Between 2003 and 2011, the Ferrovías, the railroad company, received subsidies from the state for $1,463,001,812.12 pesos, but a report from the Auditor General's Office (AGN, for its acronym in Spanish) indicates that two different bodies cannot determine whether the economic aid was reasonable or not .

Ferrovías has been operating the railways that go from Retiro to Villa Rosa since 1994. The agencies responsible for checking, among other things, the subsidies transferred to the Railroad Company are the Ministry of Transportation and the National Commission for Transport Regulation (CNRT, for its acronym in Spanish).

Grants In Detail

The contract between Ferrovías and the Federal Government states that "there shall be a redetermination of its own tariff, subsidy or canon, when a party invokes, rightly, an increase or decrease (in cost) of 6% in any of the company’s departments."

The audit says that between 2003 and 2011, the company asked the state, about 17 times, to raise the money transfers and that during that time "the monthly amount of subsidies was increased by 445.13% as a result of the successive redeterminations.”

Furthermore, of the nearly $ 1.5 billion transferred, most went to "increased costs for personnel, either by salary increases or the incorporation" of employees.

As for how this economic aid impacted Ferrovías numbers, the AGN explained that "in 2004, subsidies accounted for 66.96% of the income", i.e. that for every three dollars that the company raised two came from the National Government. According to the investigation, since 2011, "the percentage increased to 83.82%," also, the subsidy per passenger recorded an increase of 197.53% between 2004 and last year.

Controls And Weaknesses

The AGN states that, "most of the surveys relating to adjustments in the Personnel category were completed far away from the guidelines and procedures written in the regulations”. The watchdog also noted "weaknesses in the controls of the redetermination of benefits of the technicians as well as the Secretary of Transportation, and the CNRT”.

For example, the CNRT prepared technical reports that, according to the Audit, "only the verification of arithmetic is contemplated, not issued with regard to the application of the current methodology, the validity of the claims (of Ferrovías) and if these are reasonable it Is based on the level of activity.”

The federal watchdog’s report also states that while most subsidy requests were increased because of personnel costs, "in the controls done by the Secretary of Transportation the verification of the jobs the personnel was hired to do was omitted."

But there is a third public office that also caught the attention of the auditors. It is the Head of Cabinet of Advisors of the Secretariat for Railway Transportation. The reports issued from this area have "erroneous arithmetic calculations, without any supporting documentation and where the criterion does not explain nor correspond to validate the increase in grants requested by the concessionaire".

Time is Money

The Audit’s investigation explains that the body responsible for resolving claims with the dealerships, Railroads in this case, is the National Department of Transportation. Under the current contract, the set time to answer the requests of the company is 30 days. However, the watchdog found "delays" that generated "credit interests and tabs that would be canceled after the renegotiations took place, this could have been avoided, if they had to comply with the time limits specified in the regulations." For example, nine of the 13 cases examined by the AGN "show that between 103 and 292 calendar days passed between Ferrovías request and the recognition of higher costs and the respective resolution that approves the increase. This situation meant an interest payment of $291,647,670.11 from January 2003 to October 2011. "

This situation was observed even by the Office of the Comptroller General (SIGEN) in their reports on the internal control system that alerted the period 2007-2010: "The delays incurred in processing some requests have generated a financial loss for the National State for the payment of interest and updates."

The Ellipsis of the AFIP

Moreover, the National Audit verified that, on subsidies discussed the deductions provided for by the Federal Administration of Public Revenue (AFIP) in respect of income tax were not made. This information was confirmed by the Company itself.

The problem is, that because there is no regulation that states that financial aid are exempt from this withholding, the AGN consulted the AFIP if these subsidies should be reached by their regulations. And the collection agency said: "No findings of substantial nature are made as to the subject matter which is the subject of consultation (...) since they do not have contracts and respective addenda", i.e., they cannot answer the question because there are no papers that detail the money transferred received by Ferrovías.