(SOFIA) - The Bulgarian government said Wednesday it was freezing 88.4 million euros (136 million dollars) in EU money for 10 different road projects amid questions about the way the cash was being managed.

Deputy Finance Minister Dimitar Ivanovski ordered that money for 10 so-called PHARE projects be frozen after auditors KPMG found "no clear evidence of efficient management of the projects, public procurements and payments," the government said in a statement.

PHARE is a pre-accession investment programme financed by the EU to assist central and eastern European countries in their preparations for EU membership.

Originally set up in 1989 as the "Poland and Hungary: Assistance for Restructuring their Economies" (PHARE) programme, it was subsequently expanded to cover other countries, including Bulgaria.

The Bulgarian money was awarded as part of Sofia's pre-accession programme in 2001-2005 and was destined for the repair and reconstruction of roads between Bulgaria and Greece.

But KPMG said there was a "potential conflict of interests" within the Bulgarian road agency.

Agency chief Vesselin Georgiev resigned earlier this year following media reports he awarded road repair contracts to his brother's company.

Prosecutors have since launched an investigation against Georgiev for alleged abuse of power and misuse of EU funds.

A report by the National Audit Office had shown that the road agency did not meet a number of procedural requirements when awarding public tenders.

Two other high-ranking officials at the agency have also been arrested for allegedly demanding bribes.

Those irregularities held up the regional transport and infrastructure programmes, said Deputy Prime Minister Meglena Plugchieva.

Bulgaria, which joined the EU on January 1 last year, is eligible for more than two billion euros from regional transport and infrastructure programmes up until 2013 and close to seven billion euros in all in structural and cohesion funds during the same period.

Deputy premier Plugchieva said the KPMG report would now be examined by prosecutors. During a recent visit to Brussels, she also requested that investigators from the EU's antifraud agency OLAF monitor the progress of projects.

Bulgaria joined the EU as its poorest member but is still under close scrutiny from Brussels for failing to curb corruption and organised crime.

If the EU newcomer fails to come up to scratch, Brussels has threatened to fully or partially suspend some 6.8 billion euros in structural and cohesion funds available to Bulgaria until 2013.

Brussels is scheduled to publish a new report on Bulgaria's progress on July 23.

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