Auditing operation No. 04/34
The investment incentives provided to foreign and domestic subjects
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. 04/30. The auditing operation was managed and the audit conclusion drawn up by Mr. Jiří Drábek, the Member of the SAO.
The aim of the audit was to examine the benefit of the investment incentives provided for the creation of new jobs and for the improving of employee qualification in the structurally stricken areas regarding the decrease of the unemployment level.
The audited period covered the years since the Act No. 72/2000 Coll., On investment incentives, came to force until the end 2004, as well as first half of 2005 in certain cases of relevant connections.
The audited bodies were the Ministry of Labour and Social Affairs (hereinafter referred to as “MLSA”), the Ministry of Industry and Trade (hereinafter referred to as “MIT”) and selected recipients of the investment incentives.
The MIT has the role of the coordinator (in the sense of the Act No. 72/2000 Coll., On investment incentives) in the whole process of the investment incentives assigning and investment incentives enforcement supervision. The SAO audit did not detect any substantial deficiencies concerning the procedure of the investment incentives approving and assigning in the department of industry and trade.
MLSA (as the only subject of the state administration during the audited period) was contributing State Budget funds (material support) to the investment incentives receivers in the form of Agreement for creation of vacancies and improving of employee qualification. The audit detected following deficiencies lying with MLSA, for instance:
- It incorrectly classified the provided material support for the creation of new jobs and improving of employee qualification as loans instead of classifying them as non-investment subsidies provided to the non-financial business subjects, in total amount CZK 2,135,359 thousand.
- It did not adopted into the concluded Agreements conditions set by the MIT in the Decisions about the promise of the investment incentives. For instance it did not set the condition for the subsidy drawing that the beneficiary will draw subsidy for the newly created and assigned job, but it allowed drawing the subsidy only for the creation of new job. Or it did not set the duty to improve the employee qualification and to employ only the employees with undetermined period contract.
- In one case, it incorrectly set the amount of material support for creation of vacancies. This led to the provision of the material support lower by the amount CZK 12,000 thousand.
- It incorrectly set lower participation on cost of the improvement of employee qualification and thus it contributed to the beneficiary the material support lower by the amount CZK 795 thousand.
- It incorrectly provided the material support for already created and assigned jobs in total amount CZK 10,800 thousand.
- It did not prove decisive statistical data according to government regulation No. 515/2004 Coll., on material support for creation of new jobs (in total amount CZK 176,000 thousand) and for the improvement of employee qualification or training of the staff in the framework of investment incentives (in total amount CZK 523,555 thousand).
- It provided one-off funds of material support for the creation of new jobs and for the improvement of employee qualification in total amount CZK 832,074 thousand. This procedure was incorrect because the MLSA should provide those funds in time and material relation to the numbers of new jobs and re-qualified staff.
The audit made out that the investment incentives contributed to the decrease of unemployment in audited regions. There were created new or additional jobs in relation to connected production. Contracted numbers of new jobs and re-qualified employees were exceeded.
- The audit did not detect fundamental deficiencies in usage of material support for the creation of new jobs and the improvement of employee qualification at beneficiaries.
- The audit detected deficiencies in the proving of property possession, in the observation of conditions for the usage of discounts on legal persons income tax and in incorrect bookkeeping of material support.
- The audited beneficiaries created 5,228 new jobs. The contracts set creation of 3,407 new jobs. There were re-qualified 2,766 employees either the contracts set the re-qualification of 2,658 employees. The above-mentioned facts highlight that the contracted numbers were fulfilled and exceeded.