Corruption and misuse of EU funds in Hungary

Subject: Corruption and misuse of EU funds in Hungary

It has been reported1 that large amounts of EU funds have been misused under the Ignác Darányi Plan in Hungary. This programme was designed to support economic development in rural areas and provides funding for individuals to run small, family-run hotels in order to facilitate tourism. However, as these hotels can be declared private homes after five years, many of these ‘hotels’ have never seen a tourist, so often the money is de facto used to improve family homes. As this programme is largely funded by the European Union, the following questions arise:

How much EU money is designated for the Ignác Darányi Plan in total?

Is the Commission monitoring expenditure under the Ignác Darányi Plan and will the Hungarian Government have to compensate for any misused funds, or will there be sanctions if corruption is found to have occurred?

For what reason are there apparently no criteria with regard to the need for the investments, as many of these ‘hotels’ are in small villages which only a few tourists might visit?

1 http://hungarianspectrum.org/2018/07/25/european-union-money-for-village-tourism/

Answer given by Mr Hogan on behalf of the European Commission

(5 October 2018)

For Hungary, the total European Agricultural Fund for Rural Development (EAFRD) amount of funding for rural development for the 2007-2013 period was EUR 3.86 billion. Approximately EUR 90 million out of this amount were allocated to support activities under measure 313 ‘Encouragement of tourism activities’, which also cover guest houses.

Rural Development Programmes (RDPs) are implemented under shared management between the Member States and the Commission. In particular, the responsibility for project selection and control of the eligibility lies with the national authorities. T

he Member State, through the competent Paying Agency, should ensure that an operation comprising an investment in infrastructure or productive investments maintains its original objective within five years from its completion. This is done through regular administrative checks and on the spot visits as well as ex-post checks.

The Commission uses the conformity clearance to ensure that the management and control systems of the Member States and their implementation comply with the EU rules; in case of deficiencies the Commission applies financial corrections to preserve the EU financial interest.

Where suspicions of fraud arise, the European Anti-Fraud Office (OLAF) may investigate the matter; in case of fraudulent irregularities, recovery procedures and possible judicial proceedings are launched and followed-up by the Commission.

The project selection is the responsibility of the Member State. The Commission, in its advisory capacity, participates in the work of the Monitoring Committee, which has to be consulted by Managing Authorities on the selection criteria proposed.

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