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.
11EUREPORT2016,ReportontheEUFinancialManagementintheCR
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,
12 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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).
13EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
14 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
15EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
16 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
17EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
18 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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).
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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.
20 EUREPORT2016,ReportontheEUFinancialManagementintheCR
21EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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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.
23EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
24 EUREPORT2016,ReportontheEUFinancialManagementintheCR
• 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
25EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
26 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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).
27EUREPORT2016,ReportontheEUFinancialManagementintheCR
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).
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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.
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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.
30 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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- 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.
32 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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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.
34 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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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.
36 EUREPORT2016,ReportontheEUFinancialManagementintheCR
37EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
»
38 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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;
39EUREPORT2016,ReportontheEUFinancialManagementintheCR
• 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
40 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
41EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
42 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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).
43EUREPORT2016,ReportontheEUFinancialManagementintheCR
- 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.
44 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
45EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
46 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
47EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
out of which CR 0 0.0 2 0.1
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
out of which CR 0 0.0 0 0.0
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
out of which CR 0 0.0 83 11.6
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.
48 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
49EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
50 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
51EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
52 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
Source: EU Budget 2014 – Financial Report,Commission2015.
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
Source: EU Budget 2014 – Financial Report,Commission2015.
53EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
54 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
Source: EU Budget 2014 – Financial Report,Commission2015.
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.
55EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
.
Source: EU Budget 2014 – Financial Report,Commission2015.
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/€.
56 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
89 TheCNB’smonthlycumulativeaverageoftheforeignexchangemarketrateforJanuarytoDecember2015wasusedfortheconversion:27.283CZK/€.
90 Intheprogrammingperiod2007-2013,ERDF,ESFandEMFFbelongedamongstructuralfunds.
57EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
58 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
59EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
60 EUREPORT2016,ReportontheEUFinancialManagementintheCR
€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.
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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).
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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.
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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.
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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.
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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.
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- 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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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-- 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.
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- 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
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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.
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- 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.
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- 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.
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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.
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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
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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.
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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.
Special Report No. 2/2015165
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).
Special Report No. 10/2015166
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.
Special Report No. 16/2015167
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.
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Special Report No. 23/2015168
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).
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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.
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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.
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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.
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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
Source:SAIFmaterials,March2016.
NB:*reimbursementofsingleapplicationsin2014outoftheRDPfinancialenvelopefortheRDP14+.
172 Inthecaseofinterventionpurchasesandprivatestorageofmilkproductsandpigmeat,receiptofapplicationswascarriedoutattheendof2015andthebeginningof2016.Theexpenditureshavenotbeenrealisedyet.TheexpenditureCZK87.15millionisarepaymentofaloanforinterventionpurchases.
173 OtherexpenditurerelatedtoCMOistransferofexpiredsharefromreturnedsubsidies.
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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
Source:SAIFmaterials,March2016.
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
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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.
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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
Source:MoAmaterials,March2016.
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.
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(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.
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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/€.
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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
Source:MoAmaterials,March2016.
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/€.
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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.
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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.
Special Report No. 4/2015181
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.
Special Report No. 5/2015182
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.
Special Report No. 11/2015184
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?
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Special Report No. 12/2015185
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.
Special Report No. 20/2015186
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.
Special Report No. 25/2015187
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.
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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.
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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.
100 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
192 TheCNB’smonthlycumulativeaverageoftheforeignexchangemarketrateforJanuarytoDecember2014wasusedfortheconversion:27.533CZK/€.
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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.
102 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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- 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.
104 EUREPORT2016,ReportontheEUFinancialManagementintheCR
D.4.4 EU authorities’ audit work in the field of other EU financial instruments
Special Report No. 15/2014199
InthisaudittheEuropeanCourtofAuditorsfocusedontheeffectivenessoftheEBF200andtheachievementofthefund’sgoals.TheECAstatedthattheoverallresultcouldnotbemeasuredduetoweaknessesintheresponsibleauthorities’monitoringandinexpostevaluationsbytheCommissionandMemberStates.One reason is that theCommissiononly specifiedconcretereportingdata in2011,bywhichtime theactions for inclusion in theevaluationhad largelybeencompleted.ECAauditorsidentifiedseriousdeficienciesinthemanagementoftheEBFinMemberStates.TheECAstatedthattheEBFhascontributedtoexternalbordermanagement,buttheoverallresultcouldnotbemeasuredduetothelackofSMARTobjectivesandmeasurableindicators,sotheCommissionwasunabletoperformaproperevaluation.
Special Report No. 9/2016201
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).
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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
106 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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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.
108 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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
109EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
110 EUREPORT2016,ReportontheEUFinancialManagementintheCR
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.
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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.
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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.
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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.
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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/€).
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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.
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- 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/.
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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).
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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.
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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.
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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
133EUREPORT2016,Appendices
134 EUREPORT2016,Appendices
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 ---
135EUREPORT2016,Appendices
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.
136 EUREPORT2016,Appendices
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
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catio
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il)Pr
ogra
mm
e de
scrip
tion
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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.
137EUREPORT2016,Appendices
Prog
ram
me
nam
eFi
nanc
ed fr
om
ESI f
unds
Man
agin
g au
thor
ityIn
term
edia
te
body
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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.
138 EUREPORT2016,Appendices
Prog
ram
me
nam
eFi
nanc
ed fr
om
ESI f
unds
Man
agin
g au
thor
ityIn
term
edia
te
body
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catio
n
(€ m
il)Pr
ogra
mm
e de
scrip
tion
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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
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ratio
nalProgram
mePrague
–
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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.
139EUREPORT2016,Appendices
Prog
ram
me
nam
eFi
nanc
ed fr
om
ESI f
unds
Man
agin
g au
thor
ityIn
term
edia
te
body
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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
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CR-
PR
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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
140 EUREPORT2016,Appendices
Appe
ndix
4 –
Sou
rces
and
cau
ses o
f neg
ative
phe
nom
ena
in th
e 20
07-2
013
prog
ram
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g pe
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as id
entifi
ed b
y th
e Au
dit
Body
Sour
ces o
f neg
ative
ph
enom
ena
Mos
t com
mon
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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
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stru
ctur
e in
the
2014
-202
0 pr
ogra
mm
ing
perio
d
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pliestoMAs/IB,P
CAand
AB)
EU/Czech
legisla
tionan
dothe
rbinding
rules
andregu
latio
ns
-Co
nstantlyin
crea
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antityoflaws,
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latio
nsand
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-Legalu
ncertaintydue
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sufficien
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ecific
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tionan
droom
for
diffe
rentinterpretatio
ns
-Po
ssibilityofcha
ngeinth
einterpretatio
nof
legisla
tiondu
ringitseffe
ctiveperiod(e.g.in
conseq
uenceofth
eevoluti
onofthe
related
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ence)
Althou
ghim
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entatio
nstructureen
tities(a
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pone
ntso
fministrie
s)havetheirp
lacein
the
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sinman
ycasesthe
yhe
lpdrawupprop
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andregu
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ns,the
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eirfi
nalform.
Themainpo
tenti
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nstructureen
titiesth
ereforeliesinim
provingthequ
ality
of
theirw
orkinth
eprep
arati
onofd
raftlegisla
tionan
dinth
econsultin
gprocess.
141EUREPORT2016,Appendices
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
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2014
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0 pr
ogra
mm
ing
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pliestoMAs/IB,P
CAand
AB)
Metho
dology
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efund
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provider
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ngesto
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-Incompreh
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etho
dologyand
subseq
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ngesto
itsinterpretationdu
ring
thedraw
downprocess
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reau
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tionsin
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dologyand
/orformalism
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preh
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senceorin
adeq
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ecificatio
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Implem
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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
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etargeted
selecti
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xperienced
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ndeffe
ctiveworkon
improvingtheirp
rofessiona
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inessa
ndim
provingthequ
ality
ofthe
internalcon
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tionprocess.
Onthepa
rtofthe
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mun
icati
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and
otherim
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tities
couldbe
aneff
ectiv
epreven
tivemea
surein
theim
provem
ento
fprocessesand
practi
calapp
licati
on
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ommun
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onwou
lddrawim
plem
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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
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tractualagree
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dorcorrupti
on
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ainlyMAsand
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aveon
lyone
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aintain
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mun
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eficiariesthrou
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ditB
odycanexertinfl
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MAsand
IB,w
hichareben
eficiaries’m
ainpa
rtne
rsin
theprocesso
fdrawdo
wn
from
Europ
eanfund
s.
142 EUREPORT2016,Appendices
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
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ce a
nd p
reve
nt th
e in
cide
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egati
ve p
heno
men
a in
the
cont
ext o
f the
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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:
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equa
teprofessiona
lcare
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bletodefi
neclearand
mea
surable
assessmen
tcriteria
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chesofthe
ActonPu
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akesitcrucialfo
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wpub
licprocuremen
tactbecom
eseffe
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ouldbeconti
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sin
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practi
cehasprovedsuccessful.
Thego
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reachastatewhe
re(u
nlikethecurren
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lity)th
ereisno
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btth
atcon
tractin
gorganisatio
nsareacti
ngwith
sufficien
tprofessiona
lcare.
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rtialsu
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te,M
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ouldkee
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orkinrisk
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rocedu
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iftlyim
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ork.
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udito
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owledg
eofth
ewayM
Asand
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roach
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agem
enta
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akeuseofth
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rocess.
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usth
avede
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eprocessesu
sedan
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rocedu
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ppliedin
theseprocessess
othatth
eycan
evaluatetheire
ffecti
vene
ssobjectiv
ely.Tha
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blethem
to
makemoreprecise
and
objectiv
efin
ding
sand
,ultimately,tofo
rmulateprop
osalsforbett
er-qua
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emea
sures.
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itorsm
usta
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pliedan
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w
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gsystem
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ope
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usope
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ndbeab
leto
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itwork.
MAs,IBan
dAB
mustsha
reinform
ation
and
find
ingsfrom
thisconstantlycha
ngingarea
effe
ctively.
143EUREPORT2016,Appendices
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
:
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riencean
dinad
equa
teprofessiona
ltraining
-Insufficien
tqua
lityofcon
trolworkor
inad
equa
tecoverageofth
eau
ditedarea
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ngofimplem
entatio
nstructureen
titiesispartly
influ
encedbypoliticald
ecision
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ncial
capa
citie
sand
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isatio
nofposition
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chelemen
tofthe
implem
entatio
nstructure.
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forsignifican
tprogresso
rintrodu
cing
preventi
vem
easuresb
yim
plem
entatio
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entiti
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epresen
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land
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nded
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entatio
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titieshaveinsufficien
tinfl
uenceofth
ede
cisio
n-makingprocessfor
approvingorre
jecti
ngth
esemea
sures.
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ality
and
professiona
lrea
dine
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entatio
nstructurestaff
can
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encedby
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eriskman
agem
entinhu
man
resources,butalso
by:
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high-qu
ality
employee
s;
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ning
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ancein
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ployee
org
roup
ofe
mployee
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gob
jecti
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rmea
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gtheirw
orkpe
rform
anceand
foro
bjectiv
eassessmen
tof
employee
s;
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entin
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nuou
sprocessfo
cusin
gon
iden
tifying
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talentsa
ndpaying
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ntion
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rofessiona
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rgrowth;
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rentpayand
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phisti
catedrewardsand
ben
efitspolicy;
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ctivesp
ending
ontraining
and
edu
catio
n.
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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
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IB.
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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.
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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.
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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.
144 EUREPORT2016,Appendices
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
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MA
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it-scruti
nyofM
CSstructure,
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cyand
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ctivene
sswith
inOP
Individu
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onsforsh
ortcom
ingof
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s
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nsonthesid
eof
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ficiarie
s
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DGREG
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riousOP
MA,NCA
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tforbroad
casting
services
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ttranspo
sition
ofD
irecti
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gservices.
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al
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irecti
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ons
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anagem
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ight
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4With
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ndings
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erificatio
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ort-9find
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ied
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145EUREPORT2016,Appendices
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-
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/su
rvey
)2014
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ompe
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146 EUREPORT2016,Appendices
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.
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tforIn
novatio
n,Europ
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gion
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entF
und
DAS
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uarantee
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vironm
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it: "H
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hani
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ntificati
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ary20
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147EUREPORT2016,Appendices
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 issuance of ruling on action: 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
Time limit for issuance of ruling on action: 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
148 EUREPORT2016,Appendices
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
149EUREPORT2016,Appendices
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
150 EUREPORT2016,Appendices
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.
151EUREPORT2016,Appendices
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