Transgas operating at a long-term loss, neither fulfils its original purpose, nor ensures significant interests of the Czech state. The Ministry should dissolve the enterprise
Press release on audit No 21/13 – 17 January 2022
The Supreme Audit Office examined the financial management of Transgas, the state enterprise, between the years 2017 and 2021. Apart from examining the financial management of Transgas, the auditors also looked into how the Ministry of Industry and Trade (MoIT) fulfilled its obligations as founder of the enterprise, as well as how it implemented the state’s ownership policy. The audit revealed that Transgas is not ensuring any significant interests of the state, instead it merely administers, rents or sells immovable property, or performs specific tasks assigned by the MoIT. Moreover, the enterprise has been operating at a loss for a long period of time. According to the SAO, the MoIT should decide on dissolving it.
The Ministry of Industry and Trade declared that the sole reason for the existence of Transgas is the outstanding claim of CZK 4.6 billion from the so-called Jamburg Agreements1. However, Transgas keeps this claim in its accounts unjustifiably. Legally, the claim belongs to the Ministry of Finance, which was reflected not only in a 2015 government document, but also in the 2014 legal analysis commissioned by the enterprise itself. Transgas plays a minor role in this issue, i.e., it only assists and supplies necessary documents to the creditor, that is to the Czech state, which is represented by the Ministry of Finance.
This receivable accounts for 91% of Transgas’ assets, thus, it significantly distorts its accounts.
In addition, Transgas is operating at a long-term loss which amounted to CZK 22.8 million between the years 2016 and 2020. Transgas had eight employees in 2020. The labour costs of the enterprise totalled CZK 5 million in 2020. The level of appropriations for employment benefits has also increased, to CZK 70,500 per year per employee. The fact that Transgas is located in rented premises also contributes to the loss-making. The enterprise paid almost CZK 6 million for rent between 2017 and 2020.
In view of the fact that Transgas does not secure any significant interests of the Czech state and that the only reason for its existence is a claim, which the enterprise keeps in its accounts unjustifiably, the SAO recommends that Transgas be identified as a non-essential state enterprise and should be dissolved in accordance with the ‘Strategy for State ownership policy’.
1] This is a claim linked to the 1985 Agreement between the Government of the Czechoslovak Socialist Republic and the Government of the USSR on cooperation in the adoption of Jamburg’s gas pool.