The SAO assesses the functioning of the State in its annual report

Press release on the Annual Report — 4 April 2022


The SAO issued its annual report for 2021, in which it summarises its findings from a total of 29 audits, but also evaluates the progress of the State in selected policies as well as the State's financial management and economic situation. Last year, the SAO pointed out in its audits, for example, wasteful purchases, inefficient controls carried out by some State institutions, digitalisation of unmodernised processes or inconsistent approach to the State's ownership policy — shortcomings due to which the State often lost money unnecessarily. The sustainability of public finances and some systemic deficiencies, which the SAO repeatedly encounters, also remained a problem.

In its annual report, the SAO points to the pace of government debt growth, which may have serious implications for the sustainability of public finances. The State budget in 2021 ended with a deficit of almost CZK 420 billion, which was the worst financial result in the history of the Czech Republic. The reported deficit increased by more than CZK 52 billion year-on-year, even though the economic restrictions related to the COVID-19 pandemic did not reach the same level as in 2020. The total debt of the Czech Republic reached almost CZK 2.5 trillion.

The record deficit was mainly driven by a significant increase in current expenditure, which increased by more than CZK 59 billion year-on-year, an increase of 3.6%. By contrast, capital expenditure increased by CZK 4.5 billion year-on-year, which represents an increase of 2.6%.

Almost 90% of the year-on-year increase in total expenditure was not related to spending incurred in connection with COVID-19.

“The pace of increase in the government debt poses a risk to the sustainability of public finances and continues to be one of the key topics in 2021. The essential thing is that in the Czech Republic there is undoubtedly room for the State to better handle public money and not waste it," said SAO Vice-President Zdeňka Horníková.

Last year, the SAO pointed out a number of cases where the State could save money. For example, it described shortcomings related to improper management at the level of individual institutions. In the case of health institutions, expenditure on purchases amounted to more than CZK 1.3 billion between 2017 and 2019, of which up to 85% accounted for purchases done without tender procedures. Of the audited sample of CZK 239 million, the institutions spent CZK 168 million wrongfully.

The auditors also described, for example, the functioning of the State enterprise Transgas. According to the SAO, this State enterprise can be considered redundant, and the Ministry of Industry and Trade should decide to close it down. The enterprise was also in a long-term loss, which totalled almost CZK 23 million between 2016 and 2020.

“Mistakes in public procurement or wasteful purchases — all this leads to unnecessary expenditures that continue to burden the State budget,” Horníková said.

Digitalisation is one of the tools that can improve the functioning of the State. However, despite some partial improvements, this is still insufficiently reflected in increasing the effectiveness of processes and the efficiency of public administration. In the international comparison according to the DESI index, which focuses primarily on digitalisation, the Czech Republic is steadily lagging behind the average of EU countries. Year-on-year, the Czech Republic dropped by one place in 2021 and ended up 18th out of the 27 EU Member States.

In its annual report, the SAO also draws attention to systemic problems — especially the fact that the State has often failed to evaluate or monitor the real benefits of distributed support. These were, for example, investment incentives to help reduce unemployment and in which the Ministry of Industry and Trade provided more than CZK 75 billion between 2000 and 2019. Although unemployment fell, the number of incentives increased in the audited period.

In the social field, for example, the SAO has found that the set objectives did not always meet the needs of citizens. When auditing social services facilities, it turned out that the MoLSA had set up 605 new beds. However, this goal did not correspond to the real needs of the citizens. At the end of 2016, there were 92,000 unsatisfied applications for bed placement in a social care facility.

In the environmental field, for example, the State failed to improve water quality. This is demonstrated, among other things, by monitoring carried out by the Czech Hydrometeorological Institute which focused on the quality of groundwater and surface water. The ministries have not addressed the causes of water pollution and therefore have to spend billions of Czech crowns on modernising drinking water treatment plants. For example, modernisation of the technologies at the Plzeň and Želivka water treatment plants cost CZK 2.6 billion. "The State often spent money on ecological issues to deal with the consequences instead of eliminating the causes. However, this does not solve anything in the long term, while the most important thing is to eliminate the causes," concluded the SAO Vice-President.

The annual report also includes an interactive data annex, which is available below.

Communication Department
Supreme Audit Office

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