Control of the spending of aid

The process of control of the expenditure of aid should be distinguished from that of the competent authorities during the verification and award of the aid. So we can talk about initial and current verification (or final). They differ in scope and often in verified issues.

In the field of aid instruments available under the so-called crisis shield, based primarily on the provisions of the Act of 2 March 2020 specific prevention, prevention and eradication solutions COVID-19, other infectious diseases and the resulting crises 1 (Next: uCOVID-19) and the Financial Shield, implemented under the Rules of Procedure, to apply for participation in the government programme “Polish Development Fund Financial Tarcza” for small and medium-sized enterprises 2 , and other forms of aid related to COVID-19, the scope of the checks carried out varies widely.

As shown in the analysis below, the time limits for carrying out the checks, as opposed to the funding period for most forms of support, are quite long.

1. General scope and sources of control

Depending on the specific instrument and applicable provisions, checks may include:

• 1) the appropriateness of granting a specific form of aid, verification of compliance with the conditions for receiving support at the initial stage,
• 2) the veracity of the declarations made and the documents submitted (including requests and attached annexes),
• 3) the regularity of spending,
• 4) the reliability of documenting the expenditure effected from the amounts of support received,
• 5) the fact that the contract staff are employed,
• 6) other aspects relevant to the form of support.

In general, the scope and procedure of possible verifications should be included in the provisions of the relevant laws (e.g. uCOVID-19) or in the content of the contract binding the body to the beneficiary of the support (e.g. in the grant agreement).

In order to determine the essential conditions for the beneficiary and the extent of the financing, it is first necessary to examine in detail the content of the contract referred to, which is the source of the legal relationship between the parties, setting out their rights and obligations.

With regard to the abovementioned regulations at the statutory level, as an example, Article 15gg Act uCOVID-19, of which it reads: ‘The director of the Provincial Labour Office (hereinafter: Director of the WUP) may carry out checks during the period of co-financing and during the period 3 years after the end of the benefit period with the entity concerned Under section 1, in respect of the expenditure of the Fund for the payment of benefits as intended and for this purpose it may request that any documentation related to it be presented and requested to be explained accordingly.’

This provision confirms the wide range of checks that the beneficiary of support may be subject to. It is also worth paying attention to the long, three-year period during which the inspection body can be carried out. This period shall be counted from the end of the funding period. As a result, entrepreneurs receiving support In 2020 should pay particular attention to the correctness of the settlement of the aid received at least until the appropriate date In 2023

2. Subject matter of expenditure control

2.1. General principles for the spending of aid

Polish tax law and regulations on support instruments in the fight against impacts COVID-19 do not give the concept of "exploitation" a meaning different from that of the common one. As a result, the Polish Dictionary of PWN 3 , we can assume that "expenditure" means "to spend money on something" or "use something".

The remark on this concept is important in that it indicates the aid instruments involved in the control of expenditure. The beneficiary of the support may spend the money received (i.e. use the amount of funds received) in the event that he has previously received measurable financial assistance to make certain expenses.

Therefore, the control of spending will not include, for example, the exemption from the necessity to pay contributions to the Social Security Office in question under Article 31zo uCOVID-19.

The exemption is made by way of write-offs and, while redemption may give rise to income tax effects, it would be unreasonable to verify how and for what purposes the beneficiary of the exemption has allocated the amounts received, since there is no legal basis.

In this case, the characteristics of the support, which do not entail any amount being paid to the recipient, and the lack of the legal objective for which the amounts are to be decommissioned, stand in the way.

This issue sheds light on the right subject of control. Regardless of the form of support, in the case of an analysis of expenditure, verification of the conformity of expenditure effected with the purpose of the funding received (expressed also by the list of expenditure set out in the law or contract).

Under the current rules, the available official rules for granting support and the provisions of agreements between authorities and traders, it can be concluded that the above-mentioned ‘use of support’ is defined very differently, depending on the specific characteristics of the support instrument. Generally, the forms of destination are reduced to:

• 1) the indication of the direct purpose of the financing (e.g. measures ‘to finance the remuneration of employees subject to economic downtime or reduced working time’) referred to under Article 15g uCOVID-19);
• 2) an indication of the general clause which includes a list of eligible expenditure (e.g. a loan ‘to cover the current business costs of the micro-entrepreneur’) referred to under Article 15zzd uCOVID-19);
• 3) defining the cost catalogue to be financed from the support by indicating the characteristics of the expenditure (e.g. the cost of foreign services, the cost of purchasing goods and materials).

An example of such a calculation includes the above-mentioned Rules of Procedure for applying for participation in the government programme "Financial Shield of the Polish Development Fund for Small and Medium-sized Companies".

Therefore, beneficiaries of support should First, analyse the actual amount of expenditure that may be financed from the aid instrument. The analysis should cover in particular the contracts binding on the beneficiary and the provisions of the Act applicable to the aid received.

It is also worth relying on the sometimes available rules for granting support or other supporting documents issued by competent authorities. Proper determination of the scope of funding will allow safe and, above all, lawful use of support.

As part of the spending of funds, it is appropriate to adopt the principle that expenditure from the amount of funds received by the trader should only be made in accordance with the intended form of support.

Furthermore, for reasons of evidence and for a sound settlement of the appropriations, the expenditure documentation should clearly and precisely indicate the conformity of the expenditure effected with the nature of the instrument from which it was financed.

In conclusion, on the basis of the control of spending, expenditure should be considered to be correct:

• 1) financed from the envelope received,
• 2) falling within the scope of this spending of support,
• 3) properly documented. Further analyses are worth moving to the ground of the various support instruments.
• 2.2. Spending of the parking benefit

Parking benefit is allocated by the Social Insurance Institution on the basis and in the form specified in the regulations Article 15zq-15zza uCOVID-19. This is a non-tax and non-covery payment.

The provisions governing the right to receive this form of support do not explicitly indicate the allocation of appropriations, including the amount of expenditure which may be financed from it.

An indication in this respect may constitute the nature of the parking benefit, which is a partial compensation for revenue lost as a result of the COVID-19.

It is also worth noting the intention of the legislator, as set out in the explanatory memorandum to the bill of 31 March 2020 amending the Act on Special Solutions for Prevention, Prevention and Control COVID-19, other infectious diseases and their emergency situations and certain other laws 4 (hereinafter: UCOVIDzm).

Reasons for the bill of 31 March 2020

The benefit will not be subject to cover and taxation on grounds of its social nature. The benefit will be addressed to the above-mentioned persons if they do not have a different title for social security.

Social character in the basic language, resulting from the Dictionary of the Polish Language 5 , means the link between the provision and the satisfaction of the basic material needs and the actual beneficiaries. Such specificity of the benefit is confirmed by the circumstances in which it is received.

As per content Article 15zq(3) uCOVID-19 „A parking benefit shall be granted where, following the occurrence of the COVID-19 there has been a downtime in the conduct of business by, respectively, the person conducting the non-agricultural business activity or by the principal or contracting entity with whom the civil law contract has been concluded.’ Therefore, the basic condition for granting support is the existence of certain negative circumstances which result in an entity not achieving or achieving revenues in a much lower value.

Therefore, according to the justification of the Act, the receipt of a parking benefit is intended to constitute a certain compensation for the non-receivable measures which safeguard the social security of the beneficiary. The legal arrangements for the parking benefit therefore do not establish a closed list of expenditure.

However, this analysis indicates the general nature of the support instrument, not narrowed down by the provisions of the Act to specific calculated costs. In principle, the aid received should be allocated to the basic material and material needs of the beneficiaries.

This interpretation is developed on the basis of general regulations and justification of the law. It may be possible that future changes in the rules or practices of the authorities will indicate the specific mode and scope of control and will affect whether the wording of the rules will interpret a list of costs that can be covered by the parking benefit.

In the current state of the law, there are no direct indications and exclusions of the costs financed from the parking allowance. However, the Social Insurance Institution and the National Tax Administration remain competent to control the beneficiary of the benefit.

It can be assumed that the overriding purpose of the audit would be the veracity of the statements made (also in relation to possible criminal offences) together with the regularity of the granting of support.

The authorities may check whether the entity does not postpone payments, postpone invoices or make other artificial changes to obtain an undue benefit, e.g. by making an appearance of circumstances indicating a cessation of activity.

In conclusion, the parking benefit has a nature resulting from the provisions and justification of the Act, which indicates to some extent the use of support. In the framework of the general control of the parking benefit, the authorities may endeavour to verify the regularity of the allocation of funds.

However, effective control is difficult to implement, as the rules do not specify the cost catalogue covered by the parking benefit and at the same time do not imply an obligation for the beneficiary to document expenditure incurred from the pool of appropriations.

In the author's opinion, checks on the parking benefit carried out at beneficiaries could include, in particular, the appropriateness of granting support and possible irregularities. The audit of the expenditure of this instrument may be marginalised or not undertaken at all, for lack of a practical basis.

3. Control of the non-refundable loan from the Labour Fund

Loan in question under Article 15zzd uCOVID-19, provides non-refundable assistance from the Labour Fund to cover the current costs of conducting the business of a micro-entrepreneur. Now. first The paragraph of the article governing the support in question indicates the purpose of the loan.

The current operating costs are a broad set of expenditures in this case falling within the scope of financing. The category of current operating costs is not further specified in the Act. At the same time, the costs covered by the loan may be included in the general income tax costs.

Under the model loan agreement 6 , concluded between the entrepreneur and the governor, first the contractual obligation of the recipient is to use the loan in accordance with the objective specified Under section 1 section 1 loan agreements. The objective is to cover the current costs of conducting business.

The concept of current operating costs should be distinguished from the concept of the cost of obtaining revenue, such as the costs incurred to obtain revenue from the source of revenue or to preserve or secure the source of revenue, except for expenditure which the tax law excludes from the cost of obtaining revenue.

This indicates the immutable nature of these concepts. The term ‘current operating costs’ is not clearly defined. Its linguistic analysis shows that these are specific expenditures of the activity concerned concerning its current operation.

At the same time, specific criteria are not applied to their recognition, as is the case with revenue costs. It must therefore be borne in mind that not all current operating costs will be at the expense of obtaining revenues.

Only expenditure which meets the conditions resulting from Article 15 Act on 15 February 1992 on corporate income tax 7 (Next: the Corporate Income Tax Act).

In the light of the use of support, attention should be paid to two aspects of its granting. The loan shall be granted for the costs of:

• 1) current, which already indicates the present nature of the cost,
• 2) economic activity, which in this case translates into expenditure carried out by a micro-entrepreneur of economic activity, not, for example, private expenditure.

Taking account of operating costs means that the financing of the expenditure is largely dependent on the specific characteristics of the undertaking concerned. The characteristics of the loan in question also point to the possibility of indirectly linking the cost catalogue to the operating costs referred to in the Act with 29 September 1994 on accounting 8 (Further: u.o.r.).

Operating costs are linked to the basic functioning of the business. These include:

• 1) depreciation,
• 2) use of materials and energy,
• 3) foreign services,
• 4) taxes and charges, including excise duties,
• 5) remuneration,
• 6) social security and other benefits, including pensions,
• 7) other generic costs,
• 8) the value of the goods and materials sold.

The expenditure referred to above, borne by the borrower, in particular taxes, salaries and social security, can be clearly linked to the activity carried out. However, in carrying out the financing from the loan, it is important to bear in mind the need for current expenditure.

It is also important to mention that due to the number and the wide range of available support, payment titles can be covered. Thus, an entrepreneur receiving grants from the FGS to protect jobs receives funds to cover the cost of wages, and thus it should be considered as no object to cover these costs also from the loan received.

The principle should be that the expenditure in question can be financed by one support instrument. Otherwise, there would be double financing (covering payment titles) of the same costs, which is essentially unacceptable and could expose the beneficiary to sanctions.

Therefore, in carrying out the expenditure from the loan received, it should be borne in mind that it is intended to cover the costs of the current activity. Therefore, the borrower should avoid spending the amounts of the loan on behalf of entities other than the beneficiary (e.g. for a private trader who is a natural person) and pay particular attention to ensuring that the expenditure carried out is in line with the specific nature of the activity and is clearly linked to it.

In the context of the spending control mode, it should be noted that there are no specific provisions of the Act and a model agreement in this respect. However, the entrepreneur remains obliged to cooperate with the authorities and to settle the support received.

It is necessary to check that the body has been operating for a period of time 3 the months following the date of the loan and the supervision of the correct repayment of the loan in the absence of redemption. It can therefore be concluded that the Authority may also cover expenditure carried out.

This is highlighted by the record section 2 point 4 Model agreement 9 , indicating that the borrower is obliged to provide reliable information and explanations and to make available any documents related to the performance of the contract.

As already mentioned, an element of the agreement is also the obligation to use the loan as intended, i.e. to cover current business costs.

The obligations of the borrower are directly related to the performance of the contract and the documents relating to the expenditure effected are also part of the documentation to be made available to the authorities.

Therefore, despite the lack of the provisions of the Act and the provisions of the agreements which clearly define the mode and scope of control, it should be stated that the authority can verify that the borrower fulfils its obligations.

one of which it is appropriate to allocate the funds received and the documents held in this respect could be controlled by the Authority in the framework of the performance control of the contract.

However, it is crucial that the above provisions do not result in the need to document the spending of funds. This is confirmed by the work available on the website. gov.pl the instructions for the loan in which the question ‘Will I have to document these expenses somehow?’ were answered: ‘No, the basis will be the statement made in the application’. This statement is worded as follows: ‘I undertake to use the loan’ 10 .

In conclusion, the loan in question under Article 15zzd uCOVID-19, it is possible to conclude that the Authority can check the aspects of spending received.

However, this control would have to be based on their documentation, to which the beneficiary is not obliged as it replaces it with a pre-commissioned declaration of use of the aid instrument as intended.

As a result, the control of the spending of the loan would have to be very limited, and in some cases it would have been completely irrelevant due to the lack of purchasing documents, to which the borrower was not entitled.

It can therefore be concluded that the intention of the legislator was probably not to implement checks on expenditure carried out, but other aspects, such as the implementation of the conditions for granting support and it is unlikely that the authorities will take steps to check the expenditure carried out.

4. Support for job protection from the Guaranteed Workers' Benefits Fund

On the basis of the above, it is possible to grant benefits to a number of job protection entities, to pay benefits from FGSP to subsidise the remuneration of workers subject to economic downtime or to a reduced working time following the occurrence of COVID-19, under the conditions laid down in the above Act.

As in the case of a non-refundable loan from the Labour Fund, the purpose of financing has already been identified at the outset of the regulation. For this instrument, it means that the beneficiary receives compensation (possibly also social security contributions) for certain categories of workers, which are intended to preserve jobs.

As is apparent from the model agreement on the support in question, the beneficiary undertakes to use the funds:

• 1) under the conditions laid down in this Agreement,
• 2) in accordance with the objective set out in the proposal for which it has obtained it.

Thus, both the spending process and the allocation of funds were regulated in terms of the spending of wage subsidies. As in the case of a non-refundable loan from the Labour Fund, a contractual obligation for the proper allocation of funds was established on the basis of a reference to the provision governing the subject of the support.

In contrast to the Act, the contract binding the entrepreneur to the Director of the WUP for the purpose of the support has specific funds for the payment of benefits specified in the application, approved by the Director indicated above.

The modification of the destination results from the practical necessity of the recipient's obligation only to the extent that it receives support on the basis of the calculations made.

Example

The beneficiary of the support shall submit a request for remuneration from the FGS. The proposal also declares the need to receive social contributions from its employees. At the same time, the entrepreneur had previously received a positive decision to exempt from the need to pay these contributions.

In the absence of a cost that can be financed in the field of social security, social security contributions will not be granted. The co-financing agreement can therefore only cover the values accepted by the Director of the WUP and the obligation to properly spend funds will arise only as regards compensation.

Ultimately, the beneficiary is obliged to allocate the appropriations for the expenditure indicated in the agreements, which, in principle, will be expenditure on paying the salaries of the contract staff. This obligation shall be subject to control by the Authority. Attention should be paid to the very narrow scope of financing this form of aid. The funds received can only cover the remuneration and social security contributions due to it, to the amount covered by the contract.

Example

The entrepreneur received compensation for 12 employees. They've all been detailed. In the Annex To the deal. The recipient hired several employees after the contract was concluded and decided that their salaries would also be covered by funding by reducing and transferring subsidies to other employees. This situation is unacceptable and is likely to lead to the finding of misuse. The financing of remuneration outside the scope of the contract cannot be achieved from the amounts received under it.

Different from the instruments in question, the control of the co-financing is provided for in the contract. According to section 4 section 1 a model agreement may cover:

• 1) compliance with the provisions of the Agreement,
• 2) expenditure in accordance with the conditions set out in the contract and in the application,
• 3) the proper documentation and use of those resources.

In conclusion, it should be noted that funding from Article 15g uCOVID-19 it has a very narrow, limited content of the contract and the proposal, the scope of the expenditure and also provides for the scope and mode of control of the instrument. This includes:

• 1) control of the destination of expenditure,
• 2) the correctness of the process of spending them; and
• 3) documenting these events.

It can therefore be concluded that the controls carried out are very comprehensive and cover all financial aspects of receiving support. The audit will take place on a specified basis under Article 14(3) Act on 11 October 2013 special solutions related to the protection of jobs (hereinafter: u.o.m.). The key information for beneficiaries is that the right to carry out inspections of the WUP reserves for the period of implementation of the financing (maximum 3 months), and furthermore 3 years after its completion.

As a result, it should be borne in mind that:

1. funding practically only one the purpose resulting from the binding entity of the WUP agreement,
2. the expenditure control carried out is of a wide scope and verifies whether the trader has allocated the amounts exclusively for the grant and, furthermore, whether it has been transferred to the relevant recipient and whether these facts have been properly documented,
3. the authority has a long time to carry out checks (in the funding period and until 3 After him).

In the context of the dossiers, attention should be paid to contractual provisions directly requiring the submission of certain documents to the Authority. Maximum time 30 days after the expiry of the period for the receipt of benefits by employees, the beneficiary shall submit to the relevant WUP supporting documents:

• 1) the correct use of funds,
• 2) that the employees on whom he received the benefit were employed for the funding period.

The rules do not specify which documents can support the correct use of funds. Given the specific nature of the co-financing, such documents should be considered, for example, pay lists, confirmation of transfers made to employees.

In addition, at the request of the Director of the WUP, the beneficiary undertakes to provide:

1) copy of the agreement in question under Article 15g(11) uCOVID-19,

1. „List of employees entitled to benefits paid from FGSI’, drawn up in accordance with the model provided by the WUP. On the basis of documents that will or may be submitted to the Authority, it will be able to identify irregularities in both the use and the documentation of the expenditure.

The irregularities identified at the time of the checks may form the basis for sanctions.

As indicated in the model agreement, if the beneficiary uses the funds for co-financing not in accordance with the conditions set out in the contract or in the application, the beneficiary shall be obliged to reimburse them to the bank account of the WUP from which they were received.

In addition to the amount of the co-financing, interest from the date of transfer of funds not used in accordance with the conditions laid down in the contract or in the application shall be reimbursed. Avoidance of the control procedure will not result in sanctions being avoided.

In the event of a refusal to submit to control or its actual impossibility, the beneficiary shall be obliged to reimburse the amounts received in a similar manner to the above.

To sum up, in terms of this co-financing, a detailed control of expenditure, including the formal side of the process, is expected to be reflected in the accounting documentation. Any irregularities disclosed may be liable to reimbursement of the aid received, plus the statutory interest.

1. Subsidy of part of the cost of remuneration under an agreement with the governor

This funding is granted on the basis of Article 15zzb uCOVID-19. This is the co-financing of part of the wage costs of employees and the social security contributions due from those salaries, granted in the event of a fall in economic turnover following the occurrence of COVID-19.

The value of the co-financing depends on the volume of the decrease in turnover and may be higher than 50 to 90% the amounts of the remuneration of the individual staff covered by the application for co-financing together with social security contributions due on those salaries, but not more than, respectively, 50 to 90% the amount of the minimum remuneration for work under the Law of 10 October 2002 with minimum pay for work 11 (hereinafter: u.m.w.p.) plus social contributions from the employer for each employee.

In terms of funding, similar legal arrangements were adopted as in the grant in question under Article 15g uCOVID-19, i.e. the statutory indication of the general purpose of the instrument and the details and individualisation of the reference to the beneficiary by the provisions binding it to the contracting authority.

The result of the agreement is the transfer of funds to the entrepreneur to co-finance part of the wage costs of employees and the social security contributions due from those salaries in the event of a decline in economic turnover, as specified by the entrepreneur in detail in the application.

It can therefore be concluded that the funding discussed in this study has a statutory and contractual scope of destination.

It includes:

• 1) part of staff salaries (with understanding the concept of employee resulting from Article 15g(4) uCOVID-19), in the value of the decrease in turnover and the social security contributions due,
• 2) only the scope indicated in the binding party to the co-financing agreement.

Therefore, the funds received by the beneficiary can only be used to finance the target and should be duly documented to demonstrate the correctness of the expenditure in the event of checks.

As with other agreements setting out anti-crisis support, first the contractual obligation of the beneficiary is to use the funds received under the contract in accordance with the objective for which it has obtained it.

The objective is indicated above and is clear and precise in this case, for the trader concerned is clearly set in the contract. The fact that expenditure is linked to the scope of the contract means in practice that remuneration and contributions cannot be covered in a manner other than those resulting from the contract.

In addition, employees not included in the contract, despite their employment with the beneficiary, will not be able to benefit from a given pool of funds.

The grant is also accompanied by documentation obligations. They are reflected in the obligation to transfer to the UP within the time limit 30 days after the end of the financing period:

• 1) documents demonstrating the correct use of funds,
• 2) documents confirming the employment of the staff receiving the grant.

With regard directly to expenditure control, it is regulated Under section 3 a model co-financing agreement between the beneficiary and the governor represented by the director specified in the application to the UP. In this provision, UP reserves the right to control:

• 1) compliance with the provisions of the Agreement,
• 2) expenditure in accordance with the conditions set out in the contract or in the application,
• 3) the proper documentation and use of these measures.

The audit may be carried out during the co-financing period and by 3 years after its completion.

If the beneficiary refuses to submit to control or in the event that it is actually unable to carry out it, the beneficiary shall be required to reimburse to the bank account of the Labour Office (hereinafter: UP) from which he received the funds, all of those funds within the time limit 30 days from the date of delivery of the call from the governor.

In practice, such a regulation indicates the need for an old man to identify certain events which will only subsequently call on the beneficiary to reimburse the amounts of support.

A similar solution was adopted if funds were found not to be used in accordance with the terms of the contract or the proposal. The beneficiary will then be required to reimburse to the UP bank account from which he received the funds, the funds used in part not in accordance with the terms of the contract or the application.

As in the event of refusal to submit to inspection, the time limit for reimbursement shall be 30 days after serving the governor's call. However, the refund shall be subject to the part misused.

In the event of a complete irregularity, a full refund may be required, although the principle is to separate the part of the cleared part incorrectly. As already mentioned, the part used in an incompatible manner will include, inter alia, amounts of:

• 1) financing salaries (and contributions respectively) of staff other than those specified in the contract,
• 2) intended in fact for expenditure other than salaries and contributions,
• 3) non-recoverable expenses.

The finding of such irregularities may be the result of an inspection as it requires a statement of the actual flow of funds with the contractually foreseen use. After such circumstances have been established, the governor will call on the entity to reimburse the part of the funding which will be deemed to have been implemented in breach of the intended purpose.

Given the risk of potential irregularities and the set of provisions governing control issues, beneficiaries of co-financing should expect to check their accounts for this instrument.

As a means of safeguarding against the need for reimbursement, the procedure should be indicated in accordance with the provisions of the contract and thus the payment of part of the cost of remuneration only for the staff included in the contract and in the values indicated therein and the fair documentation of expenditure.

The funds received should be clearly linked to certain payments on the basis of the documents held by the beneficiary.

6. Subsidy of the Polish Development Fund and the scope of its spending

The subsidy, which was the focus of a huge group of entrepreneurs, was granted under the government programme “The Polish Development Fund for Small and Medium Enterprises”.

The origin of the rights and obligations of beneficiaries of programmes is, in addition to the grant agreement, the rules of action already mentioned 12 (currently in version with 28 May 2020). It lays down the basic conditions for the use of the Financial Shield for micro-enterprises and SMEs (small and medium-sized enterprises) respectively. The purpose of the financing was also covered by the rules of procedure.

It was developed on the basis of the “Polish Development Fund for Small and Medium Enterprises” stock regulations.[13].

The same indications are found Under section 7 Rules. On the basis of its content, it can be concluded that the subsidy is intended to cover the costs of the current business. This is a wide, albeit limited, cost catalog. The general specificity of the costs of the rules of procedure may show that the expenditure financed:

• 1) must be the cost of the beneficiary’s activities,
• 2) they must be linked to current activities.

Under the current activity cost catalogue, the rules establish subcategories which include expenditure of a given type. For example, the subsidy may be used to finance:

• 1) Staff remuneration (within the meaning of the Staff Regulations),
• 2) the purchase of goods and materials,
• 3) the cost of foreign services,
• 4) costs of external financing,
• 5) the cost of renting (or other contracts of a similar nature) of immovable property used for conducting business,
• 6) any public-law claims,
• 7) the purchase of equipment and other fixed assets necessary for the pursuit of business activities, excluding the allocation of funds for the acquisition (take-over) directly or indirectly of another entity,
• 8) early repayment of loans up to a maximum of 25% the value of the financial subsidy.

The specification made regularly indicates specific groups of eligible expenditure. However, as far as the beneficiary’s decision is concerned, it remains what costs will be borne by the pool received, as it has at its disposal the full amount of the subsidy. However, expenditure should not result from expenditure which is not the current cost of the activity of the beneficiary (e.g. private financing of the expenditure of a subsidiary of a limited partnership).

The above is reflected in the subsidy agreements. Within their framework, the beneficiary undertakes to:

• 1) the financial subsidy will only cover the costs of the business, excluding the allocation of funds for the acquisition (take-over) in a direct or indirect manner of another entity,
• 2) shall not allocate the payment subsidy to the owner or persons or entities associated with the owner of the trader.

As a result, there is a legal obligation for the recipient of a subsidy to limit expenditure to the scope laid down in the Rules of Procedure and in the Agreement. The Polish Development Fund reserves the right to carry out checks on the basis of the clause contained in the contract.

In principle, it points out that until the full recovery of the financial subsidy, the PFR can control the veracity of the information and statements made in connection with the conclusion of the contract.

As indicated above, one the declarations made are committed to the allocation of appropriations in accordance with their statutory purpose. Therefore, the spending of the subsidy falls within the scope of any control.

Where the information or declarations contained in the contract are found to be incorrect, the PFR may decide to reimburse the beneficiary for all or part of the financial subsidy. The financial subsidy will then become due within the time limit 14 the working days from the date on which the PFR decision was made available to the trader in such a way as to enable him to be informed of the decision.

In the context of the timing of the check, it should be noted that it is linked to the repayment period of the financial subsidy. As a general rule, the subsidy is settled after a period 12 months after its granting, when the value to be recovered is determined, among others.

Irrespective of Occupancy 25% the value of the subsidy will almost always remain repayable. The reimbursement of the financial subsidy shall be paid in no more than 24 equal monthly instalments, starting with 13. the calendar month following the date of payment of the financial subsidy.

In practice, this means that depending on the repayment period, the spending of subsidies can be controlled even for a period exceeding 3 years.

The PFR's control of the expenditure will therefore be to verify the veracity of the beneficiary's declaration of grant only to cover the running costs of the business. As indicated above, irregularities found at the time of the check may lead to a PFR decision requiring the beneficiary to reimburse the subsidy in part or in full.

The indissoluble link with proving the fulfilment of its obligations is the issue of documenting the expenditure incurred.

In addition, the content of the subsidy agreement directly obliges the beneficiary to provide the PFR with reliable information and explanations and to provide all documents related to the implementation of the contract.

The spending of funds is undoubtedly an important part of the implementation of the contract and is therefore subject to verification and documentation in particular. In view of the diversity of expenditure that can be covered by the subsidy, it is difficult to identify a clear list of documents certifying the correct spending of funds.

In this respect, however, it is worth collecting all reliable costs documents. Depending on expenditure, examples can be given here: purchase invoices (also simplified invoices, like the NIP receipt), payrolls, confirmations of transfers.

In the light of the evidence, it is important that expenditure on the subsidy received, on the basis of the widely understood documentation, can be determined:

• 1) the beneficiary making the payment,
• 2) receiving,
• 3) the date of its completion,
• 4) and its subject-matter so that it can be verified that it falls within the current operating costs.

In conclusion, the beneficiaries of the SME Finance Shield have to face the risk of control because they have agreed to make the right spending. In view of the amounts awarded under the scheme, the finding that part or all of the reimbursement would have severe economic consequences. Therefore, the instrument should place particular emphasis on the regularity of the spending, which consists of a proper allocation of funds and a reliable documentation of the process of having subsidies.

7. Summary

The reflections on spending and control of this process described in this article are a cross-section of the solutions that can be found under the aid instruments. However, the example of several instruments with different specifications shows a number of similarities.

The vast majority of aid forms have a statutory or contractual objective of financing. It is defined in different ways, but in any case it is possible to identify certain characteristics of expenditure which must be in line with the purpose of the instrument.

Regardless of the form of the aid received, beneficiaries of the support should carry out the expenditure in a conservative manner and to the extent only indicated in the specific arrangements. The material correctness of the cost incurred is a basic prerequisite for the safe settlement of the support.

In addition, proper, reliable documentation should be taken into account. Such a guarantee can be considered to be reliable documents on the basis of which the object and the circumstances of the expenditure can be reproduced. Combination two the factors should be such as to prevent sanctions that may arise in the course of any checks.

According to the above analysis, the time limits for carrying out checks, as opposed to the period of financing most forms of support, are quite long. The beneficiaries should therefore take particular care of the structured and properly stored documentation, in order to be able to demonstrate the regularity of their spending even in a few years and thus avoid negative consequences.

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2 Rules of Procedure for applying for participation in the government programme “Polish Development Fund for Small and Medium Enterprises” https://pfrsa.pl/dam/serwis-korporacyjny-pfr/documents/tarcza-finansowa-pfr/regulamin_programu_tarcza_finansowa_pfr_dla_mmsp.pdf (access: 19 October 2020).

3 https://sjp.pwn.pl/ (access: 12 October 2020).

4 Reasons for the Act 31 March 2020 amending the Act on Special Solutions for Prevention, Prevention and Control COVID-19, other infectious diseases and their emergency situations and certain other laws (Journal of Laws of 2020, item 568), http://www.sejm.gov.pl/sejm9.nsf/druk.xsp?nr=299 (access: 19 October 2020).

5 https://sjp.pwn.pl/szukaj/socjalny.html (access: 19 October 2020).

6 Model loan agreement for the running costs of business, https://pliki.praca.gov.pl/Tarcza_antykryzysowa/15zzd_pozyczki/15zzd_umowa_pozyczki_v5_24.06.2020.pdf (access: 19 October 2020).

9 https://pliki.praca.gov.pl/Tarcza_antykryzysowa/15zzd_pozyczki/15zzd_umowa_pozyczki_v5_24.06.2020.pdf

10 https://pliki.praca.gov.pl/Tarcza_antykryzysowa/15zzd_pozyczki/15zzd_instrukcja_pozyczka_v6_24.06.2020.pdf (access: 12 October 2020).

12 Rules for applying for participation in the Government Programme “Financial Tarcza...”, op. cit

The article comes from the book C.H. Beck Publishing House “The Tax and Balance Sheet Closing of the Year 2020” under the ed. Prof. ed. named Dr. hab. Artur Hołda, https://www.ksiegarnia.beck.pl/19591-podatkowe-i-bilansowe-zamkniecie-roku-2020-artur-holda