European Games in Poland – expensive chaos

At least PLN 1.7 billion was spent from the state budget on the Third European Games held in Poland in 2023. Before starting the event preparations, neither the authorities of Krakow nor the Marshall of Małopolska Province verified related organisational and financial needs. The Minister of State Assets, appointed by the government as the Olympics coordination plenipotentiary, did not analyse full costs and benefits of the event. Neither did the Minister of Sport and Tourism and the company European Games 2023, acting as the Organisation Committee. The Olympics took place as scheduled but the short time for the event organisation, the constantly changing conditions, particularly related to the location as well as the number and type of sports disciplines, resulted in skyrocketing costs and irregularities identified by NIK.

In light of the audit findings NIK has prepared reports for the prosecutor’s office. The Polish SAI suspects that the president and former vice-president of the management board of the company European Games 2023 caused a substantial material damage to the State Treasury. It was related to the event organisation fee which – in line with the state budget subsidy agreement – was to be paid at the best possible Euro exchange rate. The company did not hold any negotiations on that matter, though, and ordered a transfer at the selling rate offered on that day by the servicing bank. As a consequence, the fee for the European Olympic Committee Association (EOC) was overestimated by at least PLN 2.5 million.

NIK also established that the then Minister of Sport and Tourism failed to settle in due time a nearly PLN 277 million targeted subsidy from the state budget which was transferred to the company to prepare and organise the event. Also the European Games hosts did not settle the targeted subsidies paid to the company. The problem is that the lack of settlements makes it impossible to wind up the company and since the settlements are still under control, the company still operates and generates costs.

In January 2022, financial needs related to the event organisation (without sports and infrastructure investments) were estimated at PLN 400 million. The amount was to be covered in half from the state budget and in half (in equal parts: PLN 100 million each) by the Olympics hosts. According to settlements submitted by the company, those tasks were subsidised with the total of PLN 423,5 million, nearly PLN 280 million came from the state budget and a bit less than PLN 147 million from the hosts’ budgets. Additionally, the European Games hosts paid PLN 23 million each.

Total costs of the Olympics identified during the NIK audit were approx. PLN 1.7 billion at minimum. About 65% of that amount came from the state budget and from the government funds, 35% from the local government budgets and 0.5% from other sources.

The significant financial support from the sponsors was not influenced by appointing the Minister of State Assets as the Olympics coordination plenipotentiary. The company European Games 2023 signed only three sponsor agreements with three State Treasury companies for the total of net PLN 21 million, which made up a bit more than 1% of expenses made from public funds identified by NIK.

Key decisions related to the event organisation were made with delay which had a significant impact on its high costs. Some of the decisions were taken last minute:

• legal framework was adopted 19 months before starting the Olympics;
• financing principles were adopted 15 months before starting the Olympics;
• the company acting as the Olympics organisation committee was founded by the authorities of Małopolska Province in November 2021 but the competition co-host  - the city of Krakow – joined that company only a year after, that is seven months before the Olympics started;
• the company received first part of the state budget subsidy in November 2022, also seven months before the European Games and it was supposed to spend that tranche by the end of the year.  

Long-lasting negotiations of the agreement on the European Games organisation with the European Olympic Committee Association (EOC) were not without significance, either. Although the agreement was signed in May 2022, agreeing upon the sports programme started earlier and lasted over three years. The final number of disciplines and places where the athletes were supposed to compete, was determined and incorporated in the organisation contract only two days before the European Games started. As a consequence the competitions were held in 14 instead of four places which entailed extra costs. In the end, the scope of some sports investments was limited and others were given up completely.

When preparing and organising the event, the company European Games 2023 operated under huge time pressure, in uncertain conditions and faced the financial liquidity risk. According to NIK the company performed some tasks improperly and spent part of public funds in a wasteful manner. Apart from the failure to exercise due diligence concerning the EUR exchange rate while paying for the Olympics, NIK identified – among others - the following irregularities:

• violation of regulations or unreliable actions while awarding procurement contracts for the total of over PLN 123 million,
• delays in settlements with contracting parties for nearly PLN 54 million. That was a result of illiquidity which resulted mainly from late transfer of the state budget subsidy funds.

The media rights to cover the European Games in Poland were to be the main source of revenue and benefits from the event organisation, pointed by the European Olympic Committee Association. They were guaranteed in the agreement signed with the EOC in May 2022. A few months later it turned out that the Association had sold all the television rights to the European Broadcasting Union (EBU) and hence it could not transfer them to the Polish company. As a result, the EOC lowered the event organisation fee by EUR 350 thousand.

NIK cannot evaluate, though, if the objectives planned were met and if so, whether they were achieved with optimal methods and measures. The reason is that the Minister of Sport and Tourism and the Minister of State Assets failed to set the measures to determine what effects (financial and others) they expected.

The company’s promotion and information activities did not translate into the number of fans in the tribunes. Proceeds from the sale of tickets were PLN 700 thousand lower than their production costs. Only 77% of tickets for events related to the European Games were distributed. But as much as 64% of that pool were free ticket invitations.

Recommendations

To the President of the Council of Ministers as coordinator of the European Games:

• to initiate evaluation of the process of the event preparation and organisation;

To the Minister of Sport and Tourism and hosts of the European Games:

• to settle subsidies granted to the Company to financially support the event preparation and organisation.