From 2011 to 2013, the Minister of State Treasury earmarked PLN 378.5 million for financial support (which was not public aid) of research and development as well as implementation projects implemented by Polish Defence Holding. The projects aim at providing the Polish army with state-of-the-art armament and military equipment. It is also a chance for Polish entrepreneurs to build up their market position.
However, as a result of detailed review of 10 projects in 5 companies being part of PDH, NIK detected some irregularities in the course of the projects’ implementation, both on part of the Ministry of State Treasury and Polish Defence Holding.
3 of 15 projects covered by the contract had no recommendations of the Minister of National Defence (MND), in terms of their compliance with the armed forces modernisation scheme. In line with NIK’s calculations, it is about PLN 39.6 million, which makes up 12.5 percent of the total subsidy for research projects. The lack of MND recommendations makes the risk much higher that the army will not use the deliverables of works, financed from public money to a large extent. This, in turn, poses a threat that the initiative may not be profitable. The Polish SAI stands in a position that in such a precarious situation (without MND recommendations) the Minister of Treasury should not involve public funds.
PDH did not keep the deadline for completing works in 2013 which it had agreed to do in the requests submitted to the Ministry. Delays occurred already a few months after the subsidy agreement was concluded. Polish Defence Holding - which did not have its own funds for the projects’ implementation - delayed works and deposited money in bank accounts, profiting PLN 6.5 million from interest. In that situation the Minister suspended the payment of three subsequent subsidy tranches.
In these circumstances the economic results of the whole initiative promised by the company are questionable. According to NIK, though, chances for greater security of Poland are still there, provided Polish Defence Holding will speed up the implementation of projects and provided the Polish army will buy essential equipment and armament.
The audit also revealed other irregularities on part of PDH, which included:
- payment of over PLN 2.2. million to employees of Polish Defence Holding and Bumar Amunicja SA laid off as part of the Voluntary Exit Programme, who were reemployed at a later stage. NIK recommends reimbursing that amount or reducing the subsequent tranche with that amount;
- use of PLN 64.1 million by Bumar Amunicja SA against contractual provisions. The Company used the funds for taxes and collaterals of bank guarantees (16.6 million in total) and prematurely increased its initial equity (PLN 47.5 million).
NIK issued the following post-audit recommendations:
- cooperation between the Ministry of State Treasury and the Ministry of National Defence should be strengthened to guarantee close link between the research and development as well as implementation projects with the armed forces modernisation scheme, which will ensure their use and economic effects,
- funds inappropriately used by Polish Defence Holding should be reimbursed,
- PDH obligations defined in the contracts should be discharged in a proper and timely manner and reliably accounted for at each stage of the projects’ implementation.
