EU Funds: Croatia Continues to Lose EU Money Because of Irregularities

Lauren Simmonds

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Just how is Croatia doing when it comes to the proper use of EU funds? With many irregularities reported, in 2023, the line will be drawn and all of Croatia’s unused capital will be returned to the budget of the European Union.

As Marija Brnic/Poslovni Dnevnik writes on the 14th of November, 2018, this year, we slowly began to see the effects of Croatia’s earlier contracts from the current financial period 2014-2020, and the anxiety is clear after the state budget rebalance due to the dynamics of the use of available funds from European Union funds.

The question of whether or not it will be possible to actually spend the total allocation, which comes with a deadline of 2023, when the line will be drawn and the unused capital will be returned to the EU budget. In 2023, it will also be clear how many Croatian users of EU funds have managed to really fit into the rules that the EU actually set for the use of that money, as public procurement procedures and related irregularities are still rather sore points.

Of the available data, during this financial period for the Competitiveness and Cohesion Operational Program, a total of more than 700 suspected irregularities were reported, and of over 650 of those reported irregularities, over 500 reports were actually found to be true, while apparent issues with 150 applications were never properly established. The most frequent irregularities were detected during project implementation for the misapplication of the rules of public procurement.

Several major cases went public and attracted some very negative media attention to this issue over the past year; the construction of the Dugo Selo – Križevci railway line, which due to the established irregularities had to return five percent of the money, about 60 million kuna, and the renovation project of student homes in Zagreb worth 220 million kuna, are just a couple of them.

Because of the breach of public procurement rules, the rule-breaking of the Student centre project in particular threatens Croatia with significant sanctions. The final decision from Brussels on the matter is still pending.

However, such examples are, if not on such a huge scale, still rather common, and the competent state institutions have said that the most irregularities have been found in construction projects, as well as in numerous water supply projects.

“Our users are still accustomed to the old rules of public procurement, so many projects are presenting with such anomalies,” they state.

Ariana Vela, the owner of the College of EU Projects, has analysed data from the Ministry of Regional Development and EU Funds, implemented by the Central Finance and Contracting Agency for EU Programs and Projects (SAFU), according to which 183 decisions on irregularities have been made so far for as many as 75 users. In 130 cases, irregularities were identified.

“They are all projects from different sectors, but it’s important to point out that, over time, the costs are growing,” Vela said. Given that for the time being, most of the irregularities have been identified in the phase of implementation, particularly in the segment of public procurement, Vela says to expect a real wave of financial corrections to follow over the coming period, which could have a very serious impact on the public budget.

The projects aren’t being stalled or delayed by the aforementioned irregularities, at least not in a procedural sense, but the fact is that financial corrections do have an impact on the final EU contribution, on the beneficiaries of the project, as well as the cash flow if the project is still in the pipeline. In terms of when the projects are completed and the irregularities are subsequently determined, the question that remains is how the individual will return that money.

For more information on Croatia’s use of EU funds, doing business in Croatia and the domestic economic climate, make sure to follow our business page.


Click here for the original article by Marija Brnic for Poslovni Dnevnik


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