Examination of financial reports of Projects for flood protection in Odra and Vistula river basins

Since 2009, the Supreme Audit Office has been the auditor of the Odra Project, and since 2017 also of the Vistula Project. NIK examines financial reports of both Projects in line with international standards.

As part of the audit Examination of financial reports of Projects for flood protection in Odra and Vistula river basins, NIK examined expenses incurred in 2020 by six entities in total. As part of the Odra Project, the amount of nearly PLN 283.8 million was verified (which makes up nearly 98% of expenditures in 2020), whereas as part of the Vistula Project, the amount exceeding PLN 399.4 was examined (which is over 89% of expenditures in 2020).

This audit aimed at verifying financial reports of both Projects and the way the Projects funds were spent, in terms of reliability, compliance with law and proper finance management principles.

According to NIK expenditures incurred as part of both Projects complied with the objectives defined in relevant loan agreements. The examined expenditures were incurred in line with the objectives and principles set out in the Projects and their value was correctly recognised in financial reports for 2020.

Irregularities identified by NIK auditors in the financial report of the Odra Project included:

• the value of unused funds was overestimated by nearly PLN 118.5 million, although the funds were returned or withdrawn from the Project;
• incorrect amount of expenditures financed from the funds of the World Bank (WB) and the Council of Europe Development Bank (CEB) of over PLN 290.5 thousand in total was recognised.

Those irregularities were corrected in the course of the NIK audit.

Besides, the NIK audit revealed that as of 10 March 2021, out of 83 tasks of the Vistula Project included in the contract schedule, 57 tasks had their completion date delayed against initial assumptions. For as many as 15 tasks, the delay ranged from two to nearly four years.

Since the end of last year's audit Examination of financial reports of Projects for flood protection in Odra and Vistula river basins, the task completion deadlines were postponed even further: for 39 tasks the delays ranged from two to 18 months and only in four cases the deadline was shortened from one or two months.

NIK also pointed out that in 2020 the State Water Holding Polish Waters involved its own funds of over PLN 78.6 for the Odra Project and nearly PLN 106.2 million for the Vistula Project, although funds from the EB and CEB to finance the Projects tasks were allocated and available from the beginning of the year. The parties' negotiations on the agreement took several months, and so it was signed only in June 2020. Finally, the Polish Waters' own funds were refinanced with the funds of the WB and CEB (from 7 to 222 days from the date the expenditure was made). In that situation, the Polish Waters Holding was forced to temporarily use its own funds to prevent contracting parties from accruing default interest.

Financial results of the audit totalled PLN 118.7 million.

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