IT on MoLSA: failure to develop a social benefit system as well as external services. According to the SAO, the resort violated the budgetary discipline of CZK 737 million

Press release to audit No. 17/22 – 21 January 2019


The Supreme Audit Office focused on how the Ministry of Labour and Social Affairs (MoLSA) procured, operated, and developed selected IT systems. These were mainly systems ensuring the payment of social benefits, through which the state allocates approximately CZK 80 billion per year — such as unemployment benefits, allowance and housing benefits, foster care benefits, subsistence allowances, and others. Auditors examined almost CZK 900 million, which is about a quarter of the more than CZK 3.7 billion that the ministry spent in the field of ICT technology between 2013 and 2017. The audit revealed significant amounts of substantial errors, such as the failure to create new information systems for benefit payments, problems relating to public procurements and contracts, or the use of external companies.

Since 2011, the MoLSA has tried to switch suppliers of its four agendas.1 One of the reasons for this was to avoid dependence on one supplier and to stabilise the payment of benefits. These systems were designed to replace two completely new systems — IS Social benefits and IS Employment, for which the supplier was supposed to emerge from an open tender. The government decided in 2014 that the new systems were to be operated in 2016 at the latest.

However, the Ministry did not manage to hold a new tender for information systems up to the given deadline and, therefore, through negotiated procedure without publication (NPWP), concluded a follow-up contract in 2016 with the same contractor, thus, avoiding the need for an open tender. According to the SAO, hereby the MoLSA committed a breach of budgetary discipline of half a billion CZK.

The delay in the launch of new information systems Social benefits and Employment is another wasteful expenditure for the state budget. Each month, when the current systems are running, the Czech Republic, according to estimations by the SAO, pays 30 million more in comparison to the price it could pay if the new systems were in operation. Thus, in 2017 alone, the operation of these systems cost extra CZK 360 million and the costs are still increasing. At the time of the audit, the MoLSA foresaw that IS Social benefits would be started in 2021 at the earliest, the IS Employment was supposed to be launched as of July 2018, while by the end of 2018, it had not been deployed yet.

Systemic integration services were accompanied by similar problems — even in this case, the Ministry used the NPWP instead of an open tender, even though it was not entitled to do so. According to the SAO, the Ministry committed a breach of budgetary discipline totalling more than CZK 172 million.

The MoLSA remained, in practice, dependent on external suppliers of ICT services.

Reliance on external suppliers had also led to the transfer of control over IS projects from the MoLSA to the employees of the firms selected without tender, which meant additional expenditure for the state. Auditors have calculated that, for example, the price per one day of work of a project manager from the company selected on the basis of the tender was between CZK 4,800 and 8,500. In situations where the MoLSA had selected directly without tender, the daily work price of a project manager ranged between CZK 14,300 and 24,900. At the same time, the usual price2 on the ICT market was around 11.900 crowns.

Other shortcomings related, for example, to consultancy and external ICT services worth CZK 8.5 million tendered directly by the MoLSA to selected suppliers, again, without any public procurement. The Ministry also had to prepare an ICT development strategy for the years 2018 to 2020, for which it had paid over 8 million crowns by the time of the audit. If the same number of MoLSA employees had worked on it, it would have resulted in approximately CZK 1.1 million.

In total, the SAO reported a breach of budgetary discipline totalling CZK 737 million to the Tax Office as well as filed two criminal complaints including more facts.

Some of these problems could have been addressed by the MoLSA if it had striven to resolve the long-term shortage of IT experts. In 2017, the Ministry filled only 52 of the 80 available IT positions. It could also mark up to five per cent of its 1,244 official posts as key ones — such employees can be offered significantly higher salaries than those determined by the pay scale. At the time of the audit, the MoLSA was set to mark only around a percentage of posts, with only three posts being used in the ICT sector.

The audit conclusion of this audit was approved by the Board of the SAO in June 2018, but the SAO could publish it after it had received the approval of the law enforcement authorities.

Communication Department
Supreme Audit Office

1] IS for State Social Support, IS for Material Emergency and Social Services, IS for OKslužby Registry, and the IS for Employment Policy.

2] See Price list of usual pricing for ICT work (Faculty of Economics in Prague, Faculty of Informatics and Statistics, 27 November 2017) determined on the basis of an analysis of data included in the Contract Registry. Now in the updated version, an Overview of usual pricing for ICT work available at https://www.mvcr.cz/clanek/prehled-obvyklych-cen-ict-praci.aspx.

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