European Structural Funds in European Structural Funds in Slovakia: Characteristics and Slovakia: Characteristics and

Selected Realization Problems Selected Realization Problems 2004-20062004-2006

Juraj Nemec, Prof., PhD., Faculty of Juraj Nemec, Prof., PhD., Faculty of Economics, Matej Bel University Banska Economics, Matej Bel University Banska

Bystrica, Slovakia and WSB Gdansk, Poland,Bystrica, Slovakia and WSB Gdansk, Poland,

Marta Orviska, Assoc. Prof., PhD., Faculty of Marta Orviska, Assoc. Prof., PhD., Faculty of Economics, Matej Bel University Banska Economics, Matej Bel University Banska

Bystrica, SlovakiaBystrica, Slovakia

Peter Pisar, PhD., Director, Regional European Peter Pisar, PhD., Director, Regional European Information Centre Banska Bystrica, Slovakia, Information Centre Banska Bystrica, Slovakia,

EU structural funds Slovakia EU structural funds Slovakia 2004-2006 2004-2006

Slovakia, in spite of really fast economic Slovakia, in spite of really fast economic development during last years is still development during last years is still eligible (except for Bratislava region) for the eligible (except for Bratislava region) for the Objective I ERDF allocations, representing Objective I ERDF allocations, representing the largest source of potential incomes of the largest source of potential incomes of the country from EU finances. the country from EU finances.

EU structural funds Slovakia EU structural funds Slovakia 2004-20062004-2006

Except for Objective 1 ERDF allocation several other Except for Objective 1 ERDF allocation several other important direct and indirect structural allocations have important direct and indirect structural allocations have been made available for Slovakia, namely:been made available for Slovakia, namely:

European Social Fund allocationEuropean Social Fund allocation European Agricultural Guidance and Guarantee Fund European Agricultural Guidance and Guarantee Fund

allocationsallocations Financial Instrument for Fisheries Guidance allocationFinancial Instrument for Fisheries Guidance allocation Objective 2 allocation for Bratislava regionObjective 2 allocation for Bratislava region Objective 3 allocation for Bratislava regionObjective 3 allocation for Bratislava region Interreg allocationInterreg allocation Equal allocationEqual allocation

Main financial toolsMain financial tools

- OP Basic Infrastructure- OP Basic Infrastructure

- SOP Human Resources- SOP Human Resources

- SOP Industry and Services- SOP Industry and Services

- SOP Agriculture and Rural Development- SOP Agriculture and Rural Development

OP Basic InfrastructureOP Basic Infrastructure

The main goal of this OP was to improve The main goal of this OP was to improve the economic potential of Slovak regions the economic potential of Slovak regions by supporting the development of public by supporting the development of public infrastructure. Following key priorities were infrastructure. Following key priorities were defined:defined:

Transport infrastructure.Transport infrastructure. Environmental infrastructure.Environmental infrastructure. Local infrastructure.Local infrastructure.

OP Basic InfrastructureOP Basic Infrastructure

The management body for this programme The management body for this programme was the Ministry of Building and Regional was the Ministry of Building and Regional Development of the Slovak Republic. Development of the Slovak Republic.

Seven Slovak regions (except for Seven Slovak regions (except for Bratislava) became eligible for the use of Bratislava) became eligible for the use of support from this source and 422 363 452 support from this source and 422 363 452 €€ from ERD was allocated. from ERD was allocated.

SOP Human ResourcesSOP Human Resources

The main goal of this SOP was to support The main goal of this SOP was to support solving of the unemployment problems via the solving of the unemployment problems via the support of disadvantaged citizen and support of disadvantaged citizen and improvement of employment chances. The main improvement of employment chances. The main priorities were:priorities were:

active labor policy,active labor policy, social inclusion and equality of chances at the social inclusion and equality of chances at the

labor market,labor market, improving qualification and adaptability of the improving qualification and adaptability of the

labor force and new entrants into the labor labor force and new entrants into the labor market.market.

SOP Human ResourcesSOP Human Resources

Seven Slovak regions (except for Seven Slovak regions (except for Bratislava) became eligible for the use of Bratislava) became eligible for the use of support from this source, financed from support from this source, financed from ESF by 284 480 923 ESF by 284 480 923 €€ and the Ministry of and the Ministry of Labor, Social Affairs and Family of the Labor, Social Affairs and Family of the Slovak Republic served as the Slovak Republic served as the management body. management body.

SOP Industry and ServicesSOP Industry and Services

This SOP focused on the support of This SOP focused on the support of competitiveness of industries and services on competitiveness of industries and services on the Slovak territory with following priorities:the Slovak territory with following priorities:

Improving competitiveness of the national Improving competitiveness of the national industries and service branches. The focus was industries and service branches. The focus was on small and medium size enterprises, on small and medium size enterprises, supporting the creation of new capacities and supporting the creation of new capacities and implementation of new technologies.implementation of new technologies.

Development of tourism, increased proportion of Development of tourism, increased proportion of tourist industry revenues on GDP.tourist industry revenues on GDP.

SOP Industry and ServicesSOP Industry and Services

Seven Slovak regions (except for Seven Slovak regions (except for Bratislava) became eligible for the use of Bratislava) became eligible for the use of support from this source with allocation support from this source with allocation 151 210 683 € from ERD151 210 683 € from ERDFF and the and the Ministry of Economy of the Slovak Ministry of Economy of the Slovak Republic served as the management Republic served as the management body. body.

SOP Agriculture and Rural SOP Agriculture and Rural DevelopmentDevelopment

The main idea behind this SOP was The main idea behind this SOP was improved competitiveness and quality of improved competitiveness and quality of agricultural production in Slovakia and the agricultural production in Slovakia and the rural development support, with two rural development support, with two defined priorities:defined priorities:

Support of productive agriculture.Support of productive agriculture. Support for sustainable rural development.Support for sustainable rural development.

SOP Agriculture and Rural SOP Agriculture and Rural DevelopmentDevelopment

Similarly to other OP seven Slovak regions Similarly to other OP seven Slovak regions (except for Bratislava) became eligible for (except for Bratislava) became eligible for the use of support from this source with the use of support from this source with allocations from EAGGF - 181 158 922 allocations from EAGGF - 181 158 922 and FIFG - 1 829 065 €and FIFG - 1 829 065 € and the Ministry of and the Ministry of Agriculture of the Slovak Republic served Agriculture of the Slovak Republic served as the management body.as the management body.

Specific sources for structural Specific sources for structural financing financing

The Objective 2 focused on the increased The Objective 2 focused on the increased competitiveness in the sphere of small and competitiveness in the sphere of small and medium enterprises, tourism and improved medium enterprises, tourism and improved attractiveness of target regions for visitors and attractiveness of target regions for visitors and provided sources for Bratislava region. Its 2004 provided sources for Bratislava region. Its 2004 – 2006 ERDF allocation was 37 168 218 € and – 2006 ERDF allocation was 37 168 218 € and the management body for this source was the the management body for this source was the Ministry of Building and Regional Development Ministry of Building and Regional Development of the Slovak Republic. of the Slovak Republic.

Specific sources for structural Specific sources for structural financingfinancing

The Objective 3 focused on similar priorities as SOP The Objective 3 focused on similar priorities as SOP Human Resources and provided resources in this area Human Resources and provided resources in this area for Bratislava region. Because of lover unemployment in for Bratislava region. Because of lover unemployment in Bratislava in comparison with other regions the Bratislava in comparison with other regions the supported projects were more targeted towards limiting supported projects were more targeted towards limiting the social isolation, support of re-qualification courses the social isolation, support of re-qualification courses covering needs of new or restructuralized enterprises. It covering needs of new or restructuralized enterprises. It was co-financed from ESF and allocated in 2004 – 2006 was co-financed from ESF and allocated in 2004 – 2006 total 44 939 754 €. The Ministry of Labor, Social Affairs total 44 939 754 €. The Ministry of Labor, Social Affairs and Family of the Slovak Republic served as the and Family of the Slovak Republic served as the management body.management body.

Specific sources for structural Specific sources for structural financingfinancing

The initiative INTERREG focused on the The initiative INTERREG focused on the improved economic and social cohesion and improved economic and social cohesion and was realized in 2004 – 2006 on three lines:was realized in 2004 – 2006 on three lines:

INTERREG A (development of neighboring INTERREG A (development of neighboring border areas), border areas),

INTERREG B (state cooperation projects), INTERREG B (state cooperation projects), INTERREG C (regional cooperation projects). INTERREG C (regional cooperation projects).

Specific sources for structural Specific sources for structural financingfinancing

The programme EQUAL supported SOP The programme EQUAL supported SOP Human Resources, supporting projects Human Resources, supporting projects focusing on innovations, partnerships and focusing on innovations, partnerships and multinational associations, aiming on the multinational associations, aiming on the fight against racisms, xenophobia and fight against racisms, xenophobia and equality of men and women in the labor equality of men and women in the labor market.market.

Specific sources for structural Specific sources for structural financingfinancing

The Rural development plan financed by the The Rural development plan financed by the EAGGF supported activities of the SOP EAGGF supported activities of the SOP Agriculture and Rural Development and financed Agriculture and Rural Development and financed projects with similar goals but of different type to projects with similar goals but of different type to avoid double financing.avoid double financing.

Cohesion fund sources supported projects in the Cohesion fund sources supported projects in the area of transport and environment from the date area of transport and environment from the date of joining EU. of joining EU.

Financial picture Financial picture

The total allocation for structural funds for the period The total allocation for structural funds for the period 2004 – 2006 was 1 178 071 934 €, distributed to 2004 – 2006 was 1 178 071 934 €, distributed to respective years as follows:respective years as follows:

2004 sum of 285 864 474 €, 2004 sum of 285 864 474 €, 2005 sum of 393 094 678 €,2005 sum of 393 094 678 €, 2006 sum of 499 112 782 €.2006 sum of 499 112 782 €.

During the implementation Slovakia was able to achieve During the implementation Slovakia was able to achieve on 30. 6. 2008 the contracting level 101,57 %, but the on 30. 6. 2008 the contracting level 101,57 %, but the real realization was much lover. real realization was much lover.

Table 2 Use of allocated resources

Program document 

Allocation 2004-2006 in € (including automatic

reductions 2004 and 2005)

Funds not used as of  30. 06. 2008 in €

Funds not used as of  30. 06. 2008 as %

EÚ resources

SOP Industry and Services 151 211 000 41 074 330 27,16

SOP Human Resources 284 480 923 84 766 646 29,80

SOP Agriculture and Rural Development 182 987 987 23 128 538 12,64

OP Basic Infrastructure 422 363 453 89 639 582 21,22

Bratislava Objective 2 37 032 713 10 444 727 28,20

Bratislava Objective 3 37 118 134 19 758 128 53,23

IS INTERREG IIIA Austria - Slovakia 8 051 928 2 402 987 29,84

IS INTERREG IIIA Poland - Slovakia 9 500 000 1 163 180 12,24

IS INTERREG IIIA Slovakia-Czech Republic 4 667 299 722 845 15,49

IS INTERREG IIIA Hungary–Slovakia-Ukraine 9 500 000 2 441 454 25,70

IS EQUAL 22 266 351 7 315 725 32,86

Total 1 169 179 788 282 858 140,49 24,19

Source: Ministry of Finance

Main implementation problems Main implementation problems

Management and monitorigManagement and monitorig typical problems are delayed administrative control by the typical problems are delayed administrative control by the

management bodies, the use of invalid forms, the limited management bodies, the use of invalid forms, the limited quality of controlling the reality compared to what is invoiced, quality of controlling the reality compared to what is invoiced, double financing of some activities from more sources, late double financing of some activities from more sources, late submission of control protocols, formal controls, formal control submission of control protocols, formal controls, formal control reports, lack of ex-ante control, findings are not converted to reports, lack of ex-ante control, findings are not converted to measures to cope with them (including time frame for measures to cope with them (including time frame for improvements), financing of non-eligible projects, formal improvements), financing of non-eligible projects, formal mistakes in the contract, signing of contracts with bodies mistakes in the contract, signing of contracts with bodies without legal status, during the review of monitoring reports without legal status, during the review of monitoring reports the reality of submitted indicators of progress is not controlled the reality of submitted indicators of progress is not controlled (was the goal really achieved?), the real amount of generated (was the goal really achieved?), the real amount of generated project revenues is also not reported and controlled properly. project revenues is also not reported and controlled properly.

Main implementation problemsMain implementation problems

Payment process:Payment process:

– – problems like dual payments for the problems like dual payments for the same activity within one project, low same activity within one project, low quality of submitted evidence (control quality of submitted evidence (control lists, summarization protocols), non-lists, summarization protocols), non-accepted expenditures were reimbursed. accepted expenditures were reimbursed.

Main implementation problemsMain implementation problems Public procurement:Public procurement:

Very many problems are connected with this part of the Very many problems are connected with this part of the realization process, like low quality and effectiveness of realization process, like low quality and effectiveness of control of procurement, tender documentation is control of procurement, tender documentation is frequently different from delivery, the final contract is frequently different from delivery, the final contract is different from tender documentation, the winner was not different from tender documentation, the winner was not selected according the tender documentation, the selected according the tender documentation, the frequent use of direct purchasing, the qualification frequent use of direct purchasing, the qualification requirements for candidates/applicants were too requirements for candidates/applicants were too comprehensive, non-eligible selection criteria were comprehensive, non-eligible selection criteria were used, the contract prices were increased during the used, the contract prices were increased during the realization process, mistakes in procurement realization process, mistakes in procurement documentation.documentation.

Main implementation problemsMain implementation problems

Projects selections and evaluation: Projects selections and evaluation: - unfortunately also this crucial part of the - unfortunately also this crucial part of the process was connected with important failures. process was connected with important failures. Formal probity control of submitted projects Formal probity control of submitted projects was not realized in some cases, the was not realized in some cases, the suggestions of evaluation committees were not suggestions of evaluation committees were not followed (like budget cuts, conditionalities). In followed (like budget cuts, conditionalities). In some cases even the final allocation was some cases even the final allocation was higher than requested sum or projects were higher than requested sum or projects were realized differently from what was approved by realized differently from what was approved by the evaluation committee. the evaluation committee.

Main implementation problemsMain implementation problems

Non-eligible expenditures:Non-eligible expenditures: invoicing of services not related to the contract, invoicing of services not related to the contract,

reimbursing from different payment source, low reimbursing from different payment source, low quality of documentation proving the eligibility of quality of documentation proving the eligibility of invoiced sums, payment of salaries before the invoiced sums, payment of salaries before the performance, invoicing non-realized services, performance, invoicing non-realized services, invoicing more services than really used, non-invoicing more services than really used, non-eligible travel costs, corrections in the eligible travel costs, corrections in the documentation, invoicing telecommunication documentation, invoicing telecommunication services not used, purchasing computers after the services not used, purchasing computers after the realization of a training course, the same person realization of a training course, the same person was paid from two projects for activities in the same was paid from two projects for activities in the same day. day.

ConclusionsConclusions

Too many problems are connected with Too many problems are connected with processes of the use of structural funds in processes of the use of structural funds in Slovakia, resulting in the program period 2004 – Slovakia, resulting in the program period 2004 – 2006 into the high risk of under spending (during 2006 into the high risk of under spending (during the last half year of this period almost 25 % of the last half year of this period almost 25 % of allocations still needs to be invoiced and allocations still needs to be invoiced and reimbursed, what is not realistic). This situation reimbursed, what is not realistic). This situation is partly caused by the general societal is partly caused by the general societal environment in the Slovak society environment in the Slovak society (not discussed (not discussed in the paper)in the paper), but very much also by many , but very much also by many intentional and non-intentional intentional and non-intentional implementation implementation mistakes. mistakes.