SAO: Social entrepreneurship was often a tiny home for subsidy recipients

The nearly one billion crowns supporting social enterprises between 2015 and 2021 were partly used inefficiently and ineffectively. This was stated by the Supreme Audit Office (SAO), which audited the provision of subsidies between 2015 and 2021.

The money was distributed through the Ministry of Labour and Social Affairs (MoLSA), the Ministry of Regional Development (MoRD), and the Centre for Regional Development (CRD). According to spokesman Vilém Frček, the MMR is working to improve controls and intends to support social entrepreneurship further.

“While many of the supported social enterprises have used the subsidy efficiently and effectively, a full half of the projects in the audit sample were, on the contrary, assessed as having limited effectiveness and efficiency, or even as completely ineffective and inefficient. One of the reasons for this was insufficient rules set by the ministries,” the SAO summarised.

For example, the auditors criticized the administrators for not setting a maximum amount of support per job created. Hence, they also recorded cases where the amount exceeded the CZK 1 million thresholds, while the annual average was CZK 170.

Three receipts to meet the condition

Some of the conditions related to the principles of social entrepreneurship were ridiculous. According to the SAO’s findings, a company only needed to provide evidence of the purchase of environmentally friendly products to comply with the environmental responsibility condition. Three receipts for purchasing, for example, cleaning products, were sufficient.

Three receipts could also satisfy the condition of “meeting the needs of the local community.” In principle, purchasing goods or services from companies in the same or neighboring regions was a matter of principle, even though the companies could realistically be hundreds of kilometers away.

In three cases, the investigation also revealed possible breaches of budgetary discipline. In one case, most of the subsidy was used to acquire a property worth CZK 2.8 million. The property was purchased from a close relative, which is prohibited by the rules.

Personal connections

Similarly, the SAO found significant personal links between the newly established social enterprises and their intended customers and suppliers.

“Thus, the motivation for creating new social enterprises was often economic benefits to the beneficiaries rather than the substantial assistance to disadvantaged groups. Some did not even hide this in their applications for subsidies,” the SAO noted, adding that most of the audited enterprises had significantly overestimated their economic goals and often had considerably lower revenues, which could be a problem in terms of longer-term functioning.

Source

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