NIK on Madonna’s concert

The Minister of Sport and Tourism spent public money uneconomically and against its purpose - this is the final standpoint of NIK after the Council of NIK dismissed the Minister’s objections.*

The Council of the Supreme Audit Office passed a resolution on the use of public money from the specific reserve (item 40) allocated to the tasks related to the Euro 2012 and promotion of volleyball among children and youth. According to the Council, only initiatives related to the EURO 2012 or promotion of volleyball among children and youth could be financed from that reserve. The lion’s share of that amount (item 40 - PLN 284.3 million has been planned) was spent properly.  In its post-audit statement NIK questioned legality and economy of some expenditures, including first of all PLN 5.8 million which was used to sponsor Madonna’s concert.

The football tournament EURO 2012 finished at the turn of June and July 2012. NIK claims that the Minister of Sport and Tourism had the right to move to the Minister of Finance for the permit to use following tranches of funds from the abovementioned specific reserve also after the end of the football tournament. However, the tasks to be financed still had to be related to the EURO 2012 (e.g. to pay liabilities which had been incurred before the tournament but were due after the end of the Championships or to finance other initiatives related to the EURO 2012 which had to be done after the tournament). 

In no letter to the Finance Minister concerning the use of funds from the specific reserve did the Minister of Sport and Tourism mention the issue of financing concerts, including the sponsoring of Madonna’s concert and other events not related to the football tournament EURO 2012. Based on the correspondence from the Ministry of Sport and Tourism, it was justified for the Finance Minister to believe that the funds requested by the Minister of Sport would be spent in line with the reserve purpose. After all, the item called the ”National Stadium management” (or: ”facility testing”) should cover only the liabilities related to the Stadium management (”testing”) in connection with the EURO 2012 organisation or volleyball promotion among children and youth.  In that way, the decisions taken by the Minister of Finance as a result of the letters sent to him by the Minister of Sport and Tourism had the nature of consent to use the funds but without changing the reserve purpose. Using the funds for other purposes, like testing, maintenance or management of the National Stadium without any connection with the EURO 2012 or promotion of volleyball among children and youth required that the reserve purpose be changed in the manner provided in the Public Finance Act (among others a positive opinion of the Sejm Budget Committee would be needed).** No such procedure was launched with regard to the said specific reserve.

On 5 June 2012, upon consent of the Minister of Sport and Tourism, the National Sports Centre [Narodowe Centrum Sportu (NCS)] handed over to an external private entity the National Stadium facilities for free use in order to organise Madonna’s concert. On 16 March 2012, NCS concluded the Marketing Rights Agreement, under which the State Treasury became a sponsor of Madonna’s concert. In return for benefits provided by the private entity the State Treasury was committed to pay the sponsor’s fee of net EUR 600,000. Financial settlement of the Agreement shows that the State Treasury spent more than PLN 5.8 million, earning not much more than PLN 1.2 million. 

Uneconomic approach in that case consisted in sponsoring Madonna’s concert from public funds which came from the specific reserve designated for the tasks related to the Euro 2012 and promotion of volleyball among children and youth. The State Treasury lost more than PLN 4.6 million on that undertaking.

According to NIK, that was a breach of Article 44 section 3 item 1 of the Public Finance Act which says that the public expenditures should be made in a justified and economic manner, in line with the principles of the value for money and optimum selection of means and methods to achieve assumed objectives.

* http://www.nik.gov.pl/en/about-us/the-council-of-nik/

** Public Finance Act.

Article 154. section 7. Specific reserves may be allocated, subject to section 9, exclusively to the purpose for which they were established, and used in line with the classification of expenditures. (…)

Article 154. section 9. The Minister of Finance may, upon obtaining a positive opinion of the Sejm Budget Committee, change the purpose of the specific reserve.