SAO Annual Report: subsidy system does not sufficiently support regional development; public funds are often spent without regard to the objectives set
PRESS RELEASE ON ANNUAL REPORT – 31 March 2025
The subsidy system in the Czech Republic still faces fundamental problems. We continue to encounter a large number of subsidy programmes that lack an emphasis on results. In practice, the state often focuses on maximising the use of money and meeting formal requirements rather than supporting projects that can make a real contribution to society. Such a system is flawed and does not help the real development of regions or the long-term strengthening of the competitiveness of the Czech Republic. Public funds are spent without regard to the objectives set. For example, the promise to digitalise the state's agenda by 2025 has been postponed for two years. Although the state spends billions annually to support disadvantaged and vulnerable citizens, concrete changes that would actually improve their lives are still missing.
The Supreme Audit Office (SAO) states this in its just-published 2024 Annual Report. The report contains findings from 29 audits completed last year at a total of 127 institutions. It examined finances and assets worth a total of CZK 83 billion. "Last year's audits all too often pointed out that public funds were being spent without regard to the stated objectives. Although these are described in hundreds of strategic documents that are regularly discussed by the government, they were rarely implemented," commented Miloslav Kala, the SAO President, on the Annual Report.
He also recalled that the Czech Republic has received more than one trillion crowns in European subsidies over the past 20 years of its membership in the EU: "More than 170,000 projects administered by 221 entities have been reimbursed. No wonder this thriving ecosystem feeds those who are comfortable with the system. This year we will start negotiating the terms of the 2028+ programming period. This is a great opportunity for us to channel funds where they will deliver real results," added the SAO President.
The SAO's Annual Report maps the areas where the state has failed to deliver on its promises. For example, the promise to digitalise the state's agendas by 2025 was postponed until 2027. Although client portals were introduced last year, the state administration was not significantly streamlined in many cases. The MoLSA has not completed key IT projects in the area of employment policy and pension processing. Even though the applications allowed citizens to communicate electronically, they still had to document information already held by the state administration. Officials, in turn, had to continue to print out data from the information systems or manually transcribe or copy it into them (Audit No 23/25).
The successful digitalisation is paying off, as an audit of the Czech Statistical Office (CSO) has shown. The CSO significantly reduced the costs of the 2021 census thanks to an online form (Audit No 23/05). In total, 83.8% of the census forms were online. In contrast, 16.2% of the forms were provided by the Czech Post through field surveys. Overall, the census cost the CSO CZK 1.8 billion, of which the contractual remuneration for the Czech Post amounted to approximately CZK 1 billion.
Also, audits focused on the care of disadvantaged and vulnerable citizens have shown that although the state spends billions every year, concrete changes that would actually improve their lives are still lacking. Similarly, money has not been used in a meaningful way to address the causes of social exclusion of people, i.e. long-term unemployment, lack of qualifications or problems related to material and housing need (Audit No 23/29). Another audit showed that although ministries spent almost CZK 87 billion on the system of care for children at risk between 2015 and 2022, the number of children in institutional care has not significantly decreased and there has been no unification of the care system under one ministry (Audit No 23/11).
Some infrastructure investments have not had the desired results either. An example is the nearly CZK 650 million spent to support combined transport. The audit (Audit No 23/13) showed that state-supported rail freight transport is stagnating, while road freight transport in the Czech Republic is still growing. According to the SAO's calculations, the number of kilometres travelled by trucks over 12 tonnes increased by almost a third in 2023 compared to 2015. And despite more than CZK 62 billion invested in repairs of class I roads since 2018, a full one-third of these roads were in substandard condition or disrepair between 2021 and 2023 (Audit No 23/26).
Between 2014 and 2023, municipalities were granted financial aid from state and EU funds in the amount of CZK 9.5 billion for the construction and reconstruction of pavements. Almost three quarters of the 23 projects audited showed serious deficiencies. Moreover, the conditions of the financial aid did not sufficiently motivate municipalities to use it effectively and economically. The amount of the state and EU contribution ranged from 85% to 95% and municipalities financed reconstructions that were not necessary (Audit No 24/01). "Some programmes offer investments in municipal or private property, but nobody cares about the costs. A metre of pavement can cost even CZK 25,000. If subsidies for supported projects normally cover 90% of the cost, this will hardly lead the recipients to try to push the price down," said Miloslav Kala, the SAO President. The SAO has long pointed to the high level of financial aid, which does not motivate beneficiaries to be financially responsible.
A summary of the results of the audits in a user-friendly infographic can be found in this interactive annex (only in Czech): https://www.nku.cz/scripts/detail.php?id=14608.