KEHI request to FMO 4 August 2014

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Z AUG. 20141

GOVERNMENT CONTROL OFFICE CHAIRMAN

Reg. no.: 23 - 463/ 394 /2014 4 August 2014 Stine Andresen director Financial Mechanism Office Brussels

Dear Ms Andresen/ Please allow me to inform you about the audit conducted by the Government Control Office of Hungary.

Our Office had been instructed to carry out a comprehensive audit of the operation and functioning of the institutional system of the Norwegian and EEA Funds w i t h respect to both financing periods. The objective of this audit is to conclude whether the activities of the organisations i n relation to these funds are i n line w i t h the relevant laws, transparent and accountable, and whether the provisions of the international agreements are respected by the organizations.

The scope of the audit also covers activities of - Hungary-based - fund operators i n connection w i t h the Financial Mechanisms, as defined by Article 5.13 of the implementation regulation of the Financial Mechanisms.

Furthermore, the audit intends to examine if principles laid down i n Article 10 of the Memorandum of Understanding (in Article 11 as for the period 2005-2009) and i n Articles 1.6 of the implementation regulation, and defined as obligations for the beneficiary states especially

those

regarding

transparency,

accountability,

cost

efficiency

and

equal

opportunities - are respected.

According to Article 2 of Decision No 3/2007/SC of the Standing Committee of the EFTA States, any person may request access to EEA documents produced or received by the EFTA

1126 Budapest, Tartsay Vilmos Utca 13.

Tel: +36 1 224 6800; Fax: +36 1 224 6871

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2 Secretariat, and with regard to this access, i n accordance w i t h principles laid down i n the Preamble of the same document, the principle of openness to the greatest extent possible is the main requirement.

Having regard to the above objectives and rules, as well as the Public Access Policy published i n relation to the Norwegian and EEA Funds, and, i n order to enable Hungary considering its obhgations assumed i n international agreements - to ascertain that the previously cited principles are respected, please make the following documents - either i n copy or via e-mail (kehi@kehi.gov.hu) - available to the Government Control Office: 1. Audit reports containing conclusions related to Hungary and ordered or initiated by the FMO on the EEA and Norwegian Financial Mechanisms; 2. Information - concerning both program periods - on the appointment procedure of the Hungary-based fund operator as for the state (or the European Union) the laws of which were applied, the procedure which governed the appointment (public procurement or other), and tire legal basis of the authorisation for this procedure, h i case the procedure applied was not a public procurement procedure, then - having regard to Article 65(1) of the EEA Agreement and the provisions of Annex XVI - please provide the reasons (or enabling laws) for not applying public procurement procedures; 3. Documentation on the process of the selection and evaluation of the Hungary-based fund operator, including files i n connection w i t h the procurement procedure; 4. The Agreement concluded i n accordance with 1.1 of NGO Grants Guideline (published: 23 August 2006) by the Financial Mechanism Committee, the Norwegian Ministry of Foreign Affairs and the Hungarian National Focal Point on the transfer of functions of program operators to the FMO; 5. The exhaustive list of documents available on the management of EEA and Norwegian Financial Mechanisms i n Hungary.

I wotild like to draw your attention to the fact that Act CLXXXI of 2007 on the transparency of grants provided from public funds, is also applicable - besides grants deriving from state budget and EU funds - to grants deriving from „other programmes financed i n accordance with an international agreement", thus not constituting the state budget,.granted by an individual decision, through tender or tender procedures to natural persons, legal entities or entities without a legal personality,. Pursuant to Section 3(1) of the Act, data

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3 processed by Okotars Foundation i n connection w i t h the tender, the tender procedure and the tender decision, which are neither public nor sensitive data, shall be regarded as public data on public interest grounds.

Hence, with respect to grants provided on the basis of international agreements, the above mentioned law does not distinguish between grants contained or not contained by the Hungarian state budget. Furthermore, the Hungarian Criminal Code makes no distinction between abusing funds originating from the state budget or those financed from „a budget handled by or handled i n the name of an international organisation": both cause economic loss, i.e. budgetary fraud is committed.

Okotars Foundation, referring to your letters, is continuously violating provisions of applicable Hungarian laws on public funds i n relation to the Norwegian Civil Fund. With respect to, inter alia, the above fact, as a consequence of Okotars Foundation having failed to provide the above mentioned documents, the Office intends to take steps to initiate the suspension of the tax-identification number of Okotars Foundation.

I n accordance w i t h the above mentioned facts, I request your kind assistance to intervene w i t h the head of Okotars Foundation, to provide access for m y Office to data of public interest i n connection w i t h tenders, tender procedures and the evaluation process as soon as possible.

As for this audit, please contact Dr. Beatrix TARI (phone: +36-1-224 6919, e-mail: beatrix.tari@kehi.gov.hu), Head of Department, Government Control Office.

The scope of authorisation for auditing by the Government Control Office is provided by Section 63(1), points a), c) and h) of Act CXCV of 2011 on public finance, and by paragraphs 5ÂŹ 6 of Government Decree 355/2011 of 30 December 2011. The legal basis of the objective of the audit is also a Member State responsibility as stated i n Article 10 (or 11 as for the period 2005ÂŹ 2009) of Memorandum of Understanding on the EEA and Norwegian Financial Mechanisms and Article 8 of Protocol 38b.

Thank you for your co-operation i n advance,

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