Administration of funds from abroad improved, but significant risks persist in this area
PRESS RELEASE on Audit No. 14/37 – September 29, 2015
The Supreme Audit Office (SAO) carried out an audit of management of EU funds in the Czech Republic at the Ministry of Education and at the Ministry of Agriculture. Auditors scrutinized data included in annual accounts, financial statements, and closing accounts of the State budget headings for the year 2014. Significant risks were detected in the area of reporting about flat-rate corrections, which on their own represent sanctions for systemic errors in operational programmes. Corrections may be applied by the Member State itself or by the Commission. As a result, the allocated money will not be drawn from EU funds and the State budget is charged with expenditures, which were originally intended to be reimbursed form EU funds.
The national managing authority of the Operational Programme “Education for Competitiveness” – the Ministry of Education – calculated the corrections for the said Programme in the amount of CZK 1,200 million. This amount may not be final as it is being calculated progressively and will affect future expenditures of the Programme as well. The total amount of corrections will be covered from the State budget and not from EU funds. At the Ministry of Agriculture, the calculation of corrections is currently in the process.
Corrections are not entered into annual accounts of the national budget headings, which mainly include data on cash flow instead of closing accounts data and do not provide information about receivables and liabilities. The SAO recommends that the annual accounts include more accrual data and also include the exact costs of projects, which are co-financed from EU funds – after the deduction of flat-rate corrections and ineligible expenditures. Such adjustments would increase the explanatory power of annual accounts.
Auditors also detected risks in the area of reporting about advance payments that were received directly from abroad and receivables that arose from pre-financing.
The SAO appreciates the new accounting regulations related to pre-financed transfers, which came into effect this year. The principal ambiguities of the previous regulations were amended and as a result, the SAO will be able to express its views on data included in annual accounts (unlike in the previous period after 2010).
Accounting data from the State administration institutions are used by the Ministry of Finance, the Czech Statistical Office, and the Czech National Bank as basis for estimates of the general Government debt and deficit rates. “These terms provide fundamental information indicating the financial condition of the State. When the data are incomplete, the Government cannot consider them as relevant. There is a significant impact on financial markets as well“, said President of the SAO Miloslav Kala.
Communication Department
Supreme Audit Office