20 years of independent external audit in the Czech Republic - The Senior Director of the Audit Section, the SAO, Mr Stanislav Koucký
Seminar - 20th Anniversary of the SAO, Senate of the Parliament of the CR, 25.7.2013
Mr President,
Mr President of the Senate,
esteemed guests,
colleagues,
ladies and gentlemen,
allow me to take this opportunity to look back at the last twenty years of the history of the Supreme Audit Office. Twenty years is a short period of time from a historian´s perspective. From the point of view of the productive period of a human life, however, it is a fairly long time, and the Supreme Audit Office´s audit work is done by people - the people whose day-to-day work is the performance of independent external audit. All the aspects mentioned by the speakers before me - the actual founding of the independent audit office, the legislative framework or the requirements of the Lima Declaration (at least the ones that have been fulfilled) - are elementary preconditions for the performance of the work our office was established for, namely independent external audit. For more than twenty years, audit work whose mission is to audit state budget finances and the management of state property has been an integral part of this country´s public life, and for me it is an honour, ladies and gentlemen, to be a part of it. To begin, allow me to mention a few numbers. Numbers are what are expected from an auditor, after all. In this case, though, I am not going to put a figure on either potential savings or inefficiency or inaccuracies. With these numbers I would like to summarise the work and efforts of everyone who has been involved in the core work of our Office over the past twenty years. Since its founding the Supreme Audit Office has conducted 788 audits. It has audited 10,326 (ten thousand three hundred and twenty-six) auditees. On average we have therefore conducted 38 audits involving 504 (five hundred and four) auditees per year. Each year the number of audits has depended on their scope and subject, the aims to be achieved and, last but not least, the available capacity of the audit staff, i.e. members of the office and auditors who jointly conduct audits.
During the past twenty years the structure and focus of audits have always been designed to ensure that the Office fulfil its role in the areas defined by the Act on the Supreme Audit Office. The majority were audits focusing on the management of state property and the implementation of the state budget, on the management of finances provided to the Czech Republic from abroad, on public procurement and, last but not least, on the state closing account.
When drawing up the audit plan we always made sure that the planned audits dealt with topical and socially important issues. All suggestions for audits were and are carefully assessed, not just in terms of identifying the risks affecting the management of state finances and state property, but also as regards the volume of assets and finances that are to be audited. The cornerstone of the Office´s audit work is suggestions thrown up by the Office´s own control and analytical work. The Office also places considerable importance on suggestions it receives from the Chamber of Deputies and the Senate and their bodies and from the government. The Office has received 104 such suggestions since 1993: 86 from the Chamber of Deputies, two from the Senate and sixteen from the government of the Czech Republic. Most of these suggestions led to audits being conducted.
Over the years the focus of audits has changed and evolved, naturally reflecting the most important changes in the area of state financial management since 1993, the year the Supreme Audit Office was founded. In the early days of the Office´s work, scrutiny of privatisation was one of the core themes of our audits. Later our attention turned to money spent on long-term, financially demanding projects. When the Czech Republic joined the European Union, audit of finances provided to the Czech Republic from abroad became an integral part of the Office´s work. We are currently devoting our attention to finances spent on information technologies and services. Needless to say, the audit plan is always conceived in a way ensuring we cover the full scope of the Office´s purview, making effective use of our auditors´ skills and abilities, while upholding the rights and legally protected interests of the audited entities.
The audit method has also evolved over the past years. In the early days of the SAO´s work we mainly focused on compliance with the legislation. In 2002 the Office began to perform financial audits and performance audits, capitalising on the outputs of a twinning project implemented under the PHARE programme.
As the audit environment changed, so did the demands on auditors´ skills and abilities. Twenty years ago, who could have predicted such rapid development in modern technologies? Twenty years ago, the things we take for granted today were only to be found in the research laboratories for space exploration. The technologies that are now an everyday part of our lives were like something out of science fiction when the SAO was founded. To keep step with these developments - not just in the field of modern technologies - we pay considerable attention to improving our auditors´ skills and abilities. High standards have been set for our work ever since the Office was founded, when our predecessors managed to put in place very solid foundations for know-how that we are constantly improving. We should not imagine an auditor as a scowling individual with thick-lensed glasses surrounded by heaps of files in some archive. The present-day auditor is a highly erudite professional with high moral credit making use of all the available modern technologies for his work. The road to qualifying as an auditor is long and hard. Only the best last the course. Time flies, and in the deluge of work tasks we sometimes take for granted things that are exceptional. Our employees´ professionalism is our Office´s most valuable asset. We are all well aware of this fact. And it is one of the reasons why so much attention has been and still is paid to employee development.
Another integral part of improving our auditors´ skills is international cooperation with partner institutions abroad - this is something my colleague will speak about later.
At this point I would like to mention the impacts and importance of our work. I would think that none of us doubts the indispensible role the Supreme Audit Office plays in the constitutional system of the Czech Republic. The results of audit work bring an objective and impartial view of the state´s financial management. During the years, the Office has always placed the emphasis on systemic audits with a view to assessing the degree to which objectives are achieved and policies are implemented when public funds are spent, focusing on economy, efficiency and effectiveness.
Where we find that the legislation is inadequate, we try to contribute to adjustments ensuring that these shortcomings are eliminated.
The preventive effect of audit among potential auditees is another undoubted benefit of our work. That is one reason that we actively participate in expert seminars where we present the results of our audits. Posting our audit results on the Office´s web site also contributes to publicity.
In 1997 the SAO´s reporting duty to the financial authorities in cases were audit findings are linked to auditees´ tax obligations was enshrined in the act on the administration of taxes and fees. This obligation was subsequently transposed into the tax rules effective from 2011. In line with this obligation, since 1997 the Supreme Audit Office has sent 371 notifications to the financial authorities, involving a total value of almost CZK 14 billion, i.e. on average CZK 870 million per year.
Some audit findings give rise to a suspicion of criminal activity. In these cases the Office, in line with the relevant provision of the Criminal Code, notifies the criminal justice authorities of the circumstances indicating that a crime has been committed. The SAO filed a total of 183 criminal notifications between 1993 and 2012. These criminal notifications mainly concerned actions in the nature of fraud, breach of trust or non-payment of tax.
There can be no doubt that the SAO is an indispensible component of parliamentary democracy. It sees to the independent audit of the state´s financial management. During its existence, its audit results have provided important feedback that can be applied in the work of both the Parliament of the Czech Republic and the executive authorities. The results of this Office´s work are of indisputable benefit to society as a whole. Through our work we systematically strive to improve the audit environment in the Czech Republic that the SAO is an integral part of. At this juncture the SAO stands on the threshold of new challenges. Its work has to be based on current social significance and simultaneously long-term strategic goals, backed up by risk analysis in the segments it covers. In this spirit we are preparing a new development strategy for the coming period, focusing on improving the state of public finances and management of state property, strengthening the position of the SAO, improving the effectiveness of audit work, developing human resources and exemplary management of the allocated funding. A number of measures to improve the performance of audit work, the targeting of audits and the management of the Office´s finances have already been implemented. Our goal continues to be extending the SAO´s audit powers to cover all public finances, so that the Czech Republic can join the ranks of developed democracies that entrust the exercise of independent audit to institutions with the status of external independent auditor.
Mr President, Mr President of the Senate, esteemed guests, colleagues, ladies and gentlemen,
to conclude, I would like to express how proud I am that I can be part of an institution like the Supreme Audit Office. At the same time I want to thank everyone who has worked to help build up the good name of the Supreme Audit Office. My wish for this Office for the coming twenty years is that it continues to be a benefit to society and that everyone truly concerned about the sound management of public finances realises that this Office´s findings are intended to be a service to society and the citizens of this country.
Thank for your attention.