Over 3 Billion Dram Violations in the Fund for the Restoration of Sevan Trout Resources and Development of Fish Farming

The results of the studies conducted by the Republic of Armenia's State Audit Office regarding the "Fund for the Restoration of Sevan Trout Resources and Development of Fish Farming" and the companies established by it have been summarized. The fund was created in 2013 by a decision of the Armenian government, and in April 2014, another decision approved the "Comprehensive Program for the Restoration of Sevan Trout Resources and Development of Fish Farming." The main objective of the program is to restore the trout stocks in Lake Sevan and address the issues associated with the lake.

The fund has acted as the coordinating body for the program, with the only participant being the Republic of Armenia. The fund established two private companies, which aimed primarily at fish processing and live fish production. Given that the fund was the sole shareholder of these companies, the profits generated from commercial activities should have also served to resolve environmental issues.

From 2013 to 2018, the state budget allocated a total of 9 billion dram (9,000 million dram) for the implementation of the fund's statutory objectives. However, the assessment carried out by the State Audit Office concluded that the objectives defined by the program had significantly not been met.

The study evaluated the performance pertaining to procurement processes, payroll calculations, operational efficiency, and the achievement of program indicators approved by the Armenian government from 2015 to 2018. The volume of violations amounted to 3.314 billion dram (three billion three hundred fourteen million dram).

Outlined below are the recorded violations: Due to non-competitive or "formal" procurement, the contractor and subcontractor companies received a profit of 86% instead of the contracted 8%, resulting in an excess of 777 million dram. An examination of the contractor's acquisitions revealed substantiated suspicions regarding the purchase of goods worth 409 million dram, which led to the non-payment of around 163 million dram in taxes to the state budget. Ineffective expenditures by the controlled entity amounted to 1.251 billion dram. This means that the assets derived from these expenses were not used within 2 to 4 years and served no purpose.

There are justified suspicions that the controlled entity made a payment of 273 million dram to Company X, for which the goods were never actually received, though it was recorded as received in documents. Due to the alleged inaction of officials from the controlled entity, expected freezing and thawing of Lake Sevan led to net cages tearing, resulting in the loss of biological assets (fish) and property valued at 0 million dram.

The accounting service for the controlled entity was provided by Company Y, which had never offered such a service before. The controlled entity did not take measures to contract a company offering more affordable services under competitive conditions, allowing Company Y to earn a profit of 0 million dram for providing services worth 128 million dram. Additionally, financiers and accountants employed by the controlled entity had their salaries calculated at 46 million dram.

Payments of 234 million dram were made to Ukrainian Company Z, yet the company has yet to provide the work products specified in the contract and it seems that delivery will not occur in the future. The problems with Company Z stem from the actions of the controlled entity, particularly contracting for a supply of goods instead of the anticipated procurement plan and making payments without receiving goods. Moreover, an improper payment of 55 million dram was made to Company Z that should not have occurred. Various payroll violations totaling 0 million dram were also identified.

A rented area of 171 square meters was designated for the establishment of a "Pepo" shop-cafe in the intersection of Saryan and Arami streets in Yerevan. For its establishment and operation, an expenditure of 129 million dram was incurred, but the revenue amounted to only 32 million dram. The controlled entity did not establish menu and cost norms and never took measures to investigate the causes of such losses (97 million dram).

Company A was paid 0 million dram to withdraw from a leasing contract with the Sevan National Park SNCO, which still had 2 years remaining on its term, with a projected rental fee of 640,000 dram. The compiled report regarding the existence of signs of a crime has been forwarded to the Armenian Prosecutor's Office.

During the investigation, materials were submitted to the State Revenue Committee regarding the evasion of significant taxation by the company involved in transactions with the controlled entity, resulting in a criminal case being initiated under Part 2 of Article 205 of the Armenian Criminal Code.

At the demand of the State Audit Office, an opinion regarding the causes hindering the restoration and natural reproduction of the endemic "Ghegharkuni" and "Summer" subspecies of trout in Lake Sevan has been received from a specialized scientific organization. Recommendations have been submitted to the Armenian Ministry of Environment regarding the elimination of the causes outlined in the opinion.