Auditing operation No. 03/11
The State Property that the Česká konsolidační agentura is authorised to manage
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2003 under No. 03/11. The auditing operation was managed and audit conclusion drawn up by Ms. Jana Krejčová, the Member of the SAO.
The aim of the audit was to examine whether the Česká konsolidační agentura does manage the consigned property effectively and economically.
The audited period covered the period from 1 September 2001 as well as previous periods in case of relevant connections.
The audited bodies were the Ministry of Finance (hereinafter referred to as “MF”) and the Česká konsolidační agentura (the Czech Consolidation Agency - hereinafter referred to as “ČKA”).
The MF has not yet carried out any inspection in the period from the inception of the agency. It accepts and approves prescribed documents and materials from the agency and does not even react to evident errors and deficiencies such as the absence of the Advisory Board’s statements to the running reports on the management of the ČKA or the differences between an affiliated company’s subject of activity stated in the business register records and carried out in actuality.
When deciding on the further activities of the ČKA the MF did not take into the consideration the statement of the Czech Securities Commission and it was extensively expanding the ČKA activities as a securities dealer. In case of reverse repo-operations, which are characterised as providing a loan from a legal perspective, MF permitted ČKA this activity even though according to the provisions of the Act on the ČKA, the ČKA may not provide loans.
At its inception, the ČKA became authorised to administer a considerable volume of assets that it took over from its legal predecessor. The ČKA acquired further great volumes of assets, especially in connection with the dealing with the banking sector problems and the need for its stabilisation. This brought the tasks of ensuring the takeover of these assets in a relatively short time, carrying out its inclusion in the newly-built information system, completing a set of internal directives for handling them and quickly starting with their implementation.
The audit proved that some of the procedures when deciding on the method of realising claims, when choosing an organisational and legal advisor, when categorising claims into blocks and when organising tenders were not carried out consistently and the chosen variations of the solutions were not the most suitable according to the submitted documentation. The great deficiency lies also in the fact that the ČKA did not have a sufficient overview of the intrinsic value of the claims offered in blocks.
The main criteria for the activity of the ČKA when executing assets should be the efficiency and effort to minimise the negative impact on the economic result and thus on the state budget as well. By creating such large blocks of claims, as were the audited blocks ČKA04 and 05, there was given the preference to the speed of removing assets from the ČKA balance sheet over their maximum revenue. The collection of hundreds of clients and their debts created room for the occurrence of errors by the already insufficient assessment of the individual cases during their categorisation into blocks. The size of the block and other circumstances connected with this (fees, principals) limits the circle of parties possibly interested in their purchase and thus the possibility of attaining a more profitable price. The ČKA objection that the size of the block simultaneously reduces “speculative” purchases does not hold water in this regard. Such a collection – block – of claims is not made with the goal of restructuring hundreds of various clients, but is purchased for further sale. At the same time it is necessary to certify that deficiencies were also ascertained with the individual sales of the ČKA assets.
In connection with the expected reduction in the deadline for concluding the activities of the agency, it is necessary to prepare a clear and controllable strategy for dealing with the assets that the ČKA is or will yet become authorised to manage. This is essential for minimising the impact on the state budget. The foundation of this strategy and the foundation of the specific resolution of the assets must be the more exact knowledge of their current value so that it is possible to choose the most effective procedures. In this situation it appears to be ineffective in this situation for the MF to continue to extend the activities of the ČKA beyond its legally specified scope and to assign to the agency, in the form of a government decree, the tasks that solve the needs of other departments and worsens the ČKA economic results.