[Cyprus Times] Audit Report: Possible illegal state aid for the pandemic

Grants were paid before the approval of the Plan by the European Commission Minutes of meetings were not kept by the Ministry of Finance There was no recorded procedure for the implementation of the Plan All the findings of the Auditor General's report on the "State Grant Scheme for Enterprises and Self-Employed Workers"

Significant deviations were identified by the Audit Service during implementation and implementation, by the Ministry of Finance, of the "Plan of State Aid to Enterprises and Self-Employed Persons", contrary to how it was approved by the European Commission. In its report entitled "State Aid Scheme for Enterprises and Self-Employed Workers", the Audit Office even refers to any illegal state aid, to potentially non-beneficiaries.

See the Audit Office report payments made to any non-beneficiaries and any overpayment as illegal State aid.
[/LIST]

We recommended that the PO recalculate the grants on the basis of the provisions of the Plan as approved by the CoC, taking into account all the suggestions of our Office concerning the deviations observed from the provisions of the Plan and proceed with the recovery of the illegal State aid.

• The payment of the grants on the basis of the Plan started before the submission of the relevant Plan to the Office of the State Aid Control Authority for notification to the General 1 SPECIAL REPORT YO/03/2022 Competition Directorate of the European Commission (E.C.C.) and therefore before receiving the necessary approval from the European Commission.

We recommended that the submission of State aid projects to the competent bodies/institutions should be done in a timely manner and that the commencement of payments should be lawful in relation to the State's obligations under the relevant acquis communautaire.

• The PO did not comply with the requirement to disclose and submit an annual report, within one year, on grants paid in excess of €100,000 (€10.000 for the agriculture and fisheries sector), although their payment started on 1.2.2021.

We recommended that the PO comply with the obligations to the CoE regarding the disclosure of grants and the preparation and submission of the annual report, to ensure, inter alia, the principle of transparency.

• The PO did not carry out checks to verify the compliance of aid recipients with the condition of continuing their activity after the relaxation of the measures.

We recommended that the SO, in cooperation with the CF, carry out relevant checks to identify those persons who received a grant and did not comply with the going concern criterion within 2021 and initiate procedures to recover the grants paid.

• The IO did not keep minutes of the meetings where substantive decisions were taken to formulate the criteria and other aspects of the Plan, but instructions were given, either verbally or through internal correspondence. Furthermore, not all the relevant data relating to the Plan, which was approved by the CoC, were found in the TF in a physical and/or electronic file.

We recommended that, for the purposes of transparency and better control, the various criteria and the procedure for determining them should be recorded in detailed minutes, in which the decisions taken should be clearly set out, by analogy with what applies to collective bodies, on the basis of the General Principles of Administrative Law Act of 1999 (Law No 158(I)/1999).

• There was no documented procedure for the implementation of the Plan, including the allocation of responsibilities/responsibilities, both for the SO and the CF, regarding the implementation and monitoring of the various processes at all stages of the Plan, in order to avoid errors and omissions or duplication of responsibilities. It is noted that based on the Decision of the Cabinet of Ministers of the Council of Ministers of the Republic of Cyprus dated 5 June 2008. 8.1.2021, the Minister of Finance was authorised, inter alia, to determine the procedure for the implementation of the said Plan.
• We have not identified audit evidence confirming the MO's assertion that the responsibility for checking, prior to the payment of any 2 SPECIAL REPORT MO/03/2022 grant, all cumulative conditions of the Plan was assigned to the MoF from the outset. The only condition for which we identified a specific ex ante reference by the PO related to the need for the CF to verify whether the VATable persons were international business corporations (IBCs), which were not beneficiaries and should be exempted.
  [*]No written, clear instructions from the Tax Assessor or other authorised person to TF officials were identified, recorded in the relevant TF files, as to the procedure to be followed for the purposes of paying grants under the criteria of this Scheme, resulting in the incorrect payment of grants.
  [*]The PO did not consider asking the IF, either at the outset or at the stage of finalising the categories of economic activities that would be eligible for support, whether from the information available from the database, to identify and remove, from the list submitted, the cases of persons who were not beneficiaries under the Plan or who did not meet other relevant criteria.
  

We recommended that the PSO, in preparing similar Plans, ensure that any criteria and exclusions are taken into account when processing information submitted by other Government Departments, to the extent possible.

• An Investigating Officer has been appointed by the Minister of Finance to conduct an Administrative Investigation in the NF to ascertain the reasons for making erroneous payments to non-beneficiaries in the implementation of the Plan and to identify any liabilities. According to this Investigation, which was completed in November 2021, 503 companies that did not meet the criteria of the Plan were identified, to which aid totalling €15.99 million was paid

We stressed that any grant to a non-beneficiary and any overpayment constitute illegal state aid and must be compulsorily recovered.

• We found that the MO in implementing the Plan included as eligible, economic activities for which, although no obligation to suspend their activities arose from the Ministry of Health Orders, it considered that they were adversely affected by the restrictive measures because of the nature of their activities, whereas, for a limited number of economic activities, the SO applied geographical separation, considering as potentially eligible enterprises and self-employed persons, within the specific economic activities, only in the Paphos - Famagusta provinces, as it considered that they were affected to a greater extent due to their dependence on tourism.

We recommended that the SO examine whether payments were made to non-beneficiaries due to differentiation of eligible economic activities during the implementation of the Plan, compared to the Plan approved by the E.E.P. In case 3 SPECIAL REPORT OF THE SO/03/2022 relevant cases are identified, to take immediate action to recover the relevant amounts.

• In the cases of travel agencies we found that data was not used uniformly, with the result that some companies were favoured and others were penalised.

We recommended that the SO, if he/she considers it necessary and provided that he/she will secure the approval of the E.E.P., should take the necessary steps to ensure that the data is not used in the same way,

• For retail the Plan provided for different treatment than for other business activities. As a result, the principle of equality was not ensured as the beneficiaries of retail trade in the Nicosia-Larnaca-Lemesos districts, which were affected to a greater extent and experienced a reduction of the CC from 35% up to 100%, received a lower amount of aid than beneficiaries in other sectors of economic activity, where the general model was used. At the same time, a number of enterprises in the districts of Nicosia-Lemesos-Larnaca, which did not meet the criterion of a 35% reduction of the CU, as defined in the Scheme for the general model, received support.

Also, for the retail enterprises in the Paphos-Amohostos provinces, the grant amount was calculated on the basis of the general model, in order to support them to a greater extent, as the PO considered that they were more affected due to their dependence on tourism. As a result of this differentiation, the retail enterprises in the Paphos-Amamochosto districts, which did not meet the criterion of a 35 % reduction of the CU, as set out in the Plan for the general model, were not eligible for support.

• From the audit of the costing records of the general model we found payment of a grant in cases of economic activities that were excluded from support under the list of exceptions, exclusion of economic activities that were not included in the list of exceptions, as well as errors of omission, calculation, double calculation and exceeding of a defined threshold for specific sectors.

We recommended that the IO adhere to the General Principles of Administrative Law and that it review these cases and initiate the necessary actions to recover the overpayments. Also, in case it intends to reconsider, for purposes of making a grant payment, whether there are financial activities that should have been considered eligible and were excluded, to obtain the approval of the IO

• We found that, in handling the objections, a new parameter was introduced, in derogation of the IO's approval of the financial activities.

Contents of this article including associated images are belongs Cyprus Times
Views & opinions expressed are those of the author and/or Cyprus Times

[URL="HTTPS://CYPRUSTIMES.COM/POLITIKI/EKTHESI-ELEGKTIKIS-ENDECHOMENES-PARANOMES-KRATIKES-ENISCHYSEIS-GIA-TIN-PANDIMIA/"]Source