The State Forests managed the State Treasury’s property but they did not share much of the profits made on that management with the state. The organisation handled the profits almost at its own discretion, actually without any control. That was made possible by the provisions of law binding for 30 years. In 2020–2023, the State Forests’ profits ranged from nearly PLN 0.5 billion to approx. PLN 1 billion per year. That was the case despite wastefulness identified by NIK and the factors which resulted in lowering the profits by over PLN 1.7 billion. Although the costs incurred by the State Forests were growing year after year, the funds accumulated by the organisation increased from about PLN 3 billion in 2020 to PLN 8.4 billion in 2023. In view of the audit results NIK has filed two reports to the prosecutor’s office and is preparing more.
Audit no. P/24/078/LOP
The audit showed that in 2020-2024 (first quarter) the State Forests (from Polish: Lasy Państwowe or LP) improperly and unreliably managed their property and finance, also coming from the forest fund. On an annual basis individual forest districts transfer the so-called basic contribution for that purpose which is part of revenue from timber sale (the percentage rate is established based on planned revenue). The financial resources accumulated in the forest fund are mainly supposed to level financial deficits in the forest districts whose environmental and economic conditions are unfavourable for forest management.
The fund is also used, among others, to finance “joint initiatives of the LP organisational units” but since the term is not defined it is difficult to evaluate the purpose of expenditures and their compliance with the law.
In the audited period, there was an enormous increase of funds gathered in the forest fund – from over PLN 812 million at the beginning of 2020 to more than PLN 3.2 at the end of 2023. Only in 2022, that increase was 268% which mainly resulted from growing prices of timber but also from raising – at the request of the LP Director General – the basic contribution from nearly 18% to 22%. The request was justified with the need to incur more expenditures. According to NIK, though, in reality it was about transferring free financial resources from forest districts to the forest fund’s account. The LP Forest Management Regulation implies clearly that the funds should remain at the forest districts’ disposal. As a consequence, the fund gained more money but at the same time the cost of the State Forests’ operations soared which lowered their financial result in 2022 by over PLN 556.5 million.
The NIK auditors established that the State Forests spent the total of PLN 37.9 million from the forest fund to finance promotional and image-building activities, although the Act on Forests enables them only to “promote sustainable forest management and protect natural resources”. As part of that amount almost PLN 5 million was spent on organising competitions, picnics and family festivals, also held during the parliamentary elections campaign in 2023. Another PLN 9.6 million was the cost of promotional press materials. Over PLN 10.4 million was paid to participants of the competition “Timber comes from the forest” as part of which 115 entities were subsidised. The State Forests transferred the great majority of that amount – over PLN 7 million – to Catholic Church parishes.
Finally, the promotional and image-building activities fully financed from the forest fund were mainly organised by the forest districts but, among others, at the initiative of the Director General or Press Officer of the State Forests. Agreements in that matter were signed at the State Forests Information Centre whose operating costs were nearly in whole covered from that fund and which increased in the audited period by 331.5% - from PLN 18.8 million (in 2020) to PLN 81.3 million (in 2023).
The State Forests also subsidised road investments from the forest fund. PLN 14.4 million was spent on that purpose without reliable verification of measurable and direct benefits for the forest management.
NIK also found significant irregularities in the way the State Forests managed funds beyond the forest fund. In the audited period, the State Forests considerably exceeded cost limits set in their financial and economic plans: in 2021 by PLN 583.6 million, of which PLN 213.4 million was allocated to salaries and in 2022 the limits were exceeded by nearly PLN 1.5 billion, of which PLN 196.7 million was earmarked for salaries. Increasing costs of salaries of the largest group of employees, i.e. the Forest Service, resulted mainly from the arrangements of the Collective Bargaining Agreement (CBA) on the so-called basic salary rate, much higher than the one provided in the ordinance of the Minister of Environment of 2003. In the ordinance that rate was PLN 950 and in CBA it ranged from PLN 1.5 thousand in 2021 to nearly PLN 2 thousand in 2024. Despite exceeding the limits, the State Forests did not update their financial and economic plans.
Another example of financing activities going beyond the State Forests’ tasks and forest management needs can be buying for nearly PLN 15 million 100% shares in an IT company, which previously supported an IT system used in the State Forests. Following the purchase the Directorate General of State Forests, as the only shareholder, paid another PLN 2 million to the company, which NIK considered wasteful and unreliable. Without justification for forest management, the State Forests also attempted to buy a palace and park complex for PLN 12 million. Ultimately, the transaction was not finalised but the State Forests spent approx. PLN 50 thousand due to that investment.
The irregularities identified in the NIK audit did not limit the capacity of the State Forests National Forest Holding to self-finance its operations. Its financial and economic standing in 2020–2024 was very good due to systematic growth in the revenue from timber sales, which in that period was the highest in the State Forests’ history. As a consequence, the State Forests’ financial result ranged from PLN 487.6 million (2020) to PLN 986 million (2022).
Recommendations
In view of the audit results NIK has made the following recommendations:
To the President of the Council of Ministers
To work out and undertake measures to implement legal solutions to ensure:
- protection of the State Treasury’s property entrusted to the State Forests National Forest Holding for management, considering the need for sustainable forest management;
- participation of the State Treasury in profits from public property management at the level reflecting its scale and benefits;
- mechanisms reducing the scale of wasteful and unjustified measures by limiting the shaping – under internal acts – of factors which affect the level of costs and revenue.
To the Minister of Climate and Environment
- to take legislative measures to further specify the principles of exercising supervision by the Minister of Environment over the State Forests. NIK highlighted that issue as early as 2015;
- to take legislative measures to further specify the Act on Forests in terms of earmarking financial resources of the forest fund;
- to take legislative measures to specify the principles of preparing and updating financial and economic plans;
- to initiate inter-ministerial legislative measures to define the mechanisms of establishing the principles of selling timber by the Director General of State Forests;
- to make an analysis of the reason for maintaining the possibility – provided in the Ordinance on financial economy – to earmark part of the forest districts’ profits for socially useful purposes.
To the Director General of State Forests
- to manage the property and finance, also from the forest fund, in compliance with the requirements set out in the Act on Forests and executive regulations to that Act;
- to verify purposes, tasks and principles of the functioning of the State Forests Information Centre, in the context of negative evaluation of promotional activities reaching beyond the State Forests’ statutory tasks.
