Audit: Much of EU funding for business development has been used for roads

In the 2014-2020 programming period of the EU Funds, for the first time, financial resources were made available to municipalities from several specific support objectives (SAMs) under the priority axis “Competitiveness of small and medium-sized enterprises”, including to increase private investment in the regions by investing in business development.

Using the available funding, municipalities have implemented 229 investment projects, investing a total of € 489,839,170, including € 294,510,457 EU co-financing and € 195,628,713 national funding. However, only 32% of project activities involve the construction or conversion of buildings that create new business space – a place to locate production, and equipment and create new jobs.

Although road infrastructure was not highlighted as a priority issue to be addressed in order to boost the competitiveness of small and medium-sized enterprises, in fact, the largest share of funding was used for this purpose.

“The State Audit Office does not doubt that the infrastructure in local governments needs to be improved, but it cannot be denied that the funding was used more for other needs than for promoting the competitiveness of entrepreneurship, including small and medium-sized enterprises, which would create new jobs for citizens, opportunities for entrepreneurs and attract private investment,” says Oskars Erdmanis, Member of the Council of the State Audit Office.

He also points out that the State Audit Office has found that the audited municipalities have a negative balance of at least EUR 1,019,904 annually after the implementation of projects.

“Taking into account the shortfall of financial resources in the Rēzekne City Municipality, which was identified only recently, the State Audit Office calls on local governments to assess the impact of the implemented projects on the budget and, if necessary, to implement mitigating measures to avoid a similar situation in the foreseeable future,” explains Erdmanis.

It was possible to implement investment projects both by local governments themselves, creating universal business infrastructure and receiving 85% EU co-financing, and by local governments involving a business as a cooperation partner, creating infrastructure adapted for business, but receiving only up to 55% co-financing from EU funds, the State Audit Office admits.

However, the form of cooperation involving the business partner was not implemented once, says the State Audit.

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