Czech Region must pay more than EUR 7 million for subsidy distribution errors

Errors committed recently in the distribution of social services funds in Liberec Region did not constitute a felony. Police have shelved the case.

Liberec Regional Governor Martin Půta (STAN) informed the regional councilors of the outcome of the recent proceedings on 4 June. The Regional Authority filed criminal charges in February 2012 against the Liberec Romani Association on suspicion of subsidy fraud.  

The region now faces having to return CZK 103.2 million in subsidies and pay more than CZK 102 million in fines over its own financial management errors, the equivalent of EUR 7 million. The sanctions concern the region’s program supporting preventative social services as designed by the previous Social Democratic leadership of the authority.  

Liberec Region received CZK 210 million crowns between the summer of 2009 and 2012 for social services. However, the Revenue Authority discovered serious errors in the issuing of public tenders by the authority in its audit of the period from 1 April 2009 – 30 June 2011.

During the 12 selection procedures, none of the candidates applying for funding met the qualification requirements at the time, nor were they able to qualify subsequently, and they all should have been excluded from competition. Police, too, have pointed out errors committed by the regional authority.

A police investigator warned that the contracts entered into by the region were unclear and that its invoicing was insufficiently audited. It had previously been proven that more than CZK 25 million had been unjustifiably paid to the Liberec Romani Association, even though regional bureaucrats and politicians had information at their disposal showing that the association’s bookkeeping had enormous deficiencies.

The authorities failed to halt the subsidies despite that information. "However, it is true that most of the money really did go where it was supposed to, i.e., to social services and excluded localities," Regional Councilor Petr Tulpa (Mayors for Liberec Region) said previously.

The Governor has now said that during the previous Social Democratic leadership, the audit mechanism at the Regional Authority completely failed. "What’s worse, the auditing concerned only the first half of the projects, which did not end until the close of 2012," Půta said.

Social services will reportedly continue to be provided by the organizations from that first selection procedure. It could happen that if the Revenue Authority audits other funding periods, the region will have return the rest of those subsidies as well and pay a fine.