KEHI reports Ökotárs for financial malfeasance and fraud

October 23, 2014

KEHI

Hungary’s Government Control Office (KEHI) has concluded its financial probe in the case of Norway Civil Grants in Hungary. The final report’s executive summary accuses the NGO Ökotárs of mismanagement of funds, budgetary fraud, document forgery and illegal financial activities. Based on its findings KEHI has reported the beleaguered NGO to Hungarian authorities for alleged criminal activities.

The investigation asserts that in many cases the evaluation of applications was unilaterally modified by Ökotárs, thus influencing applicants’ chances of securing funding.

According to the report, KEHI uncovered irregularities in the invoicing of expenses and in the procurement of material resources for Ökotárs’ own use. It is alleged that in many cases Ökotárs backdated contracts, was late with application submissions and recouped their expenses irregularly, invoicing the same expense in multiple funding contracts. KEHI also claims to have established that some invoices originated from companies that did not exist at the time.

János Lázár, Minister of the Prime Minister’s Office, said he will invite Norwegian government officials to Budapest to present KEHI’s findings to them.

Ökotárs director Veronika Móra told state news agency MTI: “It is really difficult to react to the generalized and unfounded charges articulated in KEHI’s report. If they found irregularities, then they should have described exactly who committed these and how much money we are talking about here.”  She said she had learned about the report’s findings from the press but had yet to be given a copy of the report.

The Hungarian Government Control Office also claims that Ökotárs was partisan in the distribution of funds. KEHI says that out of 55 applicants it found 21 who were closely affiliated with the administrating NGO cluster, as well as with members of the evaluating committee. The investigators also claim that Ökotárs’ lending of HUF 100 million (USD 412,000) to applicants constitutes “illegal financial activity”. Further, it is alleged that  Ökotárs charged interest on the loans.

In a statement issued to MTI, KEHI claimed that irregularities in the invoicing of funding in five cases triggered charges of budgetary fraud, in eight cases embezzlement, and that in certain cases the backdating of certain official documents amounts to document forgery.

KEHI says it established bigger or smaller irregularities in 61 out of 63 grant applications.

According to the state office, Ökotárs and other member NGOs of the Norway Civil Grants cluster attempted to prevent the Hungarian police from revealing their illegal activities, deleting essential data from computers, as well as destroying email correspondences and reproducing missing documentation.

US President Barack Obama received Móra in the White House at the end of September. She was travelling to the US to attend the International Visitors Leadership program, and was a member of an official international committee of NGOs meeting with the President, according to Dmitry Tarakhovsky, cultural issues liaison at the US Embassy in Budapest. According to the US Embassy, the US government’s international visitor program is intended for experienced, mid-career NGO and administrational leaders, meeting stakeholders on the highest level of the US administration during their stay. Participants of the program are selected from the Clinton Initiative every year among others.

Earlier, Móra said their organization made only decisions that were in line with the contract they signed with the Kingdom of Norway, as well as with the evaluation guide that is available on Ökotárs’s website.

All applications received were evaluated by a 2- or 3-member external expert committee, and the Evaluation Committee or Ökotárs selected applicants to the second round from this submitted preliminary list, she said. There were seven different evaluation committees operational at the civil organization. “These people were not simple voting machines and have the right to overturn previous evaluations,” Móra added.

Erzsébet Kadlót, attorney of Ökotárs, told ATV a few weeks ago that the charge of malfeasance is completely unfounded.

According to Zsuzsa Foltányi, strategic advisor to Ökotárs, the only official body that has the authority to control what happens with Norway Civil Grants is the Norwegian state and Norwegian taxpayers. They do this regularly, even participating in the evaluation of the applications. The funds are physically in Norway, and withdrawals are a delicate and complicated process strictly regulated by local authorities. This is why civil society in Hungary stands puzzled when confronted with these charges, the lawyer said.

Reacting to the charge of illegal financial activities, Foltányi earlier said that they offered to advance funds to some civil organizations, reckoning that there were altogether 4 or 5 such cases each year.  She said Ökotárs was charging interest but only the amount that is normally requested by banks. The loans were not commercial in nature but rather technical because most of the Norway Grants recipients have everyday financial problems and could not cover their own contribution to the projects.

At the moment there is no legislation in Hungary that would allow KEHI to conduct such an audit. Earlier the control office referred to the public funds transparency act because the state budget legislation only authorizes them to audit funds coming through the Hungarian government.  Norway Civil Grants money does not fall into this category.

Referenced in this article:

http://hvg.hu/itthon/20141022_Feljelentest_tesz_a_Kehi_a_norveg_penzek

http://abcug.hu/okotars-kehi-jelenteseben-nincsenek-konkretumok/