Polish Waters - chaos at grass-roots level
Shortage of funds and qualified staff, tasks and property, poor coordination of the process of taking over tasks and property from local governments and managerial negligence. Those were issues identified by NIK in the process of founding and organising the SWH Polish Waters. Neither the Polish Waters Organisation Agent, nor the President, or local governments provided conditions for the institution to perform its tasks properly. NIK also has some reservations about the way the Ministry of Marine Economy and Inland Navigation supervised the institution.
The SWH Polish Waters came into being on 1 January 2018 due to the Water Law reform required by the European Union. The new, centralised institution took over tasks of local governments and duties of the National Water Management Authority and seven regional water management authorities. The need to carry out the Water Law reform was the precondition for Poland to use the EU funds for 2014-2020, earmarked for water management tasks. The reform was also expected to solve the problem of underfinancing of such tasks, thanks to customised, off-budget public funds. They were supposed to come mainly from water services, such as water intake or breaches of the conditions of using the environment. The NIK audit showed that the planned objective was not met.
Currently the SWH Polish Waters is maintained mainly from water service charges and subsidies from the state budget. After the state budget execution audits in 2018 and 2019, though, NIK could not verify if the data in the financial plans execution reports were reliable. The report for 2018 was submitted one day before the end of the NIK audit. The data from the report varied a lot from the data presented during the audit. The differences reached several hundreds of millions of Polish zloty.
The report was adjusted four times (also following comments of the Ministry of Marine Economy and Inland Navigation). In subsequent versions of the report there were several millions’ discrepancies among individual items, including the revenue and the costs. As a consequence, the financial result of the Polish Waters for 2018 was changed from nearly PLN 95 million in the initial version of the report to the loss of over 38.5 after adjustments. Also in 2019 the reliability of data in the financial plan execution report was questionable. That is why NIK, after the state budget execution audit in 2018, withdrew from evaluating the execution of the annual financial plan of the Polish Waters for that year. For the same reason, NIK did not evaluate the financial plan execution report of that institution in 2019.
According to NIK, in 2018 the SWH Polish Waters failed to control accounting records in water management authorities at the national and regional levels. There was no financial and accounting system in place and so it was impossible to generate data about the financial plan execution.
NIK stands in a position that the financial irregularities were a follow-up of improper preparation of the SWH Polish Waters to perform its tasks, as well as a complicated process of its establishment and organisation.
How the SWH Polish Waters was founded
The Polish Waters Organisation Agent was appointed on 5 September 2017 (the first Agent held that position for about 2 months and the second one until the President of the SWH Polish Waters was appointed, i.e. until 16 January 2018). The agents, however, did not receive any funds to perform their tasks. Besides, no unit was appointed to support them. As a consequence, the agents performed their tasks using the support of employees and funds of water management authorities at the national and regional levels.
The law did not regulate yet another issue, important for the functioning of the new institution. It was the takeover of premises from province marshals, district governors and commune heads. The premises were necessary to organise seats of the newly established field units of the Polish Waters. In each and every case separate arrangements with local governments had to be held. It happened that offers from the real estate market needed to be used.
In most units audited by NIK, workplaces were organised in line with the health and safety at work as well as fire protection requirements. Though, after two years of functioning some irregularities occurred in that area. An example is the Catchment Authority in Łowicz. The premises rented for the facility seat could contain the maximum of 25 persons, whereas the headcount limit for administrative employees was 42 persons. For instance, the building had no ventilation, central heating in the toilet or emergency lighting. Besides, required working space was not provided to some employees. Only in the course of the NIK audit, the Catchment Authority in Łowicz was given consent to rent new office space.
In 2018, the budget of the Regional Water Management Authority in Warsaw was at the same level as in the previous year, although the number of subordinate units doubled throughout a year. As a consequence, the Water Supervision Facility Head in Sochaczew at that time in the first half of 2018 used his own laptop, whereas the unit employees bought paper and toners for their own money. At the same time, the Catchment Authority in Łowicz was short of computers, printers and copy machines. The Authority Director used his private computer and internet access.
The problems piled up not only due to the takeover of premises, equipment and furnishing but also because of staff shortages. Neither the Polish Waters Organisation Agent, nor the President, or local governments provided the number of employees that would guarantee proper and timely performance of tasks. One of the main reasons was that the groups of specialists hired in district governor’s offices and province marshal’s offices, who were transferred to the new institution, were relatively small (104 and 31 employees respectively). Besides, the number of employees in individual units was not adjusted to the scope of tasks and there was a shortage of qualified staff in the market (hydraulic engineers, drainage engineers, hydrotechnologists or hydrogeologists in particular).
The management board of 10 in 18 audited units of the Polish Waters pointed to staff shortages. For instance, according to the Director of the Regional Water Management Authority in Szczecin, tasks in the area reporting to him were performed by about 100 persons before the reform and by about 30 persons afterwards.
Also high turnover rate was an issue. In 2018, in the Regional Water Management Authority in Warsaw 99 persons quit, according to the former director, mainly due to too low salaries resulting from the low limit. As many as 112 new employees were hired in their place. That generated huge costs, related to the lost efficiency of work but also administrative costs related to the resignation of employees, conduct of a new recruitment process and onboarding for new employees.
The personnel issues were also influenced by some negligence on part of the management board of the SWH Polish Waters. According to NIK they should have analysed the causes of that phenomenon and take proper measures. The Polish Waters said it was due to staff shortages that some tasks were not performed at all or were not performed properly. According to NIK that approach was unreliable.
Besides, adequate functioning of the new institution was hindered by the activities taken by the audited province marshals, the President of the SWH Polish Waters and regional water management authorities related to the transfer and acquisition of the State Treasury property. As NIK found out, after more than two years since the Polish Waters were founded, the institution President still lacked information about the number of acquired land properties, facilities and devices owned by the State Treasury.
Water permits were issued with delays, the way of establishing and collecting charges was complex and ineffective
A request for water permit is needed for the intake of ground- and surface waters. In 2018, in most audited cases the permits were issued with delays (in an extreme case it was 238 days in the Regional Water Management Authority in Warsaw). The directors of audited facilities explained it was due to the shortage of employees (the experienced ones in particular) and a big number of requests. At the same time, the appellate proceedings were reviewed with delays (34 to 695 days, in one case they were not reviewed for 730 days). According to the National Water Management Authority that was the outcome of the change of law which ended not only in an increased number of cases but also in their increased complexity and a greater number of interpretation doubts. NIK stands in a position that the key problem was the lack of a plan of controls related to the timeliness of reviewing requests (the National Water Management Authority was supposed to develop that plan). Also, the controls in that field were not conducted on a system basis.
The water service charges paid e.g. by communes providing drinking water to their inhabitants and companies using such services were assumed to be one of primary sources of the revenue of the SWH Polish Waters. In 2018, the revenue totalled nearly PLN 357 million which made up about 77% of the plan. In 2019, they were estimated to be lower by 41%.
The law that came into force on 1 January 2018, on the one hand, extended the list of entities obliged to pay charges. On the other hand, it introduced a new way of calculating and collecting those charges. According to NIK this is a complicated and ineffective method which was an additional, significant burden for the SWH Polish Waters at the beginning of its operation.
The water service charge includes a floating charge, depending on the amount of water drawn or the amount and quality of sewage discharged and a fixed charge established once in a year by the SWH Polish Waters and published in the so-called annual information statement, including among others the charge calculation method. This charge has to be paid in four equal tranches, once in a quarter, no matter if water services were actually used in that period.
After the new law came into force, the floating charges (fixed on a quarterly basis) in most cases were calculated by the catchment authorities following inspections made in the companies or communes obliged to pay those charges. Previously the catchment authorities had to send notifications about starting an inspection, obtain consent for a given inspection procedure, and then wait for relevant documents to be filled in and the inspection protocol to be signed. Those activities were carried out with thousands of entities and were repeated every quarter. Although they provided data about the actual scope of water services, they also considerably prolonged the process of fixing charges. The law did not define their minimum threshold. That is why, at the beginning the Polish Waters had to fix and charge even very small amounts. The law was changed and since 2019 only charges of more than PLN 20 have been collected.
To simplify the entire charge collection system and boost its efficiency, NIK has recommended that the Minister of Marine Economy and Inland Navigation restore the previous charge calculation mechanism (which was used until the end of 2017). In line with that mechanism, charges were calculated by the obliged parties and paid without a call for payment (assuming the adequacy of the calculations was under control).
The NIK audit also revealed irregularities related to the calculation and collection of water service charges, which impacted the company’s revenue. In 2018 and 2019, the Polish Waters organisational units made over 3.5 thousand administrative decisions in which the charges were - as a result of complaints - lowered or increased, in relation to the data published in the information statement for the given year. Nevertheless, in line with the law, the charge changes should have the form of a new information statement, not a decision.
Despite the measures taken, the Catchment Authority in Jasło and the Regional Water Management Authority in Rzeszów did not lead to the collection of over PLN 119 thousand from one company. Some irregularities were also confirmed in 5 of 6 catchment authorities which – as their directors explained – were caused by staff shortages or omission. E.g. in the Catchment Authority in Łowicz as much as 67% of information statements was published quarterly with delays from 1 day to nearly 1.5 years.
NIK is of the opinion that despite the actions taken, the President of the SWH Polish Waters did not ensure effective supervision of the adequacy of fixing and collecting water charges.
Flood protection
From the viewpoint of citizens, flood protection is one of basic tasks of the SWH Polish Waters. According to NIK the measures taken in this area were mostly adequate but not sufficient, e.g. in terms of water management control. As many as 4 in 6 audited regional water management authorities did not carry out a single inspection from 2018 to 2019 related to flood protection. Thus, they did not verify if the conditions on flood banks and flood-threatened areas were complied with. They also did not check how the process of eliminating flood effects was going on.
In two other regional water management authorities such inspections were conducted, mainly on an intervention basis, only when some irregularities were signalled. In one entity it was not verified if post-audit recommendations were implemented.
The directors of regional water management authorities did not take any action with regard to such inspections or the measures they took were insufficient. That approach was not compliant with the law as it could result in the failure to properly protect people and their property against flood.
NIK says the key reason behind is that the National Water Management Authority did not develop a plan of the water management control for 2018. The institution explained that the Polish Waters President was overwhelmed with matters related to the organisation of the new body. The water management control plan for 2019 was developed in January that year.
In the audited period, the Polish Waters units covered by the NIK audit did not ensure proper maintenance or use of water devices owned by the State Treasury. Nor did they ensure proper technical condition, operation and safety of hydrotechnical facilities. The reasons included shortages of funds and personnel as well as some negligence.
The water maintenance programme developed in 2018 in the National Water Management Authority comprised nearly 7.5 thousand tasks (over 4 thousand urgent ones) for about PLN 673 million. Interestingly enough, the Programme for 2019 included over 11 thousand tasks for PLN 835.5 million. The NIK findings show that until the end of 2019, less than half of them was performed – about 4.5 thousand. Due to the limited financial capacity the Polish Waters earmarked PLN 405 million for that purpose (less than 50% of the reported demand). The key criterion used to select tasks to be performed was their urgency and the limit of funds, set for a given regional water management authority.
Financing operations of state services
On 1 January 2018, the Polish Waters took over from the state budget the financing of the operations of services which perform key tasks for the safety of the state: meteorological and hydrological, hydrogeological and dealing with the safety of dams.
In 2018 and in 2019, that financing – insufficient due to the Polish Waters’ financial capacity – took the form of subsidies granted in response to requests of the Institute of Meteorology and Water Management - the National Research Institute and the Polish Geological Institute-the National Research Institute.
In 2018, the National Meteorological and Hydrological Services requested PLN 80 million and received less than PLN 65 million, whereas the National Hydrogeological Services received about PLN 8 million instead of the requested PLN 37 million. In 2019, the disproportions were much smaller, except for the National Hydrogeological Services. They requested a subsidy of over PLN 26 million and were granted PLN 19.5 million.
NIK has also found some irregularities in the way of settling subsidies for 2019.
The Polish Waters could not ensure financial stability to the services. A consequence was the amendment of the Water Law Act. Starting 1 January 2020, the services have been financed from the state budget.
Some changes were made with regard to measuring instruments. By the end of 2020, the Polish Waters were to provide them to all parties obliged to pay charges for water services. Though, in the audited period, no schedules for the replacement of those instruments were prepared. The Polish Waters President explained that in line with the new law, the instruments already used and the ones available in the market should first go through an official legalisation procedure. Since such an enormous undertaking could not be carried out in such a short time, the law has been changed. As a consequence, the previously used measuring instruments are subject only to a simplified procedure. The full procedure applies to all the new instruments. The deadline for completing the entire operation has been postponed until 31 December 2026, i.e. by 6 years.
