Rumen Porozhanov, the Executive Director of State Fund Agriculture, speaks to Dnevnik September 18, 2011
By Denitsa Vateva
At the end of March, the entire management of State Fund Agriculture (SFA) was replaced in order to expedite work on the Rural Development Programme (RDP) that has substantial problems, among which delays in processing project proposals and the risk of losing part of the budget for 2011. This spring, there was also significant discontent surrounding direct payment schemes because of fines imposed on farmers for previous years. To find out how far work at SFA has progressed, we speak to its Executive Director Rumen Porozhanov. Before taking that position, Porozhanov was chief of staff at the cabinet of Finance Minister Simeon Dyankov.
Mr. Porozhanov, did you manage to evaluate all RDP projects delayed during previous years?
My work at SFA started with proposals submitted in 2009 and 2010. During the past five months, but mostly during the past three months, we contracted 300 million euro under all RDP measures, and the projects we approved were submitted exactly during 2009 and 2010. All projects submitted in 2009 have been finalised, except for 15 projects under Measure 312: Support for the Creation and Development of Micro-Enterprises.
Most projects submitted in 2010 have also been finalised, with the exception of some proposals under Measure 322: Village Renewal and Development that concern properties belonging to the church. The only problem causing delays there is that we are waiting to receive ownership documents from the synod and the separate bishoprics. And, once again, there are delays caused by technical difficulties under Measure 312: Support for the Creation and Development of Micro-Enterprises. This measure will be finalised by the end of September. We are also currently working on some projects under other measures. I am satisfied we are finishing work on the projects accepted in 2009 and 2010.
How did you choose the criteria for ranking old projects under the private measures and did you modify some of them? For example, why does the fund award additional points to projects filed by women? (Several candidates wrote to the editor of Dnevnik saying they intend to file complaints with the Discrimination committee because of unequal conditions).
When the budget for certain measures is limited, our ranking criteria are determined by the managing authority, which is the Ministry of Agriculture and Food. According to these criteria, we must award five extra points to projects filed by women. Additional points are also awarded to proposals for investments in underdeveloped regions, etc. The criteria are clearly stated and have not been modified since I began work. There are no ambiguities whatsoever. The criteria are specific to the programme itself and its goals.
How much funding has been contracted and paid out under RDP until now?
As of August, 1.346 billion euro have been contracted, which is 41% of the programme’s budget. This sum doesn’t include some measures under Axis 2 that concern the less-favored regions and the agri-environment. We have paid out 720.1 million euro, which is 22% of the programme’s budget. The contracted funds for June and July account for over 200 million euro and those for August add up to just below 100 million euro, which is very positive and will help jumpstart payments for the upcoming months. In my opinion, our work is going very fast.
For the first time this year, Bulgaria risks losing EU funding. To avoid that, you need to pay out over 900 million euro by the end of the year, and you have so far paid out 720 million. Will you be able to pay out this difference of about 200 million euro by in time?
We are doing several things to help minimise such a possible negative effect. For example, we made changes that allow advanced payments under certain municipal and private measures to reach 50% instead of 20%. This will help us pay out larger amounts in advanced payments. We are also allowing beneficiaries under the private measures to use not only bank guarantees, but also guarantors to secure their advanced payments. The municipalities will be able to pay value added tax (VAT) on projects with these larger advanced payments.
We took many other steps regarding municipal projects, such as the so called bridge financing that the government enacted. In the environment of a global financial crisis, it is obvious that certain beneficiaries have difficulty financing their projects. Through very close communication with the union of municipalities, the Ministry of Finance and the Ministry of Agriculture and Food, we made it possible that municipalities pay out VAT on their projects out of our advanced payments. The reason for this change was the inability of some smaller municipalities to cover VAT payments. The Ministry of Finance will soon change the decree.
When will this change take place?
Any moment now. I hope that in a week’s time the government will enact the change in decree so we can both help finance municipal projects and improve the rate of funding absorption. Of course, I must point out that, at the end of the programme’s run, we might still have unabsorbed funds because the programme’s regulations require that no less than 25% of the funds are paid out under Axis 2 (Axis 2 contains mostly environment protection measures). The agri-environment measure itself requires 40,000 beneficiaries while, at the moment, we have only 2,000. Axis 2 also contains several measures for afforestation and other forest-related undertakings.
All in all, what sum do you expect to pay out by the end of the year?
Our analyses vary.
What is the optimistic and the pessimistic analysis, respectively?
I would like to avoid concrete numbers. I hope we will reach a high absorption rate. The main problem is that a high number of contracted projects simply remain in a contracted state. Many projects require a term extension, they get delayed, and at some point people file to retract them.
Did you establish a good enough organisation so you can process the projects filed now in accordance with the 5-month term set for this in the programme’s operating rules?
We did. The first round of projects submitted under Measure 121: Modernisation of Agricultural Holdings, will only be delayed with a month because we need to finalise some projects from 2009 and 2010. There are no problems with the rest of the measures.
Did you manage to pay out the entire direct payments budget for 2010?
We paid out 1.06 billion leva as assistance to the agriculture sector. This includes agri-environment payments, all payments under the Single Area Payment Scheme (SAPS), the Complementary National Payment Schemes (CNPS) per hectare and per animal, and the payments for tobacco.
Landowners could apply for direct subsidies until June. When will the technical inspections for the direct payments campaign begin?
Inspections are underway. The plan of the technical inspectorate is to finish them by October 15th. In accordance with the risk analysis, which determines where inspections must be performed, fifteen percent of the registered land will be inspected. This year, we are also making inspections at the request of beneficiaries.
Court information shows a record number of lawsuits against State Fund Agriculture. How much have you paid for lawsuits where courts ruled against the fund?
There are more lawsuits than money that needs to be paid. The number of lawsuits is high because of the acts we drew up in 2009 (against direct payment applications). These acts concern certain cases of overpayment, where it was absolutely clear that there was an overpayment. As part of an action plan, we have made a commitment to the European Commission to make sure overpayments are reimbursed and due payments are paid out.
In April, we drew up over 5, 000 acts for overpaid funds. About 16, 000 beneficiaries were overpaid, but where the overpaid sum was up to 100 euro, we did not pursue payment. A large portion of the owed funds under those 5, 000 acts have been paid back, while others were deducted from (this year’s) funding. About 1, 100 lawsuits have been filed in connection with these acts. I expected a much higher number. Of course, there are many other types of lawsuits, some of which date from the time pre-accession programmes.
What is happening with the “black list” under SAPARD and how many firms are still in it?
The list is already becoming “whiter”. There are projects worth 240 million leva in it. We set up a committee headed by one of our deputy executive directors. Following the three-round court control that determines the presence or absence of a violation, the committee examines all documentation on the cases where violations were not found and takes the projects off the list of debtors. As of now, “the debtors’ balance” has dropped to about 200 million leva.
Do you expect most of the firms in the list to come out clean? A while ago media quoted you on this….
I said that most of the firms that have already been examinedhad not committed violations. I cannot predict what will happen with the rest of them.
Is the budget going to cover all funding for firms that have not committed violations?
Unfortunately, when a SAPARD project is suspended on account of fraud suspicions, but later the project turns out to be alright, State Fund Agriculture owes the money and they are paid by the national budget.
Are you aware of cases, or are you worried that some previously black-listed firms may sue State Fund Agriculture for missed opportunities and damaged image?
I couldn’t comment on what anyone would do. Everyone is entitled to his or her own reasoning on the subject.