Auditing operation No. 04/15
Management of the funds provided from the State Budget through a contribution to the participants in the construction saving
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2004 under No. 04/15. The auditing operation was managed and audit conclusion drawn up by Mr. Josef Pohl, the Member of the SAO.
The aim of the audit was to examine the usage of the State Budget funds provided to the construction savings banks.
The audited period covered the years 2002 and 2003. The legal regulations mentioned in this audit conclusion are applied in the wording applicable in the audited period.
The audited bodies were the Ministry of Finance (hereinafter referred to as “MF”), Českomoravská stavební spořitelna, a. s., HYPO stavební spořitelna, a. s., Raiffeisen stavební spořitelna, a. s., Stavební spořitelna České spořitelny, a. s., Všeobecná stavební spořitelna Komerční banky, a. s., a Wüstenrot – stavební spořitelna, a. s.
In the audited period of 2002 and 2003, a total of CZK 24.3 billion was provided to the construction saving participants out of the State Budget of the Czech Republic as state aid advance payment. Some of these disbursed funds were returned to the State Budget by the construction savings banks, specifically CZK 0.4 billion, so the state aid for construction saving, after the returned advance payments are deducted, amounted to a total of CZK 23.9 billion for the two years.
The summary overviews of funds that were ascertained from materials of the five audited construction savings banks make it clear that while deposits by the construction saving participants amounted to a total of CZK 208.8 billion at the end of 2003, construction saving loans worth CZK 64.7 billion were provided during the same period. That leads to the conclusion that just 31 % of the funds that these construction savings banks had at their disposal from their clients was demonstrably used to cover housing needs by means of construction saving loans. The construction saving is thus used more to deposit participants’ free finances, with the possibility of obtaining state aid, and less to provide special-purpose loan to finance housing needs.
The audit findings mainly concerned the following shortcomings in the conduct of auditees:
- During the MF controls, initiated at all construction savings banks in 2001 and in 2003, the main shortcomings were the failure to make use of the Ministry’s authority under the Act on state control, the form and content of written materials acquired by the MF on the results of controls and shortcomings in proceedings on objections. When scrutinising the use of state aid at construction savings banks the MF found no breach of the conditions laid down by law and did not impose any fines on construction savings banks during the audited period. In 2002 the MF failed to draw up a plan of controls and did not start a control of the use of state aid at any construction savings bank.
- When returning funds, the construction savings banks do not strictly comply with the Act on construction saving, as the returned state aid advance payments are credited to the MF after the specified two-month period that starts when the grounds for returning funds are identified. Even so, the MF did not take any measures to ensure that advance payments of state aid were returned by the construction savings banks by the legally prescribed deadline.
- The balances of advance payments of state aid recorded in the accounts of the construction saving participants administered by construction savings banks as at 31. 12. of the years under scrutiny are not maintained in their accounting as a separate item that can be documented by an abstract from the main ledger, but can only be obtained from the construction savings banks’ information systems. Additionally, the data on the size of deposits received from participants as stated in annual reports for 2002 and 2003 did not reflect the actual state, and the users of this information were not provided truthful data on the size and structure of funds administered by these construction savings banks.
- When concluding agreements on saving, construction savings banks Všeobecná stavební spořitelna Komerční banky, a. s., and Wüstenrot – stavební spořitelna, a. s., did not comply with the Civil Code and confirmed the agreements’ “effect” regardless of the date on which the participant received the draft agreement. The consequence of this procedure was that the client was saving on the basis of an agreement that had not yet come into effect.
The construction savings banks have at their disposal a considerable volume of funds transferred out of the State Budget as advance payments on state aid, which funds they administer and record in the accounts of building saving participants. According to information obtained from four of the audited construction savings banks, this balance of the state aid advance payments amounted to almost CZK 15 billion as at 31. 12. 2003. This substantial amount means that the MF should not conduct merely formal controls: it should be thorough and proceed according to the Act on state control, providing sound outputs that can be used to prevent any repetition of the detected shortcomings.