Auditing operation No. 03/15

The Closing Account of the State Budget Chapter – the Ministry of Culture

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. 03/15. The auditing operation was managed and audit conclusion drawn up by Mr. Jan Vedral, the Member of the SAO.

The aim of the audit was to verify the accuracy of the financial and accounting statements presented by the Ministry of Culture as data for the closing account of the state budget chapter.

The audited bodies were the Ministry of Culture (hereinafter referred to as “MC”) and its contributory organizations: National Theatre (hereinafter referred to as “NT”), National Gallery in Prague (hereinafter referred to as “NG”), the National Library of the Czech Republic (hereinafter referred to as “NL”) and the State Heritage Institute in Brno (hereinafter referred to as “SHI”). Auditors examined activities that are the subject of accounting and which have an influence on the value of the tested final balances in the financial statement to 31 December 2002 of the individual inspected entities in chapter 334 – the Ministry of Culture in 2002 including related facts in the 1998 – 2001 accounting periods.

In accordance with the recommendations of the INTOSAI International Auditing Standards, the highest level of bad reporting that the users of accounting statements can hold to be still acceptable is specified as 2% of the value of the expenditures (MC), 2% of the value of assets (NT, NG, SHI) and 2% of the value of the expenses in the main activity (NL). Due to the extent of the overall inaccuracy detected in the financial statements of the individual inspected entities and to their comparison with the specified highest possible level of bad reporting (materiality threshold), it is apparent that the financial statements of the inspected entities do not provide, in all important regards, a true and fair view of the subject of accounting for the 2002 accounting period in accordance with the Act on Accounting and the respective regulations.

The financial statements of the individual audited entities were not reliable base for compiling of the final closing account of the relevant State Budget Chapter pursuant to Ordinance No. 419/2001 Coll. Violations of budgetary discipline in the sense of Section 44 of the Budgetary Rules exceeded the materiality threshold considerably.

The audited entities should execute all necessary corrections where serious inaccuracies in the financial statements were ascertained including such corresponding corrections in their accounting system which would eliminate the deficiencies described above.

Other important facts, being information from the accounting statement’s annexe, which each accounting unit must process in its entirety pursuant to Section 18 of the Act on Accounting, is not presented as a mandatory point of the Accompanying Report to the Chapter’s Closing Account, which is presented to the Chamber of Deputies of the Czech Parliament.

Pursuant to the valid version of Ordinance No. 419/2001 Coll., only a formalised annexe, which does not provide additional and explanatory data to the submitted accounting statement, is part of the chapter’s closing account. Thus the chapter’s closing account lacks the required information on facts that are not put into accounts in the double-entry accounting system, but the knowledge of which is essential for assessing the property situation of the accounting unit (the usage of foreign property, the records of rights that are not put into accounts, or material whose acquisition, storage, maintenance and monitoring follows from generally accepted legal regulations). Information on the accounting methods used and the facts that are not put into accounts in the double-entry accounting system are also missing in the closing account.

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