The inspectors also focused on the data submitted by the Ministry of Regional Development for the evaluation of the state budget implementation. A financial statement is then prepared from them. The Ministry did not have any significant shortcomings in these data or in the final account, said SAO spokeswoman Jana Gabrielová.
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“Although the total value of errors in the financial statements of CZK 5.43 billion is significant, in the context of the entire financial statements of the Ministry of Regional Development it is not significant,” the inspectors said. According to the SAO, some information is unreliable, but the financial statements are not unreliable in their entirety.
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What comes from the budget and what the EU pays for
According to the SAO, inaccuracies in the financial statements arose mainly due to system deficiencies. “The published information on the management of the Ministry of Regional Development thus in some cases did not correspond to the facts,” the office said. According to him, for example, the Ministry did not correctly report information on the structure of transfer costs. In the accounts, according to the inspectors, it incorrectly distinguished between the share paid purely from the state budget and the share represented by pre-financing from the state budget. The European Union should then pay it from its budget.
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According to the Office, the Ministry also incorrectly accounted for corrections of errors arising in previous accounting periods and accounted for the creation of provisions only when the liability arose. This distorted the explanatory power of some published accounts.
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Another significant error, according to the inspectors, was that the Ministry of Regional Development increased the threshold from which it accounts for off-balance sheet accounts to twenty times year-on-year. “In the financial statements, it thus reported information on some accounts that was not comparable, comprehensible and reliable,” the SAO said. In addition, the resort did not account for the occurrence of significant contingent liabilities from existing litigation.
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“In the statement of changes in equity, the Ministry of Regional Development provided significantly distorted and incorrect information on movements in equity,” the auditors noted.
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Improper management of state property
The Supreme Audit Office also found that the ministry did not comply with basic obligations in the management of state property. For example, when renting non-residential premises on Old Town Square in Prague, in 2014 it did not negotiate a rent at least in the amount that was usual in the given place and time. It leased space with an area of 674 square meters for 3,700 crowns per square meter per year. At the same time, similar premises were rented in this locality for 27,000 crowns per square meter per year.
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“In the period from the conclusion of the contract to the end of the SAO’s inspection, the Ministry of Regional Development thus reduced revenues from state property and state budget revenues by at least 41 million crowns,” the SAO said. In addition, the tenant did not fulfill all the agreed obligations, but the Ministry did not apply any contractual sanctions against him. In another case, the resort did not enforce a claim against more than eight million crowns in court, so it was time-barred.
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The inspectors also examined how the Ministry of Regional Development rectified deficiencies from previous inspections. Of the 17 measures, the Ministry implemented 11 measures completely and correctly, five partially and one not at all, concluded by the SAO.
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