COVID-19 aids for agriculture and private room rentals: no proof of losses was required

Funding without providing revenue information, no proof of actual losses: in its report on „COVID- 19 Funding Granted by the Agrarmarkt Austria (AMA)“, which was published today, the ACA ascertained overfunding amounting to at least EUR 9.74 million. By the end of 2021, EUR 178.48 million were disbursed for agriculture and forestry as well as for private room rentals. The COVID-19 funding was based on two directives: the hardship fund directive and the special directive on the loss compensation scheme. The funding measures had considerable weaknesses: both their funding periods and scope overlapped in part. There was potential for multiple funding, as it was possible to make use of several funding opportunities at the same time. The ACA critically notes that the Federal Ministry of Agriculture and the Federal Ministry of Finance allowed for such a situation even though the potential for overfunding was already apparent in the preparation phase of the hardship fund directive. The audited period spanned the years 2020 and 2021.

The Federal Ministry of Agriculture assumed a leading role in the preparation of two directives in order to mitigate the economic implications of the COVID-19 pandemic for agriculture and forestry as well as private room rentals: the hardship fund directive and the special directive on the loss compensation scheme. The disbursements made between March 2020 and December 2021 aimed at maintaining solvency and safeguarding the liquidity of businesses during the COVID-19 pandemic. The AMA was in charge of processing applications and disbursing the funds..

Overfunding under the hardship fund directive

In addition to emergency funding, the hardship fund directive also provided for other funding opportunities. By the end of 2021, EUR 135.61 million were disbursed for agricultural and forestry businesses as well as for private room rentals. The individual funding instruments were designed in such a way that there was a potential for overfunding when revenue shortfalls and revenues were low. For example, as regards the funding instrument named “Revenue Loss Compensation” (Abgeltung der Einkunftsverluste), including the Comeback Bonus, the Additional Bonus (Zusatzbonus) and the Lockdown Turnover Compensation (Lockdown-Umsatzersatz), it was revealed that in many cases the funding granted exceeded the self-declared revenue shortfalls stated in the applications. In this case, the ACA ascertains overfunding amounting to at least EUR 9.74 million.

• As part of the “Revenue Loss Compensation” funding instrument, 1,066 agricultural and forestry businesses as well as 917 private room rental businesses received amounts exceeding the stated revenue shortfalls by a total of EUR 5.20 million. For instance, a revenue shortfall of 50 Cent was sufficient to receive “Revenue Loss Compensation” amounting to EUR 1,100 per application.
  
• Likewise, the funding volume that was received by 1,385 agricultural and forestry businesses as well as by 2,303 private room rental businesses as part of the Lockdown Turnover Compensation exceeded the stated turnover by a total of EUR 4.54 million. The funding volume for private room rentals exceeded the stated turnovers. An amount of EUR 4.50 million was approved even though the applications did not contain turnover information at all. This was revealed by an evaluation carried out by the ACA.

In the period from November to December 2020, businesses could apply for funding under the “Revenue Loss Compensation” as well as for Lockdown Turnover Compensation and Loss Compensation (Ausfallbonus). The ACA critically notes that the hardship fund directive did not contain provisions aimed at avoiding overfunding. For the drafting of future aid measures, it recommends defining funding criteria in such a way to exclude overcompensation. Furthermore, a funding practice making it possible to grant funding without basic data on the eligibility requirements should be refrained from.

Long application periods should be avoided

There was a total of nine versions of the hardship fund directive. The funding opportunities covered a period of around 18 months. In view of the unforeseeable development of the pandemic and the urgency of financial aids, the ACA comprehends that the hardship fund directive was amended and that additional aid measures were implemented at a later stage. However, it was critical of the fact that at times, depending on the date of the application and the version of the directive, different funding criteria were applicable to situations that occurred at the same time. In addition, it was possible to apply for funding in the full amount for a period that dated back more than a year. The ACA recommends avoiding long application periods and subsequent changes to directives for funding programmes that are supposed to have immediate effects.

Loss compensation without proof of revenue shortfall

The special directive on the loss compensation scheme was a funding instrument subsequently introduced for agricultural businesses indirectly affected by the pandemic, e.g. due to the closed restaurant business and hotel industry. A total of EUR 42.87 million of funding was disbursed to businesses in the agricultural branches of pig farming, potato farming, laying hens and wine. As a result of the lump-sum funding model, businesses could apply for loss compensation without having to prove a revenue shortfall. Again, this funding model could thus not rule out that agricultural businesses were compensated for losses even though they had not actually suffered a revenue shortfall.

Criticism of multiple funding

The funding instruments of the two directives, the hardship fund and the loss compensation scheme, could sometimes be cumulated, which opened up possibilities for multiple funding. For the period from October 2020 to March 2021, a wine-growing business that markets its products directly to the restaurant business and experienced a revenue shortfall was eligible to receive funding under the hardship fund directive. In addition, it was eligible to receive funding under the special directive on loss compensation if its annual wine sales decreased. A total of 155 businesses received funding under both the special directive on loss compensation and the hardship fund directive for the activity area of direct distribution.