Court of Auditors recommends dissolution of Covid-Aid Agency

Court of Auditors recommends dissolution of Covid-Aid Agency

The examiners criticize the design of the Corona aid, there is talk of “considerable overfunding potential”. The funding design of the fixed cost subsidy I alone caused up to 117 million euros in additional payments. There is also massive criticism of the establishment and composition of the management and control bodies. The Court recommends dissolving COFAG.

COFAG was founded within a few days on behalf of the then Finance Minister Gernot Blümel (ÖVP) to handle the Corona aid. For the auditors of the Court of Auditors, it is unclear why a new settlement office, COFAG, was needed at all. After all, the Ministry of Finance could have used existing structures, such as tax offices that already have all company data or the state development bank AWS. The responsible finance department in the ministry was hardly involved. The Court of Auditors also criticizes the fact that the new funding institution was set up “without clearly documenting the formation of will and decision-making in the Ministry of Finance and without weighing up alternatives.”

As of June 2021, COFAG had a working capacity of well over 200 full-time positions. This was mainly due to outsiders, because the financing agency only had around 16 employees (full-time equivalents) including the two managing directors. Around EUR 21 million was incurred from March 2020 to mid-2021 for the purchase of consulting services, and almost EUR 36 million by the end of 2021. According to the report, COFAG bought in expertise in funding and state aid law that professional funding bodies usually have themselves.

According to a simulation by the Court of Auditors, the funding design of the fixed cost subsidy I caused additional payments of EUR 101 million to EUR 117 million in the period from September 2020 to the end of June 2021. The auditors found “avoidable excessive funding potential” in the lockdown sales substitute for November and December 2020. This instrument enabled companies belonging to a specific industry to obtain grants without having to prove financial damage. There was “considerable potential for overfunding” in the case of groups because, in the absence of a group view, each branch as an individual company could claim subsidies up to the maximum amount. This has affected the accuracy of the grants and potentially led to distortions of competition.

The uncomplicated granting of grants is justified for micro and small companies because of their lower resilience in crises, says the report. For medium-sized and large companies, on the other hand, it would have been reasonable and advisable, according to the Court of Auditors, to have the financial losses specifically proven. “This would have improved the accuracy of the grants and prevented possible overcompensation.”

Another point of criticism from the Court of Auditors is the interdependence of COFAG and its parent company ABBAG. The former COFAG managing director, Bernhard Perner, was also the managing director of ABBAG. This led to practical problems: At the first general meeting of COFAG in March 2021, as the owner representative of ABBAG, he was not allowed to decide on his own discharge as managing director, the discharge of his supervisory board and the amount of remuneration for supervisory board members. Ultimately, it took four legal opinions to legally complete the annual financial statements for 2020. Perner also recently announced his withdrawal from ABBAG in order to switch to the private sector.

There were also errors in the job advertisement and appointment of the management: These did not comply with the recruitment law. In addition, Perner drove on a double salary track. That happened even though, according to the employment contract with ABBAG, Perner had to provide services to subsidiaries – such as COFAG – without additional remuneration. In addition, Perner’s working hours in the companies were not coordinated. The double payments have now been repaid, according to the Ministry of Finance.

In addition, the handling of conflicts of interest in the COFAG supervisory board was not sufficiently regulated, for example in the case of the supervisory board members who also held management positions in real estate companies. Even before the company was founded, people who later held positions in the management and on the supervisory board of COFAG had a significant influence on the design of their future framework conditions, according to the report from the Court of Auditors.

In order to determine the amount of annual remuneration for the supervisory board, ABBAG commissioned a study that used Austrian banks with total assets of eight to 20 billion euros as a comparison group. From the point of view of the Court of Auditors, however, the comparison is flawed. Because: COFAG was neither active on the market nor did it have to bear any financial risks. Consequently, the remuneration of the Supervisory Board was set too high. The Court of Auditors is also critical of the fact that an external minute-taker was commissioned for the meetings of the Supervisory Board, which cost EUR 125,000 from April to September 2020.

The COFAG management approved almost 700,000 applications by the end of June 2021. Only 221 applications had to be approved by the supervisory board because they were over 800,000 euros. Since there was no group consideration, the management only had to obtain the approval of the supervisory board for this small number of cases before approving the applications. A total of 79 percent of the applications resulted in the payment of grants. The highest subsidy paid to a company by the end of June 2021 was EUR 13.94 million.

For the financing agency, which according to the Court of Auditors did not need it, the sober but clear recommendation to the Ministry of Finance is: “When the financial measures expire, it should be checked which services (…) are still to be provided by COFAG and to dissolve the company after completion of the tasks.” The Court of Auditors audited the period from March 2020 to June 2021.

The Constitutional Court (VfGH) also recently expressed concerns about the handling of the Corona aid and therefore initiated an official examination procedure in mid-October. The supreme court doubts that the payment of the aid via a private legal entity – such as COFAG – is permissible. From the point of view of the judges, such financial aid is one of the tasks of the state sovereign administration. Several constitutional principles could therefore have been violated. It is sometimes problematic that COFAG’s activities are not directly subject to instructions from the Minister of Finance.

The federal government had started the Corona aid under the slogan “Cost it what it may”, as formulated by the then Chancellor and ex-ÖVP boss Sebastian Kurz. According to Eurostat data, 1,475 euros of tax money per Austrian was spent on Corona economic aid in 2020. Accordingly, the Alpine republic was the front runner in Europe. The EU average was only 325 euros.

Source: Nachrichten

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