To overcome the crisis caused by COVID-19 and mitigate its consequences, the government allocated 45.5 million euros from the state contingency budget to support the agricultural and food production sectors in 2020. The State Audit Office publishes an interim report on the allocated 35.5 million euros, which, based on the calculations of the Ministry of Agriculture, was provided for three support programs and of which 84% was spent. When auditing the calculation and estimation of the funds’ demand, the State Audit Office had to conclude that they were based on the occurrence of a significantly more negative scenario than later turned out to be. The actual decrease in revenue of the supported sectors was not at all as large as initially forecasted by the Ministry. Consequently, support payments from the state budget indemnified for the decrease in sectoral revenues and even increased revenues for certain agricultural sectors compared to the corresponding periods of previous years.
The Ministry of Agriculture set up a crisis management group in its sector by involving farmers’ social partners to monitor the situation concerning the effects of the spread of COVID-19 regularly, immediately after the emergency was declared on 12 March 2020. Following the observations and calculations of the Ministry of Agriculture, the government adopted regulations on state aid to agriculture in order to reduce the negative impact of the COVID-19 outbreak on 14 April 2020. There were 45.5 million euros allocated for this purpose, including 35.5 million euros in three support programs, which one assessed in the interim report published by the State Audit Office.
During a random inspection of the administration of support by the Rural Support Service, the auditors concluded that the support had been paid under the administrative requirements of the regulations. At the same time, when analysing the estimates of the demand for funds of the Ministry of Agriculture, the check-up performed by the State Audit Office revealed that the forecasts used in the calculation of the amount of required funds and the actual situation differed significantly. The actual decrease in the income of producers in the sector was not at all as large as initially forecasted by the Ministry.
Demand was very low in two of the three support programs, and unspent funds of around 10 million euros were redirected to the third program, that is, income stabilisation support for farmers in certain livestock sectors (dairy cows, beef cattle, pigs for fattening), which planned 19 million euros but one paid the support of 26 million euros. Initially, the reduction of income in the supported sector set by the Cabinet of Ministers was at least 20%. Then it was changed to 5% already in June by justifying it with the need to set a similar support rate as for Lithuanian farmers. As a result, all agricultural sectors mentioned in the regulations qualified for support. Simultaneously, the total amount of aid and the aid rate per livestock were set at a level that compensated for most of the 20% decrease in revenue.
Although the situation was more favourable than expected, the Ministry of Agriculture did not review the support rates for farmers in the sectors. Therefore, with the actual decrease in revenue, which was lower than planned in most cases, state aid payments offset the decrease in the sectoral revenue and even increased revenue compared to previous years. For example, the auditors estimated that state aid to the dairy sector exceeded revenue by at least 7.3 million euros. Besides, given that there was a fund surplus in two other support programs making the extension of the support period possible, thus it was disbursed in both August and December.
The total number of beneficiaries of income stabilisation aid was 9040, and the maximum amount of aid was 100 thousand euros. The Rural Support Service disbursed this support automatically based on livestock register data. The Ministry of Agriculture had calculated the possible decline in revenue for each sector. However, it had not intended to assess changes in the income of individual beneficiaries or tax arrears.
In the light of the European Commission’s guidelines stipulating that rescue and restructuring aid is one of the most economically and competition-distorting forms of state aid, the State Audit Office invites the Cabinet of Ministers to assess the conditions of state aid provided to the sectors more thoroughly further on to prevent potential adverse effects and facilitate the effectiveness and solidarity of public spending.