Allegations of Irregularities in KOSGEB Support Programs and Legal Responsibility

Businesses benefiting from KOSGEB support are obligated to comply with KOSGEB regulations, undertaking provisions, and board decisions from the application stage to project completion and post-support audits.

If it is determined that the application information is false, that the supported goods or services were not actually received, that the invoices are misleading, or that the supported machine has been transferred to another business, an "incompetence" procedure may be initiated against the business.

In practice, this situation is often referred to as a "KOSGEB irregularity investigation" or "KOSGEB irregularity review." However, the fundamental term used in KOSGEB legislation non-compliance."

Not every irregularity constitutes a crime. While a simple missing document, a failure to submit a notification on time, or a discrepancy with technical specifications may have administrative and financial consequences; forged invoices, false documents, fraudulent applications, or intentional actions causing public harm may also lead to criminal investigations.

Therefore, when allegations of irregularities are made against a business, the administrative, financial, and criminal responsibilities must be evaluated separately.

What is a KOSGEB Non-Compliance?

According to the KOSGEB Non-Compliance Directive, non-compliance is defined as the beneficiary or service provider acting contrary to legislation, contract, protocol, or undertaking during the registration process in the database, support application, support utilization, or post-support process for the purpose of benefiting from KOSGEB support.

The directive also lists offenses such as fraud, deception, false statements, forgery of official or private documents, false statements in the preparation of official documents, and alteration or concealment of documents as falling under the scope of non-compliance. Failure to submit requested information, documents, and records in a timely manner during an audit may also lead to the initiation of non-compliance proceedings.

Therefore, irregularities do not only become apparent after payment has been made to the business. Even if payment has not yet been made, action can be taken against the business if false information is detected during the application or evaluation process.

What is the difference between irregularity and impropriety?

"Irregularity" is a broad concept in everyday usage that refers to any violation of regulations. However, in KOSGEB's specific regulations, the term "non-compliance" is predominantly used.

Inappropriateness;

due to a lack of a formal document,
from acting contrary to the project conditions,
from missing payment or notification deadlines,
from making false statements,
from the use of forged documents,
fraudulent behavior that could constitute a crime

may be the cause.

Therefore, the mere finding of irregularities regarding the business does not, by itself, definitively mean that the authorities have committed a crime. For criminal liability to be established, all the material and moral elements of the crime as defined in the Turkish Penal Code must also be present.

How to Detect KOSGEB Non-Compliance?

Nonconformities;

By KOSGEB implementation units,
By KOSGEB inspection units,
by the audit units of other public institutions

This can be determined as a result of the investigations carried out.

The review may not be based solely on the documents submitted by the business. KOSGEB;

invoices and bank statements,
electronic invoice records,
Social Security Institution (SGK) service records,
trade registry information,
tax records,
machine serial numbers,
the business address,
on-site inspection reports,
the ownership structure of the supplier company,
other public grants received for the same expense

They can compare.

Apart from KOSGEB's own review, the process of identifying irregularities can also be initiated based on a tax audit, a Court of Accounts audit, a prosecutor's investigation, or a report from another public institution.

Why is the Nonconformity Detection Form Important?

The discrepancy identified by KOSGEB must be clearly, precisely, and in detail the Discrepancy Detection Form. Generally, the form should include:

Beneficiary information,
related support program,
The amount of support requested to be refunded,
interest start date,
identified irregularities,
violated legislative provisions
if there is a criminal element

It is shown.

According to the directive, a ban cannot be imposed on a beneficiary in the KOSGEB Database, nor can legal action be initiated, if a Non-Compliance Detection Form has not been completed. Therefore, sending a letter containing only general statements may not be sufficient; it must be explained which specific action and which legal provision the finding is based on.

It is important for the company to request copies of the form and the review reports on which the decision is based so that it can prepare its defense.

Most Frequent Allegations of Irregularities in KOSGEB Support Programs

Providing false application information

Providing false information about a company's number of employees, date of establishment, NACE code, ownership structure, financial size, or field of activity may constitute a violation.

If it is determined at the time of application that the eligibility criteria for support were not actually met, the entire amount of support paid under the relevant program, not just a specific expense, may be reclaimed.

Using fake or misleading invoices

Showing the purchase of goods or services as having been made when they were not actually received, or failing to deliver the goods or provide the service listed on the invoice, constitutes a serious allegation of irregularity.

Even if the invoice is issued by a legitimate company, it may be considered a fraudulent transaction if the economic transaction does not actually take place, if the invoice is prepared formally to obtain support, or if the payment is subsequently recovered from the supplier.

Fraudulent payment

If the invoice amount is sent to the supplier via bank transfer and then the same amount is returned to the business or company partner under the guise of a separate transaction, this may give rise to the claim that the support is not based on a genuine expense.

The mere existence of a bank statement does not, in every case, prove that the payment was legitimate from an economic standpoint. The delivery of goods, the provision of services, accounting records, and actual use of the transaction in the business may also be investigated.

Purchasing from a relative or related company

Even if the relevant support program prohibits it, purchasing goods or services from businesses owned by a company partner, manager, or their relatives may result in non-payment and the recovery of existing payments.

Companies having different trade names does not mean their partners or directors are unrelated. Indirect ownership and control relationships can also be examined.

Receiving multiple grants for the same expense

Submitting the same invoice or the same expense to both KOSGEB and another public institution may lead to a duplicate support claim.

While it may be possible in some programs for different institutions to support different expenses of the same investment, the expenses and payment documents must be clearly separated from each other.

Transfer of the supported machine

The machinery, equipment, or software acquired through this support may need to remain in operation for the duration stipulated by legislation and be used for the purpose of the project.

Failure to notify KOSGEB when a machine is sold, leased, transferred to another business, moved to a group company, or is under seizure may constitute a violation.

The staff not actually working

If the person reported under the personnel support program is not actually working, is only listed on the payroll, or works for another company, this may result in the support payment being reclaimed.

The mere existence of a Social Security registration does not, by itself, definitively prove actual employment. The employee's role within the company, attendance records, wage payments, work output, and other work records can be examined.

Failure to submit documents

Failure to submit the information and documents requested by KOSGEB or inspection officials on time can also be considered a reason for non-compliance.

If it is claimed that the document is lost, in the accountant's possession, or not delivered by the previous management, this must be explained with concrete records.

If irregularities are detected, is the business immediately shut down?

If the KOSGEB implementation unit detects any non-compliance, the beneficiary or service provider may be deactivated in the SME Information System. During this process;

New support applications will not be accepted
Pending support payments are suspended
The process is initiated to record the receivable in the accounting records.

These measures may effectively prevent the business from benefiting from the support before the financial consequences of the non-compliance are definitively resolved.

Therefore, the business may need to object within the stipulated time frame not only to the amount requested back, but also to the process of being deactivated in the system.

Will the company be given time to rectify the deficiency?

If the identified non-conformity is rectifiable, the business is given 30 days to remedy it

If correcting the deficiency will take longer than 30 days, an additional period of up to 30 days may be granted upon request within the initial period and if deemed appropriate by the head of the authorized implementation unit. Once the deficiency is corrected, a Nonconformity Correction Form will be completed, and the nonconformity process will be concluded.

Examples of remediable nonconformities include:

Completion of the missing document
Correction of record discrepancies,
Addressing the lack of notification,
submission of technical document,
presentation of the necessary license or permit

It can be shown.

However, actions such as using forged documents or falsely representing an expense that did not actually occur may not be resolved through a simple document completion process.

Which amount can KOSGEB request back?

The KOSGEB Non-Compliance Guideline makes two main distinctions.

If a criminal offense is found or it is determined that the beneficiary does not meet the program's application requirements, a full refund of the support paid under the relevant support program may be requested.

In other cases of irregularities, as a rule, only the refund of the support amount in which the irregularity occurred is requested.

For example, if a technical incompatibility is found in only one of five separate machine purchases, and there is no concrete evidence that the other expenses were also inappropriate, then only the payment made for that specific machine may need to be reclaimed.

Conversely, if it is determined that the company did not meet any of the basic eligibility requirements at the time of application, all project payments may be reclaimed.

This distinction is important for assessing whether the administration acted in accordance with the principle of proportionality in its actions

Will the repayment be requested with legal interest?

If the discrepancy is not rectified within the given time frame, or if rectification is not possible, the support payment made may be requested back along with legal interest.

The Non-Compliance Detection Form also stipulates that the interest commencement date should be indicated. According to the form's explanation, in case of installment default, the installment or due date can be taken as the interest commencement date; in other cases, the support payment date can be taken as the interest commencement date.

However, in this specific dispute;

whether the interest start date was determined correctly,
which support payment is subject to the inappropriateness,
whether the business is at fault,
whether the amount requested back was calculated twice

It should also be checked.

Could Liability for Public Damages Arise?

In the Public Financial Management and Control Law No. 5018, public damage is defined as preventing an increase in public resources or causing a decrease in them as a result of decisions, actions, or omissions contrary to legislation.

Payments made without receiving goods or services, overpayments or unjustified payments in transfer-type expenditures, and payments made even when not foreseen in the legislation are among the situations considered in determining public damage. The identified public damage, along with interest calculated according to the relevant legislation, can be recovered from those responsible.

If a machine is falsely claimed to have been purchased when it wasn't, or if payment is received for a service that wasn't provided, not only may the KOSGEB support be reclaimed, but an assessment of public financial loss may also be considered.

Law No. 5018 also states that those who knowingly prepare, sign, or approve false documents that falsely represent work or services that have not been performed will be subject to penal laws.

Does every irregularity constitute fraud?

No. The fact that a transaction violates KOSGEB regulations does not automatically mean that the crime of fraud has been committed.

In general, for fraud:

fraudulent behavior,
This behavior results in deceiving the other party
damage to a person or institution,
the perpetrator gains a benefit for himself or another,
the act being performed knowingly and willingly

is necessary.

In the Turkish Penal Code, fraud committed to the detriment of public institutions and organizations is regulated under the category of aggravated fraud. The current provision prescribes severe imprisonment and a fine for this aggravated offense.

For example, an inadvertently incorrect code on an invoice for a company's actual expenditure does not always qualify as fraud. However, obtaining payment from KOSGEB (Small and Medium Enterprises Development Organization) by issuing a fake invoice for a machine that was never purchased could, depending on the specific circumstances of the case, be considered qualified fraud to the detriment of a public institution.

Criminal Consequences of Using Forged Documents

Using forged documents in a KOSGEB application or payment request may result in charges of forgery of official or private documents, depending on the nature of the document.

Article 204 of the Turkish Penal Code criminalizes the following offenses: falsifying an official document, altering a genuine official document in a deceptive manner, or using a forged official document.

Forgery of a private document is covered under Article 207 of the Turkish Penal Code. Making false statements to a public official authorized to prepare official documents is also evaluated separately under Article 206 of the Turkish Penal Code.

Whether a document is considered "official" or "private" depends on who issued it, its legal function, and its classification under the legislation. Therefore, not every invoice or record is considered an official document.

Whether the same conduct constitutes both fraud and forgery, whether the documents were used solely as a means of deception, and the relationship between the offenses must be evaluated separately in the specific case.

Who is liable for the crime?

According to the Turkish Penal Code, criminal liability is personal. No one can be automatically held responsible for the actions of another person simply because they are a company partner or manager. As a rule, the commission of a crime requires intent, that is, the knowing and willful performance of the legal elements.

Therefore, in a KOSGEB file;

who prepared the application form,
who gave the electronic approval,
who provided the invoice,
who made the payment
Who knows that the machine wasn't bought?
who prepared the accounting documents,
The role of the project consultant,
company manager's knowledge and instructions

They should be investigated separately.

The fact that a company director is only authorized to represent the company does not, in itself, prove that they were aware of the fraudulent transaction. However, a director who manages the entire application and payment process, instructs the use of forged documents, or is aware of the unjustified payment may incur personal criminal liability.

Will a Certified Public Accountant or KOSGEB Consultant be held responsible?

The fact that the application and project file have been prepared by an accountant or consultant does not, in all cases, absolve business officials of responsibility.

It could be argued that the company official approving the electronic commitment letter or payment request on behalf of the business has an obligation to verify the documents. However, the consultant or financial advisor;

preparing forged documents,
creating false records,
leading the business to make false statements,
knowingly planning the fraudulent transaction,
uploading the document to the system knowing that it is forged

Whether or not he participated in the act can also be examined.

The legal consequences of a consultant merely uploading documents provided by the company to the system do not differ from the legal consequences of the consultant personally preparing or obtaining the forged document.

Does the company have criminal liability?

According to the Turkish Penal Code, direct criminal sanctions cannot be applied to legal entities. Criminal responsibility rests with the natural persons who committed the act. However, security measures may be applied to legal entities in cases stipulated by law.

If fraud results in an unfair advantage for a legal entity, company-specific security measures may come into play.

From the company's perspective as well;

Revocation of KOSGEB support,
being deactivated in the system,
inability to benefit from new support,
conversion of collateral into cash,
collection of public receivables
loss of commercial reputation

This can lead to serious financial and administrative consequences.

Does Repayment of Support Amount Remove Criminal Liability?

As a rule, repayment of the support payment does not automatically eliminate the suspicion of crime.

According to the KOSGEB Non-Compliance Directive, when a situation constituting a crime is identified, even if the debt is collected or a settlement and installment plan is reached, the file must be sent to the Legal Counsel's Office for the purpose of filing a criminal complaint. The file can also be sent to the Legal Counsel's Office for the purpose of filing a criminal complaint even if payment has not been made.

However, compensation for damages may have consequences in criminal proceedings in terms of effective repentance, determination of the basic sentence, or discretionary reduction of punishment, depending on the specific type of crime. Therefore, both financial and criminal defenses should be planned together before making a payment.

Does paying off a debt to KOSGEB mean admitting guilt?

The business may consider paying the requested amount to avoid interest increases or the liquidation of collateral. However, the legal position must be clearly stated when making the payment.

If the debt and non-compliance claims are not accepted, payment will be made;

It was done with reservations
The rights to appeal and sue have not been waived
the payment is solely intended to prevent the financial loss from escalating

It must be reported in writing.

However, a reservation of rights does not restart a missed objection or litigation period. Administrative and judicial appeal periods must be followed separately.

Is installment payment possible?

It is possible to pay the full amount of the KOSGEB receivable requested due to the non-compliance, or to arrange for installment payments. If installment payments are arranged and the first installment is paid in advance, the non-compliance situation can be terminated administratively. If the receivable is not paid or arranged for installment payments, the file may be sent to the Legal Counsel's Office for legal action.

When preparing an installment payment application;

whether the debt is acknowledged or not
whether the application contains any reservations,
reserving the right to sue,
suitability of the payment plan to the company's financial strength,
status of collateral

It must be clearly regulated.

How to Appeal Against KOSGEB's Allegations of Non-Compliance?

The business must first determine which support program and which legal provision the finding is based on.

The objection or defense should include the following points:

Date and number of the non-conformity detection form,
Date of notification,
The alleged irregularity,
The documents that KOSGEB relies on,
The company's statement regarding the incident:
Evidence demonstrating the authenticity of the transaction,
Issues regarding the lack of intent on the part of the business,
Whether the deficiency can be remedied,
The scope of the amount requested back,
Error in interest calculation,
The disproportionate nature of the imposed sanction,
Objections to the demand for full repayment of the support amount.

It is not sufficient to make an objection only with general statements such as "the transaction is real". Evidence such as invoices, receipts, delivery notes, serial numbers, photographs, emails, shipping documents, inventory records, and accounting vouchers must be submitted along with the objection.

What documents should a business collect?

A business facing allegations of irregularities or impropriety must retain at least the following documents:

Support application form,
Project file,
Letter of commitment,
Board decisions,
Revision requests,
Payment request forms,
Invoice and e-invoice records,
Bank statements,
Offers and proforma invoices,
Sales and service contracts,
Delivery and installation records,
Shipping documents,
Machine serial numbers and photos,
Fixed asset and depreciation records,
Payroll records,
Social Security Institution (SGK) records,
Timekeeping and payroll documents,
Commercial registry records,
Partnership and representation documents,
KOSGEB correspondence,
On-site inspection reports,
E-notifications and KBS records.

The subsequent creation or falsification of documents may lead to a new forgery allegation instead of strengthening the defense.

How should a defense be established in a criminal investigation?

KOSGEB filing a criminal complaint does not mean the business official is guilty. The public prosecutor's office will separately investigate whether the incident constitutes one of the crimes defined in the penal code.

Especially in defense;

whether the transaction is real or not
whether the goods or services have been delivered,
whether the document is fake or not
whether the suspect knew the document was forged,
whether or not there was intent to deceive,
suspect's position in the company,
whether or not they actually participated in the application process,
What information did KOSGEB use to make the payment?
whether or not public damage has occurred,
the link between the harm and the suspect's actions

It should be examined.

The statement given to the prosecutor's office on behalf of the business and the administrative appeal submitted to KOSGEB (Small and Medium Enterprises Development Organization) must not contradict each other. A matter accepted in the administrative file may be used against the suspect in the criminal investigation.

Can a lawsuit be filed against a non-compliant procedure?

Depending on the nature of the action taken by KOSGEB, administrative or judicial proceedings may be initiated.

It can be argued that the prohibitions, suspensions, or revocations of support imposed unilaterally by KOSGEB using public authority under its Non-Compliance Directive are administrative actions. Conversely, some disputes arising from commitments, guarantees, or debt relationships may fall within the jurisdiction of the judicial courts.

The Council of State has ruled that disputes arising from support recovery procedures established by public authority based on the KOSGEB Non-Compliance Directive and which are separable from the contract should be heard in administrative courts.

Therefore, before filing a lawsuit, the dispute must be understood;

from the application or rejection process,
from the detection of non-conformity,
Without being deactivated in KBS,
from the support return decision,
from the undertaking,
from the conversion of collateral into cash,
from enforcement proceedings

It must be determined which one it relates to.

Can a stay of execution be requested?

If a business's support payments have been suspended, new applications have been blocked, or a large debt has been accrued due to a KOSGEB (Small and Medium Enterprises Development Organization) action, a stay of execution can be requested in an administrative lawsuit.

For the claim to be accepted, both the act must be clearly unlawful and its implementation must result in irreparable harm.

The business;

risk of ceasing operations
closing of credit limits,
the possibility of the collateral being converted into cash,
employees becoming unemployed,
the complete termination of the project,
rejection of new support applications

Results such as these should be explained with financial statements and concrete documents.

Mistakes to Avoid When Claiming Non-Compliance

The most common mistakes businesses make during this process are:

Leaving KOSGEB's letter unanswered,
Missing the deadline for submitting documents,
Only providing explanations over the phone,
Preparing a defense without presenting any evidence,
To generally blame the accountant or consultant,
Subsequently preparing false documents,
Contradiction between KOSGEB and the prosecutor's office statements,
Paying the debt without reservation,
Failing to examine the results of the installment payment request,
To think that collection will automatically stop when a lawsuit is filed,
Failure to monitor the warranty period,
Ignoring the personal criminal responsibility of company executives.

Legal Roadmap in KOSGEB Irregularity Allegations

The general procedure that a business should follow when irregularities or non-compliance are detected is as follows:

The notification date and response period are determined.
The Non-Conformity Detection Form and inspection report will be provided.
Each alleged irregularity will be examined on a separate basis.
The KOSGEB regulations in effect at the time of application are determined.
Documents proving the authenticity of the transaction are collected.
It is determined whether the deficiency can be remedied.
If necessary, completion will be done within an additional 30 days.
The principal and interest requested back are recalculated.
The responsibilities of the company and individuals are separated.
The risk of a criminal investigation is assessed.
Administrative appeal and litigation periods are calculated.
Additional measures are taken to address collection, collateral, and enforcement risks.

Conclusion

Allegations of irregularities in KOSGEB support applications do not only result in the repayment of the support payment for the business. The business may be deactivated in the KOSGEB system, pending payments may be suspended, new applications may be rejected, the support may be recovered with legal interest, and a criminal complaint may be filed.

However, not every violation of regulations constitutes a crime. There are significant legal differences between violations of regulations due to missing documents, technical incompatibility, or missed deadlines, and the use of forged documents and fraudulent applications.

If a criminal irregularity occurs or the business did not meet the application requirements from the outset, the entire amount of support paid under the program may be reclaimed. In other cases, only the amount of support related to the irregularity needs to be recovered.

When an investigation into irregularities is initiated regarding a business, the Irregularity Detection Form, the investigation report, the application file, payment documents, and the applicable legislation should be examined together. The consistent conduct of administrative defense, financial appeal, and criminal law defense is of great importance in preventing future loss of rights.

Single Blog Title