National Audit Office: Up to EEK 1.5 billion of aid from the Cohesion Fund may remain unused by Estonia

Toomas Mattson | 7/11/2008 | 12:00 AM

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TALLINN, 11 July 2008 - According to the National Audit Office (NAO), up to EEK 1.5 billion of transport sector aid from the EU Cohesion Fund may remain unused by Estonia, because the implementation of financed projects has been managed inadequately. Also, the NAO is worried about the absorption capacity during the period ending in 2013.

The NAO audit revealed that in a number of cases the Ministry of Economic Affairs and Communications has failed to ensure that the projects are implemented in accordance with the time frame and the planned extent and budget. The low administrative capacity of the Ministry and the applicants for assistance poses a risk that Estonia may be unable to disburse the required amount of aid by the end of 2010, which may lead to the forfeiture of up to EEK 1.5 billion of EU money.

Due to the delay, Estonia must find the forfeited amounts itself, because the envisaged development of transport nodes is essential for improving the efficiency of the economy.

The NAO audit pointed out the fact that the Ministry has abandoned the implementation of one third of the projects of the period 2004-2006 – only 31 of the initial 49 projects are being implemented. Furthermore, the audit showed that the time frame has not been adhered to in the implementation of projects. 43 of the 49 projects should have commenced by the end of 2005, but in reality, contracts were awarded for only 15 projects by the said date.

Delays in the commencement of projects have proved costly for the beneficiaries, since the public procurement for construction of several major objects was carried forward to 2005 and 2006 when the construction boom sky-rocketed the prices. The NAO finds that this caused the cost of construction projects to increase by more than EEK 1 billion.

Although the use of assistance from the Cohesion Fund in the new programming period 2007-2013 is only in the beginning phase, the NAO detects signs of danger which imply that the projects haunting the preceding period will continue. The list of transport sector projects financed from the Fund in the new period was approved belatedly only in 2008 and it envisages the deployment of only half of the available aid. Since delays in the selection of projects postpone the commencement of new projects and later on cause the accumulation of projects, the NAO lacks assurance that the government will be able to use all the aid during the Fund's programming period 2007-2013 and that the projects will be implemented in a timely manner and to the planned extent.

Background information
The purpose of the Cohesion Fund is to contribute to the modernisation of the infrastructures of economically less developed areas of the EU by financing of up to 85 % of their expenditure. In 2004-2006, the EU allocated EEK 2.4 billion to Estonia for developing the transport infrastructure, supplemented by EEK 890 million of ISPA (EU programme for pre-accession assistance which aimed to help the candidate countries in investing in the development of the environment and infrastructure sectors) funds carried forward. In 2007-2013, there is EEK 8.22 billion available for Estonia. The intermediate body responsible for the implementation of the Fund's transport projects is the Ministry of Economic Affairs and Communications.

Toomas Mattson
Communication Manager of National Audit Office
Telephone: 6400 777
Mob: 51 34900
E-mail: toomas.mattson@riigikontroll.ee

  • Posted: 7/11/2008 12:00 AM
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