The auditor general has referred a case of possible abuse of an EU-sponsored programme to the EU anti-fraud office Olaf following a complaint that a single beneficiary had allegedly bypassed grant ceilings by using several smaller companies, his office said on Wednesday.
Intended for small and medium sized enterprises (SMEs), the programme set a maximum on how much money each beneficiary can secure.
In a report made public on Wednesday, Auditor-general Odysseas Michaelides said that his office had carried out an investigation after receiving a complaint regarding grants received by eight companies under a programme for 2004-2006 (to promote alternative economic activities) and 2007-2013 (to promote agrotourism in the countryside).
The complaint also referred to a ninth company that received a grant under a third scheme to enhance the tourism product.
The nine companies received grants of between €157,000 and €300,000 under schemes one and two, and €1.3m under scheme three over the period of 2004 to 2013. In total, the grants total some €3m.
All three schemes were part of the EU’s sustainable development and competitiveness programme and were co-financed by the EU and the Republic.
According to the complaint, the companies are part of the same tourist complex and have a common manager and a common real beneficiary. The individual allegedly created companies in the names of relatives and associates and secured funds through these schemes, bypassing the maximum grant each applicant is permitted.
“The checks raised reasonable questions as to whether all the above companies should be considered as separate enterprises, rather than a single enterprise, which would have resulted in only one application being accepted per scheme and grants not being approved as in total they would exceed the limits set by schemes 1 and 2 and which concern a period of three financial years,” the report said.
Moreover, if all the companies linked to the individual were considered one enterprise, they may conceivably not have satisfied the criteria to be considered a small business, it added.
According to the report, the individual is owner of the buildings which were assigned to the companies (final beneficiaries of the projects) for a symbolic rent, with the aim of restoring them and converting them into agrotourist accommodation.
The representatives of the companies that signed the applications for grants through the schemes all had family or professional links with the individual, the report said.
All the buildings of the companies were advertised as accommodation of company A, have a shared reception area and bookings are made through company A. In addition, many of the employees are employed by the companies.
Three of the nine companies that received a grant were not active, registered in Cyprus and SMEs when they submitted their application, in violation of terms of the programme for potential beneficiaries.
“Because of the seriousness of the findings, which may lead to sums having been unduly paid and taking into consideration our obligations under article 8 of regulation 883/2013/ΕΕ, we have informed the European anti-fraud office (Olaf) so that it can evaluate and recommend whether further investigation was warranted. Olaf informed us, after studying the data before it, that there are reasons for investigation and has opened a case file and in the investigation is underway,” the report added.
The auditor general’s report clarified that neither the report nor forwarding of the issue to Olaf should not be understood to mean that the office is making any charge that any individual has committed a criminal or other offence, it clarified.