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The compliance of the public funds management by the Implementation Unit of the Increase of the Food Production Project

March 25, 2020 views 1022

 

During the meeting on March 25 this year, the Court of Accounts of the Republic of Moldova examined the Audit Report on compliance of the public funds management by the Implementation Unit of the Increase of the Food Production Project.

The technical assistance given by the Government of Japan contributed to the increase of the food production and the tangible results for the agriculturists. The modernization of the agricultural sector includes the relevant supplying with performant agricultural equipment and machinery.

During 2001-2018 the Government of Japan has given to the Government of the Republic of Moldova an overall grant of 445,0 million lei:

  • 198,4 million lei – for the implementation of the Project regarding the assistance of the Unprivileged Farmers;
  • 47,1 million lei – for the implementation of the Project regarding the improvement of the Equipment of the National Training Center in the field of Agriculture Mechanization;
  • 129,6 million lei – for the implementation of the Project regarding the Efficient Usage of the Biomass Solid Fuel ( procurement of pellet boilers, pellets production equipment);
  • 69,9 million lei – for the implementation of the Conservative agriculture project – Developing a sustainable soil management system in Moldova (procurement of Kubota tractors).

The aim of this mission was to offer a reasonable assurance regarding the compliance of the public funds management by the Implementation Unit of the Increase of the Food Production Project and provide the according recommendations.

During the mission’s performance, the audit focused on obtaining the assurance if the activities, transactions and data were performed according to the legal regulations, including the provisions within the Exchange Notes signed between the Government of Moldova and the Government of Japan.

In order to support the findings and issue recommendations, the audit was made within the Implementation Unit of the Increase of the Food Production Project by collecting the relevant evidence from the Ministry of Agriculture, Regional Development and Environment, the National Training Center in the field of Agriculture Mechanization and from certain users and providers of the implemented Projects.

During its activity period, the Implementation Unit has managed seven Projects with an overall value of 564,4 million lei. Four of these Projects were supported by the Government of Japan with over 445,0 million lei or 78,9% from the overall value. Three of the projects were financed by other donators – the United Nations Development Programme, European Committee, the USA Government, but were managed by the Implementation Unit as a beneficiary.

During 2001-2018, the Beneficiaries of the Installments Selling Program 2KR procured over 8420 unities of agriculture machinery. In order to train them the National Training Center in the field of Agriculture Mechanization was created and quipped with all the necessary machinery. In order to improve the biomass energy usage the Agriculture Biomass Processing Center for pellets producing was created and 25 pellet boilers were delivered.

According to the Unit’s Regulation, based on the agreements with other international organizations, the Unit can coordinate and manage the implementation activities of other projects financed by it. As a result, during 2001-2018, the Unit, as a beneficiary, managed funds within other projects, which were based on the signed agreements that had an overall value of over 119,4 million lei.

As a result of the audit there were discovered dysfunctionalities within the management and usage of the funds that include:

  • Not assuring the compliance of the process regarding the Unit’s creation;
  • The lack of transparency and structure of the funds reporting regarding the Partner Fund for each project, because of the fact that all the resources were managed throughout the same banking account;
  • The Unit placed the financial resources within the deposit accounts in the situation when no provisions regarding the disposal and usage of financial means existed;
  • The lack of assurance regarding the relevant control from the Agriculture and Food Industry Ministry (currently the Ministry of Agriculture, Regional Development and Environment), which allowed the signing of judicial acts regarding the implementation of the projects managed by the Unit by people that had no legal rights;
  • The Unit did not ensure the valorization of the opportunities given by the Japanese partners within the 2 KR Program regarding the procurement of agriculture machinery;
  • Trading expensive agricultural equipment and not taking into account the donator’s principles in this domain;
  • When selecting the beneficiaries of the 2 KR Program, the Unit accepted ineligible solicitants and limited the access to the program for the potential participants;
  • Differentiated expenditures were included in the cost of the agricultural equipment and machinery regarding certain beneficiaries of the 2 KR Program;
  • The lack of internal procedures regarding the obligation of facultative insurance, which may involve additional expenditures for the Unit, because of the agricultural machinery and equipment destruction or deterioration;
  • Not assuring the necessary documents regarding the commercial offer, because of the lack of internal regulations in this domain;
  • The increase of the number of expired claims with an overall value of 36,8 million lei, determined by the internal regulations insufficiency and the monitoring process of the goods sold to the 2 KR beneficiaries;
  • The Unit did not ensure well formalized procedures regarding the procurement organization and performance;
  • The decisional factors (the Ministry, the Unit) did not take all the relevant and sufficient measures in order to ensure the functionality of the Agricultural Biomass Processing Center;
  • Not ensuring the functionality of 11 biomass boilers from the overall of 25 delivered by the Japanese partners, because the involved bodies did not perform their obligations (the Unit and the LPA);
  • Not assigning the Unit to be a budgetary institution subordinated to the Ministry, which has led to the lack of reporting regarding the indicators linked to the state budget (incomes, expenditures, credits given and received) and regarding the debts. This fact affected the performance of the state budget.

 

The financial means within the Partner Fund were used without any “Operation Programs” and were established by the parts within the Exchange Notes, which did not ensure the Program’s aim – ensuring the unprivileged farmers with agriculture machinery.

Also, even though regarding 6 tranches there was established the obligation to accumulate financial resources within the Partner Fund in a 50% quantum, the Unit increased the percentage up to 100% from the agricultural machinery’s delivered price. This situation contributed to the increase of the final selling price of the equipment to the beneficiaries of the Program and they did not receive the privileges given by the donor.

In this context, the unsupported increase operated by the Implementation Unit has compromised the program’s conditions and did not ensure the usage of the grant regarding the possibility of the small and average farmers to buy agriculture machinery at a lower price.

Also, in 2012 the Unit excluded the data that had to be registered within the “Partner’s Fund Results Report” regarding the actual volume of the means within the Partner’s Fund. In this way the Unit did not report the sum of 33,8 million lei and this situation determined the fact that the Japanese partner could not manage the financial means anymore.

As a result of the audit assessments it was stated that the works regarding the building of the National Training Center in the field of Agriculture Mechanization were made on a terrain that belongs to the state, has an agricultural purpose and during 1996 was given into usage for the Agriculture Household “CHISINAU’S GREENHOUSES”.

The terrain was rented for 30 years by “ECOPLANTSERE” and the lessor was the State Agricultural Enterprise “CHISINAU’S GREENHOUSES”. It was attested that the PLC “ECOPLANTSERE”, reorganized in 2016 into the LLC “ECOPLANTSERE”, was liquidated in 2017. Its successor became its founder – LLC “ECOPLANTERA”.

The audit stated that because of unfounded reasons, until 2019, the terrain linked to the Training Center’s building was not transmitted into usage to the Public Institution National Training Center in the field of Agriculture Mechanization. The created situation involves the risk that the terrain might be sold and the Public Institution might not keep its right of first refusal.

The Training Center’s building, built during 2005-2007, on the public domain terrain, with the public financial means (over 17,3 million lei) of the Implementation Unit’s funds, represents a real estate asset that is also a public and private ownership.

The asset “building of the National Training Center in the field of Agriculture Mechanization” was registered by the Chisinau Territorial Cadastral Office within the property of the “ECOPLANTSERE” in 2007.

In this context, in 2007 the real estate asset was divided in two parts – 2482,9 s.a. belonging to the Implementation Unity and 639,1 s.a. belonging to the LLC AGROFARMOTECH.

Regarding the Center’s activity, in 2010 the Implementation Unit submitted without charge assets with an overall value of 18,4 million lei, which were bought from the 2 KR Partner Fund’s account.

Even though the donor accepted to diminish the 2 KR Fund with 15,6 million lei, the Unit used 20,3 million lei for building the pellets factory, the building’s foundation, the pumping station, etc., so it used more money without the agreement of the Japanese partner. The building works of the pellets factory were procured by the Unit without any clear written procedures.

Also, the division of the building’s infrastructure has generated additional costs of over 0,6 million lei, as a result of two separate contests.

The audit mentions that according to the provisions of the Budgetary-tax responsibility and public finances Law, the external grants meant for the outside financed projects are a part of the budgetary incomes and the credits given within the Project represent debt operations and are a part of the financing sources. The transactions made throughout the project were not reported to the Ministry of Agriculture, as a founder, in order to include them in the Ministry’s consolidated report, nor by the Ministry of Finance in the state budget performance.