Audit of EU Structural Funds investments: more than EUR 235 million misused

• The application of Covid-19 business support measures poses risks relating to the proper use of the money.
• There have been cases of construction work in special category buildings being carried out by legal entities and professionals who are not authorised to carry out such work.
• The overall error rate of 14.15% is the highest for the whole period.

The European Union (EU) Investment Audit Department of the National Audit Office has carried out an assessment of the functioning of the management and control system created for the implementation of the Operational Programme for Investments of the European Union Funds for 2014-2020, expenditure declared in the accounts and expenditure declared for the period from 1 July 2023 to 30 June 2024 for which reimbursement has been requested from the European Commission.

According to the auditors, not all of the COVID-19 business support was used properly. There was no adequate risk management control for the measure "Covid-19 e-commerce model" (worth more than EUR 40 million). As a result, the quality of most of the websites created with project money was not in line with the money spent on them. As a result of the risks identified by the Audit Authority, the Innovation Agency declared more than EUR 3.6 million of expenditure ineligible that should be recovered from the project implementors. The auditors point out that the new period of EU projects also contains a similar measure on e-solutions, so the Innovation Agency should assess the potential risks and take appropriate action to avoid errors.

The audit found that it is still common for construction contract projects in special category buildings to be carried out by subcontractors or specialists who are not authorised to carry out the construction work. For example, the construction works of the Medical Science Centre of the Faculty of Medicine of Vilnius University and of the Study Campus of the Lithuanian Academy of Music and Theatre were carried out by subcontractors without the required certificate. These non-compliances resulted in more than EUR 3.5 million of ineligible expenditure.

As every year, this audit identified procurement irregularities which were attempted to be resolved by changing the procurement practice regarding changes to works during the implementation of the contract: contract changes are now proposed to be calculated mathematically by assessing the difference, which creates a risk of abuse in the volume of changes made. The new practice raises a number of risks due to the lack of equality of treatment of former project participants.

According to the auditors, the overall error rate of 14.15% was found in 32 projects financed with EU money. This exceeds the European Commission's (EC) tolerable limit of 2% and is the highest in the history of the National Audit Office's audits of EU Structural Fund investments, so it is crucial to ensure that these errors do not occur in other EU projects.

"This error level has led Lithuania to make a financial correction of more than EUR 216 million, which is covered with state money. In this report, the auditors share risks of project administering authorities which I believe will be very useful for the administration of projects for the 2021-2027 EU funding period. I also hope that the errors now identified will not be repeated and will be significantly reduced in EU projects of the new period", said Auditor General Mindaugas Macijauskas.

The results of the audit have been submitted to the European Commission for approval as required by Article 139 of Regulation (EU) No 1303/2013 of the European Parliament and of the Council.