Closing of investigation no. VIZSG_27_2023 – abuse involving funds for fishponds in Nógrád County

The Integrity Authority has filed a complaint with the National Tax and Customs Administration (NTCA) on the suspicion of budget fraud and the use of forged private documents concerning three projects that have received a total of HUF 487 million in European Union grants as part of the Hungarian Fisheries Operational Programme (MAHOP) in the villages of Kazár and Mátraverebély, located in Nógrád County.

The total cost of the projects, which were aimed at constructing fishponds, amounted to HUF 973 million, as shown in the grant application, with a Budapest-based sole proprietor as the beneficiary of the grants, whose premises are located in these two communities.

The Authority has established that the beneficiary did not carry out any licensed activities related to fish farming during the projects (between 2018 and 2023), as records from the National Food Chain Safety Office (NFCSO), the authority overseeing fish farming, indicate that the beneficiary possessed no rights to fish farming. When submitting the grant application, the entrepreneur attempted to verify their fishing activities using earlier invoices while at the same time also lacking a water-use permit for facility operation. The absence of this permit meant that the Beneficiary utilised the awarded grant without entitlement and directed its use in ways that were inconsistent with the objectives of MAHOP.

With regard to the projects, the entrepreneur should not have been entitled to HUF 117 million in grants for the procurement of machines, as the fishponds under their operation had an area much smaller than the 20-200 hectares required by the tenders.

The Authority believes that the beneficiary of the grant submitted documents, including false invoices, evidencing fictitious business events to support the indicators required in the project. One typical example of this is that the beneficiary attempted to verify their fish farming activities using fish sales receipts, but data from the NTCA indicate that the beneficiary issued receipts only at the end of the five-year period under review, between 15 December 2023 and 23 December 2023, totaling 704 for HUF 17,421,467 gross. This means that on average the beneficiary issued a receipt every 4 minutes and 46 seconds under a period of 9 days for an average of HUF 24,746 gross, which is a fragment of the value of invoices presented in the grant application.

Therefore, the Authority has filed a complaint regarding suspicions of issuance of false invoices and budget fraud.

A conflict of interest also emerged amongst the tenderers, contractors engaged in the project, and the beneficiary: invoices totaling HUF 623 million (half of this funded by the European Union) were issued by contractors that were not independent of the beneficiary. The value of these invoices accounted for almost 70% of the total eligible costs of almost HUF 900 million in the Projects.

The Authority has found the suspicion of double funding to be warranted as well: in two grant-supported projects, fishpond construction contracts, which were for the same subject matter but concluded with different companies, do not specify how the tasks were divided. Moreover, the contractors presumably did not even possess the adequate capacities to perform the contracts.

The investigation concluded by the Integrity Authority has already produced results ahead of the investigations, prompting the managing authority of MAHOP and the Ministry of Agriculture to stop the disbursement of grants, exclude the beneficiary from the grants system, cancel the grant document, withdraw from the contracts, and demand the return of the misused funds.