Financial resources allocated from the state budget and external sources for the implementation of programs to support small and medium-sized enterprises periodically “fail” to reach their beneficiaries. Other applicants for support do not need to ask for a long time. They have learned to meet the criteria from different budgetary funds.
This situation, as the auditors found out, is caused by “failure to fulfill obligations to launch some products within the framework of the Fund for Entrepreneurship and Economic Growth of Moldova”, duplication of applications and other organizational difficulties that catch up state support funds permanently.
Someone loses, someone finds
Another problematic aspect concerns the beneficiaries who did not fully meet the selection criteria, which “led to the improper provision of irrevocable financial support in the amount of approximately 522,200 lei within the program “Start for Youth: Sustainable Business at Home”.
At the same time, the audit found that the investment contracts did not contain clear provisions regarding the responsibility of the beneficiaries in cases of failure to fulfill the set objectives, as well as the measures to be taken by ODA in such cases.
“Most beneficiaries did not achieve the performance indicators set out in the business plan. This non-fulfillment ranged from 40% to 66% in 2022 and 58% to 63% in 2023. The lack of accountability mechanisms negatively affects the achievement of the program’s objectives and the efficiency of the use of public funds”, – said SP member Natalia Trofim.
Procedural difficulties
The audit also found irregularities in the timing of the preliminary evaluation of applications, in some cases with delays of 17-28 days. According to the Office of Rural Development (ODA), these delays were caused by “the large volume of applications, insufficient quality of documents submitted, and lack of staff involved in the evaluation process”.
There were also cases of simultaneous provision of financial support to some applicants from both ODA funds and the Agricultural Interventions and Payments Agency (AIPA). Despite the existence of cooperation agreements and mutual access to databases, there is duplication of support as there is no automated exchange of information needed to verify compliance with the investment ceiling.
The audit also found that ODA did not have uniform internal rules regarding the storage of beneficiary files, which affected how the valuation process was carried out. Cases of outdated documents or lack of mandatory documents were found.
At the same time, the lack of an updated Register of de minimis beneficiaries limits ODA’s ability to conduct effective monitoring activities. In other words, what happens to an enterprise after financial assistance or guarantees are disbursed remains unknown.
Non-recourse financial guarantees
Regarding the Credit Guarantee Fund, the audit found “delays in the development and implementation of key internal policies and procedures, including the secondary legal and regulatory framework necessary for the implementation of financial support instruments for SMEs.”
At the same time, ODA has not implemented a separate mechanism for exercising the right of recourse on issued financial guarantees, especially for taxpayers in bankruptcy. Although this procedure is provided for in national regulations.
The audit also found that ODA does not have clear restrictions on the use of its own revenues from guarantee fees, which it places on deposit accounts, and the right to use them.
As a result, during the audited period, own revenues in the amount of 33.9 million lei, or 81% of the total amount, were used to cover the institution’s administrative expenses, while the fund was capitalized mainly through financial resources allocated from the state budget.
Another aspect identified during the audit concerns the fact that the persons responsible for managing the Fund did not ensure full and timely collection of outstanding fees related to individual guarantees.
After the inventory of guarantee contracts, additional outstanding commissions amounting to MDL 3.6 million were identified, of which MDL 1.12 million were recovered during the audit.
The “automation of processes” is also idle for the time being. The information system of guarantee management purchased for 3 million lei had not been implemented at the time of the audit.
