The SAO reviewed automobiles of the Army of the Czech Republic: obsolete vehicles, delayed purchases and inefficient spending on repairs
Press release on audit No 22/11 - 15 May 2023
The Supreme Audit Office (SAO) examined how the Ministry of Defence (MoD) handled State budget funds earmarked for automobiles of the Army of the Czech Republic (hereinafter “Czech Army”) between the years 2018 and 2022. The audit revealed that the automobiles were outdated and their operation was unsustainable. The average age of vehicles was almost 21 years, some of which had been in circulation for 39 years. Two thirds of the vehicles had exceeded their lifespan. However, despite the fact that the MoD had increased its budget by billions of Czech crowns, it has failed to implement plans for the replacement of these vehicles. Purchases were delayed, some did not take place at all. The auditors have also found that the MoD spent funds inefficiently and ineffectively on repairs of outdated automobiles. A total of CZK 20.2 million was spent inefficiently on repairs of off-road vehicles and cranes. The SAO also verified the operation of the state Military Repair Company (MRC) and found that the company failed to achieve its set objectives over a long period of time and even operated at a loss. The loss amounted to CZK 391.8 million between the years 2018 and 2021.
By the end of the audit, the MoD had not purchased, for example, new car cranes, rescue cars with a load capacity of 30 tonnes, automobile excavators, decontamination vehicles or container hook loaders. For example, compared to the original plan, the purchase of car cranes was delayed by at least six years and the purchase of container hook loaders by at least five years. The delay in the purchases was due to the changes in the priorities of the Czech Army, as well as the lengthy preparation of investments due to changes in technical requirements.
As the auditors have found, the MoD had old passenger off-road vehicles and car cranes repaired which were in a poor technical condition and beyond their lifespan, even though the price of repairs was close to or above the price of new vehicles. At that time, however, the MoD was already preparing the purchase of new automobiles. For example, according to the SAO, the MoD paid CZK 12.5 million inefficiently for 15 repairs of off-road cars 22 to 24 years old. The price of the repairs ranged from CZK 510,885 to CZK 1,362,626 and thus exceeded by multiples the residual book value of the vehicles. In the case of two repairs, the price also exceeded the purchase price of the vehicles and, in the case of four vehicles, the repair exceeded the price of a new passenger off-road vehicle.
A total of CZK 7.7 million was spent by the MoD – once again inefficiently according to the SAO – for nine repairs of cranes that were approximately 30 years old. This morally and technically outdated equipment has complex security systems manufactured 30 to 50 years ago. Spare parts are difficult to access and some even need to be produced, which is not only time-consuming but also expensive. For example, it took more than a year and cost more than CZK 2 million to repair a 28-year old shovel excavator whose residual book value was CZK 63,299 and the purchase price was CZK 1,400,302. The SAO found that the mileage of the vehicle was only 2,858 km, its superstructure had worked for 102.7 moto-hours and the chassis 54 moto-hours.
During the audited period, the Czech Army had almost 1,300 passenger off-road vehicles with an average age of 19 years. Therefore, the MoD has decided to fully replace them. Although the spreadsheet number (in force since 2020 and reflecting the necessary need for the equipment) was set at 1,344 vehicles by the Czech Army, the purchase plan exceeded this number by 884 vehicles, i.e. by 65.8 %. The MoD did not justify this increase in any way. According to the SAO, the plan is overestimated and there is a risk of wasteful and ineffective spending of state budget funds amounting to hundreds of millions of Czech crowns.
Regarding the audit of the state company MRC, the SAO found that the MoD had not used the company in accordance with its objectives. The company’s sales received from the MoD amounted to only 13.2 % of total sales in 2018-2021. The company also failed to implement its financial plans and achieved a negative economic result. For the years 2018-2021, the total loss amounted to CZK 391.8 million. The MoD and the MRC concluded a framework contract for the repair and maintenance of car cranes and shovel excavators of the Czech Army. The SAO found that only two of the 34 repairs generated a profit for the MRC, amounting to CZK 3,000 and CZK 8,000. Other repairs of the company generated a loss. In a contract worth CZK 9.4 million (excluding VAT), the company reported a total loss of CZK 4.6 million (excluding VAT).
Supreme Audit Office