas found inadifferentproject inGermany.

163 ThefindingsrelatingtotheCRareinbold.164 IncludesRegional and Urban Policywithatotalerrorrateof6.1%(year-on-yearfallof0.9percentagepoints)

andEmploymentandSocialAffairswitha3.7%errorrate(year-on-yearincreaseof0.6percentagepoints.


ECA special reports

The following pages contained selected examples of findings from the ECA’s special reportsentirely or partially concerning the SF and CF and explicitlymentioning entities, projects orexpenditureintheCR.


TheEuropeanCourtofAuditorsanalysedprogress inthe implementationofthewastewatertreatmentdirectiveintheDanubebasin(CR,Hungary,RomaniaandSlovakia)and,forasampleof28EU-co-financedwastewatertreatmentplants,theperformanceoftechnologyintreatingwastewater.Itwasfoundthatattheendof2013intheCR,HungaryandSlovakiaalargeportionof theEUandnationalfinancesearmarked for funding investment inwastewater treatmenthad not been committed (projects had not been approved). The slow implementation paceimpliesariskthattheEUfundsavailablewillnotbefullyabsorbedbytheendof2015.Inviewof the significant differences between targets set and 2013 implementation levels, the ECAconsideredthatsomeofthetargetswereclearlyoveroptimistic.Forexample,inthecaseoftheCRachievementoftheindicatorasat31December2013wasjust27%,i.e.94outof350wastewatertreatmentplants(numberofnew,rehabilitatedandintensifiedplants).


TheEuropeanCourtofAuditors examinedwhether theCommissionandMember States aretakingappropriateandeffectiveactionstoaddresstheproblemofpublicprocurementerrorsin the area of cohesion policy. Errors could partly have stemmed from differences in theinterpretationofthelegislation.IntheCzechRepublic,forexample,differentinterpretationsofthesameissuebetweendifferentbodies(e.g.managingauthorities,auditauthorities,theSAO,publicprocurementoffices,theCommission)ledtodifferingauditresultsandlegaluncertainty.SomeMember States put in place rules at national level that go beyond the EU directivesregardingcertainaspectsofpublicprocurement.IntheCR,forexample,nationallawsetsa20%limitforincreasingthevalueofacontractduetounforeseeablecircumstances,incontrasttothe50%limitsetintheEUdirective.Thereportdeclaredthat12ofthe28MemberStateshadnotfulfilledthepublicprocurementconditionsatthestartof2015.ThatnumberincludedtheCRwhich,becauseofshortcomingsinitsmanagementandcontrolsystems,drewupanactionplanasrequiredbytheCommissionandmadeimprovements.


TheEuropeanCourtofAuditorsfoundthattheEU’sobjectiveofcompletingtheinternalenergymarketby2014wasnotreached.EnergyinfrastructureinEuropeisgenerallynotyetdesignedforfullyintegratedmarketsandthereforedoesnotcurrentlyprovideeffectivesecurityofenergysupply.Oneoftheindicatorsforawell-functioninginternalenergymarketwouldberelativelysmallwholesalepricedifferencesofenergybetweenneighbouringcountriesandwithinregions.The electricitywholesale prices have not converged betweenMember States, however. Thehighestwholesaleprice ismorethan85%higherthanthe lowest.SubstantialdifferencescanbenotedbetweensomeneighbouringMemberStates,e.g.betweentheCzechRepublic(€33/MWh)andPoland(€44/MWh).

165 SpecialReportNo.2/2015–EU-funding of Urban Waste Water Treatment plants in the Danube river basin: further efforts needed in helping Member States to achieve EU waste water policy objectives.

166 SpecialReportNo10/2015:Efforts to address problems with public procurement in EU cohesion expenditure should be intensified.

167 SpecialReportNo.16/2015–Improving the security of energy supply by developing the internal energy market: more efforts needed.



TheECAauditfocusedonfourMemberStatesintheDanubebasin(CR,Hungary,RomaniaandSlovakia)toseewhethertheMemberStates’implementationofthewaterframeworkdirectiveleadtoanimprovementinwaterquality.Noneofthefourmemberstateshadmeasurestargetingspecificsubstances,butevensotheprogressintermsofsecondarytreatmentofurbanwastewaterfromagglomerationsequaltoorabove2,000overtheperiod2007-2012wassignificant.Attheendof201299%ofurbanwastewaterfromagglomerationsintheCRfulfilledtheemissionlimitssetbythedirective(animprovementof73percentagepoints).

ItisclearfromtheseexamplesthattheECAfoundshortcomingsintheachievementofgoalsdeclaredinconnectionwiththesupportedactivities..

Audit missions of the European Commission in the CR in 2014 and 2015

TherelevantdirectoratesgeneraloftheCommissionconductedatotalofninemissionsin2014and2015toauditselectedOPs169orthePCA.Theprincipalpurposeofthesemissionswastogainassurancesabouttheeffectiveworkingoftheauditedoperationalprogrammes’managementandcontrolsystems.

The Commission identified deficiencies in connection with the declaration of ineligibleexpenditure inoperationalprogrammes.ThePaymentandCertifyingAuthoritywas found tohave procedural shortcomings and disproportionate procedures in audit of the recovery offinances.TheshortcomingstheCommissionidentifiedinitspreviousyears’auditsintheCRwereagainrepeatedin2014and2015.Annex5containsalistoftheCommission’sauditmissionsintheCR.

D.3 EU Common Agricultural Policy and Common Fisheries Policy

D.3.1 Current developments in Common Agricultural Policy

Approximately40%oftheEUbudgetgoesontheCAP.ThemainreasonforsuchalargeshareisthefactthattheCAPispredominantlyfinancedbytheEuropeanUnionandnotbynationalbudgets. Spending on the CAP is financed out of theEuropean Agricultural Guarantee Fund (directpaymentsandcommonmarketorganisation)andEuropean Agricultural Fund for Rural Development (RDPsubsidies).

TheamountpaidoutinsubsidiesintheCRinthemainareasoftheCAPfortheyears2007–2015isshowninthefollowinggraph.

168 SpecialReportNo.23/2015–Water quality in the Danube river basin: progress in implementing the water framework directive but still some way to go.

169 TheauditstargetedROPSouth-WestandROPMoravia-Silesia (CommissionDirectorateGeneralforRegionalandUrbanPolicy)andOPF07+(CommissionDirectorateGeneralforFisheries).


Graph 17 – Finances paid out under the CAP in the years 2007–2015 (CZK million)

18 84616 718

25 057

18 15819 954

22 37519 815

24 324

16 827

2 8285 312

7 720

15 94613 867

11 816

11 016

12 520

15 5151 190

3 739

4 294 2 9061 920

759

1 005

718

804

2007 2008 2009 2010 2011 2012 2013 2014 2015

CMO

RDP

Directpayments

Source:SAIFannualreportsfortheyears2007-2014;SAIFmaterials,March2016–CAPBudgetfor2015andDrawdownasat31December2015.

NB:TheamountsdonotincludepaymentsundertheHorizontal Rural Development Plan (theprecursortotheRDPinthe2004-2006programmingperiod).

Asthegraphshows,since2009thetotalamountofsubsidiespaidoutfortheCAPhasrangedfromCZK32billionto37billionperannum.Directpaymentsarethebiggestcategoryofsupportinfinancialterms.TheyrangefromCZK17billionto25billion.InsecondplaceinthevolumeofCAPsubsidiesdisbursedintheCRistheruraldevelopmentarea,inwhichflat-ratemeasures,i.e.claim-basedsupport,takeupthemostfunding.

AccordingtoSAIFdata,in 2015almostCZK33.19billionwaspaidoutintheCRundertheCAP,with EU funding accounting for the equivalent of approx. CZK 28.21 billion of that and thenationalsharestandingatCZK4.98billion.

Table 8 – Overview of finances paid out in the main areas of the CAP for 2015 (CZK million)

Expenditure area CR EU Total

Directpayments 846.28 15980.25 16 826.53

CommonMarketOrganisation 350.44 453.89 804.33

RuralDevelopmentProgramme* 3 772.63 11742.61 15515.24

Horizontal Rural Development Plan 9.51 30.12 39.63

Total 4 978.86 28 206.87 33 185.73

Source:SAIFmaterials,March2016–CAPBudgetfor2015andDrawdownasat31December2015.

NB:*Includingclaim-basedpaymentsdisbursedoutoftheRDP14+,i.e.CZK1,129.6million.


Direct payments

Intermsoftheamountoffinancespaidout,directpaymentshavebeenthebiggestcategoryoffundingthatischannelledintoCzechagriculturefromtheEUsince2004.

Since2015therehavebeenchangesinthedisbursementofdirectpaymentslinkedtotheCAPreformfrom2013.Thereformcomprisesanumberofnewelements,suchastheactivefarmercriterion,which are intended to ensure payments are only provided to entities that actuallyperform farming. At the sametime, the nature of direct payments is changing into amulti-componentpaymentincludingbothcompulsorypaymentsandvoluntarypayments.Thebiggestcompulsorycomponentintermsofvolume(atleast50%oftheannualenvelope170)remainsthesingleareapaymentscheme(SAPS),which ispaidouttofarmersperhectareof farmed landregistered in theLand Parcel Identification System and is fully coveredbyEU funding.Othercompulsorycomponentsofdirectpaymentsarethepaymentforfarmingpracticesbeneficialtotheclimateandenvironment,knownasgreening,whichmakesup30%oftheenvelopefordirectpayments,andthepaymentforyoungfarmers,whichispaidoutasa25%bonusontopoftheSAPSpayment.Coupledsupportprovidedtosensitivesectorsofplantandanimalproductionisavoluntarycomponent.FromthestatebudgetfarmersreceivetransitorynationalaidtotopupthelevelofdirectpaymentsinnewMemberStatesforselectedcommoditiesthataredisadvantagedinSAPS.Thispayment replaces the formernationalTop-Uppayment.Theprovisionofdirectpaymentsisdependentoncompliancewithgoodagriculturalandenvironmentalconditionsandstatutorymanagementrequirements.

Almost €5.2 billion is earmarked for direct payments for the 2015-2020 period. The annualenvelopefordirectpaymentsistheequivalentofroughlyCZK23billion.NowMemberStatesareallowedtoadjusttheenvelopedefinedfordirectpaymentsinfavouroftheRDP,i.e.totransfertotheRDPasmuchas15%ofthedirectpaymentsenvelope.TheCzechRepublicmadeuseofthisoption,decidingtotransferonaverage2.5%perannumtoRDP14+fortheyears2015-2019.Thevalueofthistransferin2015wasCZK800million.

In 2015 farmers received both direct payments based on applications from previous years(including the now abolished separate sugar payment and separate payments for tomatoes)andpaymentsbasedonapplicationsfrom2015.Thesewereadvancesofupto70%ontheSAPSpayment.

Table 9 – Overview of finances paid out on direct payments in 2015 (CZK million)

Direct payments CR EU Total

SAPS 0 12 663.07 12 663.07*

Separate sugar payment 0 1198.36 1198.36

Separate tomato payment 0 11.24 11.24

Extra support 0 1529.10 1529.10

Temporary inner-state support 846.28 0 846.28

Financial compensation171 0 578.49 578.49

Total 846.28 15980.26 16826.54

Source: SAIFmaterials,March2016.

NB: *CZK11,483.3millionwaspaidouttoapplicationsfrom2015andCZK1,179.8milliontoapplicationsfrompreviousyears.

Comparedto2014,spendingondirectpaymentsin2015wasCZK7.5billionlower,areductionofover30%.ThereasonforthatisthechangestoandnewconditionsoftheCAPthatimpacted170 Annualframeworkallocationfordirectpayments.171 Financialdisciplinecompensation.Paidoutoffinancialreservewhichwasgainedin2014outofapplicationsfor

2014.Roughly18,000beneficiarieswerepaidoutofthisreserve.


ontheadministrationofsupportandthesubsequentdelayinpaymentstofarmers.Paymentstoyoungfarmers,greeningpaymentsandtransitorynationalaidwerenotpaidoutuntilthestartof2016.TherewasapronouncedreductioninSAPSpaymentscomparedto2014.WhiletheMoAprovidedroughlyCZK22.4billionforSAPSin2014,in2015thefigurewasCZK12.6billion.

Thetotalvolumeofdirectpaymentsremainsroughlythesamehowever,becausethelowerSAPSamountistoppedupbythenewlyestablishedpayments.

Penalties

In2015theCommissionpenalisedtheCzechRepublic(imposingafinancialcorrection)basedontheresultofacompletedaudit.Thepenaltyofalmost€29.49million,i.e.approx.CZK810million,wasforinadequatedirectpaymentscross-complianceconditions.AccordingtotheCommission,from2010to2013theMoAinsufficientlycheckedcompliancewithcertainconditionsfortheprovisionofsubsidiesinthefieldsoftheenvironment,healthandgoodanimallivingconditions.TheCommissionauditfound,forexample,thatCzechsupervisoryauthorityinspectorsdidnotcheckwhetherfarmerswereupdatingtheirregistersoffarmanimalsandannouncetransfersof animals in good time. The Czech Republic used its right to file a petition for conciliatoryproceedings,whichwereheldinOctober2015.TheCommissionhasstucktoitsoriginalopinion,however,andisdemandingtheCRpaybackthemoney.TheMinistryofAgricultureispreparinganactionforthedeclarationofthefinancialcorrectionasnullandvoidincollaborationwiththeOfficeoftheAgentfortheCzechRepublicbeforetheEuropeanCourtofJustice.

Common Market Organisation

CommonMarketOrganisation(CMO)appliestoagriculturalprimaryproduceandproductsoffirst-stageprocessingandisintendedmainlytostabiliseagriculturalproducemarketsandsecureincomesforfarmers.Variousinstrumentsareusedtothisend,suchasfinancialaid,subsidies,productionquotas, interventionpurchasing,aidforstorageandsupportforthepromotionofagriculturalproducts.

Quota-basedregulationofthemilkmarketendedon31March2015.Withtheexpiryofthemilkquotassystem,aprocesstoputinplaceanewsystemformonitoringthemarketproductionofmilkintheEUwaslaunched.Inthiscontext,since1April2015allentitiesdoingbusinessintheCRandbuyingmilkfromproducershavebeenobligedtoregisterwiththeSAIFas“firstbuyers”.Firstbuyersareobliged tomonitorandkeep recordsof suppliesofmilk fromproducersandmustinformtheSAIFmonthlyaboutexecutedsupplies.Becauseoftheexpiryofmilkquotas,temporaryextraordinarymeasuresforthemilkanddairyproductssectorwereadoptedin2015intheformofbuying-inandprivatestorageofbutteranddriedskimmedmilkandtemporaryaidfordairycowbreedersdesignedtocompensateforthelowpurchasepricesofmilk.

Following the announcement of the Russian embargo on imports of selected agriculturalproductsfromtheEU,in2015anexceptionalsafety-netmeasurewasadoptedtomitigatetheharmtocertainexportersinthefruitandvegetables,dairyproductsandcattleandpigbreedersandisintroducingmeasuresforprivatepigmeatstorage.

LikeotherMemberStates,theCzechRepublicmakesuseofsupportfromEUfundstopromoteits own agricultural products. These are promotional programmes designed to improve themarketingandsalesofagriculturalandfoodindustryproducts.In2015programmeswereruntopromotemilkandrape-seedoilconsumptionintheCR,topromotetheprotecteddesignationoforiginintheCRandSlovakiaandtopromotehigh-qualityEuropeandairyproductsinRussiaandUkraine.

The largest amount of CMO finances go on financial aid, however, most notably under theprogrammesFruit and Vegetables in Schools, Support for School Milk Consumption and Improving the Production of Apiculture Products and Placing Them on the Market.


Table 10 – Overview of finances paid out on CMO in 2015 (CZK million)

CMO measures CR EU Total

Financial support 121.14 278.97 400.11

Subsidies and levies 122.94 142.96 265.90

Export subvention 0.00 0.00 0.00

Intervention purchases 172 87.15 0.00 87.15

Support of agricultural products 19.18 31.96 51.14

Other related expenditure 173 0.03 0.00 0.03

Total 350.44 453.89 804.33

Source:SAIFmaterials,March2016.

Comparedto2014,spendingonCMOincreasedbyroughlyCZK86million.Thismainlyinvolvedincreasedaidtofruitandvegetablesproducers.Theadoptionoftemporaryexceptionalsupportintheareaofthemilkanddairyproductsmarket,thepigmeatmarketandthefruitandvegetablesmarketwillnothaveafinancialimpactuntil2016.

Rural Development Programme

Rural Development Programme of the CR for 2007–2013

ImplementationofRDP07+andthephasing-outoftheprogrammewiththeprimaryobjectiveofutilisingthefullallocationwentaheadin2015.InOctober2015theMoA,withtheCommission’sconsent,performedthe12thmodificationoftheprogrammeinordertoreallocatefinancesfrommeasureswherethefinancialallocationwasnotfullyutilisedtomeasureswherethebudgethadalreadybeenusedup.Inparticular,flat-ratemeasuresunderaxisIIwerefinanciallystrengthened.Spring2015broughtthelastroundofreceiptofapplicationsinanendeavourtoutilisethefullallocation,mainlyininvestmentinagriculturalproperty.TheeligibilityofexpenditurefromtheRDP07+budgetexpiredon31December2015.

All commitments for which there was not a sufficient allocation in RDP07+ and paymentapplicationssubmittedin2014foragri-environmentalmeasures(AEMs)weredisbursedoutoftheRDP14+budgetin2015.Paymentapplicationsinlessfavourableareas(LFAs)submittedin2014werepartiallyreimbursedoutoftheRDP07+budgetin2015and,afterthatwasexhausted,outofRDP14+.

Table 11 – Overview of finances paid out of RDP07+ in 2015 (CZK million)

Axis RDP CR EU Total

I. Improving competitiveness of agriculture and forestry 1 263.22 3 683.56 4946.78

II. Improving environment and landscape* 1266.24 3798.72 5064.96

III. Quality of life in rural areas and diversification of rural economy

413.82 1651.48 2 065.30

398.60 1195.78 1594.38

IV. Leader 123.32 490.79 614.11

V. Technical assistance 25.04 75.12 100.16

Total 3 490.24 10 895.45 14 385.69


NB:*reimbursementofsingleapplicationsin2014outoftheRDPfinancialenvelopefortheRDP14+.

172 Inthecaseofinterventionpurchasesandprivatestorageofmilkproductsandpigmeat,receiptofapplicationswascarriedoutattheendof2015andthebeginningof2016.Theexpenditureshavenotbeenrealisedyet.TheexpenditureCZK87.15millionisarepaymentofaloanforinterventionpurchases.

173 OtherexpenditurerelatedtoCMOistransferofexpiredsharefromreturnedsubsidies.


In total, therewere 23 rounds of receipt of applications during theRDP07+ implementationperiod.Thelasttworoundswereaimedatinvestmentprojectsthatcouldimplementedintheshortestpossibletimesothatthemaximumvolumeofavailablefinanceswasutilised.Thetotalallocationwasalmostfullycommittedandpaidoutattheendof2015.

ThankstosupportunderRDP07+,morethanCZK95billionwasdisbursedtobeneficiariesforbothinvestmentandflat-ratemeasurescombined.

The following tablespresent amoredetailedoverviewof subsidiespaidout tobeneficiariesunderRDP07+asat31December2015andanoverviewofRDP07+drawdown.

Table 12 – Overview of finances paid out to beneficiaries under RDP07+ in the years 2007-2015 (CZK million)

Axis RDP 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total in

2007-2015I 100.00 781.50 2 607.36 3 706.63 3 583.76 3165.48 1 518.53 2077.90 4946.78 22 487.93II 2727.54 4064.92 2968.43 8 277.18 7054.69 5 756.26 6497.95 7399.31 7 130.26 51 876.52III 0.00 451.28 1977.18 3218.14 2 117.17 1945.51 2 127.30 2 116.61 1594.38 15 547.57IV 0.00 8.41 141.46 710.40 1069.84 903.17 812.67 870.45 614.11 5 130.50V 0.00 6.13 25.17 34.16 41.22 45.15 59.84 55.73 100.16 367.55

Tota

l

2 827.54 5 312.24 7 719.60 15 946.50 13 866.67 11 815.56 11 016.29 12 520.00 14 385.69 95 410.07


Table 13 – Overview of total value of allocation drawdown in the axes of RDP07+ as of 31 December 2015

Axis RDPAllocation RDP07+

(EU ratio)Paid out to beneficiaries

(EU ratio)

(€ thousands) (€ thousands) %

Axis I. 654691.47 654629.85 99.99

Axis II. 1590276.43 1588462.12 99.89

Axis III. 442365.05 442043.06 99.93

Axis IV. 159673.38 158 805.53 99.46

Axis V. 10 500.02 10458.45 99.60

Total 2 857 506.35 2 854 399.01 99.89

Source:MoAmaterials,March2016.

IncollaborationwiththeCommission,theCRmanagedtoensurethatover99%oftheprogrammeallocationwasutilised.Theclosureoftheprogramme,inotherwordsthesendingoftheRDP07+closuredeclaration,mustbedoneby30June2016.Thesamedeadlineappliestothesubmissionofthelastannualprogressreport.TheMoAmustsendtheCommissionanex-postassessmentby31December2016.TheCommissionblocks5%oftheRDP07+budgetuntiltheprogrammingperiodisclosed.TheremainingamountisexpectedtobesentinApril2017.

Rural Development Programme for 2014–2020

InMay2015theCommissionapprovedtheRDP14+programmingperiod,whichtargetsruraldevelopment,innovationbyagriculturalenterprises,supportforyoungpeopleenteringfarmingand improving the environment through the renewal, preservation and enhancement ofecosystemslinkedtoagricultureandforestry.

Atotalof€3.07billionwasallocatedtotheimplementationofRDP14+intheCR,withtheEAFRDcontributingalmost€2.31billionof that.Consequently,Czechagricultureandruralareascan


obtainroughlyCZK97billionoveraseven-yearperiod,CZK63billionofthatfromtheEuropeanUnion.Roughly€2billionisearmarkedforflat-ratemeasures(claim-basedpayments),i.e.65%oftheRDP14+budget.Remainingapprox.€1.07billiongoestowardsprojectmeasures.

ThefirstroundofreceiptofsubsidyapplicationstookplaceinSeptember2015. Itconcernedproject measures focusingoninvestmentsintangibleassets,investmentsinthedevelopmentofforestryareasandimprovingtheviabilityofforestsandsupportforthedevelopmentofnewproductsandagriculturalproductprocessingtechniquesandtechnologiesunderCooperation measures. In total, 3,040applications for subsidies amounting toalmostCZK11billionweresubmitted.Thegreatestinterestwasinmeasure4.1.1Investment in Agricultural Enterprises.TheSAIFrecommendedatotalof2,446applicationsworthCZK7.24billionforco-financing.

TheallocationforthefirstroundofreceiptofapplicationstotalledCZK5.39billion,withCZK3.28billiongoingtowardsmeasure4.1.1.Becauseofthelargeoverhangofsubmittedapplications,especiallyinmeasures4.1.1and4.2.1,thetotalallocationwasincreasedtoCZK7.46billion.

Table 14 – Overview of applications for subsidies from RDP14+ submitted in the first round (projects)

Measure/ operation / project

Registered applications

Recommended applications

Number

Subsidy amount

(CZK million)

Number

Subsidy amount

(CZK million)

4.1.1 Investment in agricultural enterprises 2 233 7961.0 1746 4553.0

4.2.1 Processing of agricultural products and their introduction to the market 420 1172.4 396 1109.0

4.3.2a Forest infrastructure- investment into forest pathways 186 568.5 107 343.7

8.6.1a Technique and technology for forest industry – machinery purchase 167 115.5 167 115.5

16.2.2 Support for development of new products. procedures and technology for processing of agricultural products and their introduction to the market (Food innovation)

34 1 155.2 30 1 123.3

Total 3 040 10 972.6 2 446 7 244.5

Source: MoAmaterials,March2016.

Administrativeverificationandtheawardingofpointstothesubmittedapplicationsiscurrently(asofApril2016)takingplace,withapprovalexpectedinAugust2016.NopaymentapplicationsunderRDP14+werethereforepaidin2015.

The receipt of applications for RDP14+flat-rate measures submitted in the formof a singleapplication took place inMay 2015. In total, almost 34,000 applications (figure fromMarch2016)weresubmitted,requestingmorethanCZK8billion.Applicationsforagri-environment-climatemeasures(AECMs)andmeasuresforareaswithnaturalorotherspecificconstraints(lessfavouredareas,LFAs)madeupmostofthesubmittedapplications.


Table 15 – Overview of applications submitted for RDP14+ flat-rate measures in 2015

MeasureNumber of submitted

applications

Requested subsidy

(CZK million)

M08 Forestation 35 3.6

M10 Agri-environmental climate measures 14818 3438.0

M11 Ecological agriculture 4100 1397.0

M12 Payments within Natura 2000 network and according to directive on water 424 118.0

M13 Payments for areas with natural or other special restrictions 13 808 2434.0

M14 Fair living conditions for animals 812 751.0

Total 33 997 8 141.6


CZK1.13billionwaspaidoutintotalonRDP14+flat-ratemeasuresin2015.Atthesametime,ongoing RDP07+ commitments from the previous period are being financed out of budgetallocatedforthisperiod.

D.3.2 The SAO’s audit work in the field of the CAP in the period under scrutiny

In2015theSAOperformedaudit of rural development programme projects174inwhichitfocusedonprogresstowardstheRDP07+objectives,programmemanagementanditsinfluenceontheeffectiveimplementationofprojects,andtheachievementofthepurposeandsustainabilityof120selectedinvestmentprojectsthatreceivedoverCZK375millioninsubsidies.

The Supreme Audit Office scrutinised the defined conditions for the provision and use ofsubsidiesandfoundthatthedesignedrulesmadeitpossibletofinancecertainprojectsinanuneconomicalandinefficientmanner.Projectsthatdidnotmoderniseagriculturalenterprisesanddidnotpromoteenterprise,tourismdevelopmentandtherenewalanddevelopmentofvillagesweresupported.Forexample,RDP07+subsidieswereusedtobuildbiomassboilersinhouses(wherethesubsidiarybeneficiarycouldmoreover,afterafive-yearsustainabilityperiod,offertheownersofhousesthebuy-backofboilerswithapurchasepriceinthehundredsofthousandsofkorunaforthetokenpriceofCZK10),andmoneyearmarkedmainlyforeducationaltrailswasinsomecasesusedtobuildobservationtowersorarbours.TheMinistryofAgriculture(orSAIF)alsopaidfortheconstructionofasilagechannelthatwasneverusedforanimalproductionandwasnevermeantto.TheMoAalsofundedtheconstructionofbuildingsforanimalproductionwithoutcheckingwhethertheapplicants’requirementsforthesizeandcapacityofthebuildingsmatchedtheiractualneeds.

The MoA put in place poorly designed conditions for subsidy drawdown, as it made it possible to support projects that in some cases did not contribute to the development of enterprise and in no way served the development of rural areas and agriculture.

Theconditionsforprojectselectionwereprimarilybasedoneffectivenessoreconomy.Whenselecting projects, however, theMoA in some cases overlooked their effectiveness and didnot take into account applicants’ real requirements and the quality and subsequent benefitofprojects.TheSAO’sauditconclusionindicatedthattheMoAshouldpaycloserattentiontodefiningeligibleexpenditureinconnectionwiththenatureofthemeasureandtheleveloftheindividualoutlaysdonebybeneficiaries.

Besides poorly designed conditions for subsidy provision, the MoA also set unrealistic keyindicatorvaluesfortheprogramme’soutputsandoutcomesandhadtoadjustthemsignificantly174 Auditno.14/26–Funds spent on the projects of the Rural Development Programme.


(e.g.ithugelycutthenumberofjobscreatedindicatorfrom22,000to2,020).Furthermore,theMoAdidnotpossesssufficientandsufficientlytimelyinformationforassessingtheprogramme’sprogress andeffectiveness, so itwasunable toassess theeffectivenessof the subsidies andadjustitsstrategyasnecessary.

The SAO recommended that the MoA modify the subsidy conditions for the 2014-2020 programming period so that they enabled the selection of high-quality and beneficial projects that would support rural development and so that the risks of uneconomical and inefficient use of public money and its misuse by beneficiaries were minimised.

Inaddition,theSAOfoundshortcomingsintheSAIF’scontrolworkwhenadministeringsubsidyapplications and payment applications. The SAO rated the SAIF’s control system as partiallyeffectiveasregardstheauditedsampleofprojects.AsaresultofincorrectlyperformedcontrolworktheSAIFreimbursedbeneficiariesforineligibleexpenditureworthCZK8.5million,whichwasreportedtotherelevantfinancialofficeasasuspectedbreachofbudgetarydiscipline.TheerrorrateintheSAIF’scontrolworkamountedto2.28%oftheauditedvolume.

Inthecaseofsubsidybeneficiariesitwasfoundthattwoofthemdidnotconservetheprojectoutcomes throughout the sustainability period and one beneficiary was reimbursed for asignificantlygreaterquantityofbuildingmaterialthancouldhavebeenusedinrealityandforotherbuildingmaterialthanthatinvoiced.

Basedontheauditconclusionfromthisaudit,the MoA and SAIF adopted measures to eliminate the identified shortcomings, including deadlines for their execution.Whendiscussingtheauditconclusionthegovernmentinstructed175theagricultureministertoexecutetheadoptedmeasuresandtoinformthegovernmentabouttheirexecutionby31March2017.The adopted measures are mainly systemic and relate to the 2014-2020 programming period. ThemeasureslargelyconcernchangesintherulesforprovidingsubsidiesoutofRDP14+inthesenseofabolishingcertainmeasuresandcertainspecificconditions(e.g.scrappingfinancingintheformofleasing,preventingthesubmissionofseveralsubsidyapplicationsforoneoperationinoneround).Otherchangesareintendedtohelpimprovetheassessmentofpracticality,necessityandeffectivenesswhenselectingprojects,thelimitsoneligibleexpenditure,publicprocurementconditionsandpenalties.Inaddition,theMoAundertooktoadoptmeasuresinRDPmanagement,mostnotablyin riskmanagement, thedesignandmonitoringofoutputandoutcome indicators,assessingprogress towards the RDPmeasures’ goals and continuous assessment of the programme’sprogressandeffectiveness.

In2015theSAOalsoconductedanaudit176 targeting the procedure and results of the MoA and SAIF when performing land consolidationco-financedoutofRDP07+.Intheyears2007-2014 theMoAspenta totalofCZK13billion fromEUsourcesand the statebudgeton landconsolidation(EUfundingaccountedfor34%ofthetotalinvestmentinlandconsolidation).TheauditresultsshowedthatRDPfinanceswerenotdrawndownevenlyacrosstheprogrammingperiod, which slowed down the execution of the approved land consolidation. The unevendrawdownwasmainlycausedbythepoorlydesignedrulesforprovidingsubsidiesoutoftheRDPandbyinstitutionalchanges.

TheactualexecutionoftheproposedlandconsolidationhaslongbeenveryslowintheCzechRepublic. Since 1995, only 9% of the proposedmeasures (measures intended tomake landaccessible,protectthesoilfromerosion,conservethesoilfund,watermanagementmeasuresandenvironmentalprotectionandlandscapingmeasures)havebeencompleted.Theircompletioncouldtakeseveraldecadesmore,giventheprogresstodate.TheSAOpointedoutthatroughly50%ofarable land in theCR isunder threat fromwatererosionandalmost10% fromwinderosion.Themajorityofthevulnerablelandisthusnotsystematicallyprotectedandthereisa

175 ResolutionoftheGovernmentoftheCzechRepublicNo.1000of7December2015.176 Auditno.14/40–Funds earmarked for remittance of costs for land area amendments.


constantdecreaseinarableland.Failuretoexecutealltheproposedmeasuresendangerstheachievementof thepurposeandgoalsof landconsolidationandalsomakes it impossible toassessthebenefitsofthesemeasures.

The execution of land consolidation in the CR is very slow and incomplete. The possibilities for achieving the goals of comprehensive land consolidation have remained almost unused. This puts the purpose and objective of land consolidation at risk.

Moneyspentonlandconsolidationwaseffectivelyusedtosettleownershipofagriculturallandandtointegratethesoilfund.

The Ministry of Agriculture does not assess the effectiveness of the undertaken comprehensive land consolidation as the defined goals are long-term and hard to measure.

TheSupremeAuditOffice judged that thegoalsof landconsolidationasdefined in the ruraldevelopment programme are very long-term and hard to measure, whichmakes it difficultto assess them.What ismore, theMinistry put in place indicators that give nomeaningfulinformationabouttheimplementationoftheproposedmeasuresandtheeffectivenessoftheperformedlandconsolidation.

TheMoAandStateLandOffice(SLO)issuedastatementontheauditconclusionfromthisaudit.Thestatementwasdiscussedby theCzechgovernment. In thecontextof this statement theMoA and SLO adopted measures to remedy the identified shortcomings, including deadlines for executing the measures.Thegovernmentinstructed177theagricultureministertoexecutetheadoptedmeasuresandtoinformthegovernmentabouttheirexecutionby31March2017.The adopted measures relate to the new programming period 2014-2020. Alargepartofthemeasuresconcernsthesettingofobjectivesandtheirmonitoringandassessmentbymeansofoutcome,outputand impact indicators: theMoAquantifiednewgoalsandput inplacenewindicators thatshould improvethemonitoringofachievementof thegoalsandeffectivenessof the performed land consolidation. Another adoptedmeasure is the stipulationof newormodifiedconditionsgoverningtheprovisionofsubsidiesforlandconsolidation:theseconcerncriteriafortheselectionofcadastralregionsorbeneficiaries’obligations,forexample.

D.3.3 Current developments in Common Fisheries Policy

2007–2013 programming period

In the2007-2013period theCRhad thepossibilityofdrawingdown€36.14million, i.e.CZK976million178, for the implementationof theCommonFisheriesPolicy,outofwhich theEU’scontributionwas€27.11million,withthestatebudgetproviding€9.03million.

MorethanCZK208millionwasdisbursedtoapplicantsunderOPF07+in2015.

Table 16 – Overview of disbursed OP F07+ subsidies in 2015 (CZK million)

Axis OP F07+ CR EU Total

II. Aquaculture, processing and marketing of fish products and aquaculture 33.67 101.01 134.68

III. Common interest measures 15.08 45.24 60.32

V. Technical assistance 3.30 9.90 13.20

Total 52.05 156.15 208.20

Source: materialsoftheMoA,March2016

177 ResolutionoftheGovernmentoftheCzechRepublicNo.999of7December2015.178 Exchangerateof27CZK/€.


Spending increasedbyoverCZK130million from2014.The reason for the increasewas theendeavourtoutiliseasmuchoftheprogrammeallocationaspossiblebeforethe31December2015deadlinefortheeligibilityofexpenditureonprojects.Bytheendof2015,morethan€33million,i.e.almostCZK900million179,hadbeendisbursedtobeneficiaries.92%ofthefinancialframeworkofOPF07+,amountingtoalmostonebillionkoruna,hadbeendrawndownasat31December2015.

Table 17 – Total OP F07+ drawdown as at 31 December 2015

Axis OP F07+OP budget for 2007–2013

(total resources) Paid out

(€ thousand) (€ thousand) %

Axis II. 21 561.50 21248.62 98.55

Axis III. 12 773.62 10746.85 84.13

Axis V. 1 807.11 1233.74 68.27

Total 36 142.23 33 229.21 91.94


NB: Correctionsanddiscrepanciesarefactoredintothecourseofdrawdown.

2014–2020 programming period

Theoperational programmeFisheries 2014-2020 is an instrument throughwhich theCR canimplement theCommonFisheriesPolicy in thenewprogrammingperiod. It followson fromthepreviousprogrammefor2007-2013anditsglobalobjectiveissustainableandcompetitiveaquaculture based on innovation, competitiveness, knowledge and more efficient use ofresources.

Theallocationfortheentire2014-2020periodis€41.2million,€31.1millionofwhichwillbefundedoutoftheEMFFand€10.1millionfromnationalsources.

Threecalls for subsidyapplicationswereheld in2015.Anunnumberedcall (continuous call)washeldfortechnicalassistance projectsandthefollowingtwocallswereforprojectstargetinginvestmentinaquaculture,productprocessing,innovationandrecirculatingsystemsandonthereintroductionof the Europeaneel. Roughly CZK280millionwas earmarked from the EMFFforthesetwocalls.Inthefirstandsecondroundsofreceiptofapplications,whichtookplacebetween21Octoberand18November2015,100applications(projects)withatotalrequestedvalueofoverCZK130millionwererecommended.

Table 18 – Overview of recommended OP F14+ applications in the 1st and 2nd rounds of calls

MeasuresRecommended applications

Number Amount of subsidy in CZK thousands

2.1 Innovations 3 2214.85

2.2 Productive investment into aqauculture 77 68957.19

2.4 Recirculating equipment and run-through systems of cleaning 13 54470.89

2.5 Aquacultures providing environmental services 4 4001.00

5.3 Investment into product processing 3 791.50

Total 100 130 435.43

Source:datafromMoAwebsite,April2016

NB: Noinformationisavailableonthenumberofapprovedapplicationsintechnicalassistancearea.

179 Exchangerateof27CZK/€.


NofinancesweredisbursedtoapplicantsunderOPF14+in2015.Allthattookplacewasthereceiptofapplicationsandtheirinitialadministration.

D.3.4 Audit work by the EU authorities in field of the CAP and CFP

ECA annual report for 2014

TheECAannualreportontheimplementationofthebudgetfor2014containsthefollowingkeyinformation:359operationsweretestedintheSustainable Growth: Natural Resources headingasawhole.177oftheseoperations,i.e.49%,wereaffectedbyerror.Basedon129quantifiederrors,theECAestimatedtheerrorrateinSustainable Growth: Natural Resourcesasawholeat3.6%.

TheCzechRepublic ismentionedintheECAreportfor2014inconnectionwiththedeclaringofineligiblelandandineligibleexpenditure,forexample,andspecificallyexpendituredeclaredoutsidetheeligibilityperiod.ThecriticismoftheCzechRepublicinthereportiscomparabletothatlevelledatotherMemberStates.

Agriculture: market support and direct aid

ThesesubsidiesarepaidoutfromtheEuropeanAgricultureGuaranteeFund(EAGF)whichdoesnotbelongamongESIfunds.

In2014theEAGFauditsampleofpaymentsincludedsubsidiespaidoutin17MemberStates,includingtheCR.InthisaudittheECAexaminedasampleof183operations(oneofwhich,doneinCroatia, cameunder the IACS180). 93of theseoperations, i.e. 51%,wereaffectedbyerror.Basedon88quantifiederrors theECAestimates themost likelyerror rateat2.9%.TheECAreachedtheconclusionthatpaymentsfor2014inthisareaweremateriallyaffectedbyerror.

The most common errors were the overstatement of agricultural land and declaration ofineligible land. Land was incorrectly declared as arable land, for example, or aid was paidout for landdeclaredaspermanentpastureeven though itwaspartlyorwholly coveredbyineligiblevegetation.TheECAalsodetectedcross-complianceinfringementsin27%ofthetestedoperations.

In respect of the audited Member States and others the ECA recommended that MemberStates make further efforts to ensure that their LPIS databases contain reliable and up-to-dateinformationandmakeuseofalltheavailableinformationinordertoavoidpaymentsforineligibleland.

Rural development, the environment, fisheries and health

InitsauditworktheECAlookedatasampleof176operations,84ofwhich(48%)wereaffectedbyerror.Basedon41quantifiederrors theECAestimates themost likelyerror rateat6.2%.TheECAreachedtheconclusionthatpaymentsfor2014inthispolicyheadingweremateriallyaffectedbyerror.

Themainreasonsfortheerrorswereineligiblebeneficiaries,projectsorexpenditureandnon-compliancewithagri-environmentcommitments.Forexample,itwasfoundthatnewentitieshadbeenartificiallycreatedtofulfiltheeligibilityandselectioncriteria inordertoobtainaidandtheproportionatenessofprojectimplementationcostswasinadequatelydocumented.Intheareaoffisheries,deficiencieswerefoundinthemanagementanddocumentationofcontrolactionsandverificationofeligibilityconditions.

In the area of rural development, the ECA recommended that the Commission should takesuitablemeasurestostrengthenMemberStates’actionplansandtacklethecommoncausesof

180 Integrated Administration and Control System.


errorsandshouldrevisethestrategyforitsruraldevelopmentconformityaudits.TheECAalsorecommendsthattheCommissionensure,inthecaseofboththeEAGFandruraldevelopment,thatthenewassuranceprocedure(mandatoryfrom2015)iscorrectlyappliedandreliable.Intheareaoffisheries it recommendsmorethoroughon-the-spotcontrolsand improvedauditdocumentation.

ECA special reports issued in 2015

TheEuropeanCourtofAuditorspublishedsixspecialreportsfocusingonagriculture,fisheriesandforestry in2015.TheCzechRepublicwasnotpartof theauditedsample inanyof theseaudits.


The audit focused on the use of technical assistance in the field of agriculture and ruraldevelopmentinthe2007-2013period.TheEuropeanCourtofAuditorsfoundthattheCommissionandMemberStateshavetakenfulladvantageoftheregulatoryflexibilityinthisareabutthishasresultedinalackofrigouraboutthegoalsoffundingandhowtechnicalassistancecanbeused.“Rural networks” offered the greatest potential for acceptable use of technical assistance inruraldevelopmentpolicy.Themajorityofexpenditureoftechnicalassistancetoppedupgeneraladministrativebudgets,inparticulartocoverpayrollcosts.TheECAthusreachedtheconclusionthattheabsenceofasuitableperformanceframeworkfortechnicalassistanceexpenditureinagricultureandruraldevelopmentmeantthatneithertheCommissionnortheMemberStateswereabletodemonstratehowwelltechnicalassistancehascontributedtothegeneralpolicyobjectivesoftheCAP.


InthisaudittheEuropeanCourtofAuditorsaskedthequestionwhetherfinancialinstruments183 areasuccessfulandpromisingtool intheruraldevelopmentarea.Itconcludedthatfinancialinstruments(creditandguaranteefunds)hadbeenunsuccessfulinthefieldofruraldevelopmentand itwill be a considerable challenge to achieve the desired impact in the coming period.According to theECA,noclearcasehadbeenmade for settingup thefinancial instruments,actualneedswerenotprovenandtheinstrumentswereovercapitalised.Theauditresultsalsoindicatethatthefinancialinstrumentshadnotworkedasexpected.NeithertheCommissionnorMemberStateshadintroducedappropriatemonitoringsystemstoprovidereliabledatatoshowwhethertheinstrumentshadachievedtheirobjectiveseffectively.


ThisaudittargetedfisheriesagreementsforwhichafinancialcontributionispaidoutoftheEUbudget.IntheaudittheEuropeanCourtofAuditorsexaminedfourofthetwelveagreementsinforceatthetimeoftheaudit.Itconcludedthatfisheriespartnershipagreementsaregenerallywellmanagedby theCommission, but that there are still several areas for improvement, asregardsthenegotiationprocessandtheimplementationoftheprotocols.Theproceduresfornegotiatingandrenewingtheagreementsareoftencomplexandlengthy.TheECAalsofoundthattheactualunitcostpaidforatonneoffishwasfrequentlyhigherthantheunitpricenegotiated.ItalsofounddifferencesbetweenthecatchdataprovidedbyMemberStates,theCommissionandexpostevaluations.Thereisnoclearframeworklayingdowneligibilityandtraceabilityrulesfortheactionsfunded,andtheCommissiondoesnothavesufficientcontrolrights.181 SpecialReportNo.4/2015–Technical assistance: what contribution has it made to agriculture and rural

development?182 SpecialReportNo.5/2015–Are financial instruments a successful and promising tool in the rural development

area?183 FinancialinstrumentsareinstrumentsoftheEUbudgetthroughwhichbeneficiariescanobtainfinancesinthe

formofloans,guaranteesorcapitalinvestments.184 SpecialReportNo.11/2015–Are the Fisheries Partnership Agreements well managed by the Commission?



The audit examined theworkdone to deliver knowledge transfer and advisory activities co-financed out of the EU budget for rural development andMember States’ national budgetsinthe2007-2013period.TheEuropeanCourtofAuditorsfoundthatmoneywasnotspentinresponsetoidentifiedneeds;workwasnotprovidedatreasonablecost;andresultswerenotmeasurable.TheauditreportdrewattentiontoweaknessesinmanagementbyMemberStatesandinsufficientsupervisionbytheCommission.TheECAalsoidentifieddeficienciesinthechecksMemberStatesareobligedtocarryout.MemberStatesoverpaidforcertainservices.ItwasalsofoundthataconsiderablenumberofsimilarservicesarefinancedbydifferentEUfunds–thiscreatesariskofdoublefinancing.Theauditorswentontostatethattherewasalackofdetailedevaluationofwhatwasactuallyachievedwith thepublic fundsandonly simplistic indicatorswerecollected.Basedontheaudit,theECAissuedseveralrecommendations.Itrecommends,forexample,thatMemberStatesshouldhaveproceduresinplacetoanalysetheknowledgeandskillsneedsofrural operators. Serviceproviders receivingpublic funds shouldbe selected through fair andtransparentcompetition.MemberStatesshouldassesstheneedtosupportactivities,whicharereadilyavailableonthemarketatareasonableprice,andshouldestablishfeedbacksystemsthatusemonitoringandevaluationinformation.


Theauditscrutinisedthecost-effectivenessofnon-productiveinvestments(NPIs)inagriculture,focusingonMemberStates’managementandcontrolsystemsandNPIprojects.TheEuropeanCourt of Auditors concluded that NPI support has contributed to the achievement ofenvironmentalobjectiveslinkedtothesustainableuseofagriculturalland,butinawaythatwasnotcost-effective.TheauditfoundthatMemberStatesreimbursedinvestmentcostswhichwereunreasonablyhighorinsufficientlyjustified.TheECAfoundprovableindicationsofunreasonablecostsin75%oftheauditedprojects.Forexample,MemberStatesreimbursedinvestmentcostson thebasis of unit costswhichweremuchhigher than the actualmarket costs, or did notappropriatelyverifytherealityofthecostsclaimed.AccordingtotheECA,therewasalackofperformanceinformationtoshowwhathasbeenachievedwiththesupporttoNPIsatEUandMemberStatelevelsandtheavailablemonitoringindicatorsmeasuredonlyinputandoutputdata.


InthisaudittheEuropeanCourtofAuditorsexaminedwhethertheCommissionandtheMemberStateshadachievedvalue formoneywith the rural infrastructuremeasures theydecided tofinance.TheECAfoundthattheMemberStatesandtheCommissionhadachievedonlylimitedvalueformoneyasaidwasnotsystematicallydirectedtowardsthemostcost-effectiveprojectsaddressingtheobjectivessetintheRDPs.MemberStatesdidnotalwaysclearlyjustifytheneedforusingEUruraldevelopmentfunds.Selectionproceduresdidnotalwaysdirectfundingtowardsthemostcost-effectiveprojects. Itwasalsofoundthatthemonitoringandevaluationsystemdidnotproduceadequate information.Althoughtheauditedprojectsdeliveredtheexpectedphysicaloutput,reliableinformationonwhathasactuallybeenachievedwiththepublicfundsspentwasunavailable.

185 SpecialReportNo.12/2015–TheEUpriorityofpromotingaknowledge-basedruraleconomyhasbeenaffectedbypoormanagementofknowledge-transferandadvisorymeasures.

186 SpecialReportNo.20/2015–The cost-effectiveness of EU Rural Development support for non-productive investments in agriculture.

187 SpecialReportNo.25/2015–EU support for rural infrastructure: potential to achieve significantly greater value for money.


D.4 Other EU financial instruments and expenditure

Other EU financial instruments comprise a group of funds and programmeswhose financesareallocateddirectlytoapplicantsbypublictenderandnotthroughindividualMemberStates(allocations are not defined for individual Member States). If an applicant wants to obtainfinancesfromOFIs,itsprojectmustsucceedindirectinternationalcompetition.

OFIs represent justasmallpartof thetotalEUbudgetexpenditureandaremostlymanageddirectlybytherelevantunitoftheCommission188undercentralisedmanagementandmerelyhaveacontactpointat theprogrammecoordinators in theMemberStates.TheyaremainlyfinancedthroughawiderangeofCommunity programmes;othersourcesoffinancingincludethe IPA189, theEUSFand funds for theEU’smigrationandasylumpolicyand internalsecuritypolicy.

ThegoalofthesupportprovidedunderotherfinancialinstrumentsistodelivermoreeffectivesolutionstocommonproblemsintheEU’svariouspolicieswhileboostingcooperationbetweenMember States and their entities. Two essential conditions for gaining support are that apartnership between entitiesfromdifferentstateshastobeestablishedandEuropean added valuehastobecreatedbysupranationalprojects.

D.4.1 Other Financial Instruments in the EU budget for 2014

TotalexpenditureofEUinOFIsamountednearlyto€11.5billionin2014whichwasalmost€2billionlessthanin2013.

Graph 18 – Drawdown of finances from OFIs in EU Member States in 2014 (with close-up section) (€ million)

Source: EU budget 2014 – Financial Report,Commission2015, http://ec.europa.eu/budget/figures/interactive/index_en.cfm.

In termsofhowotherfinancial instrumentsareusedand thegoals theyareused todeliver,the per capita drawdown level is particularly telling. From this point of view, the CR, alongwithPolandandRomania,hastraditionallybeenattheverybottomofthesuccessrankingsofMemberStates:in2013,forexample,percapitafundingwasjust€10.13.

TheCRsignificantlyimproveditsrankingbyincreasedOFIdrawdownin2014,obtaining€16.32percapita.Inthepercapitarankingsofall28MemberStatesitcame22nd,beatingcountrieslike188 InparticulartotheDirectoratesGeneraloftheCommission(DG).189 InstrumentforPre-accessionAssistance.

http://ec.europa.eu/budget/figures/interactive/index_en.cfm


GermanyandItaly.TheOFIdrawdownpercapitarankingsareregularlyheadedbyLuxembourg(€441.73)andBelgium(€112.27).

Although entities in the CR succeeded in obtaining a higher per capita amount in 2014, theCzechRepublicstilllagsbehindinthisarea,asthefigurefortheEUasawholeinthatyearwas€43.26.190

ItisstillthecasethatCzechapplicantsarerelativelyunsuccessfulinpubliclycompetingforOFIsupport.In2014,theproportionofthedrawdownfromthesesourcesacrosstheEUaccountedforbytheamountsdrawndownintheCRwas1.5%.Ayearearlierithadbeenjust0.8%.

Graph 19 – Per capita drawdown of OFI finances in EU Member States in 2014 (with close-up section) (€)

0

20

10

30

50

40

110

440

BE MT EE LT DK CY HR NL FR FI SE SI HU IE ES AT LV BG EL UK CZ IT SK DE PT PLROLU

Source: EU budget 2014 – Financial Report,Commission2015, http://ec.europa.eu/budget/figures/interactive/index_en.cfm,Eurostat(populationasat1January2014),January2016.

190 Ifweleftoutthetwo“recordholders”(LuxembourgandBelgium)fromtheEuropeanrankings,theaverageOFIpercapitadrawdownintheEUwouldbejust€25.28,sotheCRwouldbeclosetotwo-thirdsoftheEUdrawdownaverage.



D.4.2 Other EU financial instruments and expenditure in the CR in 2014

In2014,revenuesthatentities intheCRobtainedfromOFIstotalledalmost€171.6million191 (theequivalentofoverCZK4.72billion192).Comparedto2013,whenCzechentitiesobtainedjust€105.1million,thatrepresentsarecordimprovementof63.32%.

Graph 20 – OFI drawdown in the Czech Republic in the years 2007-2014 (€ million)

72.1

91.5 91.1

104.6 105.8

78.5

105.1

171.6

2007 2008 2009 2010 2011 2012 2013 2014

Source: EU Budget – Financial Reportsfor2007–2014,EuropeanCommission2008–2015.

ThegraphshowsthattherewasagradualincreaseintheutilisationoftheseresourcesbyentitiesintheCRinthefirstyearsofthe2007–2013programmingperiod.Atthestartof2010,however,annualdrawdownstagnatedtoalevelofapproximately€105million.Twoexceptionswere2012,whentherewasasharpfall,and2014,whendrawdownincreasedmarkedly.

Byfarthebiggestincreasein2014wasregisteredintheEuropean Satellite Navigation Systems (EGNOS and GALILEO)Communityprogramme,wheretheCRdrewdownalmost€72.2millionin2014(upfromjust€6.3millionayearearlier).

191 EUBudget2014–FinancialReport EuropeanCommission2015,http://ec.europa.eu/budget/figures/interactive/index_en.cfm.




Graph 21 – Utilisation of other financial instruments in the CR in 2014 (€ million)

EGNOS and GALILEO

Horizon 2020

Erasmus+

Creative EuropeCEFFEAD

Other

1.56

1.23

1.59

1.16

1.91

Foodand feed

EUROATOM

Life

Commission Actions

1.06 AMF

ISF

72.18

44.73

30.90

4.923.832.573.

94

Source: EU Budget 2014 – Financial Report,EuropeanCommission2015, http://ec.europa.eu/budget/figures/interactive/index_en.cfm.

Full names of the financial instruments abbreviated in the graph: EGNOSandGALILEO–European Satellite Navigation Systems (EGNOS and GALILEO); Erasmus+ – Erasmus+(Education,Training,YouthandSport); CEF – ConnectingEuropeFacility (CEF); FEAD – Fund for EuropeanAid to theMostDeprived (FEAD); ISF – Internal Security Fund; Life – Life(EnvironmentandClimate); EURATOM – EURATOM–programmeforatomicenergy,researchandprofessionaltraining; CommissionActions–actions fundedon thebasisof theCommission’sprivilegesandspecificpowersvested in theCommission;AMF–AsylumandMigrationFund.

NB: In2014entities in theCRalsoutilisedotherfinancial instruments thatarebunchedtogetherunder theOthers group.Theseare:Competitiveness of Enterprises and Small and Medium-sized enterprises, Rights and Citizenship,Europe for Citizens,Other Actions and Programmes,Customs, Budgets and the Fight against Fraud,Programme for Social Change and Innovation,Health for Growth,Justice,Consumer Protection, Instrument for Pre-Accession (IPA) andPilot Projects and Preparatory Actions.

EU budget expenditure on thework ofdecentralised EU agencies also stands outsideOFIs.TheseareindependentlegalentitiesfoundedtoperformspecifictasksaccordingtoEUlaw.TheonlysuchagencyintheCRistheGNSS Agency193,managespublicinterestsrelatedtoEuropeanGlobal Navigation Satellite Systems (GNSS) programmes, European Geostationary NavigationOverlaySystems(EGNOS)andGalileo.TheagencyhasbeenbasedinPraguesinceSeptember2012. More than €25.30 million was spent on its work in 2014.

D.4.3 The SAO’s audit work in the field of other EU financial instruments

IntheperiodunderscrutinytheSupremeAuditOfficecompletedtwoauditsfocusingonotherEUfinancialinstruments.

In April 2015 the SAO Board published the audit finding from an audit194 scrutinising themanagementoffinancesprovidedtotheCRfromtheEUSFtodealwiththeconsequencesofthecatastrophicfloodsthathittheCRinMay,AugustandSeptember2010.

TheresultsoftheauditshowedthattheadministrationoftheCR’sapplicationforsupportfromtheEUSF,fromthetimeitwassubmittedtotheCommissiontillfinanceswerecreditedtothe

193GlobalNavigationSatelliteSystem.194 Auditno.14/27–Funds of the EU Solidarity Fund provided for the Czech Republic in relation to catastrophic

floods.



accountoftheNationalFund195,tookarelativelylongtime:intwocasesittookmorethan14months.TheapplicationsadministrationprocessattherelevantauthoritiesoftheCRtookupapproximately fourmonthsoutof thattime.Another two to threemonthspassed from thecreditingof the aid to theCR to the transfer of payments from theMoF to the accounts ofregions,sotheregionsandaffectedmunicipalitieshadtowaitaroundayearandahalfafterthefloodsbeforetheycouldusethemoney.

TheCommissionwasawareofthelongdelaysbetweenthelodgingoftheapplicationandtheprovisionofaidoutoftheEUSF.ForthatreasonanumberofmeasuresweretakenatthelevelofEuropeaninstitutionsattheendof2013andin2014tohelpmaketheaidprocessfasterandmoreeffective.

TheSAOwentontostatethatthebindingEUSFpracticecomprisingproceduresandfundamentalrulesforimplementingaidfromthisfundintheCRdidnotcategoricallydefinethejustificationofexpenditureatindividuallevelsofprojectdocumentationforinfrastructurerepair.TheMinistryofFinancedidnotspecifymorepreciserulesfortheeligibilityofspecificexpenditureuntilthestageofassessmentandevaluationofsummaryapplicationsfromindividualregionsoraspartoftheprovisionofsupplementarymethodologicalsupport.

IntwocasestheSAOidentifiedabreachofbudgetarydisciplineconsistingintheprovisionofpartofasubsidytowardsexpenditurethatwasnotdirectlylinkedtoclearingupdamagescausedbythefloods.Theexpenditurewasnegligibleinbothcases,however.Inaddition,minorformalshortcomings were detected, consisting in incorrect accounting for a provided subsidy, theabsenceofanapplicationforasubsidyfromtheEUSFinthecaseofanorganisationpart-fundedbyaregion,andafailuretosubmitamandatoryannextoanapplication.

ThesecondauditwasdevotedtothefinancingofmigrationandasylumpolicygoalsundertheSolidarityprogrammeintheCR.Theauditconclusionfromthisaudit196wasapprovedinMarch2016.

The Supreme Audit Office scrutinised compliance with the conditions for the provision anddrawdown of finances from the European Refugee Fund for 2008 to 2013 (Refugee Fund),European Return Fund for 2008 to 2013 (ReturnFund),European Fund for the Integration of Non-EU Migrants for 2007 to 2013 (IntegrationFund),andtheExternalBordersFund(EBF)for2007to2013.Theaudit focusedonthefunds’managementandcontrolsystems.Usingaselectedsampleof49projectsfinancedoutoftheIntegrationFundandRefugeeFundbetween2011and2015,itscrutinisedtheachievementofgoals,monitoringindicatorsandtheexecutionofprojectactivitiesincompliancewiththedefinedconditions.

Theauditresultedinthefollowingfindings:

- Inthecaseofthemulti-yearRefugeeFundprogrammeitisnotpossibletoassessthedegreetowhichalltheprogramme’sgoalswereachieved,becausemonitoringindicatorswereonlyputinplaceforpartoftheoperationalobjectives.

- Inthecaseofthemulti-yearReturnFundprogrammenotalltheactivitieslinkedtoassistedvoluntaryreturnsofthird-countrynationalstotheircountryoforiginwereexecutedintheplannedextent,mainlybecausetheprocessofassistedvoluntaryreturnsisnotcategoricallyenshrinedinCzechlawandalsoduetoalackofinterestintheseactivitiesamongCzechnon-profitorganisations.

- EBF projects accounted for 41% of total drawdown of Solidarity programme finances.However, projects tomodernise and improve security at consular departmentswerenotexecuted.

195 TheNationalFundispartoftheMoF(division55)andperformstheroleofPCAintheCR,amongotherthings.196 Auditno.15/24–Funds earmarked for the implementation of EU asylum and migration policy objectives.


- Thesystemforassessingfulfilmentofthemonitoringindicatorsofthemulti-yearIntegrationFundandRefugeeFundprogrammeswaslargelydependentonqualifiedestimatesandnotonprecisemeasurement.ThatwasbecausetheCommissiononlystatedtherequirementformonitoringtheseindicatorsduringthecourseoftheperiodunderassessment,makingitimpossibletoputinplaceasystemformonitoringtheiractualvaluesfromthestart.

- ThesystemformeasuringthevaluesofmonitoringindicatorsfortheIntegrationFundandRefugeeFunddidnotmakeitpossibletoascertainthenumberofpersonsbenefitingfrommeasuresunderthesefunds.

- The reliability of the system for tracking monitoring indicators at project level wascompromised,becausetheresponsibleauthority(MoI)didnotrequirebeneficiariestokeepdataonthedateofbirthoftheirclients,whichwasessentialforanysubsequentverificationofaforeignnational’sidentityandresidencestatusininformationsystems.Consequently,themonitoringsystemdidnotmakeitpossibletoverifyreliablywhetherclientsusingtheprovidedserviceswereeligibleundertheprogramme’sconditions.

- The design of the assessment criteria enabled the selection and funding of economical,efficientandeffectiveprojects.Buttheselectionprocesscontainedcertainadministrativedeficienciesandthedesignofthesystemofpenaltiesforviolationsofthesubsidyconditionswasoutoflinewiththebudgetaryrules197.Forthesubsequentprogrammingperiod2014-2020 these deficiencies have been eliminated from the responsible authority’s workprocedures.

- TheSupremeAuditOfficealsoidentifiedineligibleexpenditureamongsupportbeneficiaries.This included the claiming of expenditure on rent for premises unconnected to projects(IntegrationFund)orexpenditureonfuelnotbackedupbyevidenceofactualoutlays198.

Theamountoftheidentifiedineligibleexpendituredidnotexceedthematerialitythresholdforquantifiableirregularitiessetat2%ofthevolumeofauditedfinances.

Controlworkbytheresponsibleauthoritywasassessedintheauditasonlypartiallyeffectiveowingtoindividualfailingsinsomecontrolworkdonebytheresponsibleauthority.Thiscontrolworkdidnotexposecertaindeficienciesamongbeneficiariesthatwere,however,identifiedbytheSAO.Otherreasonsforpartialefficiencyofauditswereinsufficientcoordinationofprojectselection with other departments funding complementary non-EU integration programmes(MoLSA, MoEYS); insufficient transparency of the appeal process when assessing projectapplications;andinsufficientuseoftheoptionslaiddownbythebudgetaryruleswhendefiningtherangeofpenaltieslinkedtothegravityoftransgressionsbysubsidybeneficiaries.

TheSAO’saudit conclusion regarding theoperationalobjectivesof theSolidarityprogrammecontainedfindingsthatarepracticallyidenticaltotheECA’sfindingssetoutinitsSpecialReport(seesubheadingD.4.4).Themostimportantonesarethe absence of measurable monitoring indicators; the specification of a limited number of quantified data by the Commission at the start of implementation; and the Commission’s specification of additional requirements for retrospective indicators going back to the start of implementation.

197 ActNo.218/2000Coll.,onbudgetaryrulesandamendingcertainrelatedacts.198 PartII.1.2(2)ofAnnex11toCommissionDecision2008/22/ECandAnnex11ofCommission

Decision2011/152/EU.


D.4.4 EU authorities’ audit work in the field of other EU financial instruments


InthisaudittheEuropeanCourtofAuditorsfocusedontheeffectivenessoftheEBF200andtheachievementofthefund’sgoals.TheECAstatedthattheoverallresultcouldnotbemeasuredduetoweaknessesintheresponsibleauthorities’monitoringandinexpostevaluationsbytheCommissionandMemberStates.One reason is that theCommissiononly specifiedconcretereportingdata in2011,bywhichtime theactions for inclusion in theevaluationhad largelybeencompleted.ECAauditorsidentifiedseriousdeficienciesinthemanagementoftheEBFinMemberStates.TheECAstatedthattheEBFhascontributedtoexternalbordermanagement,buttheoverallresultcouldnotbemeasuredduetothelackofSMARTobjectivesandmeasurableindicators,sotheCommissionwasunabletoperformaproperevaluation.


In2016theECAauditedthetwoprincipalfinancinginstrumentsoftheexternaldimensionoftheEU’scommonmigrationpolicy.202TheauditscrutinisedwhetherEUexpenditureunderthetwoinstrumentshadcleargoalsandwhetheritwaseffectiveandwellorganised.TheresultoftheauditwasadeclarationthatEUspendingpursuedawiderangeofgeneralobjectivesandwascompromisedbyweaknesses.ThetotalamountofexpenditurechargedtotheEUbudgetcouldnotbeestablishedinthecourseoftheaudit.Norwasitclearwhetherexpenditurehadbeendirectedinlinewiththeintendedgeographicalandthematicpriorities.BasedonitsexaminationofselectedprojectstheECAconcludedthatitwasoftendifficulttomeasuretheresultsachievedbyEUspendingbecauseofobjectivescoveringaverybroadthematicandgeographicalareaandthelackofquantitativeandresults-orientedindicators.TheECA recommended that theCommissiondevelop clear andmeasurableobjectives tobeimplementedbyacoherentsetofEUfunding instrumentssupportedbyeffectivemonitoringandevaluation,andbyanappropriateinformationsystem.

199 SpecialReportNo.15/2014–The External Borders Fund has fostered financial solidarity but requires better measurement of results and needs to provide further EU added value.

200 TheEBFwastheEU’smainfinancialinstrumenttosupportthemanagementofexternalbordersforthe2007-2013periodwithavalueof€1.9billion.TheEBF’sgeneralgoalwastohelpexistingandfutureSchengenstatesensureuniform,efficientandeffectivecontrolonthecommonexternalbordersofEUMemberStates.

201 SpecialReportNo.9/2016–EU external migration spending in Southern Mediterranean and Eastern Neighbourhood countries until 2014.

202 ThematicProgrammeforMigrationandAsylum(TPMA)andEuropean Neighbourhood and Partnership Instrument (ENPI).


E. Other activities related to the EU’s financial management

E.1 Legal matters

E.1.1 SAO recommendations concerning changes to the legal environment

Section6ofActNo.166/1993Coll.,ontheSupremeAuditOffice,asamended(theActontheSAO), provides thatboth chambersof theCzechparliament and their bodies are authorisedto demand from the SAO opinions on draft legislation concerning budgetary management,accounting, state statisticsand theperformanceof control, supervisionand inspectionwork.Thesebodiesdidnotexercisethisauthorisationthroughthesubmissionofaformalrequestforanopinionin2015.TheSAO’sfindingsinrelationtothenecessarylegislativeamendmentswerepresentedatsessionsoftheCommitteeonBudgetaryControloftheChamberofDeputies inconnectionwiththediscussionofauditfindings.

Againin2015theSenateofParliamentdidnotcompleteitsdebateofadraftconstitutionalactamendingConstitutionalActNo.1/1993Coll.,ConstitutionoftheCzechRepublic,asamended,asregardsArticle97(1)oftheConstitutionregulatingthepowersoftheSupremeAuditOffice,whichwasapprovedbytheChamberofDeputiesinMay2014.TheproposedwordingenvisagesthattheSupremeAuditOffice,asanindependentbody,willcarryoutauditofthemanagementofpublicfundsandfundsprovidedfrompublicbudgetsandthemanagementoftheassetsoflegalentitiesinwhichthestatehasacapitalinterestortheassetsofaterritorialself-governingunit.Inconnectionwiththisconstitutionalamendment,in2015theChamberofDeputiesdebatedagovernmentdraftactamendingtheActontheSAOandotherrelatedacts(parliamentarypaperno.610).Thedebateofthisdraftwasnotcompletedin2015.

Act No. 78/2015 Coll., amending Act No. 166/1993 Coll., on the Supreme Audit Office, asamended, was passed in 2015. The principal aim of the amendment was to bring the Acton the SAO into linewith current trends in theprocessingof information in auditwork, thecomputerisationof theagendasof thepublicauthoritiesand thecurrentoptions for remoteaccesstotheresultsoftheSAO’swork.TheamendmentalsogavetheSAOnewpowerstoobtainmaterialsfordrawingupandchangingtheauditplan,whichisoneoftheinstrumentstoenabletheSAOtotargetitsauditworkmoreeffectively.TheamendmentallowsthepresidentoftheSAOtoattendgovernmentmeetingsatwhichauditconclusionsandopinionsonthemaretobediscussedandwidens theauthorisationof thepresidentof theSAOtoattendsessionsoftheChamberofDeputiesandtheSenateandbothchambers’bodieswhereauditconclusionsandmaterialslinkedtotheSAO’sworkaretobediscussed.Theamendmentalsorespondstochangesinterminologyensuingfromotherlegislation.

Inaninter-departmentalconsultationprocessconductedpursuanttotheGovernment’sLegislativeRules,theSAOgaveitsopinionondraftlegislationthatconcerneditasanorganisationalunitofthestateorfellwithinitscompetence.TheSAOobtainedatotal178legislativedraftsin2015.TheSAOissuedspecificcomments,stemmingprimarilyfromauditfindings,on57drafts.

InApril2015theMinistryforRegionalDevelopmentsubmittedadraftactonpublicprocurementinconnectionwiththeadoptionofthreeEUdirectivesonpublicprocurementwhosesubstancemustbetransposedintonationallawbyApril2016.Thedraftofthenewlegislationonpublicprocurement dropped certain mechanisms established by earlier amendments of Act No.137/2006Coll., on public procurement, and in particular by the “transparency” amendmentof theActonPublicProcurement implementedbyActNo.55/2012Coll.TheSAOsubmittedcommentson thedraftmainlydealingwith theproposed ruleson changes to contracts and


theformulationofnewexemptions.TheSAOalsoexpresseddoubtsaboutthesuitabilityoftheproposedrulesonthesupervisionoftheawardofpubliccontractsthatarefinanced,evenonlypartly, by the EU.Most of the SAO’s commentswere taken into account in the draftof thisactapprovedbythegovernment.Thedraftofthenewactonpublicprocurementwasfinallyadoptedwitheffectfrom1October2016(ActNo.134/2016Coll.).

InJuly2015theMinistryofFinancesubmittedadraftactonthemanagementandcontrolofpublicfinances.Theaimofthisdraftistodefineresponsibilityfortheestablishmentofinternalmanagementandcontrolsystemsandforthesafeguardingofpublicfinances,toeliminatetheduplicationofcontrolworkdonebythefinancialadministrationbodies,toboostthescrutinyofthefinancialmanagementofsubordinateorganisationsbytheirfoundersandtostrengthentheindependenceof internalaudit. In itscommentsonthisdrafttheSupremeAuditOfficedrewattentiontothefactthatinitssubmittedformthedraftoverlooksthestatusoftheSAOasanindependentauditbodysui generis203andthefactthatauditoftheSAO’sfinancialmanagementandthusalsoofitsinternalauditprocessesisentrustedexclusivelytotheChamberofDeputiesoftheParliamentoftheCRspecificallyinordertopreserveitsindependence.AnotherfundamentalcommentissuedbytheSAOdealtwiththeneedforlegislationcoveringthereportingofcasesofbreachesofbudgetarydisciplineidentifiedbySAOauditsinasituationwherethesubmitteddraft removes theexistingauthorisation toperformfinancial control fromthepowersof thetaxoffices.ThecommentssubmittedbytheSAOweretakenintoaccountbythelegislatorinamodifiedwordingofthedraftact;nevertheless,thedraftactonthemanagementandcontrolofpublicfinanceswasnotdiscussedbythegovernmentbytheendof2015.

As farasdraft legislationcommentedonby theSAO inpreviousyears is concerned,ActNo.24/2015Coll.,amendingActNo.250/2000Coll.,onthebudgetaryrulesofterritorialbudgets,wasadoptedin2015.Theact’swordingmadeallowancefortheSAO’scommentwhich,furthertofindingsmadeinauditno.09/26204,drewattentiontotheissueofsubsidiesbeingprovidedbyregionalcouncilsofcohesionregionsunderprivate-lawcontracts.Theamendmentprovidesthatsubsidiesorreturnablefinancialassistancearetobeprovidedonthebasisofpublic-lawcontracts.

Inaddition,ActNo.25/2015Coll.,amendingActNo.218/2000Coll.,onthebudgetaryrulesandamendingcertainrelatedacts(thebudgetaryrules),wasadopted.Itsaimwastomakeitpossible,inrespectofsubsidiesco-fundedbytheEU,todefinereducedfinesforbreachesofbudgetarydisciplinebymeansof afixedpercentageand toapply the reduced subsidybeforepaymenttoothercases than just casesofbreachesof thepublicprocurement rules.ThegovernmentdraftofthisactwaspartlyaresponsetotheEU’srequirementsexpressedintheAction Plan to Improve the Functioning of Management and Control Systems for the Structural Funds in the Czech Republic205 and partly a response to the SAO’s findings presented in audit conclusionstouchingonthisissue.

203Meaning“ofitsownkind”.204 Auditno.09/26–Funds earmarked for transport infrastructure projects under the regional operational

programmes.205 TheCzechgovernmentnotedthismaterialatitssessionof28March2012.


E.1.2 Application, implementation and transposition of EU law in the CR

The Commission’s assessment of the CR as regards transposition206

In2015207thesecondSingleMarketScoreboard208revealedthefollowing:

Transposition deficit: 0.5% (figuregiveninpreviousreport:0.3%)–Althoughthedeficithasgrown,theCRisstilloneof14MemberStatesachievingthedefinedtarget–0.5%(theEUaverageis0.7%;thesubmittedSingle Market Act proposalspecifies0.5%).

Overdue directives: 6 (figuregiveninpreviousreport:4)including4inthefinancialservicessectorand1 more than 2 years overdue concerning the energy performance of buildings.

Average delay: 8.9 months (figuregiveninpreviousreport:12.5months)TheCRimprovedinthisindicatorbutisstillabovetheEUaverage(7.4months).

Graph 22 – Transposition deficit in the Czech Republic in the years 2004-2015 in comparison to EU average

9.6 %

3.6 %

3.0 %

2.3 %2.5 %

1.9 %1.5 %

2.0 %

0.6 % 0.4 % 0.5 % 0.3 % 0.5 %

3.6 %

1.9 % 1.9 %1.6 %

1.0 % 1.0 % 0.9 %1.2 %

0.9 %0.6 % 0.7 %

0.5 % 0.7 %

May2004

May2005

May2006

May2007

May2008

May2009

May2010

May2011

May2012

May2013

May2014

November2014

May2015

CZ

EUaverage

Source: http://ec.europa.eu/internal_market/scoreboard/index_en.htm.

206 UponjoiningtheEUtheCzechRepublicassumedtheobligationtofulfilcommitmentsarisingfromEuropeanUnionmembership.TheseincludelegislativeobligationsestablishedbyArticle4(3)oftheTreaty on European Union,whichrequiresMemberStatestotakeanyappropriatemeasure,generalorparticular,toensurefulfilmentoftheobligationsarisingoutofthetreatiesorresultingfromtheactsoftheinstitutionsoftheUnion.ThelegislativeobligationsconsistintheproperandtimelyimplementationofEUlawinnationallawifthenatureoftheEUlawsorequires.ImplementationandmonitoringarethenindifferentwaysdependingonthetypeofEUlegislation.InthecaseofEUdirectives,boththeirtranspositionandthesubsequentnotificationofnationaltranspositionregulationstotheCommissionisassessed.

207 Itshouldbenotedthat130directivesintheautomobilesectorhavebeenrepealedsincethelastresults.Thatledtoa10%reductioninsinglemarketdirectives,whichaffectedthecalculationofallresults.

208 DetailscanbefoundontheCommissionwebsite:http://ec.europa.eu/internal_market/scoreboard/index_en.htm.

http://ec.europa.eu/internal_market/scoreboard/index_en.htm




State of infringement cases brought against the CR by the EU:

Pending cases: 26 (figuregiveninpreviousreport:28)1newcaseand3casesclosed(theEUaverageis27cases).

Problematic sectors: Transport–airtransport(3cases),roadandrailtransport(3cases)andtransportsafety(1);environment(7casesintotal).

Average case duration: 29.4 months (figure given in previous report: 24.3months) for 25casesnotyetsenttotheCourtofJustice(EUaverageis29.1months).

Compliance with Court rulings: 19.2 months (nochangefromfiguregiveninpreviousreport)–InthisregardtheCRisslightlybetterthantheEUaveragebutabovethe18-monththreshold(EUaverageis19.8months).

Graph 23 – Evolution of infringement cases in the Czech Republic in comparison to EU average

5

14

7

22

27

31 31

36

3032

33

2321

24

20

24 2423

28 2826

4547 47

50

53

4948

4947 47

46

40

37

34

31 3130 30 30 30

27

2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015

EUaverage

CZ

May November May November May November May November May November May November May November May November May November May November May

Source: SingleMarketScoreboard,PerformanceperMemberState,CzechRepublic,(Reportingperiod:2004–2015)–http://ec.europa.eu/internal_market/scoreboard/_docs/2015/09/member-states/2015-09-czech-republic_en.pdf.

It follows from the above that the Czech Republic does not deviate significantly from theEuropeanaverageasregardsthetranspositionofEuropeandirectivesintonationallawandasregards preliminary ruling proceedings on infringements of EU lawbrought againstMemberStatesbytheCommission.

Risks arising from inadequate transposition of EU directives

Although the Commission rates the Czech Republic as basically average, the risks to the state economy arising from shortcomings in the application, implementation and transposition of regulations and directives cannot be overlooked.

General

EUdirectivesaregenerallybindingactsthatspecifygoalsthataretobeachieved.Howthegoalis tobeachieved is left to theMemberState.Directives therefore require transposition intoCzechlaw.Thistakesplacethroughnationalgenerallybindinglegislation,whichdeterminesthe

http://ec.europa.eu/internal_market/scoreboard/_docs/2015/09/member-states/2015-09-czech-republic_en.pdf


responsibilityofanentirechainoflegislativebodies.TheconsequencesoflackingorinadequatetranspositionofEUdirectivesincludedirectiveshavingdirecteffect,directiveshavingindirecteffect,liability for damages causedbythelackingorinadequatetransposition(liabilityofbothnaturalandlegalentities)andTFEUinfringement proceedings.

The last two risks are a particularly serious threat to the state economy.

TheCommissionistheguardianofcontinuouslegalenvironmentintheEUandoverseeswhetherandhowMemberStatestransposeand implementEUdirectives. If theCommission isoftheopinionthataMemberStatehascommittedatranspositioninfringement,itcommencesTFEUinfringementproceedingsagainsttheMemberState.Thefirstphaseisaletterofformalnoticefrom theCommission; the second is a reasonedopinion of theCommissionwith a deadlineforcompliance;thethirdphaseisthereferralofthemattertotheCourtofJusticeandcourtproceedings.Theproceedingscanendwitharejectionof theactionorarulingbytheCourtdeclaringinfringement.IftheMemberStatedoesnotdischargeitsobligationdespitethisruling,theCommissionmayfileanotheractionproposing the impositionofa lump-sumpenaltyor,whereappropriate,arepeatedpenalty.209

Examples arising out of the SAO’s audit work in 2015

Auditno.15/23210foundcircumstancesindicatinganinfringementoftheTFEUinthecaseofthefollowing: - preliminaryproceedingsandanongoingaction fornon-fulfilmentofanobligationby the

CzechRepublicstemmingfromsecondaryEUlaw,specificallyArticle16ofRegulation(EC)No1071/2009of theEPandof theCouncil, i.e. theobligation tokeepa registerof roadtransportundertakingsaccessibleintheentireCommunity.Thiswasacaseofinadequateapplicationofthisregulationwhich,assecondaryEUlegislation,isdirectlyapplicable,andtheobligationwasestablishedipsofacto(withregardtolegalcompetence)fortheMinistryofTransport;

- preliminary proceedings and an ongoing action relating to the lacking or inadequatetranspositionofArticle16ofDirective2006/126/ECoftheEPandoftheCouncilondrivinglicences,asamendedbyDirectives2009/113/ECand2011/94/EU,(Directive2006/126/EC),i.e.thenon-fulfilmentofobligationsunderprimaryEUlaw,andspecificallytheTFEU.

Government report on the adoption of legislative commitments arising from the CR’s membership of the European Union for 2015211

Asfarasthestateoftranspositionofalldirectivesisconcerned,i.e.includingdirectivesreachingbeyondtheareaofthesinglemarket,asat30November2015intheCRtherewere12 directives whose transposition deadline had elapsed and for which the notification process had not

209 Inthecaseoftheinfringementin2013theCzechRepublicwasatriskofpenaltiesfromtheCourtofJusticeoftheEU.IfthesituationisnotremedieddespitearepeatedcallfromtheCommission,theCourtmayimposelump-sumfinesandpenaltiesinthemillionsofeuroonaMemberState.ThesizeofthefineandpenaltydependsonthelengthoftimeduringwhichtheMemberStatedidnotfulfilitsobligationunderCommunitylaw,theseriousnessoftheinfringementanda“nationalfactor”(theeconomicandpoliticalcircumstancesofthecase).Theminimumlump-sumfineinthecaseoftheCzechRepublicis€1,773,000.Thisamountismultipliedbyaseriousnesscoefficient,however.TheminimumpenaltyfortheCRis€2,500perdayuntiltheCRremediesthesituation.However,thissumtooismultipliedbyaseriousnesscoefficientandacoefficientlinkedtothedurationoftheinfringement.TheCourt’spracticetodatemakesitreasonabletoexpectthatthelump-sumfineandpenaltyinthiscasecouldapprox.€10,000perday(i.e.CZK8.25millionpermonth)and€2millionasaone-offpayment(CZK55million).

210 Auditno.15/23–Management of the state property and state funds allotted to information and communication technology projects at the Ministry of Transport.Theauditconclusionwasnot

211 PublisheduntilaftertheeditorialdeadlineofEUReport2016.DetailedinformationwillbepublishedinEUReport2017.Ref.no.:21007/2015-KOM.


been completed. The following authorities were responsible for the following shares of thetranspositiondeficit: - MoF–7directives;

- MoI–2directives;

- MoT–1directive;

- MoIT–1directive;

- MoE–1directive.

Environmental impact assessment

Opening remark

The regulations on environmental impact assessment apply to any project that satisfies therelevantlegaldefinitionregardlessofwhetheritispubliclyorprivatelyfinanced.Itisirrelevantwhetherthefinancingcomesfromterritorial-administrationcorporations,thestatebudgetortheEUgeneralbudget.Evenprojectsnotco-financedbytheEUmustbeassessed.

AstheCRfailedtoadequatelytransposetheEIAdirectivesbetweenthetimeitjoinedtheEUandtheyear2015(aperiodof10years),itwasinstructedtoadequatelytransposethesedirectivesas an ex ante conditionality on which the ability to draw down funding in the 2014-2020programmingperioddepends(thiswasalegitimatemechanismforforcingtheCRtocomply).

Inadequate transposition

TheEIAdirectives(point3below)aretransposedintoCzechlawprimarilybyActNo.100/2001Coll.and itsamendmentsadoptedsubsequentlyupto2015(seepoint4below).Belowisanoverviewoftheaffectedregulationsordocuments:1. ActNo.244/1992Coll.,onenvironmentalimpactassessment,2. Convention on Access to Information, Public Participation in Decision-making and Access

to Justice in Environmental Matters,publishedintheCollectionofInternationalTreatiesunderno.124/2004(AarhusConvention);

3. Directive 85/337/EEC, as amended by Directives 97/11/EC and 2003/35/EC, which wasrepealed(witheffectfrom17February2012)byDirective(EU)No2011/92/EUoftheEPandoftheCouncilontheassessmentoftheeffectsofcertainpublicandprivateprojectsontheenvironment;

4. ActNo. 100/2001 Coll., on environmental impact assessment (Act on EIA), as amendedbyActsNos.93/2004Coll.(transposition),163/2006Coll.(transposition),186/2006Coll.,216/2007Coll., 124/2008Coll., 436/2009Coll. (transposition), 223/2009Coll., 227/2009Coll.,38/2012Coll.(transposition),85/2012Coll.(transposition),167/2012Coll.,350/2012Coll.,39/2015Coll.and268/2015Coll.;

5. ActNo.500/2004Coll.,theadministrativeproceduralcode;6. Act No. 150/2002 Coll., administrative court procedural code, Act No. 303/2011 Coll.,

amendingActNo.150/2002Coll.,theadministrativecourtproceduralcode,asamended,andcertainotheracts;

7. ActNo.183/2006Coll.,onzoningandthebuildingcode,ActNo.350/2012Coll.,amendingActNo.183/2006Coll.,onzoningandthebuildingcode(thebuildingact),asamended,andcertainrelatedacts;

8. ActNo.114/1992Coll.,ontheconservationofnatureandthecountrysideandotherlegalregulationsgoverningthepermissionofprojectswithsignificantenvironmentalimpacts;

9. ActNo.123/1998Coll.,on theright to informationon theenvironment,ActNo.6/2005Coll.,amendingActNo.123/1998Coll.,ontherighttoinformationontheenvironment,asamendedbyActNo.132/2000Coll.;

10. Decree No. 13/2014 Coll., on procedure when performing land consolidation and therequiredparticularsoflandconsolidationproposals.


Infringements

Inaletterdated4July2006theCommissionstateditsopinionthat,incontraventionofwhatisexplicitlystatedinArticle10a(1)to(3)ofCouncilDirective85/337/EEC,Czechlaw,owingtotherestrictionsitcontains,doesnotawardtotheentirepublicconcernedwithinthemeaningofArticle1(2)ofthedirectivetherighttoexaminedecisions,actsandomissionsthislegislationappliesto,withparticularregardtonon-governmentalorganisations.InthisletteritcalledontheCzechRepublic tosubmitastatementwithin twomonthsafter receiving the letter. In itsresponse of 6 September 2006 the Czech Republic stated that it implemented the directivebymeans ofActNo. 100/2001Coll. and admitted that this legislation is not compliantwiththerequirementsofArticle10a(1)to(3)ofCouncilDirective85/337/EEC.Itthusexpresseditsintention to comprehensively change the said legislation.As theCommissiondidnot receiveanyfurtherinformationregardingthechangetotheaffectedCzechlegislation,on29June2007itissuedareasonedstatementinwhichitcalledontheCzechRepublictoadopttherequiredmeasuresandthuscomplywiththereasonedstatementwithintwomonthsafterreceivingit.Initsresponseof14October2008tothereasonedstatementtheCRadmittedthejustificationofthereservationsraisedbytheCommissionandstatedthatitwouldmovetochangetheaffectednationallegislation.Inparticular,itdrewattentiontothedraftamendmentofActNo.100/2001Coll.thathadbeenputbeforetheChamberofDeputiesoftheParliamentoftheCzechRepublic.Inaddition,itinformedtheCommissionbyletterof10March2009thatalthoughthedraftwasrejectedanewdraftwouldbeputbeforetheChamberofDeputies.However,theCommissionreceivednofurtherinformationthatwouldenableittoconcludethatthemeasuresnecessaryfortheimplementationofArticle10a(1)to(3)hadbeenadopted,soitlodgedanaction.

The Court of Justice of the EU (8th senate) ruled on 10 June 2010 as follows:

1)InnotadoptingthelegalandadministrativeregulationsnecessaryforachievingcompliancewithArticle10a(1)to(3)ofCouncilDirective85/337/EECof27June1985,ontheassessmentofoftheeffectsofcertainpublicandprivateprojectsontheenvironment,asamendedbyDirective2003/35/ECoftheEuropeanParliamentandoftheCouncilof26May2003,theCzechRepublicdidnotfulfiltheobligationsarisingtoitfromthisdirective.

2)TheCzechRepublicshallbearthecostsoftheproceedings.

On26April2013theCommissioncommencednewproceedingsagainsttheCRinthematteroftheincorrecttranspositionoftheEIAdirective.TheCommissionviewedthefollowingdeficienciesasthemostsignificant: - EIAoutputswereinsufficientlybindingandchangestotheprojectcouldoccurduringthe

relatedpermissionproceedings(typicallyzoningandbuildingpermission),orbetweentheEIAprocessandtherelatedproceedings;

- theapplicablelegislationdoesnotensurethattheprovisionsoftheEIAdirectiveshouldbeappliednotjusttotheEIAprocessbutadditionallytotherelatedpermissionproceedingsunderwhichaprojectisdefinitivelyapproved;

- thepublicplaysaninsufficientroleintherelatedproceedings;

- thelegislationdoesnotensuretimelyandeffectivejudicialprotectionformembersoftheconcernedpublic.

Ex ante conditionality

Implementation of the requirements of the EIA directive was included among the ex anteconditionalitiesthatMemberStatesaretofulfilbytheendof2016.The ex ante conditionality was fulfilled upon the effect of Act No. 39/2015 Coll. as at 1 April 2015 andwasverifiedbytheCommissionasatthedayoftheadoptionofoperationalprogrammes.


ActNo.39/2015Coll.isthereforetheupshotofanendeavourtoeliminatethetranspositiondeficitinrespectofDirective2011/92/EUoftheEuropeanParliamentandoftheCouncilof13December2011,ontheassessmentofoftheeffectsofcertainpublicandprivateprojectsontheenvironment(theEIAdirective),whichtheCRwasreproachedforintheproceedingsonaninfringementoftheTFEUinthematteroftheincorrecttranspositionoftheEIAdirective.

The main benefit of the amendment was to prevent considerable the financial losses stemming from the incorrect transposition of the EIA directive into Czech law and to preserve the ability to utilise finances from EU funds based on fulfilment of the ex ante conditionalities.

Anotherundeniablebenefitisenhancedprotectionoftheenvironmentasaresultofgreaterpublic involvement in permission proceedings (and thus also greater transparency) andrigorouscompliancewiththeconditionsofEIAopinions.Theestablishmentofadeadlineforcourts’rulingswillspeedupcourtproceedingsonactionsagainstaffirmativedecisions,whichwillimprovelegalcertaintyonthepartofalltheaffectedentities.

Transitory provisions and their impacts

UpontheeffectofActNo.39/2015Coll.on1April2015,anobligationwasestablishedunderArticle2ofthisacttoverifyeveryopinionontheenvironmentalimpactassessmentofaprojectissuedbeforeitseffect(unlesstherelatedproceedingswerecompletedbeforetheact’seffect)intermsofitscompliancewiththerequirementsofthelegalregulationstransposingDirective2011/92/EUof theEP andof theCouncil and, if affirmative, to issueabindingopinion. ThepermissionprocessforinvestmentprojectsintheCRsince1April2016issetoutinAppendix7.Iftheresultoftheverificationisnegative,theprojectmustbeputthroughanewassessmentunderthetermsofSection4ofActNo.100/2001Coll.,onenvironmentalimpactassessmentandamendingcertainrelatedacts(theActonEIA),asamendedaftertheeffectofthisact.Asthetablebelowshows,theentireprocessforthiscaseandotherstakesalmostayear,andintheeventofanaction(Articles7/10)afurther3months,ifthecourtmanagestocomplywiththelegaltimelimit.


Table 18 – Approximate time procedure of project influence on the environment according to Act No. 100/2001 Coll.

Section of act Milestone Deadline (days)

§ 16 Announcementofprojecttorespectiveoffice

§6/6 Publishingtheinformationabouttheannouncement 7

§6/7 Writtenresponsetotheannouncement 20

§7/4 Inquiryprocedureterminatedbytherespectiveoffice 45

§7/10 Legalactionagainstthedecisionissuedintheinquiryprocedure 90

§8/2 Sendingofdocumentation 10

§8/3 Responsetodocumentation 30

§8/5 Sendingofdocumentationtotheproducerofopinion 40

§9/3 Opinionprocessing 90

§9/7 Sendingoftheopiniontotheapplicant 10

§9/8 Statementabouttheopinion 30

§9/10 Amendmentofthedraftopinion 10

§9a/1 Expressingabidingopinion 30

Totalwithoutalegalaction 322

Totalwithalegalaction 412

NB:Thetotalappliestothefulluseofthestipulatedtimelimitsandtheprocesscanbeshorter(themaximumtimelimitsaresummed).MoredetailedinformationontheentireEIAprocess,includingrelatedproceedings,canbefoundinAppendix7.

ThetransitoryprovisionscontainedinArticle2ofActNo.39/2015Coll.areintendedtoensurethatopinionsissuedbefore1April2015(andnotmeetingtherequirementsoftheEUdirectives)arebroughtintolinewithDirective2011/92/EUoftheEPandoftheCouncil.

That brings costs, however, as approval procedures are prolonged by 12 to 18 months. Inconnectionwith the startof implementationofOPs thatposes a risk to theachievementofsomeoftheirgoals.

Opinions issued under Act No. 244/1992 Coll., on environmental impact assessment – “historical opinions”

FromthedateonwhichActNo.39/2015Coll.enteredintoeffectuntil30March2016theCRhadapproximatelyoneyearinwhichprojectswithahistoricalopinioncouldbeassessedunderActNo.100/2001Coll.,asamended,orasignificantpartoftheprocesscouldbeperformed.

Inthelasteightmonths(uptotheendofMarch2016)theCRheldtalkswiththeCommissiononamechanismforverifyingprojectsforwhichanopinionwasissuedunderActNo.244/1992Coll.ThemechanismwasmeanttobelaiddownbytheamendmentofActNo.100/2001Coll.,onenvironmentalimpactassessment.TheresultofthesetalkswasnotknownatthetimeoftheeditorialdeadlineofEU Report 2016.

Impact of “historical opinions” on drawdown of finances from operational programmes

Then+3ruleaffectstheeligibilityofexpenditureintermsoftime.InpracticethatmeansthatfinancesallocatedtoaMemberStatefor2014,forexample,havetobeutilisedwithinthreeyears,i.e.bytheendof2017.Thisruleiskeyforthepermissibleperiodofprojectimplementationanditsfinancialsettlement.


Accordingtosomesources(e.g.astatementbytheprimeminister)thereisariskofdelaywith64importanttransportconstructionprojectsforwhichtheEuropeanUniondemandsanewEIA.ThatcoulddelayprojectsbyseveralyearsandalsojeopardisetheutilisationofEuropeanfunds.ThetotalamountinvolvedisaroundCZK90billion.212

Ifabsorptioncapacityexistsintheformofeligibleprojects(transportnetworkshavesufferedfromlong-termunderfunding)thatdonotneedanEIAorsatisfytherequirementsofActNo.100/2001Coll.,asamended,utilisationoftheallocationneednotbejeopardised.

PuttingbacktheimplementationofprojectsbecauseofanewEIAwilltemporarilyreducetheabsorptioncapacityofOPT14+.

TheMinistryofTransportannouncedthefirstfivecontinuouscallsunderOPT14+inNovember2015.Thesecallsareopenuntil30June2023.212

Table 19 – Overview of OP T14+ calls

Number of call

Specific objective Supported activities EU allocation

(CZK billion) Call documentation - link

1 1.I Modernisation and construction of railway network 33.9 http://web.opd.cz/vyzva-01

2 2.I Construction of motorway network TEN-T 16.5 http://web.opd.cz/vyzva-02

3 2.I Modernisation of motorway network TEN-T 8.0 http://web.opd.cz/vyzva-03

4 3.I Modernisation and construction of motorway network apart from TEN-T 23.7 http://web.opd.cz/vyzva-04

5 4.I Technical assistance 1.9 http://web.opd.cz/vyzva-05

Source: http://web.opd.cz/ministerstvo-dopravy-vyhlasuje-prvni-vyzvy-v-ramci-opd-2014-2020/.

ApproximatelyCZK84billionintotalwasmadeavailablefromtheESIFundsunderthesecalls.ThesefinancescanbeutilisedtoupgradeandbuildtheroadandrailnetworkintheCR,primarilyin the TEN-T network. Themain beneficiaries of aid under these callswill be the Road andMotorwaysDirectorate of the CR andRailway InfrastructureAdministration. All the calls arecontinuousandnon-competitive.Thesupportwillthereforebeprovidedtoindividualprojectsintheorderinwhichtheprojectsaresubmitteduntiltheavailableallocationundertheindividualcallsisusedup.

ThegoalsofbuildingandupgradingTEN-TnetworksmaybeendangeredinthecaseofprojectsforwhichanewEIAwillberequired.Puttingofftheimplementationofprojectscouldaffecttheachievedpriceofimplementation(whichincreaseswithtime)andtheimpactsofprojectswillmaterialiselater,whichcouldbringaboutfurtherlosses.

E.2 Accounting for and reporting EU finances in the CR

Incomparability of accounting data – a systemic problem of the period 2010-2014

InconnectionwithEUfinancestheSupremeAuditOfficerepeatedlypointedoutinthepastthattheCR’saccountingregulationswerenotabsolutelyclearinthewaytheydefinedhowfinanceslinkedtoprojectsco-fundedbytheEUbudgetshouldbeaccountedforandreported.Themainconfusionintheregulationswasovertheroleoforganisationalcomponentsofthestate(OUSs)whenprovidingtransfers,astheindividualrolesaredefinedinCzechaccountingstandard(CAS)no.703–Transfers(rolesoftheprovider,beneficiaryand,whereapplicable,intermediary).212 TotalallocationofOPT14+is€4,695.8millionwhichisapprox.CZK127billion(exchangerate27CZK/€).

http://web.opd.cz/vyzva-01





http://web.opd.cz/ministerstvo-dopravy-vyhlasuje-prvni-vyzvy-v-ramci-opd-2014-2020/


According to the SAO, this systemic problemexisted in the years 2010-2014 and resulted inaccounting informationbeing less usable, as in practice it could happen thatOUSs reportedmutuallyincomparabledataintheirfinancialstatementsinconnectionwithprojectsco-financedoutofEUfunds.

Theexistenceofmutually incomparabledatawasconfirmedbyaspecificauditconductedbytheSAOin2014and2015whichfocusedonthereportingoffinancesprovidedtotheCRfromabroad. The audit compared the procedures applied in the accounting for and reporting ofstatebudgetfinancesforthepre-financingofexpenditureaccordingtoCASno.703–Transfers.EventhoughtheSAOfoundnomeaningful reasons for theuseofvariousrolesanddifferentaccountingprocedures,itstatedthattheauditedentitiesaccountedforpre-financedtransfersinentirelydifferentrolesintheyears2011to2014.

Theauditthereforeconcludedthatifbothauditedentitiesoptedforthesamerole(i.e.provider/beneficiary, or intermediary), they would report significantly different data from those theyactuallyenteredintheiraccounts.ThedifferenceinthecaseofcertainitemswasoverCZK60billion,whichtheSAOjudgedtobeaconsiderabledifference.

Systemic modification of the accounting regulations

ThefundamentalsystemicproblemresultinginincomparableaccountingdataonfinancesfromtheEUbudgetreportedbyOUSswasremediedbytheMoFbymeansofanamendmentoftheaccountingregulationseffectivefrom1January2015,i.e.DecreeNo.410/2009Coll.andCASno.703–Transfers.AccordingtotheSAO,thisamendmenteliminatedthefundamentalconfusionoverthechoiceofrolebyOUSswhenprovidingandreceivingfinancesearmarkedforprojectsco-financedfromabroad.

Since1January2015ithasbeenclearlyspecifiedwithinthemeaningofCASno.703–TransfersthatOUSsaccountforfinancesthattheyusedforpre-financingintheroleofproviders.ThebasicapproachforOUSswasthusunifiedandtheprovisionoffinances forpre-financingandtheirrefundingshouldbeaccountedforascostsandrevenues.

EliminatingthesystemicriskofincomparableaccountingdataisapositivestepfortheusabilityofdatafromtheaccountsofOUSsconcerningthepre-financingofaidprovidedfromEUfunds.Thepossibleusabilityofaccrual-basedaccountingdatafornationalaccountscompiledbytheCzechStatisticalOfficewasthusimproved.

Persisting and new risks in the field of accounting

TheSAO’sauditfindingsdrewattentiontocertainothersystemicrisksaffectingfinancesprovidedfromtheEUbudget.Theserisksmayleadtofurtherincomparabilityofaccountinginformationandasignificantriskthatdatasummarisedinthefollowingareaswillbelessmeaningful: - theconsolidationofthestateaccounts,whichwilltakeplaceforthefirsttimein2015; - nationalaccounts(dataforthegovernmentinstitutionssector),i.e.forstatisticalpurposes.

Thisisaquestionof:

- the capturing of financial corrections

For 2014 and 2015 the accounting regulations did not lay down any procedures foraccountingforfinancialadjustmentsintheformofflat-ratecorrectionsbornebytheCR.Yettherecanbevariousinterpretationsoftheirsubstantiveessence,sodifferentaccountingunitsmayagainreportmutuallyincomparabledata.AccordingtotheSAO,theintroductionofaunifyingaccountingregulation is thereforeanecessarysystemicmatter.Thatwouldalso improve theusabilityof accrual-basedaccountingdata for the requirementsof thecompilationofnationalaccounts.


- accounting for preliminary payments received from abroad

InthecaseofpaymentsreceivedfromabroadinamannerotherthanviatheNationalFunditisnotpossibletounequivocallydeducefromtheapplicableaccountingregulationhowtheyshouldbeaccountedforandreported.

- accounting for receivables from pre-financing

In the case of part of the finances provided from abroad to co-finance projects certainministriesfindthemselvesinasituationwheretheyarebeneficiariesofthefinancesbuta different entity submits the application for thesefinances.Given that since 1 January2015theaccountingregulationhasrequiredanOUStoaccountfortheestablishmentofaconditionalreceivableinthecaseoftheprovisionofpre-financingregardlessofwhetherthisaccountingunitsubmittedanapplicationfortherefundingofthispre-financing,theamendedaccountingregulationimplicitlyrequiresthattheOUShassufficientinformationtoassessthedurationofthereasonforreportingsuchareceivable.TheSAOpointsout,however,thatthefulfilmentofthisrequirementcanbedifficultinpracticeinsomecases,aseventhoughtheOUSreceivesthefundstheadministrationoftheclaimitselfisunderthecontrolofadifferententity.Thiscangiverisetodifferencescausedbyalossofrefundabilitythatisnotcapturedintheaccountsorinconsequenceofexchangeratechanges.

Promoting the use of accrual-based accounting

TheSupremeAuditOfficestresses the importanceandusefulnessofaccrual-baseddata inaccounting(e.g.implementationofblanketcorrections),asthesedatacanhelpevaluatethetruecostofexpenditurepoliciesco-fundedoutoftheEUbudget.

TheSupremeAuditOfficethereforesupportsthewide-scaleuseofaccrual-basedaccountingdata concerning finances provided out of the EU budget to co-finance programmes andprojectswhenaccountsarecompiledfortheuseofstatefinances,e.g.forthepurposesofevaluating expenditure policies, but also for the purposes of the closing accounts of statebudgetheadings.

E.3 International activities of the SAO

Participating incoordinatedauditsandexperttrainingactivities,holdingseminars,playinganactiveroleintheworkofinternationalorganisations’workinggroupsandnetworks,cooperatingwithEuropeaninstitutionsinauditsconductedintheCR,organisingworkingmeetingsattendedbySAOrepresentativesandforeignexperts,representationininternationalorganisationsand,lastbutnotleast,day-to-daysharingofinformationforexternalpubliccontrolwiththesupremeauditinstitutionsofothercountries.ThesearetheSAO’sprincipalinternationalactivitieseveryyear.

EveryyeartheSAOorganisesanumberofeventslinkedtotheCR’smembershipoftheEU.Oneofthemostimportanteventsin2015wastheofficialvisit of ECA president Vítor Caldeira to the CR. Hisfour-dayvisitincludedameetingwithPresidentoftheRepublicMilošZeman,ameetingwithPrimeMinisterBohuslavSobotkaandattendingasessionoftheCommitteeonBudgetaryControloftheChamberofDeputiesoftheParliamentoftheCR.Vítor Caldeira also held talks with SAO representatives and opened a conference entitled eData – the future of audit213.ThisconferencestagedbytheSAOfocusedontheissueof“bigdata”,opendataanddatamininginstateandpublicadministration.

213 http://www.nku.cz/cz/konference-seminare/konference-edata/.


The SAO also held a regularmeeting between leading representatives of the SAO and the ambassadors of EU Member States in the Czech Republic, which was also attended byrepresentativesoftheMinistryofForeignAffairsandtheRepresentationoftheCommissionintheCR.TheresultsofSAOauditstargetingthedrawdownofEuropeanfinanceswerediscussedatthemeeting.Inaddition,newapproachestoauditwerepresentedthatusemoderntechnologiestofacilitatetheacquisitionandprocessingofdataforthepurposesofauditwork.The Supreme Audit Office also held talks with OECD representativeswhowerepreparingtheEconomic Survey of the CR 2016strategicdocumentduringtheirmissionintheCR.

BilateralmeetingsbetweenSAOexpertsandrepresentativesofEUMemberStates’SAIs isanimportantareaofinternationalcooperation.Forexample,in2015theSAOwelcomedtoitsheadoffice the supreme representatives of the SAIs of Denmark, Austria andSlovakia,whohadcometodiscusspossiblecooperation,informationsharingbetweenSAIsandrepresentativesofnationalparliamentsandactivitiesfocusinginteraliaontheauditofself-administratingunits.TheSAO’smostintensivecooperationwaswiththeSupreme Audit Office of the Slovak Republic (SAO SR),withwhichitispreparingacoordinatedaudittargetingexciseduties.OthermeetingsbetweentheSAOandSAOSRdealtwithself-assessmentaspectsandmethodsaccordingtotheINTOSAI214methodologicalframework215.

The involvement of SAO experts in the work of European agencies was another importantactivity.Since2015SAOrepresentativeshavebeenmembersoftheCollege of Auditors of the European Defence AgencyandtheReview Board of the European Space Agency.

Audit missions of European institutions in the CR

TheEuropeanCourtofAuditorsfulfilsthekeyroleinexternalauditofEUbudgetfinances.SevenauditmissionswereconductedintheCzechRepublicin2015.Oneofthesehadbegunin2014.TheSupremeAuditOfficecoordinatedtheexchangeofinformationbetweentheECAandtheauditedentities,withSAOauditorsparticipatinginthemissionasobservers.

214 InternationalOrganizationofSupremeAuditInstitutions.215 PerformanceMeasurementFramework(PMF).


InselectedcasestheSAOalsoassiststheECAbyacquiringmaterials forstudiesbeingdrawnupinsurveyworkorbyverifyinginformation.AnoverviewoftheECAauditmissions,includingcorrespondenceenquiriesthattookplacein2015ispresentedinAppendix6.

SAOauditorsdidnottakepartinanyCommissionauditmissionin2015.ThefocusandtimesofauditmissionsconductedbytheCommissionintheCRduring2015aregiveninAppendix5.

International cooperation in the context of Contact Committee activities216

ActivitieslinkedtotheContactCommittee(CC),whichiscomposedofheadrepresentativesofsupremeauditinstitutionsintheEUandtheEuropeanCourtofAuditors,isanintegralpartoftheSAO’sEuropeaninternationalcooperation.TheCC’sworkinggroups,inwhichmembersjointlydealwithselectedtopics,giveitsrepresentativesthechancetopresentandgainexperienceswithauditofEuropeanfinances.

In2015SAOrepresentativeswereparticularlyactiveinthe Working Group on Structural Funds,whichdiscussedtheresultsofparallelauditanalysingpublicprocurementerrorsinprogrammesfinancedoutoftheSFandCF.Thejointreportfromthisaudit,whichwasdrawnupwiththeparticipationoftheSAOrepresentatives,canbefoundinEnglishontheCCwebsite217.Atthegroup’slastmeetingtheSAOrepresentativeshelpedpreparetheplanforanotherparallelaudit,whichwillthistimetargetthebenefitofEU-financedOPsfortheachievementoftheobjectivesoftheEurope2020strategy.

AnotherworkinggrouptheSAOisanactivememberofisthe Working Group on Value Added Tax,whichfocusesontwopriorityareas:analysingthelevelofapplicationofthereversechargemechanisminMemberStatesandmonitoringthestrategyofthefightagainstVATfraudatEUlevel. In2015theSAO’srepresentatives intheworkinggroupsharedinformationfromauditstargetingthereversechargemechanismandinformationconcerninglegislativeamendmentsoftheActonVATinconnectionwiththefightagainsttaxevasion.Thegroup’smembersidentifiedproblemslinkedtovaryingratesinMemberStatesthatareevidentintheapplicationofthenewMiniOneStopShopsystem.TheworkinggroupdrewECArepresentativestotheresultsofitsworkandispreparingtosubmitasuggestionfortheECAtofocusonthisareainitsaudits.

Although theSAO isnotamemberof theNetwork on Fiscal Policy, its representatives tookpartinthelastmeetingthatwasduetodiscussthesustainabilityofpublicfinanceswithregardto regional budgets, government debt and state aid for banks andfinancial institutions. TheSAOrepresentativesparticipatedinthepreparationofaparallelauditinthefieldofriskstothesustainabilityofpublicfinances,wheretheyhelpedassessthesignificanceofthevariousriskstopublicbudgetsandsubsequentlyselecttopicsfortheplannedparallelaudit.

Lastbutnotleast,theSupremeAuditOfficetookpartintheworkoftheLisbon/Europe 2020 network,partlybysharinginformationduringaquestionnaire-basedsurveyandalsobyattendingmeetingsbeneficialtotheSAO’sauditwork.SAOrepresentativesrecentlypresentedtheresultsofauditsatameetingdevotedtotopics linkedtothepromotionofcompetitivenessthrougheducation,researchanddevelopmentandtopicslinkedtotheemploymentandintegrationofthesociallydisadvantaged.

In2015theSupremeAuditOfficelaunchedadatabaseofauditsbyEUROSAI218supremeauditinstitutions,whichCCmembersdecidedtomakeuseofinfutureforsharingtheresultsofauditsofEUfinancesthatwerehithertostoredinthedatabaseofauditsofEUfunds(CIRCABC)219.

216MoreinformationontheContactCommitteecanbefoundatwww.contactcommittee.eu.217 http://www.eca.europa.eu/sites/cc/Lists/CCDocuments/Final%20report%202015/Final_report_2015_EN.pdf.218 EuropeanOrganizationofSupremeAuditInstitutions.219 CommunicationandInformationResourceCentreforAdministrations,BusinessesandCitizens.

http://www.contactcommittee.eu

http://www.eca.europa.eu/sites/cc/Lists/CCDocuments/Final%20report%202015/Final_report_2015_EN.pdf

119EUREPORT2016,Sourcesandreferences

F. Sources and references

1. Action Plan for Improving the Work of the Management and Control Systems for the Structural Funds in the Czech Republic,whichwasnotedbytheCzechgovernmentatitssessionof28March2012.

2. CurrentStateofDrawdownofProgrammes2014–2020,MfRD/NCA,17.3.2016.

3. AnnexII:CountryfichestotheCommunicationfromtheCommissionInvestinginjobsandgrowth–maximisingthecontributionofEuropeanStructuralandInvestmentFunds,14.12.2015,EuropeanCommission,COM(2015)639final.

4. AnnexIII:OverallAssessmentofAdditionality(Article95CPR),AnnexIV:TimingofsubmissionandadoptionofpartnershipagreementsandprogrammestotheCommunicationfromtheCommissionInvestinginjobsandgrowth–maximisingthecontributionofEuropeanStructuralandInvestmentFunds,EK,14.12.2015COM(2015)639final.

5. CommissionAnti-FraudStrategy,CommunicationfromtheCommissiontotheEuropeanParliament,theCouncil,theEuropeanEconomicandSocialCommittee,andtheCommitteeof the Regions and the Court of Auditors On the Commission Anti-fraud Strategy,COM(2011)376,finalwordingof24June2011.

6. PartII.1.2(2)ofAnnex11toCommissionDecision2008/22/ECandAnnex11ofCommissionDecision2011/152/EU.

7. QuarterlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,4thquarterof2014,MfRD/NCA,31January2015.

8. QuarterlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,2ndquarterof2015,MfRD/NCA,31July2015.

9. QuarterlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,4thquarterof2015,MfRD/NCA,1February2016.

10. QuarterlyReporton the Implementationof theESIFunds in theCzechRepublic in the2014-2020ProgrammingPeriod,1stquarterof2016,MfRD/NCA,12May2016.

11. Partnership Agreement for the 2014–2020 Programming Period, approved by theCommissionon26August2014.

12. Councilrecommendationof14July2015ontheNationalReformProgrammeoftheCzechRepublicfor2015anddeliveringaCouncilopinionontheConvergenceProgrammeoftheCzechRepublic,2015,EUOfficialJournal(2015C272/09),18August2015,p.32.

13. Councilrecommendationof8July2014ontheNationalReformProgrammeoftheCzechRepublicfor2014.

14. EU Budget 2014–FinancialReport,EuropeanCommission2015.

15. InformationonthedesignanduseoftheMoA,orSAIF,informationsystemformanagingandmonitoringtheRDPof18March2016.

120 EUREPORT2016,Sourcesandreferences

16. InformationonprocedurewhenpromotingtheCR’sinitiativeforwiderapplicationofthereversechargemechanism,ref.no.MF-2150/2015/25-1,MoF.

17. Information on the state of drawdown and implementation of Czech governmentresolutionno.124/2015,December2015.

18. Consolidated version of the Treaty on the Functioning of the EuropeanUnion,OfficialJournalC115,9May2008,p.47.

19. Auditconclusionofauditno.09/26–Funds earmarked for transport infrastructure projects under the regional operational programmes.

20. Audit conclusion of audit no. 14/15 – Funds spent on the projects and measures for support and fulfilment of efficient public administration including savings of expenditures implementation.

21. Auditconclusionofauditno.14/17–Value added tax administration and the impacts of legislative amendments for the state budget revenues.

22. Auditconclusionofauditno.14/22–Funds earmarked for the infrastructure of university education.

23. Auditconclusionofauditno.14/24–EU and state budget funds provided for settlement of expenditures of national projects within the Operational Programme Education for Competitiveness.

24. Auditconclusionofauditno.14/26–Funds spent on the projects of the Rural Development Programme.

25. Auditconclusionofno.14/27–Funds of the EU Solidarity Fund provided for the Czech Republic in relation to catastrophic floods.

26. Audit conclusion of audit no. 14/28 – Spirit and tobacco excise tax administration and administration of revenues from the sales of tobacco duty stamps, including the management of these duty stamps.

27. Auditconclusionofauditno.14/32–Funds earmarked for the construction of line A of the Prague underground.

28. Audit conclusion of audit no. 14/37 –State budget, EU budget funds and other funds acquired from abroad.

29. Auditconclusionofauditno.14/40–Funds earmarked for remittance of costs for land area amendments.

30. Auditconclusionofauditno.15/02–Financial resources provided by the state to promote energy savings.

31. Auditconclusionofauditno.15/06–State budget funds and EU structural funds earmarked for financing of operational programmes with respect to projects sustainability.

32. Auditconclusionofauditno.15/18–Funds earmarked for the support of housing.


33. Audit conclusion of audit no. 15/23 – Management of the state property and state funds allotted to information and communication technology projects at the Ministry of Transport.

34. Auditconclusionofauditno.15/03–Funds earmarked for projects related to introduction of electronic public administration under the supervision of the Ministry of the Interior.

35. Auditconclusionofauditno.15/04–Funds earmarked for the infrastructure of the project “Pilsen – European cultural capital 2015” .

36. Audit conclusion of audit no. 15/10 – Funds spent on the National Infrastructure for Electronic Public Procurement and its utilisation for purchase of selected commodities.

37. Auditconclusionofauditno.15/14–Funds earmarked for modernisation of the 3rdand4thtransitrailwaycorridors.

38. Audit conclusion of audit no. 15/24 – Funds earmarked for the implementation of EU asylum and migration policy objectives.

39. Convergence Programme of the Czech Republic, April 2015, drawnupby theMoFandapprovedbyCzechgovernmentresolutionno.319of29April2015.

40. MonthlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,December2008,MfRD/NCA,2February2009.

41. MonthlyMonitoringReportonDrawdownfromtheStructuralFundsandCohesionFundintheProgrammingPeriod2007–2013,December2009,MfRD/NCA,26January2010.





46. MonthlyReportontheImplementationoftheESIFundsintheCzechRepublicinthe2014-2020ProgrammingPeriod,January2016,MfRD/NCA,1February2016.

47. MonthlyReportontheImplementationoftheESIFundsintheCzechRepublicinthe2014-2020ProgrammingPeriod,February2016,MfRD/NCA,3March2016.

48. MonthlyReportontheImplementationoftheESIFundsintheCzechRepublicinthe2014-2020ProgrammingPeriod,March2016,MfRD/NCA,1April2016.

49. MonthlyReportontheImplementationoftheESIFundsintheCzechRepublicinthe2014-2020ProgrammingPeriod,April2016,MfRD/NCA,2May2016.


50. Methodological Instruction for the Preparation of Programming Documents,Methodological Instruction for Evaluation,Methodological Instruction for the Principles of Designing and Using Indicators,Methodological Instruction for Expenditure Eligibility and Reporting,Methodological Instruction for ESI Funds Risk Management,Methodological Instruction for Public Procurement, Methodological Instruction for Publicity and Communication, Methodological Instruction for Monitoring the Implementation of ESI Funds, Methodological Instruction for Programmes’ Financial Flows,MfRD.

51. Multiannual financial framework 2014–2020 and EU budget 2014 — The figures,Commission2013.

52. National Reform Programme of the Czech Republic drawn up by the Office of theGovernmentoftheCzechRepublicandapprovedbythegovernmentoftheCRon29April2015.

53. Regulation (EU)No2015/779of the EP andof theCouncil of 20May2015amending Regulation (EU) No 1304/2013, as regards an additional initial prefinancing amount paid to operational programmes supported by the Youth Employment Initiative.

54. Regulation(EUNo1299/2013oftheEPandoftheCouncilof17December2013on specific provisions for the support from the European Regional Development Fund to the European territorial cooperation goal.

55. Regulation(EU)No1300/2013oftheEPandoftheCouncilof17December2013on the Cohesion Fund and repealing Council Regulation (EC) No 1084/2006.

56. Regulation (EU)No 1301/2013of the EP and of the Council of 17December 2013on the European Regional Development Fund and on specific provisions concerning the Investment for growth and jobs goal and repealing Regulation (EC) No 1080/2006.

57. Regulation(EU)No1303/2013oftheEPandoftheCouncilof17December2013anditsimplementingCommissionRegulation(EU)No215/2014of7March2014.

58. Regulation(EU)No1304/2013oftheEPandoftheCouncilof17December2013on the European Social Fund and repealing Council Regulation (EC) No 1081/2006.

59. Regulation(EU)No1305/2013oftheEPandoftheCouncilof17December2013on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 andRegulation(EU)No1306/2013oftheEPandoftheCouncilof17December2013on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008.

60. Regulation (EU) No 1306/2013 of the European Parliament and of the Council of17 December 2013 on the financing, management and monitoring of the commonagriculturalpolicyandrepealingCouncilRegulations (EEC)No352/78, (EC)No165/94,(EC)No2799/98,(EC)No814/2000,(EC)No1290/2005and(EC)No485/2008.

61. Regulation(EU)No250/2014oftheEuropeanParliamentandoftheCouncilof26February2014whichistointroduceprogrammeHerculeIII,andrepealsdecisionNo804/2004/EC


62. Regulation(EU)No508/2014oftheEPandoftheCouncilof15May2014on the European Maritime and Fisheries Fund and repealing Council Regulations (EC) No 2328/2003, (EC) No 861/2006, (EC) No 1198/2006 and (EC) No 791/2007 and Regulation (EU) No 1255/2011 of the EP and of the Council.

63. Regulation(EU,Euratom)No966/2012oftheEPandoftheCouncilof25October2012.

64. CouncilRegulation(EC)No1083/2006of11July2006layingdowngeneralprovisionsontheEuropean Regional Development Fund, the European Social Fund and the Cohesion FundandrepealingRegulation(EC)No.1260/1999.

65. Governmentregulationno.361/2014,onthestipulationofthesupplyofgoodsorprovisionofservicesfortheuseofthereversechargemechanism,22December2014.

66. ProposalforacouncilregulationamendingCouncilRegulation(EU,Euratom)No609/2014of2015May,onthemethodsandprocedureformakingavailablethetraditional,VATandGNI-basedownresourcesandonthemeasurestomeetcashrequirements,COM(2015)447,14September2015.

67. ProposalforaCouncilDirectiveonaCommonConsolidatedCorporateTaxBase(CCCTB),COM(2011)121/4,16March2011.

68. Estimatesofthedrawdownshortfallattheendofthe2007-2013programmingperiod,MfRD–EUfundsmanagementandcoordinationdivision,17.3.2016.

69. Materials from theMoA sent at the request of the SAO – RDP 2007-2013 drawdownoverview; OP Fisheries 2007-2013 drawdown overview; Information on the currentevolutionof implementationof the reformedCAP;Descriptionof thecurrent situationwiththesinglemethodologicalenvironment.

70. SAIFmaterialssentattheSAO’srequest–tables–overviewofsubsidiespaidoutundertheCAP,CAPbudgetanddrawdownasof31.12.2015.

71. Country Report Czech Republic 2015,CommissionstaffworkingdocumentSWD(2015)23,finalwordingof26February2015.

72. ProgrammingdocumentsforindividualprogrammesapprovedbytheCzechgovernment.

73. Commission Implementing Regulation (EU) 2015/272 of 19 February 2015 amendingImplementingRegulation(EU)No612/2013ontheoperationoftheregisterofeconomicoperators and tax warehouses, related statistics and reporting pursuant to CouncilRegulation(EU)No389/2012onadministrativecooperationinthefieldofexciseduties,OfficialJournalL47,20February2015,p.10.

74. CommissionImplementingRegulation(EU)2015/2378of15December2015layingdowndetailed rules for implementing certain provisions of Council Directive 2011/16/EUonadministrativecooperationinthefieldoftaxationandrepealingImplementingRegulation(EU)No1156/2012,EUOfficialJournalL332,18December2015,p.19.

75. AnnexIofCommissionRegulation1378/2014of17October2014amendingAnnexIofRegulation1305/2013oftheEPandoftheCouncil(seesubheadingA.3).


76. DecisionNo406/2009/EContheeffortofMemberStatestoreducetheirgreenhousegasemissions.

77. EuropeanParliamentdecisionof12February2015onsettingupaspecialcommitteeontaxrulingsandothermeasuressimilarinnatureoreffect,itspowers,numericalstrengthandtermofoffice(2015/2566(RSO)).

78. EuropeanParliamentdecisionof2December2015onsettingupaspecialcommitteeontaxrulingsandothermeasuressimilarinnatureoreffect(TAXE2),itspowers,numericalstrengthandtermofoffice(2015/3005(RSO)).

79. CommissionDecision94/140/EC,onestablishmentofAdvisoryCommitteeforcoordinationofthefightagainstfraud,wordingof25February2005.

80. CommunicationfromtheCommissiontotheEuropeanParliamentandtheCouncil–AFairandEfficientCorporateTaxSystemintheEuropeanUnion:5KeyAreas forAction,COM(2015)302,17June2015.

81. CommunicationoftheCommissiontotheEuropeanParliament,theCouncil,theEuropeanCentral Bank, the European Economic and Social Committee, the Committee of theRegionsandtheEuropeanInvestmentBank:Annual Growth Survey 2016, Strengthening the recovery and fostering convergence,COM(2015)690,26November2015.

82. CommunicationoftheCommissiontotheEuropeanParliament,theCouncil,theEuropeanCentralBank,theEuropeanEconomicandSocialCommittee,theCommitteeoftheRegionsandtheEuropeanInvestmentBank:Annual Growth Survey 2015,COM(2014)902,finalwordingof28November2014.

83. Communication of the Commission to the European Parliament, Council, EuropeanEconomicandSocialCommitteeandtheCommitteeoftheRegions:Taking stock of the Europe 2020 strategy for smart, sustainable and inclusive growth,COM(2014)130,finalwordingof5March2014.

84. Communication fromtheCommission to theCouncil inaccordancewithArticle395ofCouncilDirective2006/112/EC,COM(2015)538,28October2015.

85. Communication fromtheCommission to theCouncil inaccordancewithArticle395ofCouncilDirective2006/112/EC,COM(2015)214,22May2015.

86. Commissioncommunication:EUROPE 2020 A strategy for smart, sustainable and inclusive growth,COM(2010)2020,finalwordingof3March2010.

87. SingleMarketScoreboard,PerformanceperMemberState,CzechRepublic, (Reportingperiod:(2014–2015).

88. Directive85/337/EEC,asamendedbyDirectives97/11/ECand2003/35/EC,whichwasrepealed(witheffectfrom17.2.2012)byDirective(EU)No2011/92/EUoftheEPandoftheCouncilontheassessmentoftheeffectsofcertainpublicandprivateprojectsontheenvironment.

89. Directive2009/28/ECoftheEPandtheCouncilonpromotionoftheuseofenergyfromrenewablesources,amendmentofdirective2009/125/ECand2010/30/EU,andrepealofdirectives2004/8/ECand2006/32/EC.

http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2015/3005(RSO)


90. Directive2012/27/EUoftheEPandtheCouncilonenergyefficiency.

91. Directive2011/92/EUof theEPandof theCouncilonassessmentof the influenceofprivateandpublicinterestsontheenvironment.

92. Directive2014/24/EUoftheEuropeanParliamentandoftheCouncilof26February2014on public procurement and repealing Directive 2004/18/EC.

93. Directive2014/40/EUoftheEuropeanParliamentandoftheCouncilof3April2014ontheapproximationofthelaws,regulationsandadministrativeprovisionsoftheMemberStatesconcerningthemanufacture,presentationandsaleoftobaccoandrelatedproductsandrepealingDirective2001/37/EC,EUOfficialJournal,L127,29April2014,p.1.

94. CouncilDirective(EU)2015/2376of8December2015amendingDirective2011/16/EUasregardsmandatoryautomaticexchangeofinformationinthefieldoftaxation,EUOfficialJournalL332,18December2015,p.1.

95. CouncilDirective2003/48/ECof3June2003ontaxationofsavingsincomeintheformofinterestpayments,OfficialJournalL157,26June2003,p.38.

96. CouncilDirective2006/112/ECof 28November2006on the common systemof valueaddedtax.

97. CouncilDirective2011/16/EUof15February2011onadministrativecooperationinthefieldoftaxationandrepealingDirective77/799/EEC,OfficialJournalL64,11March2011,volume54,p.1.

98. Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States.

99. Council Directive 2014/107/EU amending Directive 2011/16/EU as regardsmandatoryautomatic exchange of information in the field of taxation, Official Journal L 359, 16December2014,p.1.1.

100. ECAOpinionsNos.7/2014,2/2012,2/2008and2/2006,ECA.

101. OpinionNo.7/2015ontheproposalforacouncilregulationamendingCouncilRegulation(EU, Euratom) No 609/2014 on the methods and procedure for making availablethe traditional, VAT andGNI-basedown resources andon themeasures tomeet cashrequirements,11November2015.

102. Opinion of the Committee on Economic and Currency Affairs for the Committee onDevelopment on Tax avoidance and tax evasion as challenges for governance, social protection and development in developing countries(2015/2058(INI)),8May2015.

103. OpinionoftheCouncilontheConvergenceProgrammeoftheCzechRepublicfrom2014,EUOfficialJournal2014/C247/03,29July2014.

104. OlderissuesofEU Reports 2008-2015,SAO.

105. Economic Survey of Czech Republic 2016,OECD.


106. TechnicalrevisionofthePartnership Agreement for the 2014-2020 Programming Period,approvedbytheCommissionon13April2016.

107. The EU Emissions Trading System–aninternationalsystemforgreenhousegasemissioncreditstrading.

108. MinistryofAgriculturepressrelease(publishedon www.eagri.cz).

109. Datafromdivision52oftheMoF–AB,2016.

110. DatafromMoF–AFCOS,February2016.

111. DataonthestateofdrawdowninindividualOPs2007-2013,MfRD–EUfundsmanagementandcoordinationdivision,17.3.2016.

112. ConventiononAccesstoInformation,PublicParticipationinDecision-makingandAccesstoJusticeinEnvironmentalMatters,publishedintheCollectionofInternationalTreatiesunderno.124/2004(AarhusConvention).

113. TheOfficial JournaloftheEuropeanUnionof10November2015,Part IVNotices from European Union institutions, bodies, offices and agencies,C373/3.

114. ResolutionadoptedattheAmsterdammeetingoftheEuropeanCouncilontheStabilityandGrowthPactof17June1997(OfficialJournalC236of2August1997)andamendmentsthereto,lastamendedin2015.

115. EuropeanParliamentresolutionof25November2015ontaxrulingsandothermeasuressimilarineffectornature(2015/2066(INI)).

116. ResolutionoftheGovernmentoftheCzechRepublicNo.540of8July2015.

117. ResolutionoftheGovernmentoftheCzechRepublicNo.447of12June2013.

118. ResolutionoftheGovernmentoftheCzechRepublicNo.612of21July2014.

119. ResolutionoftheGovernmentoftheCzechRepublicNo.314of27April2011.

120. ResolutionoftheGovernmentoftheCzechRepublicNo.867of28November2012.

121. ResolutionoftheGovernmentoftheCzechRepublicNo.650of31August2011.

122. ResolutionoftheGovernmentoftheCzechRepublicNo.434of7June2010.

123. ResolutionoftheGovernmentoftheCzechRepublicNo.1000of7December2015.

124. ResolutionoftheGovernmentoftheCzechRepublicNo.999of7December2015.

125. ResolutionoftheGovernmentoftheCzechRepublicNo.242of9April2014.

126. Decree No. 13/2014 Coll., on procedurewhen performing land consolidation and therequiredparticularsoflandconsolidationproposals.

http://www.eagri.cz

http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2015/2066(INI)


127. ECA Annual Report on the Implementation of the Budget for the Financial Year 2014,2015/C373/01,2014.

128. AnnualReportonDirectPaymentsfor2015,drawnupbytheSAIF,April2016.

129. SAIFannualreportsfortheyears2007to2014.

130. ActNo.100/2001Coll., onenvironment impactassessment, as amendedbyActsNos.93/2004Coll. (transposition), 163/2006Coll. (transposition), 186/2006Coll., 216/2007Coll. 124/2008 Coll., 436/2009 Coll. (transposition), 223/2009 Coll., 227/2009 Coll.,38/2012 Coll. (transposition), 85/2012 Coll. (transposition), 167/2012 Coll., 350/2012Coll.,39/2015Coll.,268/2015Coll.

131. ActNo.123/1998Coll.,ontherighttoinformationontheenvironment,ActNo.6/2005Coll.,amendingActNo.123/1998Coll.,ontherighttoinformationontheenvironment,asamendedbyActNo.132/2000Coll.

132. ActNo.6/2005Coll.,amendingtheActNo.123/1998Coll.,ontherightoninformationabouttheenvironment,wordingofActNo.132/2000Coll.

133. ActNo.137/2006Coll.,onpublicprocurement.

134. Act No. 150/2002 Coll., administrative court procedural code, Act No. 303/2011 Coll.,amendingActNo.150/2002Coll.,theadministrativecourtproceduralcode,asamended,andcertainotheracts.

135. ActNo.303/2011Coll.,amendingActNo.150/2002Coll.,proceduralcourtrules.

136. ActNo.157/2015Coll.,amendingActNo.353/2003Coll.,onexciseduties,asamended,andActNo.311/2006Coll.,onfuelsandfuelfillingstationsandamendingcertainrelatedacts,asamended.

137. ActNo.166/1993Coll.,ontheSupremeAuditOffice,asamended.

138. ActNo.218/2000Coll.,onbudgetaryrulesandamendingcertainrelatedacts.

139. ActNo.234/2014Coll.,onthecivilservice,of1October2014(validfrom6November2014,effectivefrom1January2016).

140. ActNo.235/2004Coll.,onvalueaddedtax.

141. ActNo.244/1992Coll.,onenvironmentalimpactassessment.

142. ActNo.262/2014Coll.,amendingActNo.235/2004Coll.,onvalueaddedtax,asamended,andotherrelatedacts.

143. ActNo.307/2012Coll.,onthemandatorylabellingofliquor.

144. ActNo.315/2015Coll.,amendingActNo.353/2003Coll.,onexciseduties,asamended.

145. ActNo.340/2015Coll.,onspecialconditionsoftheeffectivenessofcertaincontracts,thepublishingofsuchcontractsandaregisterofcontracts(ActontheRegisterofContracts)of24November2015(validfrom14December2015,effectivefrom1July2016).


146. ActNo.353/2003Coll.,onexciseduties.

147. ActNo.360/2014Coll.,amendingActNo.235/2004Coll.,onvalueaddedtax,asamended,andotherrelatedacts.

148. Act No. 39/2015 Coll., amending Act No. 100/2001 Coll., on environmental impactassessmentandamendingcertainrelatedacts(ActonEIA),asamended,andotherrelatedacts.

149. Act No. 50/1976 Coll., the building code, Act No. 183/2006 Coll., on zoning and thebuildingcode,ActNo.350/2012Coll.,amendingActNo.183/2006Coll.,onzoningandthebuildingcode(thebuildingact),asamended,andcertainrelatedacts.

150. ActNo.183/2006Coll.,onzoningandthebuildingcode(thebuildingact).

151. ActNo.350/2012Coll.,amendingActNo.183/2006.

152. ActNo.500/2004Coll.,theadministrativeproceduralcode.

153. ActNo.114/1992Coll.,ontheconservationofnatureandthecountrysideandotherlegalregulationsgoverningthepermissionofprojectswithsignificantenvironmentalimpacts.

154. Minutesofthe19thmeetingoftheRDP2007-2013MonitoringCommitteeof19November2015,includingmaterialsfromthemeeting.

155. Minutesofthe2ndmeetingoftheRDP2014-2020MonitoringCommitteeof19November2015.

156. CommissionReporttotheEuropeanParliamentandtheCouncilProtection of the European Union’s financial interests – Fight against Fraud 2014 Annual Report,COM(2015)386,31July2015.



159. AnnualTaxReport(2014/2144(INI),3March2015.

160. Report with recommendations to the Commission on bringing transparency, coordination and convergence to Corporate Tax policies in the Union (2015/2010(INL)), 2December2015.

161. Government report on the adoption of legislative commitments arising from the CR’smembershipoftheEuropeanUnionfor2015,ref.no.:21007/2015-KOM.

162. ECASpecialReportNo.2/2015–EU-funding of Urban Waste Water Treatment plants in the Danube river basin: further efforts needed in helping Member States to achieve EU waste water policy objectives,Luxembourg,PublicationOfficeoftheEU,2015.

163. ECASpecialReportNo.4/2015–Technical assistance: what contribution has it made to agriculture and rural development?Luxembourg,PublicationOfficeoftheEU,2015.


164. ECASpecialReportNo.5/2015–Are financial instruments a successful and promising tool in the rural development area?Luxembourg,PublicationOfficeoftheEU,2015.

165. ECASpecialReportNo.9/2016–EU external migration spending in Southern Mediterranean and Eastern Neighbourhood countries until 2014,Luxembourg,PublicationsOfficeoftheEuropeanUnion,2016.

166. ECASpecialReportNo10/2015–Efforts to address problems with public procurement in EU cohesion expenditure should be intensified,Luxembourg,PublicationOfficeoftheEU,2015.

167. ECASpecialReportNo.11/2015–Are the Fisheries Partnership Agreements well managed by the Commission? Luxembourg,PublicationOfficeoftheEU,2015.

168. ECASpecialReportNo.12/2015–TheEUpriorityofpromotingaknowledge-basedruraleconomy has been affected by poormanagement of knowledge-transfer and advisorymeasures,Luxembourg,PublicationOfficeoftheEU,2015.

169. ECASpecialReport15/2014–The External Borders Fund has fostered financial solidarity but requires better measurement of results and needs to provide further EU added value,Luxembourg,PublicationOfficeoftheEU,2014.

170. ECASpecialReportNo.16/2015–Improving the security of energy supply by developing the internal energy market: more efforts needed Luxembourg,PublicationOfficeoftheEU,2015.

171. ECASpecialReportNo.20/2015–The cost-effectiveness of EU Rural Development support for non-productive investments in agriculture,Luxembourg,PublicationOfficeoftheEU,2015.

172. ECA Special Report No. 23/2015 – Water quality in the Danube river basin: progress in implementing the water framework directive but still some way to go, Luxembourg,PublicationOfficeoftheEU,2016.

173. ECASpecialReportNo.25/2015–EU support for rural infrastructure: potential to achieve significantly greater value for money,Luxembourg,PublicationOfficeoftheEU,2016.


Web sites used: - http://www.eagri.cz

- http://www.szif.cz

- http://www.vlada.cz

- http://www.euroskop.cz

- http://www.euractiv.cz

- http://ec.europa.eu

- http://ec.europa.eu/eurostat

- http://ec.europa.eu/contracts_grants/funds_en

- http://ec.europa.eu/budget/figures/interactive/index_en.cfm

- http://ec.europa.eu/internal_market/scoreboard/index_en.htm

- http://ec.europa.eu/internal_market/scoreboard/_docs/2015/09/member-states/2015-09-czech-republic_en.pdf

- http://www.nku.cz

- http://www.nku.cz/cz/konference-seminare/konference-edata/

- http://www.strukturalni-fondy.cz

- http://www.strukturalni-fondy.cz/cs/Fondy-EU/Kohezni-politika-EU/Metodicke-pokyny

- https://cohesiondata.ec.europa.eu/countries/CZ

- https://www.cnb.cz/cs/menova_politika/prognoza/index.html?cnb_css=true#HDP

- http://www.mfcr.cz

- http://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2016/cista-pozice-ceske-republiky-vuci-rozpoc-23947

- http://web.opd.cz/ministerstvo-dopravy-vyhlasuje-prvni-vyzvy-v-ramci-opd-2014-2020/.

- www.contactcommittee.eu

http://www.eagri.cz

http://www.szif.cz

http://www.vlada.cz

http://www.euroskop.cz

http://ec.europa.eu

http://ec.europa.eu/eurostat

http://ec.europa.eu/contracts_grants/funds_en





http://www.nku.cz

http://www.nku.cz/cz/konference-seminare/konference-edata/

http://www.strukturalni-fondy.cz

http://www.strukturalni-fondy.cz/cs/Fondy-EU/Kohezni-politika-EU/Metodicke-pokyny

https://cohesiondata.ec.europa.eu/countries/CZ

http://www.mfcr.cz



http://web.opd.cz/ministerstvo-dopravy-vyhlasuje-prvni-vyzvy-v-ramci-opd-2014-2020/

http://www.contactcommittee.eu

131EUREPORT2016,Appendices

AppendicesAppendix 1 Timetableofthesubmissionofthepartnershipagreementsandprogrammesof

MemberStatesandtheirapprovalbytheCommission

Appendix 2 CurrentstateoffulfilmentofexanteconditionalitiesintheCRasof31March2016

Appendix 3 FocusofprogrammesfinancedfromEUstructuralandinvestmentfunds

Appendix 4 Sources and causes of negative phenomena in the 2007-2013 programmingperiodasidentifiedbytheAuditBody

Appendix 5 OverviewofEuropeanCommission´sauditandfact-findingmissionsintheCzechRepublicin2014and2015

Appendix 6 OverviewofauditmissionsoftheEuropeanCourtofAuditorsin2014and2015

Appendix 7 Flowchart of the permission process for investment projects in the CR andsummaryoftheamendmentoftheActonEIA

Appendix 8 OverviewofSAOauditscompletedintheperiodfrom1April2015to31March2016andpartlyorwhollyfocusedonEUbudgetfinances

132 EUREPORT2016,Appendices

Appendix 1 – Timetable of the submission of the partnership agreements and programmes of Member States and their approval by the Com-mission



Appendix 2 – Current state of fulfilment of ex ante conditionalities in the CR as of 31 March 2016

- Fulfilled:27exanteconditionalities,outofwhich22verifiedbytheCommission

- Partially fulfilled:12exanteconditionalities

- Not fulfilled:1exanteconditionality

Code Short title of ex ante conditionalities

State of fulfilment

State of fulfilment

(%)

Leading ministry

Deadline for fulfilment

Verified by the Commission

T.1.1 R&D–intelligentspecialisation Partially 50 GO 31. 10. 2016

T.1.2 R&D–longtermplanforbudgetsetup Yes 100 GO ---

T.2.1 Digitalgrowth Yes 100 MoIT ---

T.2.2 Infrastructureofaccessnetworksofnewgeneration No 0 MoIT 30. 11. 2016

T.3.1 Supportofbusinessactivities(SBA) Partially 67 MoJ 1.9.2016

T.4.1 Energyefficiency Yes 100 MoIT ---

T.4.2 Productionofheatandelectricity Yes 100 MoIT ---

T.4.3 Renewableenergyresources Yes 100 MoIT ---

T.5.1 Riskmanagementanditsprevention Yes 100 MoE --- (SFC)

T.6.1 Waterresourcemanagement Yes 100 MoE+

MZe MoA (SFC)

T.6.2 Wastemanagement Partially 50 MoE 31. 12. 2016

EZFRV4.1

Goodagriculturalandenvironmentalstate Yes 100 MoA ---

EZFRV4.2

Minimumdemandsonfertilizersandadditives Yes 100 MoA ---

EZFRV4.3

Otherapplicableinterstateprovisions Yes 100 MoA ---

ENRF Longtermnationalaquacultureplan Yes 100 MoA ---

ENRF Fisheryadministration Yes 100 MoA ---

T.7.1 Roadtraffic Partially 93 MoT 30.9.2016

T.7.2 Railroadtraffic Partially 83 MoT 30.9.2016

T.7.3 Othertraffic Partially 66 MoT 30.9.2016

T.7.4 Energynetwork Yes 100 MoIT ---

T.8.1 Activeemploymentpolicy Yes 100 MoLSA ---

T.8.2 Privatebusiness,enterpriseandcompanysetup Partially 75 MoJ 1.9.2016

T.8.3 Reformofthelabourmarketinstitutions Yes 100 MoLSA ---

T.8.5 Assistanceforemployees,companiesandfirms Yes 100 MoLSA --- (SFC)

T.8.6 Youthemploymentsupport Yes 100 MoLSA ---

T.9.1 Povertyreduction Yes 100 MoLSA ---


Code Short title of ex ante conditionalities

State of fulfilment

State of fulfilment

(%)

Leading ministry

Deadline for fulfilment

Verified by the Commission

T.9.2 Romanyassimilationpolicy Partially 84 GO 30. 6. 2016

T.9.3 Health Yes 100 MoH --- SFC

T.10.1 Schoolattendancetermination Yes 100 MoEYS --- SFC

T.10.2 Universityeducation Yes 100 MoEYS ---

T.10.3 Life-longlearning Yes 100 MoEYS ---

T.10.4 Specialeducationandpreparation Yes 100 MoEYS ---

T.11 Publicadministration Partially 55 MoI 31. 12. 2016

O.1 Non-discrimination Yes 100 GO ---

O.2 Genderequality Yes 100 GO ---

O.3 Personswithdisabilities Yes 100 MoLSA ---

O.4 Publiccontracts Partially 70 MfRD 31. 12. 2016

O.5 Publicsupport Partially 66 MfRD 30. 6. 2016

O.6 EIA/SEA Yes 100 MoE ---

O.7 Statisticalsystemsandresultindicators Partially 67 MfRD 30. 6. 2016

Source: Information about fulfilment of ex ante conditionalities – current state, main risks and procedures, NCA, April 2016.

Note:Toconsideranexanteconditionalityasfulfilled,itmustreceiveanagreeablestatementfromtheCommissionthroughtheSFC2014220system.Arecord“SFC”intheVerifiedbytheCommissioncolumnmeansthatitappliestoconditionalitieswhichhadtheinformationabouttheirstatusuploadedintotheSFCsystembytheCR,andatthesametime,thisinformation/statushasnotbeenverifiedbytheCommissionyet.

Whole titles of leading ministries which are not included into the List of Abbreviations: GO–GovernmentOffice, MoJ–MinistryofJustice,MoH–MinistryofHealth.

220 SFC2014isasystemforallofficialelectronicdataexchangebetweenMemberStatesandtheCommission.Seeart.74,par.4RegulationofEPanCouncilNo1303/2013of17December2013.


Appendix 3 – Focus of programmes financed from EU structural and investment funds

Prog

ram

me

nam

eFi

nanc

ed fr

om

ESI f

unds

Man

agin

g au

thor

ityIn

term

edia

te

body

Allo

catio

n

(€ m

il)Pr

ogra

mm

e de

scrip

tion

OP

Tran

spor

t www.opd

.cz/cz/O

P_do

prava_

2014

-202

0ER

DF,C

FMoT

StateFu

nd

forT

rasport

Infrastructure

469

5.77

Themainob

jecti

veofthe

Ope

ratio

nalProgram

meTran

sport(OP

T)isto

ensurehigh

-qua

litytran

sportinfrastructurethroug

hout

theCzechRe

public,including

gradu

alalignm

ento

fthe

qua

lityof

theCzechRe

public’stran

sportsystemwith

the“old”EU

cou

ntrie

s.

Thetran

sportsectoriso

neofthe

mostimpo

rtan

tareasofthe

na

tiona

lecono

my,aff

ectin

gvirtua

llyallarea

sofp

ublicand

privatelifean

dbu

siness.High-qu

ality

tran

sportinfrastructureis

aprereq

uisiteforimprovingthecompe

titivene

ssofthe

enti

re

coun

tryan

ditsre

gion

s.Itsv

arying

qua

lityisalsoone

ofthe

cau

ses

ofte

rrito

riald

ifferen

ces.

Inte

grat

ed R

egio

nal O

pera

tiona

l Pr

ogra

mm

e www.crr.cz/cs/iro

p

ERDF

MfRD

Centrefo

rRe

gion

al

Developm

ent

CR

464

0.70

TheIntegrated

Regiona

lOpe

ratio

nalProgram

me(IR

OP)isafo

llow-

upto

thesevenregion

alope

ratio

nalp

rogram

mesand

partia

lly

toth

eIntegrated

Ope

ratio

nalProgram

meofth

eprog

ramming

perio

dof200

7–20

13.The

IROP’sp

riorityistoena

bleba

lanced

territo

riald

evelop

men

t,im

provetheinfrastructure,improve

publicse

rvicesand

pub

licadm

inistratio

nan

den

suresu

staina

ble

developm

entinvillages,to

wnsand

region

s.

OP

Ente

rpris

e an

d In

nova

tion

for

Com

petiti

vene

ss

www.m

po.cz/cz/pod

pora-pod

nikani/opp

ik

ERDF

MoIT

Czechinvest

Technical

Agen

cyCR

433

1.06

Theob

jecti

veofthe

Ope

ratio

nalProgram

meEn

terprisean

dInno

vatio

nsfo

rCom

petiti

vene

ss(O

PEIC)isto

achievea

compe

titiveand

sustaina

bleecon

omyba

sedon

kno

wledg

ean

dinno

vatio

n.The

term

“com

petiti

ve”includ

esth

eab

ilityof

localcom

paniesto

gaingrou

ndin

worldm

arketsand

create

sufficien

tjob

s.The

term

“sustainab

le”accentua

testhe

long

-term

horizo

nofcom

petiti

vene

ss,w

hichalso

includ

esth

een

vironm

entald

imen

sionofecono

micgrowth.Focus:P

romoti

on

ofre

searchand

develop

men

tforin

novatio

n,develop

men

tof

SMEs’entrepren

eurshipan

dcompe

titivene

ss,ene

rgysaving

san

dde

velopm

ento

fhigh-spee

dinternetaccessn

etworksand

inform

ation

and

com

mun

icati

onte

chno

logies.


Prog

ram

me

nam

eFi

nanc

ed fr

om

ESI f

unds

Man

agin

g au

thor

ityIn

term

edia

te

body

Allo

catio

n

(€ m

il)Pr

ogra

mm

e de

scrip

tion

OP

Rese

arch

, Dev

elop

men

t and

Edu

catio

n www.m

smt.c

z/strukturalni-fo

ndy-1/op

-vvv

ERDF,ESF

MoE

YS

MoE

YSand

region

al

governmen

ts

Technical

AgecyCR

2 76

8.06

Thekeyprincipleofth

eOpe

ratio

nalProgram

meRe

search,

Developm

enta

ndEdu

catio

n(OPRD

E)isdevelop

men

tofh

uman

resourcesforkno

wledg

e-ba

sedecon

omyan

dsustaina

ble

developm

entinasociallycoh

esivesociety,an

dissupp

ortedby

interven

tionsund

erm

orepriorityaxes.Tha

tisfollowed

upby

thesupp

orto

fqua

lityresearchfo

rwhichqua

lified

workforce

represen

tsakeyin

putfactor.Interven

tionsin

edu

catio

nwillalso

be

supp

ortedbysy

stem

cha

ngesaim

edatimprovingtheCzech

Repu

blic’sed

ucati

onsy

stem

.

OP

Envi

ronm

ent

www.opzp.cz

ERDF,C

FMoE

State

Environm

ental

Fund

ofthe

CR

263

6.59

Themainob

jecti

veofthe

Ope

ratio

nalProgram

meEn

vironm

ent

(OPE)isto

protectand

ensurequ

ality

enviro

nmen

tforth

elife

ofth

eCzechRe

publicin

habitants,to

supp

orte

fficien

tuseof

resources,to

elim

inatene

gativ

eim

pactso

fhum

anacti

vityonthe

environm

enta

ndto

mitigateclim

atechan

geim

pacts.

Rura

l Dev

elop

men

t Pro

gram

me

for

2014

–202

0 ea

gri.cz/pu

blic/w

eb/m

ze/dotace/prog

ram-

rozvoje-venkova-na

-obd

obi-2

014

EAFR

DMoA

State

Agric

ultural

Interven

tion

Fund

2 30

5.67

Theprincipa

lobjectiv

eofth

eprog

rammeistore

habilitate,

preserveand

improvetheecosystemsd

epen

dentonagric

ulture

bym

eansofa

gro-en

vironm

entalm

easures,to

investinto

compe

titivene

ssand

inno

vatio

nofagriculturalenterprise

s,

tosu

pporte

ntryofyou

ngpeo

pleintofa

rming,orlan

dscape

infrastructure.The

program

mewillalso

supp

ortd

iversifi

catio

nof

ruralecono

micacti

vitie

swith

theaimofcreati

ngnew

jobsand

im

provingecon

omicdevelop

men

t.Itwillsu

pportC

ommun

ity-Led

LocalD

evelop

men

tand

,morespecifically,the

LEA

DERmetho

d,

whichcon

tributesto

bett

erta

rgeti

ngofsup

portatthe

localn

eeds

ofgiven

ruralareasand

thede

velopm

ento

fcoo

peratio

nbe

twee

ninvolved

partie

satthe

locallevel.


Prog

ram

me

nam

eFi

nanc

ed fr

om

ESI f

unds

Man

agin

g au

thor

ityIn

term

edia

te

body

Allo

catio

n

(€ m

il)Pr

ogra

mm

e de

scrip

tion

OP

Empl

oym

ent

www.esfcr.cz/op

-zam

estnan

ost-2

014-20

20

ESF,Youth

Employmen

tInitiati

veMoLSA

214

5.74

Theob

jecti

veofthe

Ope

ratio

nalProgram

meEm

ploymen

t(OPEm

p)isto

improvethehu

man

cap

italo

fcitizensand

the

publicadm

inistratio

ninth

eCR

,i.e.the

basicelemen

tsof

compe

titivene

ss.The

CzechRep

ublicm

ustp

aycon

siderab

le

atten

tiontoth

esearea

sifitw

antsto

succee

dinto

day’sc

omplex

world.The

OPEm

palsofo

cuseso

nprom

oting

equ

alopp

ortunitie

sbe

twee

nmen

and

wom

en,employee

and

employerada

ptab

ility,

furthe

redu

catio

n,so

cialin

clusionan

dcomba

tingpo

verty,he

alth

services,o

nmod

ernizin

gpu

blicadm

inistratio

nan

dservicesand

on

promoti

nginternati

onalcoo

peratio

nan

dsocialin

novatio

nsin

em

ploymen

t,socialin

clusionan

dpu

blicadm

inistratio

n.

OP

Tech

nica

l Ass

istan

ce

www.strukturalni-fo

ndy.cz

CFMfRD

223.

70

Thepu

rposeofth

eOpe

ratio

nalProgram

meTechnicalA

ssistan

ce

(OPTA

)istofin

anceadm

inistratio

nan

dtosu

pportthe

absorpti

on

andad

ministrativ

ecapa

cityand

com

plem

entaryacti

vitie

snee

ded

fora

successfulope

ratio

nofth

een

tiresystem

ofE

SIFun

dsin

theprog

rammingpe

riodof201

4–20

20.The

OPTA

willbecrucial

fore

nsuringsuccessfulacti

vitie

softhe

MinistryofR

egiona

lDe

velopm

entintheroleofthe

Nati

onalCoo

rdinati

onAutho

rity

andothe

rbod

ies.The

goa

lofthe

OPTA

isto

makesureth

atESI

Fund

sresou

rcesareusedasefficien

tlyasp

ossib

le.

OP Prague

–GrowthPole

www.opp

raha

.cz

ERDF,ESF

Prague

Mun

icipal

Governmen

t

Prague

Mun

icipal

Governmen

t20

1.59

Themainob

jecti

veofthe

Ope

ratio

nalProgram

mePrague

–

Grow

thPoleofth

eCzechRe

publicfo

rthe

program

mingpe

riodis

tocon

tributetoth

emati

cob

jecti

ves.In

doing

that,itisn

ecessary

toensureeff

ectiv

eim

plem

entatio

nofinvestmen

tsin

Pragu

e,

whichwillhelpim

provecompe

titivene

ssofP

ragu

easth

egrow

th

poleofthe

CzechRep

ublicand

toensurequ

ality

lifeofthe

inha

bitants.The

creati

onoffavou

rablebu

sinesse

nviro

nmen

tand

supp

ortforedu

catio

nan

dsciencemustw

orktowardsfu

lfilling

the

roleofP

ragu

easth

emaininno

vatio

ncentreofthe

cou

ntry.A

tthe

sametim

e,itisnecessaryto

ensureeff

ectiv

eman

agem

ento

fall

form

sofresou

rces-land

,rea

lprope

rtyan

dinfrastructure,ene

rgy

andfund

ingwith

inth

emea

ning

ofsustainab

ledevelop

men

tprinciplesand

balan

cing

outth

eirm

utua

llinks.


Prog

ram

me

nam

eFi

nanc

ed fr

om

ESI f

unds

Man

agin

g au

thor

ityIn

term

edia

te

body

Allo

catio

n

(€ m

il)Pr

ogra

mm

e de

scrip

tion

OP

Fish

erie

s 201

4–20

20

eagri.cz/pu

blic/w

eb/m

ze/dotace/op

eracni-

prog

ram-ryb

arstvi-na-ob

dobi-1

ENRF

MoA

State

Agric

ultural

Interven

tion

Fund

31.1

1

Theglob

alobjectiv

eofth

eOpe

ratio

nalProgram

meFisheries

(OPF)issu

staina

blean

dcompe

titiveaqu

aculturebased

on

inno

vatio

n,com

petiti

vene

ss,kno

wledg

ean

dmoreeffi

cien

tuse

ofre

sources.The

program

meaimstode

velopsustaina

blefish

farm

inginth

eCzechRe

publicand

toensureeven

distrib

ution

of

fresh-waterfishth

roug

houtth

eyearto

thedo

mestic

marketin

thede

man

dedrang

e,in

clud

ingthediversificatio

nofaqu

aculture

(fishpon

ds)toen

sureth

eprod

uctio

nofcarpan

ditssu

pplies

toth

emarket,whileitisnecessaryto

supp

ortintrodu

ction

of

mod

ernintensivefish-bree

ding

system

stoincrea

seth

efish

prod

uctio

nan

dtohelpelim

inatene

gativ

een

vironm

entalimpa

cts;

thesystem

swillbeacqu

iredtoprodu

cesa

lmon

idand

otherkinds

offishto

ensureall-yea

r-rou

ndsu

ppliestothemarketn

etwork..

INTE

RREG

V-A

CR-

PR

http://www.cz-pl.eu/

ERDF

MfRD

226.

22

TheOpe

ratio

nalProgram

meCross-Bo

rderCoo

peratio

nCzech

Repu

blic-Po

land

200

7-20

13(O

PCzechRe

public-Po

land

)focuseso

nim

provem

ento

ftranspo

rtaccessib

ilityto

the

cross-bo

rderre

gion

;enviro

nmen

talp

rotecti

on;p

romoti

on

ofecono

miccoo

peratio

n;promoti

onofthe

develop

men

tof

cross-bo

rderinfrastructureand

tourism

services;p

romoti

onof

educati

onal,culturaland

socialeffo

rts;and

coo

peratio

nwith

local

governmen

tsand

otherenti

tieso

nbo

thside

softhe

borde

r.

Tota

l allo

catio

n fo

r the

CR

24206

.21

Sour

ce:PartnershipAgreemen

tforth

eprog

rammingpe

riod20

14-20

20from

26Au

gust201

4,program

mingdo

cumen

ts


Appe

ndix

4 –

Sou

rces

and

cau

ses o

f neg

ative

phe

nom

ena

in th

e 20

07-2

013

prog

ram

min

g pe

riod

as id

entifi

ed b

y th

e Au

dit

Body

Sour

ces o

f neg

ative

ph

enom

ena

Mos

t com

mon

cau

ses o

f neg

ative

phe

nom

ena

Poss

ible

way

s to

redu

ce a

nd p

reve

nt th

e in

cide

nce

of n

egati

ve p

heno

men

a in

the

cont

ext o

f the

w

ork

of th

e im

plem

enta

tion

stru

ctur

e in

the

2014

-202

0 pr

ogra

mm

ing

perio

d

(mainlyap

pliestoMAs/IB,P

CAand

AB)

EU/Czech

legisla

tionan

dothe

rbinding

rules

andregu

latio

ns

-Co

nstantlyin

crea

singqu

antityoflaws,

regu

latio

nsand

otherbinding

rules

-Legalu

ncertaintydue

toin

sufficien

tlysp

ecific

andcompreh

ensib

lelegisla

tionan

droom

for

diffe

rentinterpretatio

ns

-Po

ssibilityofcha

ngeinth

einterpretatio

nof

legisla

tiondu

ringitseffe

ctiveperiod(e.g.in

conseq

uenceofth

eevoluti

onofthe

related

jurisprud

ence)

Althou

ghim

plem

entatio

nstructureen

tities(a

scom

pone

ntso

fministrie

s)havetheirp

lacein

the

legisla

tiveprocessa

sinman

ycasesthe

yhe

lpdrawupprop

osalsforlegaland

otherbinding

rules

andregu

latio

ns,the

ycann

otinflu

enceth

eirfi

nalform.

Themainpo

tenti

alofimplem

entatio

nstructureen

titiesth

ereforeliesinim

provingthequ

ality

of

theirw

orkinth

eprep

arati

onofd

raftlegisla

tionan

dinth

econsultin

gprocess.


Sour

ces o

f neg

ative

ph

enom

ena

Mos

t com

mon

cau

ses o

f neg

ative

phe

nom

ena

Poss

ible

way

s to

redu

ce a

nd p

reve

nt th

e in

cide

nce

of n

egati

ve p

heno

men

a in

the

cont

ext o

f the

w

ork

of th

e im

plem

enta

tion

stru

ctur

e in

the

2014

-202

0 pr

ogra

mm

ing

perio

d

(mainlyap

pliestoMAs/IB,P

CAand

AB)

Metho

dology

ofth

efund

ing

provider

-Freq

uentcha

ngesto

thelegisla

tivefram

ework

-Incompreh

ensib

lem

etho

dologyand

subseq

uentcha

ngesto

itsinterpretationdu

ring

thedraw

downprocess

-Ineffectivebu

reau

craticin

terven

tionsin

metho

dologyand

/orformalism

-Unclear,incom

preh

ensib

leand

difficult-to-

mea

surecriteriain

pub

licprocuremen

t

-Inad

equa

tedescriptio

nofprocesses

-Ab

senceorin

adeq

uatesp

ecificatio

nofcon

trol

proced

ures

Implem

entatio

nstructureen

titiesm

aysign

ificantlyinflu

enceth

equ

ality

ofm

etho

dologiesprim

arily

throug

htheirregularupd

ating

(atrea

sona

bleintervals,th

ough

)furtherto

legisla

tivean

dothe

rfund

amen

talcha

nges.

Twofactorstha

tcou

ldhaveasig

nifican

timpa

ctonim

provingmetho

dologiesisth

etargeted

selecti

onofe

xperienced

metho

dologistsa

ndeffe

ctiveworkon

improvingtheirp

rofessiona

lread

inessa

ndim

provingthequ

ality

ofthe

internalcon

sulta

tionprocess.

Onthepa

rtofthe

AB,com

mun

icati

onbetwee

ntheAB

and

otherim

plem

entatio

nstructureen

tities

couldbe

aneff

ectiv

epreven

tivemea

surein

theim

provem

ento

fprocessesand

practi

calapp

licati

on

ofeffe

ctivecon

trolprocedu

res.Thisc

ommun

icati

onwou

lddrawim

plem

entatio

nstructureen

tities’

atten

tiontowea

knessesinmetho

dologiesin

existen

ceand

,abo

veall,und

erprepa

ratio

nbe

fore

theyareapp

rovedan

dpu

tintopractic

e.

Bene

ficiarie

sof

finan

cesfrom

Europe

anfu

nds

-Inexpe

rience

-Inad

equa

teprofessiona

lcaredu

ringproject

prep

arati

onand

implem

entatio

n

-Inab

ilityto

fulfilthe

ircommitm

entsand

com

ply

with

con

tractualagree

men

ts

-Affi

nityto

ora

ccep

tanceoffrau

dorcorrupti

on

Theim

plem

entatio

nstructure,in

thiscasem

ainlyMAsand

IB,h

aveon

lyone

opti

onin

thismatt

er

–toprope

rlydisc

hargetheiro

bligati

onslaiddo

wninth

esubsidyprovision

rulesa

ndm

aintain

constantand

effe

ctivecom

mun

icati

onwith

ben

eficiariesthrou

ghou

tthe

process.

TheAu

ditB

odycanexertinfl

uenceon

app

lican

tsand

ben

eficiariesthrou

gheffe

ctiveand

targeted

commun

icati

onwith

MAsand

IB,w

hichareben

eficiaries’m

ainpa

rtne

rsin

theprocesso

fdrawdo

wn

from

Europ

eanfund

s.


Sour

ces o

f neg

ative

ph

enom

ena

Mos

t com

mon

cau

ses o

f neg

ative

phe

nom

ena

Poss

ible

way

s to

redu

ce a

nd p

reve

nt th

e in

cide

nce

of n

egati

ve p

heno

men

a in

the

cont

ext o

f the

w

ork

of th

e im

plem

enta

tion

stru

ctur

e in

the

2014

-202

0 pr

ogra

mm

ing

perio

d

(mainlyap

pliestoMAs/IB,P

CAand

AB)

Contracti

ng

organisatio

ns

Inexpe

rience:

-Inad

equa

teprofessiona

lcare

-Una

bletodefi

neclearand

mea

surable

assessmen

tcriteria

-Brea

chesofthe

ActonPu

blicProcuremen

t(deliberateorth

roug

hne

gligen

ce)

-Affi

nityto

ora

ccep

tanceofcorrupti

on

Almost5

0%ofa

llde

tected

shortcom

ingsand

alm

ost7

5%ofa

lliden

tified

ineligibleexpen

diture

arelin

kedtoth

epu

blicprocuremen

tprocess.Inmostcases,d

eficien

ciesofthistyp

earecaused

by

alackofd

ueprofessiona

lcareon

thepa

rtofthe

organ

isatio

nsholding

pub

licte

ndersa

nd/orb

yviolati

onso

fActNo.137

/200

6Co

ll.,o

npu

blicprocuremen

t,eitherth

roug

higno

ranceornegligen

ce.

Thatm

akesitcrucialfo

rcon

tractin

gorganisatio

nsto

con

stan

tlyim

provetheirk

nowledg

eofActNo.

137/20

06Coll.Th

atm

ainlyap

pliestothene

wpub

licprocuremen

tactund

erprepa

ratio

n.

Whe

nthene

wpub

licprocuremen

tactbecom

eseffe

ctive,the

resh

ouldbeconti

nuity

inallarea

sin

whichexisting

practi

cehasprovedsuccessful.

Thego

alisto

reachastatewhe

re(u

nlikethecurren

trea

lity)th

ereisno

dou

btth

atcon

tractin

gorganisatio

nsareacti

ngwith

sufficien

tprofessiona

lcare.

Despite

thepa

rtialsu

ccessestoda

te,M

Asand

IBsh

ouldkee

pim

provingtheirw

orkinrisk

man

agem

ent,de

tecti

nglackingcontrolp

rocedu

resa

ndsw

iftlyim

plem

entin

gthem

inpub

lic

procurem

ent.Th

eou

tcom

eshou

ldbeafund

amen

talimprovem

entincontrolw

ork.

Asre

gardsthe

AB,itsa

udito

rsm

usta

cquiredetailedkn

owledg

eofth

ewayM

Asand

IBapp

roach

riskman

agem

enta

ndm

akeuseofth

iskn

owledg

ethroug

houtth

eau

ditp

rocess.

Theym

usth

avede

tailedkn

owledg

eofth

eprocessesu

sedan

dthecontrolp

rocedu

resa

ppliedin

theseprocessess

othatth

eycan

evaluatetheire

ffecti

vene

ssobjectiv

ely.Tha

twillena

blethem

to

makemoreprecise

and

objectiv

efin

ding

sand

,ultimately,tofo

rmulateprop

osalsforbett

er-qua

lity

correctiv

emea

sures.

ABaud

itorsm

usta

lsohavede

tailedkn

owledg

eofth

eap

pliedan

ti-corrup

tionmea

suresa

ndkno

w

howto

verify

them

whe

nau

ditin

gsystem

sand

ope

ratio

ns.

MAsand

IBand

ABau

ditorsm

ustk

nowabo

utth

emostcom

mon

lyusedmod

usope

rand

iof

irregularitiesand

frau

d,kno

wth

eirred

flagsa

ndbeab

leto

reliablyiden

tifythem

whe

ncarrying

out

specificcontroland

aud

itwork.

MAs,IBan

dAB

mustsha

reinform

ation

and

find

ingsfrom

thisconstantlycha

ngingarea

effe

ctively.


Sour

ces o

f neg

ative

ph

enom

ena

Mos

t com

mon

cau

ses o

f neg

ative

phe

nom

ena

Poss

ible

way

s to

redu

ce a

nd p

reve

nt th

e in

cide

nce

of n

egati

ve p

heno

men

a in

the

cont

ext o

f the

w

ork

of th

e im

plem

enta

tion

stru

ctur

e in

the

2014

-202

0 pr

ogra

mm

ing

perio

d

(mainlyap

pliestoMAs/IB,P

CAand

AB)

Human

resources

ford

rawdo

wn

administratio

nfor

controlw

orkan

dau

ditw

ork

Insufficien

tstaffing

:

-Inexpe

riencean

dinad

equa

teprofessiona

ltraining

-Insufficien

tqua

lityofcon

trolworkor

inad

equa

tecoverageofth

eau

ditedarea

Thestaffi

ngofimplem

entatio

nstructureen

titiesispartly

influ

encedbypoliticald

ecision

s,fina

ncial

capa

citie

sand

thesystem

isatio

nofposition

sinea

chelemen

tofthe

implem

entatio

nstructure.

Room

forsignifican

tprogresso

rintrodu

cing

preventi

vem

easuresb

yim

plem

entatio

nstructure

entiti

esisusuallyre

stric

tedtoth

epresen

tatio

nofra

tiona

land

well-fou

nded

propo

sals.

Implem

entatio

nstructureen

titieshaveinsufficien

tinfl

uenceofth

ede

cisio

n-makingprocessfor

approvingorre

jecti

ngth

esemea

sures.

Thequ

ality

and

professiona

lrea

dine

ssofimplem

entatio

nstructurestaff

can

beinflu

encedby

effectiv

eriskman

agem

entinhu

man

resources,butalso

by:

-recruiting

high-qu

ality

employee

s;

-defi

ning

keyperform

ancein

dicatorsfo

reachem

ployee

org

roup

ofe

mployee

sand

implem

entin

gob

jecti

vecriteriafo

rmea

surin

gtheirw

orkpe

rform

anceand

foro

bjectiv

eassessmen

tof

employee

s;

-implem

entin

gaconti

nuou

sprocessfo

cusin

gon

iden

tifying

keyemployee

sand

talentsa

ndpaying

specialatte

ntion

toth

eirp

rofessiona

land

caree

rgrowth;

-transpa

rentpayand

aso

phisti

catedrewardsand

ben

efitspolicy;

-effe

ctivesp

ending

ontraining

and

edu

catio

n.

ABhasonlypa

rtialin

fluen

ceoverthe

qua

lityofcon

trolworkdo

nebyim

plem

entatio

nstructure

entiti

es,M

Asand

IBin

individu

alope

ratio

nalp

rogram

mes,w

hichcan

beexertedbyhigh-qu

ality

au

ditw

orkan

deff

ectiv

ecommun

icati

onwith

MAsand

IB.

Durin

gitsaud

its,A

Bshou

ldpaycon

stan

tatte

ntion

toth

estaffi

ngand

qua

lificatio

nof

implem

entatio

nstructureem

ployee

scarryingou

tcon

trolwork.

ABsh

ouldm

akeuseofanynegati

vefind

ingsin

thisarea

tofo

rmulaterecommen

datio

ns.

Theprofessio

nalrea

dine

ssofimplem

entatio

nstructureem

ployee

s,in

clud

ingAB

aud

itors,can

be

influ

encedbygreaterra

tiona

lityan

dfocusw

henrecruitin

gne

wemployee

sinselecti

onprocedu

res,

effectiv

eman

agem

ento

ffina

ncesearmarkedfortrainingan

dtargeted

spen

ding

.

Thepe

rforman

ceofa

uditcanmainlybe

influ

encedbyhigh-qu

ality

man

agem

ent,go

odplann

ingan

dratio

nalselectio

nofaud

itorsfo

raud

itteam

s.

- -Inab

ilityto

fulfilthe

ircommitm

entsand

com

ply

with

con

tractualagree

men

ts

- -Affi

nityto

ora

ccep

tanceoffrau

dorcorrupti

onTh

eim

plem

entatio

nstructure,in

thiscasem

ainlyMAsand

IB,h

aveon

lyone

opti

onin

thismatt

er

–toprope

rlydisc

hargetheiro

bligati

onslaiddo

wninth

esubsidyprovision

rulesa

ndm

aintain

constantand

effe

ctivecom

mun

icati

onwith

ben

eficiariesthrou

ghou

tthe

process.


Appendix 5 – Overview of European Commission´s audit and fact-finding missions in the Czech Republic in 2014 and 2015

Year

Audi

t mis

sion

Ope

ratio

nal p

rogr

amm

e/au

dite

esAu

dit t

ype/

subj

ect

Mai

n fin

ding

sFi

nal r

epor

t

2014

DGEMPL

OPE

C

MA

System

aud

it-scruti

nyofM

CSstructure,

efficien

cyand

effe

ctivene

sswith

inOP

Individu

alcorrecti

onsforsh

ortcom

ingof

bene

ficiarie

s

Accepted

individu

al

correctio

nsonthesid

eof

bene

ficiarie

s

DGEMPL

DGREG

IOVa

riousOP

MA,NCA

Publicprocuremen

tforbroad

casting

services

Insufficien

ttranspo

sition

ofD

irecti

vefo

rbroa

dcastin

gservices.

Incomplete(nofin

al

repo

rt)

DGEMPL

DGREG

IOVa

riousOP

MA,NCA

Publicprocuremen

tforbroad

casting

services

Insufficien

ttranspo

sition

ofD

irecti

vefo

rbroa

dcastin

gservices.

Individu

alcorrecti

ons

DGREG

IOOPE

07+

MA

Adeq

uacyofm

anagem

entcon

trolso

fMAan

dIBOPEn

vironm

ent

Shortcom

ingsid

entifi

ed(ine

ligible

expe

nditu

re)

Individu

alcorrecti

ons

DGREG

IOIOP

AB

System

aud

it-G

ainassuranceab

outsystem

functio

nalitybe

twee

n20

07-20

13th

roug

hscrutin

yofaud

itbo

diesacti

vity

Shortcom

ingsid

entifi

ed(ine

ligible

expe

nditu

re)-In

adeq

uateprocedu

resw

ithin

performed

aud

its

Incomplete(nofin

al

repo

rt)

DGREG

IOOPE

I AB

Verifi

catio

nofABactiv

ities-selecti

onofe

ight

auditswith

inOPE

Ifrom201

4With

outfi

ndings

Completed

2015

DGREG

IORO

PSW

MA

MCS

aud

itaccordingtoarticles60an

d72

ECRe

gulatio

nNo.108

3/20

06with

in

complem

entaryM

PŠbetwee

n20

07and

20

13.V

erificatio

nofPC2sufficien

tope

ratio

nselecti

onand

PC4sufficien

tman

agem

ent

control

PC2assessedbycategory2,PC4bycategory

2with

theexcepti

onofp

ublicprocuremen

twhe

rem

anagem

entcon

trolsw

erecarriedou

tbe

fore31Au

gust201

2an

dwerereim

bursed

aft

erth

isda

te.

Incomplete(nofin

al

repo

rt)

DGM

ARE

OPF07

+

MA,AB

Assuranceab

oute

fficien

tMCS

ope

ratio

n,

aimed

atA

B,partly

MA

MAdraftrep

ort-9find

ingsid

entified

Incomplete(nofin

al

repo

rt)the

ABha

daccepted

mosto

fthe

resultsand

remed

ied

mosto

fthe

shortcom

ings

DGREG

IORO

PMS

AB

Gainassuran

ceabo

utsy

stem

functio

nality

betw

een20

07–2

013throug

hscrutin

yofAB

activ

ities

Shortcom

ingsid

entifi

ed(ine

ligible

expe

nditu

re)-In

adeq

uateprocedu

resw

ithin

performed

aud

its

Incomplete(nofin

al

repo

rt)

DGREG

IODG

MAR

EPC

AAu

dito

ffun

dsre

claim

Proced

uralsh

ortcom

ings,ina

dequ

ate

proced

ures

Incomplete(nofin

al

repo

rt)


Appendix 6 – Overview of audit missions of the European Court of Auditors in 2014 and 2015

Year

Date

of e

xecu

tion

Audi

t sub

ject

(pro

gram

me)

Audi

t typ

e (D

AS/

Perf

orm

ance

aud

it)Au

dit f

orm

(on-

the-

spot

/su

rvey

)2014

117

.-21.2.

OPTran

sport(CF

)DA

Son

-the

-spo

t

219

.-28.5

OP

Prag

ue-C

ompe

titive

ness

DAS

on-the

-spo

t

316

.-27.6.

OPEd

ucati

onfo

rCom

petiti

vene

ssDA

Son

-the

-spo

t

430

.6.-4

.7.

29.9.-3

.10.

OPRe

searchand

Develop

men

tforIn

novatio

nDA

Son

-the

-spo

t

518

.-22.8.

Europe

anAgricultureGua

rantee

Fun

dDA

Son

-the

-spo

t

623

.-26.9.

Are

the

Com

miss

ion

and

the

Mem

ber S

tatr

es ta

king

app

ropr

iate

and

effe

ctiv

e ac

tions

to a

ddre

ss th

e pr

oble

m o

f pub

lic p

rocu

rem

ent e

rror

s in

the

Cohe

sion

area

?Pe

rform

anceaud

iton

-the

-spo

t

729

.9.-3

.10.

Europe

anAgriculturalFun

dforR

uralDevelop

men

tDA

Son

-the

-spo

t

810

.-13.11

.ExcessiveDe

ficitProced

ure

Perfo

rman

ceaud

iton

-the

-spo

t

924

.-28.11

. 8.-9.12.

Perfo

rman

ceaud

iton

EUra

ilfreigh

ttranspo

rtinterven

tions

(200

7-20

13program

mingpe

riod)

Perfo

rman

ceaud

iton

-the

-spo

t

1016

.-19.12

.201

4 6.1.-9.1.201

5*OPEd

ucati

onfo

rCom

petiti

vene

ss(E

SF)

DAS

on-the

-spo

t

Februa

rySu

rveyofthe

effe

ctso

fmicrofin

incing

inth

eEu

rope

anm

arketcon

ducted

with

inan

performan

ceaud

itofth

eEC

Asurvey

survey

April

Perfo

rman

ceaud

itofra

ilwayprojectsc

oofin

ancedinth

eprog

rammingpe

riod

20

07-201

3an

dCo

hesio

nfund

survey

survey

April

Surveyofe

ducatio

nalinfrastructureprojectscoo

finan

cedfrom

ERD

Fan

dESF

survey

survey

May

Surveywith

inaperform

anceaud

itofte

chnicalassistan

cein

agricultureand

rural

developm

ent

survey

v

June

Que

stion

naire

relatedtounfulfilledim

plem

entatio

noffina

ncialinstrum

entswith

in

theartic

les5

0-52

ofE

Cprovision

No19

74/200

6EA

FRD

survey

survey


Year

Date

of e

xecu

tion

Audi

t sub

ject

(pro

gram

me)

Audi

t typ

e (D

AS/

Perf

orm

ance

aud

it)Au

dit f

orm

(on-

the-

spot

/su

rvey

)2015

124

.-27.1.

OPRe

searchand

Develop

men

tforIn

novatio

n,Europ

eanRe

gion

al

Developm

entF

und

DAS

on-the

-spo

t

224

.-27.8.

Europe

anAgriculturalG

uarantee

Fun

dDA

Son

-the

-spo

t

37.-15.9.

OPEn

vironm

ent20

07+(CF)

DAS

on-the

-spo

t

420

.-23.10

.OPEd

ucati

onfo

rCom

petiti

vene

ssDA

Son

-the

-spo

t

59.-13.11

.Eu

rope

anAgriculturalFun

dforR

uralDevelop

men

t(ESF)

DAS

on-the

-spo

t

618

.-20.11

.Au

ditcon

cerned

with

theStatem

ento

fAssuran

ce201

5DA

Son

-the

-spo

t

Janu

ary

Surveyinth

econtexto

fperform

anceaud

iton

farm

incomestati

sticsand

pe

rforman

cein

dicators

survey

March

Perf

orm

ance

aud

it of

stat

e ai

d: "D

oes t

he C

omm

issio

n pa

y att

entio

n to

bre

ach

of

EU ru

les f

or st

ate

aid

in th

e co

hesio

n ar

ea?"

survey

April

Fina

ncia

l Ins

trum

ents

Per

form

ance

Aud

it: "H

ave

finan

cial

inst

rum

ents

bee

n an

effi

cien

t mec

hani

sm to

pro

vide

EU

fund

ing

in th

e re

gion

al, s

ocia

l, tr

ansp

ort a

nd

ener

gy p

olic

y ar

eas?

”survey

July

Surveyin

con

necti

onto

aud

itofth

eLand

ParcelIde

ntificati

onSystem

survey

Septem

ber

Audi

t of c

ondi

tiona

lity

for a

nsw

erin

g th

e qu

estio

n: "I

s the

man

agem

ent a

nd c

ontr

ol

syst

em fo

r con

ditio

nalit

y sim

ple

and

effici

ent?

"survey

Octob

erPe

rfor

man

ce A

udit

on C

losu

re: "

Is th

e cl

osur

e of

the

2007

-13

Cohe

sion

and

Rura

l De

velo

pmen

t pro

gram

mes

des

igne

d to

ach

ieve

its e

ffecti

ve im

plem

enta

tion?

”survey

Decembe

rPe

rfor

man

ce A

udit

on N

atur

a 20

00 n

etw

ork

survey

Note:*Aud

itmiss

ionbe

ganwith

thefirstvisitinDe

cembe

r201

4an

dconti

nued

with

thesecond

visitinJanu

ary20

15.


Appendix 7 – Flowchart of the permission process for investment projects in the CR and summary of the amendment of the Act on EIA

Notification of project

Fact-finding procedure

Building permission

Žaloba

Appeal

Ruling on appeal

EIAPROC

E S

S

Flowchart of project permission proceedings in the CR – state from 1 April 2015 The total length of time it takes to permit a project depends on the submission of EIA documentation, documentation for the issuance

of a zoning decision (ZDD) and documentation for issuance of building permission BPD), for which no legal deadline is set (1 month used for calculation)

Time limit for completion of fact-finding procedure: 45 days

1

1

3

3

3

1

1

3

3

3

Zoning proceedings ZDD submission

Zoning decision

EIA opinion

EIA documentation

assessment

public discussion

Ruling on action

Appeal

Appeal Appeal

Ruling on appeal

Ruling on appeal Ruling on appeal

Action

Ruling on action

Appeal

Ruling on appeal

Action

Ruling on action

Action

Coherence stamp 2

Coherence stamp 2

Building proceedings BPD submission

Part A (left)PROJECTS NOT SUBJECT TO EIA PROCESS

Total duration: approx. 1 year; up to several years longer if an action against

a zoning decision or building permission has a deferral e�ect

Part A (left)PROJECTS SUBJECT TO EIA PROCESS

Total duration: approx. 1.5 years; + max. 0.5 years if an action

against a zoning decision or building permission has a deferral e�ect

Appeal may be lodged by:a) notifierb) privileged complainantsTime limit for appeal submission:15 days

Active complainant legitimisation:a) notifierb) privileged complainantsTime limit for appeal submission:2 months

Time limit for issuance of ruling on action: 90 days

Time limit for lodging application for issuance of a zoning decision: not defined

Time limit for issuance of a zoning decision: without undue delay/60 days/90 days

Time limit for completion of fact-finding procedure: 45 days

Time limit for issuance of statement on documentation: 30 days

Time limit for drawing up assessment: 60 days/90 days

Time limit for issuance of statement on assessment and possible ordering of public discussion: 30 days

Time limit for issuance of EIA opinion:30 days

Time limit for lodging application for issuance of a zoning decision: not defined

Time limit for issuance of a zoning decision: without undue delay/60 days/90 days


Time limit for lodging application for issuance of building permission: not defined

Time limit for issuance of building permission: without undue delay/60 days/90 days


Appeal may be lodged by:a) participants in zoning proceedingsb) privileged complainantsTime limit for appeal submission: 15 days

Active complainant legitimisation:a) participants in zoning proceedingsb) privileged complainantsTime limit for appeal submission: 2 months

3

1

Appeal may be lodged by:a) participants in zoning proceedingsb) privileged complainantsTime limit for appeal submission: 15 days

3

1

Active complainant legitimisation:a) participants in zoning proceedingsb) privileged complainantsTime limit for lodging action: 2 months

Appeal may be lodged by:only participants in zoning proceedingsTime limit for appeal submission: 15 days

Active complainant legitimisation:only participants in zoning proceedingsTime limit for appeal submission: 2 months

Time limit for issuance of ruling on action: not defined

Time limit for lodging application for issuance of building permission: not defined

Time limit for issuance of building permission: without undue delay/60 days/90 days

Time limit for issuance of ruling on action: not defined

Appeal may be lodged by:only participants in building proceedingsTime limit for lodging appeal: 15 days

Active complainant legitimisation:only participants in zoning proceedingsTime limit for appeal submission: 2 months

Negative conclusion of fact-finding procedure (not subject to EIA process) – form: decision

Positive conclusion of fact-finding procedure (subject to EIA process) - action as per Part IV of Administrative Procedural Code

Ruling on action Ruling on action

Action Action


Notes:

1)Privilegedcomplainants=theconcernedpublicwithinthemeaningoftheEIAdirective,i.e.legalpersonsunderprivatelawdefendingtheinterestsoftheenvironmentandmeetingthelegallydefinedrestrictions.

2)Coherencestamp=requirementoftheEuropeanCommissionforcheckingthattheprojectpresentedintherelatedproceedings(zoning,building)matchestheprojectforwhichtheEIAopinionwasissued.Abindingopinionisalwaysissuedinbuildingproceeding(affirmative/negative).Inzoningproceedings,abindingopinionisonlyissuedifanegativebindingopinionhastobeissued.

3)Participants in proceedings pursuant to the Building Act, i.e. primarily the applicant andownersofadjoiningland.

Amendment of the Act on EIA

TheamendmentoftheActonEIAenteredintoeffecton1April2015.Theamendmentbroughtanumberofchangesthatwillaffectboththoseapplyingforpermissionforaprojectandtheconcernedpublic.

Binding nature of EIA opinions

TheoutcomeoftheEIAprocedure(“theEIAopinion”)hasnowbecomebinding.Theopinioncanbe independently reviewed in reviewproceedingsunder theadministrativeprocedural code.Otherremedialmeasuresagainstthebindingopinioncanonlybeappliedwhenrelateddecisionsarecontested,however.

Conclusion of fact-finding proceedings

Anegative conclusionof fact-findingproceedings, i.e. that a project needsnomore scrutinyintheEIAprocess,istobepublishedontheofficialnoticeboard.Environmentalorganisationssatisfyingthelegalconditions(seebelow)canlodgeanappealagainstanegativeconclusionandthen,ifappropriate,anactionundertheadministrativejudicialprocess.Theadministrativecourtmustruleonthisactionwithin90days.

Iftheconclusionofthefact-findingproceedingsispositiveandtheEIAprocessconsequentlyhastobetakenfurther,noremediesareadmissible.

Related proceedings

Theconceptof“relatedproceedings”hasnowbeendefined:thismeansproceedingsinwhichdecisionspursuanttospeciallegalregulations(e.g.theBuildingAct,WatersAct,IPPC,MiningActetal.)areissuedandwhichpermitthelocationorperformanceoftheprojectbeingassessedundertheActonEIA.

Public involvement

Theamendmentdefinestheconceptof“concernedpublic”,whichnowmeanspersonswhoserightsandobligationsmaybeaffectedbyadecisionandlegalpersonsunderprivatelawwhichofficiallyperformenvironmentalorlandscapeprotectionactivitiesoroperateinpublichealth.

The Act on EIA now differentiates two categories of non-governmental environmentalorganisations.Thefirstcategoryis“establishedorganisations”,whichmusthaveexistedforatleast3years.Thesecondcategoryis“adhocenvironmentalorganisations”,wherethenumberofsupportingsignatures(200)isthecriteriondefiningtheirlegitimacy.Sincetheamendment,theActonEIAhasalsoregulatedtheparticularsrequiredofthesignaturesdocument.

Publishing of information on the start of related proceedings

Relatedproceedingsarealwayspublishedsolelybyapublicnoticeontheofficialnoticeboard.NowenvironmentalNGOsareobligedtoregisterforrelatedproceedingswithin30daysafter


theinformationonthestartoftherelatedproceedingsispublishedontheofficialnoticeboard–otherwisetheywillnothavethestatusofparticipantsintheproceedings.

Consultative form of public participation

Allpersonswhoexpressaninterestinparticipation,regardlessofhowtheyclaimtheirrightsareaffected,havetherighttoparticipateinrelatedproceedingsonaconsultativebasis.Consultativeparticipationentails:

- rightofaccesstoinformation

- righttoasktherelevantauthoritiestoprovideaccesstoinformationandanswerquestions

- obligationoftherelevantauthoritytotakecommentsintoconsideration

- obligationof the relevantauthority topublishdecisions, including reasons, coveringhowcommentsmadebythepublicweredealtwith

- Remedialmeasuresandaccesstojudicialprotection

The concerned public, not including environmental NGOs, does not acquire the status ofparticipantsinproceedingsrelatedtotheEIAprocess:theyaremerelyguaranteedproceduralrightsaccordingtotherequirementsoftheEIAdirective(seeabove–Consultiveparticipationentails:).Bycontrast,environmentalNGOssatisfyingalltheaforesaidrequirements(3yearsofexistenceor200signatures)areawardedthestatusofparticipantsintheserelatedproceedings,providedtheyregister(seeabove).

Inaddition,environmentalNGOswillbeabletolodgeappealsandsubsequentlyactionsagainstissuedpermitsthatareoutcomesoftherelatedproceedings,eveniftheydidnotparticipateinthesepermissionproceedings.

If NGOs lodge an action against a negative conclusion of fact-finding proceedings, the courtmustruleon itwithin90days. InthiscasetheCourtrulesontheawardofadeferraleffectoron apreliminary injunctionevenwithoutbeingpetitioned, if there is adangerof seriousenvironmentaldamage(thedeferraleffectdoesnothavetobeawardedinallcases).

Coherence stamp

ThiscoherenceverificationisdonetocheckwhetherduringtherelatedproceedingstheprojectwaschangedfromtheprojectassessedintheEIAprocess.

Before filing an application in related proceedings the investor must present the fulldocumentation,includingalistofallchanges,tothecompetentauthority.Iftherehavebeensignificantchangesthatcouldhaveanegativeimpactontheenvironment,anegativeopinionis issuedandtheentireEIAprocess is repeated.Anegativeopinioncanalsobe issued if thefulldocumentationwasnotpresentedtotheauthority intherelatedproceedingsorwasnotpresented in time. If the project has not changed, the relevant authority in the EIA processcommunicatesthistothenotifierandtotherelatedproceedingsauthorityanddoesnotissueabindingopinion. This “coherence stamp” is always required if the relatedproceedingsarebuildingproceedingsorproceedingsonachangetoabuildingprojectbeforecompletion.

Use of the administrative procedural code

Undertheamendment,theadministrativeproceduralcodecanbeappliedtotheEIAprocess,whichmainlymeansthatanEIAopinion(nowbinding)canbereviewedunderthetermsoftheadministrativeproceduralcode.

Projects that have not yet undergone related proceedings must undergo verification.

WhentheamendmentoftheActonEIAhastakeneffect,EIAopinionsissuedbeforetheeffectivedate of the amendmentmust be checked for compliancewith the legal regulations and EIAdirective.Thisverificationwillonlyapplytoopinions inwhosecaserelatedproceedingshave


only just been commenced, however. If this verification identifies non-compliance with thelegalregulationsandEIAdirective,anewEIAisrequired.This“verification”procedurecanbecombinedwiththecoherenceprocedure(seeCoherencestampabove),ifitiscurrentlytakingplace.

Related changes to the Building Act

TheappropriatebuildingauthorityforproceedingsonprojectswithEIAisalwaysthebuildingauthorityofamunicipalitywithextendedcompetence.


Appendix 8 – Overview of the SAO audits published in the SAO Bulletins – Issues 2/2015 and 3/2016 which were focused partly or completely on EU funds

Audit No. Audit subjectPublished in the

SAO Bulletin (Issue/Year)

14/15Fundsspentontheprojectsandmeasuresforsupportandfulfilmentofefficientpublicadministrationincludingsavingsofexpendituresimplementation

2/2015

14/22 Fundsearmarkedfortheinfrastructureofuniversityeducation 2/2015

14/24 EUandstatebudgetfundsprovidedforsettlementofexpendituresofnationalprojectswithintheOperationalProgrammeEducationforCompetitiveness 3/2015

14/26 FundsspentontheprojectsoftheRuralDevelopmentProgramme 2/2015

14/27 FundsoftheEUSolidarityFundprovidedfortheCzechRepublicinrelationtocatastrophicfloods 2/2015

14/28Spiritandtobaccoexcisetaxadministrationandadministrationofrevenuesfromthesalesoftobaccodutystamps,includingthemanagementofthesedutystamps

3/2015

14/32 FundsearmarkedfortheconstructionoflineAofthePragueunderground 3/2015

14/37 Statebudget,EUbudgetfundsandotherfundsacquiredfromabroad 3/2015

14/40 Fundsearmarkedforremittanceofcostsforlandareaamendments 2/2015

15/02 Statebudgetfundsprovidedforsupportofenergysavings 1/2016

15/03 FundsearmarkedforprojectsrelatedtointroductionofelectronicpublicadministrationunderthesupervisionoftheMinistryoftheInterior 1/2016

15/04 Fundsearmarkedfortheinfrastructureoftheproject"Pilsen-Europeanculturalcapital2015" 1/2016

15/06 StatebudgetfundsandEUstructuralfundsearmarkedforfinancingofoperationalprogrammeswithrespecttoprojectssustainability 1/2016

15/10 FundsspentontheNationalInfrastructureforElectronicPublicProcurement(NIPEZ)anditsutilisationforpurchaseofselectedcommodities 3/2016

15/14 FundsearmarkedformodernisationofIII.andIV.transitrailwaycorridor 3/2016

15/18 Fundsearmarkedforhousingsupport 3/2016

15/24 FundsearmarkedfortheimplementationofEUasylumandmigrationpolicyobjectives 3/2016

152 EU REPORT 2016

AUGUST 2016

EU REPORT 2016REPORT ON THE EU FINANCIAL MANAGEMENT

IN THE CZECH REPUBLIC

Czech Republic | Supreme Audit Office | EU REPORT 2016

Date post:	14-Sep-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times