NIK has positively evaluated, despite irregularities, the way the State Development Bank of Poland [in Polish: Bank Gospodarstwa Krajowego, or BGK] prepared to implement three government programmes: support of social housing, student loans and technology loans in the period 2011-2013. The Bank monitored the programmes, informed responsible ministries of the programmes’ implementation status and proposed changes to streamline the programmes.
NIK has not questioned the way of spending money from the programme of student loans and cash loans. The programme efficiency has been evaluated negatively, though. In the period 2011-2013, over 40 thousand student loans were extended and nearly PLN 227 million was spent due to interest rate subsidies. NIK points out, though, that in the audited period the number of submitted student loan applications went down significantly: from 17.5 thousand in the academic year 2010/2011, over 12 thousand in 2011/2012 to 10.4 thousand in 2012/2013.
NIK has noted that the process of redeeming student loans was almost out of control. In the period 2011-2013, BGK audited the student loan redemption only once, although in line with internal provisions the handling of the subsidy programme should also include the properly taken and implemented decisions to redeem student loans. In that period the crediting banks redeemed 2 524 student loans worth over PLN 10 million. The great majority of cases (more than 2 thousand) concerned redeeming 20 percent of the loan to the best university graduates and the total remaining amount to be repaid by graduates in a difficult life situation (nearly 400 loans).
Although the number of student loan applications was going down, the Ministry of Science and Higher Education did not analyse the demand for student loans or cash loans. BGK has not developed any procedures of granting cash loans to students because - due to poor condition of public finance - there was no money for that. As a consequence, the student loans were not extended at all in the audited period.
The student loans were granted by the crediting banks. BGK did not receive any documentation filed by students applying for a loan, nor did it participate in reviewing the applications. BGK transferred money to the crediting banks based on written requests, on a timely basis. The audits of the student loan documentation (BGK looked into 229 loan agreements in the audited period) show that irregularities in the applications were usually related to incorrect calculation of income per capita in student families and the lack of documents from tax offices, confirming the income level of family members.
From 2011 to 2013, as part of the social housing support programme, the State Development Bank of Poland accepted 333 loan applications worth nearly PLN 255 million (of 376 requests worth PLN 254 million). The funds earmarked for social housing support in the audited period were not used to the full (usually it was 90 percent of funds).
The number of loan agreements actually signed was small too: less than 70 percent of planned agreements were signed in 2011 and in 2012 it was only 65 percent. The adverse trend reversed in 2013 when the plans were exceeded by 25 percent and 125 projects instead of 100 were financed.
According to investors[1], some of the reasons why the social housing support programme was not so popular included: insufficient amount of investor’s own funds, low-level funding from the state budget (support level depending on the investment type) and the lack of appropriate real properties or investment areas where the construction site could be located. The Ministry of Infrastructure and Development as well as BGK were aware of the barriers limiting the use of funds intended for the social housing support. However, they did not implement any solutions improving accessibility of programme funds in the audited period.
An important reason why investors were not so much interested in the social housing support programme could have been - according to NIK - the way of paying funds by BGK. Instead of financing, BGK in fact used reimbursement which means that it paid money to investors only after the investment completion (which was against the statutory provisions). According to NIK that could have limited the investors’ interest in the programme.
NIK justifies the standpoint of BGK which says that transferring funds only at the end of the investment process minimises the risk of paying funds in the amount exceeding investment outlays, the risk of considerable delay, or the failure to finish or settle the project. NIK points out, though, that the law-maker intended to finance the investment in the course of its execution, and not reimburse the costs already incurred. This view is also shared by the Ministry of Infrastructure which says that the objective of the social housing support programme is to finance the investment costs, not to reimburse them.
The ratios of execution and effectiveness of the technology loan programme were monitored effectively - in more than one year’s perspective . As for the technology loan, the expenditures were even higher than planned: nearly PLN 970 million was spent (instead of planned PLN 950 million) which confirms that the entrepreneurs were very much interested in this kind of support. Nevertheless, NIK has criticised a mechanism that was implemented in 2013, concerning the payment of money from the Technology Loan Fund. Namely, the funds were transferred to escrow accounts instead of being directly transferred to accounts in the crediting bank.
NIK has also emphasised that the existing system for selecting projects, financed from the technology loan programme did not promote the most innovative solutions or the ones that required a long-time preparation. All the eligible projects were granted financing but since the money ran out in a short time, no more projects could be accepted. As a result, some of the interested investors could not request financing for their project. NIK stands in a position that in the next financial perspective the loan applications could be reviewed based on the criteria promoting innovative solutions.
The NIK audit results show that the BGK Board should make sure the process of making and implement decisions to redeem student loans by commercial banks is audited.
NIK also points to the need of automatic payment of funds from the social housing support programme, immediately after committing the investor’s own funds (30 percent minimum), without the need for the investor to apply for the loan. NIK says that the automatic payment would make it possible to avoid changing the financing programme into the reimbursement programme, which is against the law-maker’s intention and is also unfavourable for investors.
