European Structural Funds in Slovakia: Characteristics and Selected Realization Problems 2004-2006

1. European Structural Funds in Slovakia: Characteristics and Selected Realization Problems 2004-2006 Juraj Nemec, Prof., PhD., Faculty of Economics, Matej Bel University Banska Bystrica, Slovakia and WSB Gdansk, Poland, Marta Orviska, Assoc. Prof., PhD., Faculty of Economics, Matej Bel University Banska Bystrica, Slovakia Peter Pisar, PhD., Director, Regional European Information Centre Banska Bystrica, Slovakia,

2. EU structural funds Slovakia 2004-2006 Slovakia, in spite of really fast economic development during last years is still eligible (except for Bratislava region) for the Objective I ERDF allocations, representing the largest source of potential incomes of the country from EU finances.

3. EU structural funds Slovakia 2004-2006 Except for Objective 1 ERDF allocation several other important direct and indirect structural allocations have been made available for Slovakia, namely: • European Social Fund allocation • European Agricultural Guidance and Guarantee Fund allocations • Financial Instrument for Fisheries Guidance allocation • Objective 2 allocation for Bratislava region • Objective 3 allocation for Bratislava region • Interreg allocation • Equal allocation

4. Main financial tools - OP Basic Infrastructure - SOP Human Resources - SOP Industry and Services - SOP Agriculture and Rural Development

5. OP Basic Infrastructure The main goal of this OP was to improve the economic potential of Slovak regions by supporting the development of public infrastructure. Following key priorities were defined: • Transport infrastructure. • Environmental infrastructure. • Local infrastructure.

6. OP Basic Infrastructure • The management body for this programme was the Ministry of Building and Regional Development of the Slovak Republic. • Seven Slovak regions (except for Bratislava) became eligible for the use of support from this source and 422 363 452 € from ERD was allocated.

7. SOP Human Resources The main goal of this SOP was to support solving of the unemployment problems via the support of disadvantaged citizen and improvement of employment chances. The main priorities were: • active labor policy, • social inclusion and equality of chances at the labor market, • improving qualification and adaptability of the labor force and new entrants into the labor market.

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

9. SOP Industry and Services This SOP focused on the support of competitiveness of industries and services on the Slovak territory with following priorities: • Improving competitiveness of the national industries and service branches. The focus was on small and medium size enterprises, supporting the creation of new capacities and implementation of new technologies. • Development of tourism, increased proportion of tourist industry revenues on GDP.

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

11. SOP Agriculture and Rural Development The main idea behind this SOP was improved competitiveness and quality of agricultural production in Slovakia and the rural development support, with two defined priorities: • Support of productive agriculture. • Support for sustainable rural development.

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

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

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

15. Specific sources for structural financing The initiative INTERREG focused on the improved economic and social cohesion and was realized in 2004 – 2006 on three lines: • INTERREG A (development of neighboring border areas), • INTERREG B (state cooperation projects), • INTERREG C (regional cooperation projects).

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

17. Specific sources for structural financing • The Rural development plan financed by the EAGGF supported activities of the SOP Agriculture and Rural Development and financed projects with similar goals but of different type to avoid double financing. • Cohesion fund sources supported projects in the area of transport and environment from the date of joining EU.

18. Financial picture The total allocation for structural funds for the period 2004 – 2006 was 1 178 071 934 €, distributed to respective years as follows: • 2004 sum of 285 864 474 €, • 2005 sum of 393 094 678 €, • 2006 sum of 499 112 782 €. During the implementation Slovakia was able to achieve on 30. 6. 2008 the contracting level 101,57 %, but the real realization was much lover.

19. Table 2 Use of allocated resources Source: Ministry of Finance

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

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

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

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

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

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