TALLINN - Estonia may leave 1.5 billion kroons (nearly 96 million euros) from the European Union Cohesion Fund unused due to inadequate management, according to the National Audit Office. Under the conditions of the program, Estonia must return any unspent funds.
The NAO audit revealed that in a number of cases, the Ministry of Economic Affairs and Communications failed to ensure that projects were on track to be completed within the planned time frame and budget. NAO is also worried about absorption capacity, which is ending in 2013.
The NAO pointed out that the ministry is leaving one-third of planned projects from the period undone: 31 of 49 are actually being implemented.
"I can't agree with the assertion that the ministry has given up on one-third of its projects," said Gea Otsa from the Ministry of Economic Affairs and Communications. Otsa said the planned project list presented to the European Commission was essentially a "wish list" because Estonia needed far more money than it got from the Cohesion Fund.
NAO said not a single document given to the National Audit Office says that the ministry or government treated the list of projects affirmed in 2004 as a "wish list." On the contrary, each project on the list got a certain amount of support from the Cohesion Fund and a deadline was set for each.
"The ministry's opinion is that the possibility that Estonia will have to pay the sum back to the European Union is very small," Otsa said, adding that the resources can be used until the end of 2010 and all projects are in progress and will be completed on time. Otsa added that two projects that the NAO audit says are in danger, the Muuga harbor extension and Kukruse-Johvi road repair, are slated for completion in late autumn of 2010.
The Ministry also pointed out that due to lower building prices, the Muuga harbor extension may come in under budget. The NAO had suggested that because of delays, the prices of the projects would increase by a billion kroons.
The NAO audit says that the ministry's financial planning for the new funding period is the root of the problem. Tarmo Olgo, the director of the audit, said that due to project delays, "Estonia might have difficulties with the EU demand that Estonia use 900 million kroons of new financing period support before 2010." Unspent funds will have to be returned.
The NAO said that the Muuga harbor extension was supposed to have been completed by the end of 2007. The project's first procurement was declared a failure because the price was too high 's nearly double what the ministry had predicted. The scope of the project was decreased substantially, though the cost of the project may be up to one billion kroons.
The purpose of the Cohesion Fund is to contribute to infrastructure modernization in less developed areas of the EU. It will finance up to 85 percent of expenditures.
