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Audit activity: deficiencies found in the distribution of subsidies granted to the "Moldsilva" Agency for the sale of firewood

  • 28.12.2023
  • 356

In the context of the precarious situation on the energy resources market generated by multiple risk factors that influenced the increase in energy resource prices, the Commission for Exceptional Situations (CES) of the Republic of Moldova ordered the allocation of 64.25 million lei.

This decision was taken in order to reduce the impact of the crisis and alleviate the energy burden on the country's citizens, as well as to ensure the necessary stocks of wood for the cold period of 2022-2023. Respectively, the Court of Accounts of the Republic of Moldova, on December 28, examined in the online session the Compliance Audit Report on the subsidies granted to the "Moldsilva" Agency in 2022 and 2023 for the purpose of disallowing the increase in the prices of firewood sold to the population for the cold season.

The Ministry of the Environment approved the Action Plan regarding the supply of firewood for the cold period of 2022-2033. In carrying out the planned actions, several actors were involved:

  • "Moldsilva" Agency - early execution of the silvo-technical works from the setmeasure of the cutting of main products planned for the first quarter of 2023, 150 thousand m3 gross volume of wood mass;
  • SE "State Administration of Roads" (SAR) - the execution of silvo-technical works to collect timber from the lands with forest plantations related to the national roads under management, the volume of timber harvested being 4.3 thousand m3;
  • Local public authorities (LPA) – execution of silvo-technical works to harvest wood from LPA lands, 33 thousand m3 of wood.

At the same time, the Government of Romania approved on 05.10.2022, the granting of aid to the Government of the Republic of Moldova of 200 thousand cubic meters or about 130 thousand cubic meters of firewood. Thus, in order to increase energy security during the cold period of the year by supplementing the available wood mass, the "Moldsilva" Agency concluded the sale-purchase contract directly with the "Romsliva" National Forest Authority regarding the procurement of wood for heating in the volume and limit of the stocks set at provided by "Romsilva".

The Administrative Council of the National Forestry Agency "Romsilva" approved the sale of firewood at a weighted average price of 230 Romanian lei per cubic meter.

The Court of Accounts found that the differentiated approaches and the lack of functionality of the key controls established generated a series of deficiencies and non-conformities:

  • some actors involved in the implementation of the Action Plan regarding the supply of firewood for the cold period of 2022-2023 – SE " SAR" and LPA although they obtained authorizations for cutting outside the forest fund, did not report either the volumes of wood mass obtained, nor the categories of beneficiaries to whom it was distributed, trading firewood without well-designed criteria;
  • the authorization of the harvesting of forest vegetation from the forest fund was carried out without complying with the approved procedures, as follows: (i) out of the total of 80 authorizations issued by the "Moldsilva" Agency in the period August 2022 - March 2023, 37 permissive documents or 46% were issued beyond the 10-day deadline imposed by the CES, the overstay varying between 3 and 11 days; (ii) the lack of regulations regarding the method of notifying the Environmental Protection Inspectorate (EPI) regarding the requests received regarding the request for the authorization of cuttings in the forest fund, the content, the format, including the responsible persons, led to essential divergences between the data of the primary inventory and the data of the control inventory being improvement of 6 permissive documents, the previously authorized volume being reduced by 82 m3;
  • the price catalogues for wood products of some State Forestry Enterprises (SFE) were not coordinated with the founder, and 6 SFE, during the year 2022, did not publish the updated marketable prices of the wood mass, not respecting the principle of transparency;
  • although, the www.lemne.md platform with its current functionality, provides for the publication of information on wood stocks, as well as the availability of wood at the beginning of each week, it does not work at the level of the maximum designed capacities (the development services of the online wood platform. md were contracted by Dexis Consulting Group, and the development was executed by Evisoft Ltd, the cost of the mentioned services being 24,472.0 USD, equivalent to 474,512.08 lei)
  • the criteria imposed by the CES regarding the sale of firewood were not respected, the Lists drawn up by SFE include several family members from the same household, persons whose domicile is not within the LPA and persons who own several heating sources, and SFE Chisinau sold firewood based on individual requests, because Chisinau City Hall did not present the list of potential beneficiaries;
  • four forestry entities subject to auditing admitted, in 1185 cases, the sale of firewood above the approved limits of 5 sterile meters, which consequently led to the reduction of available wood stocks in a volume of 3.3 thousand m/st. Significant exceedances are attested in Cimișlia, where seasonal employees procured firewood in quantities of up to 39 m/st above the admissible limits. Out of 160 seasonal employees, 146 purchased 1.3 thousand m/st over the established limits of 5 m/st. In the period 01.09.2022-31.01.2023, forestry enterprises sold firewood in a volume of 2.3 thousand m/st to categories of beneficiaries not foreseen in the CES provisions, such as: individual enterprises, peasant households, Limited Liability Companies and associations non-accredited societies;
  • the method of calculating the prices for the sale of wood products approved by the "Moldsilva" Agency is defective, contributing to the artificial increase in the sale prices of wood, to the unargued and unjustified obtaining of additional income and consequently to the reduction of the possibility of buying wood to the population;
  • the imperfection and ambiguous character of the mechanism for distributing budgetary means/subsidies approved by the Ministry of the Environment contributed to the granting of increased subsidies aimed at accelerating the collection of wood mass in the cold period of 2022-2023, in the calculation applied by the "Moldsilva" Agency, the estimated costs of forestry works for 1 m3, which actually did not have theirs and were not supported. As a result of the recalculations carried out by the audit, with the application of the real increase in the costs related to the forestry works carried out in the IV quarter of 2022 and the I quarter of 2023 for the entire volume of wood mass, including that obtained from accelerated cutting, the forestry entities according to the audit estimates were to benefit from subsidies in the amount of 7.3 million lei, or 42.9 million lei less than the amount granted by the constituted Distribution Commission. Excluding the part of the subsidies that was returned to the state budget in the form of profit deductions (25%) - 4.4 million lei, the amount of subsidies granted to forestry entities in addition, according to the audit, is 38.5 million lei;
  • in order to prevent and counter illegal logging, the Environmental Protection Inspectorate, the "Moldsilva" Agency, the General Police Inspectorate have developed and approved an Action Plan in this regard, with individual and joint actions being established that will contribute to achieving the set objectives. We mention that, cumulatively, a volume of 3.97 thousand m3 of illegally cut wood was detected, fines amounting to 9.3 million lei were applied and damage was calculated in the amount of 17.4 million lei.

The Court of Accounts concluded that the activities carried out by the decision-makers led to the simplification and acceleration of the process of obtaining authorizations for cutting forest vegetation, including the execution of forest engineering works anticipated in 2022 from the account of 2023. As a result, the stocks of wood mass were increased, but the volume of firewood sold in 2022 is 30.2 thousand m3 lower than that of 2021, conditioned by the limitation of the volumes of solid wood admissible for sale to eligible beneficiaries.

The dysfunctionality of the designed internal controls, only in the case of 4 forestry entities, determined the sale of 2.3 thousand m/st of firewood to ineligible beneficiaries and the exceeding of the admissible limits for the procurement of firewood by 1.4 m/st. The methodology for formation, regulation and application of the sale prices of wood products developed and approved by the “Moldsilva” Agency is ambiguous and contributes to the SFE obtaining additional income and exaggerated profits.

The mechanism developed by the Ministry of the Environment in order to distribute the budgetary means was not an appropriate one and conditioned the granting of increased subsidies aimed at accelerating the collection of wood mass and not allowing the increase of firewood prices for the population.

The unique nature of the exercise carried out by the actors involved determined the design of insufficient and non-functional internal controls, which directly contributed to the materialization of non-compliance risks.

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