Auditing operation No. 04/14
Financing the construction of a multi-purpose facility in Bublava municipality
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2004 under No. 04/14. The auditing operation was managed and audit conclusion drawn up by Mr. Jan Holeček, the Member of the SAO.
The aim of the audit was to assess the effectiveness and the economy of the spending of the State Budget funds earmarked for the construction of a multi-purpose facility in Bublava municipality.
The audited period covered the years 1999 to 2003 as well as previous periods in case of relevant connections and the periods up to the conclusion of the audit.
The audited bodies were the Ministry of Finance (hereinafter referred to as “MF”), the Ministry of Education, Youth and Sport (hereinafter referred to as “MEYS”), The State Environmental Fund of the Czech Republic and Bublava municipality.
The agreed cost of the construction project was CZK 99,858,455. When construction of the waterpark commenced, Bublava municipality had secured just CZK 17 million, which came out of the State Budget. This action was insufficiently financially secured. Although CZK 57 million has gradually been released out of the State Budget, the building work is not finished: work has stopped entirely at present, so these finances were not expended effectively or economically. What is more, the plan to build a waterpark in Bublava municipality was not suited to the local conditions, as, among other things, to this day the municipality still does not have a reliable water source of sufficient capacity or even a water main.
State Budget finances were allocated to Bublava municipality as follows: the relevant subsidy was first approved by the Chamber of Deputies in the State Budget act for the given year and only then did the municipality submit the requested materials to the subsidy providers. The ministries through which subsidies were provided thus had no possibility of appraising the state of readiness and realism of the investment action before it was included in the State Budget. What is more, in 2001 the financing of the action was made part of the MEYS’s programme, even though it is completely unrelated to that government department.
The MEYS failed to make use of the legal possibilities for performing financial control of Bublava municipality and scrutinising compliance with the conditions of the subsidy use as determined by the Decisions.
Bublaba municipality submitted investment plans from 1997, 1998 and 2001 to the subsidy providers. In these investment plans it is stated that they were approved by the municipal authority. The audit detected that in 1997 and 2001 they were not approved by the municipal authority.
When the agreement on provision of the subsidy was signed with the MF on 12. 8. 1999, Bublava municipality submitted documents that confirmed their ownership of the land on which the waterpark was being built, even though it had already sold this land to a private company on 21. 6. 1999. This conduct misled the MF.
Bublava municipality breached the Act No. 199/1994 Coll., on public procurement, by concluding an agreement running to a total price of CZK 189,599,526 (not including VAT) for a work that did not correspond to the subject of the public procurement.
Bublava municipality breached the Act No. 576/1990 Coll., on the rules for managing budget funds of the Czech Republic and municipalities in the Czech Republic (the State Budget rules), and failed to comply with budgetary best practice by overrunning the specified deadline for completion of the construction and technical supplies (05/2002) and the deadline for the final evaluation of the action (11/2002).
Bublava municipality breached the Act No. 563/1991 Coll., on accounting, by entering invoices made out by a firm called IPS, a. s., Prague, which were not conclusive as they did not contain any information on specific units and the quantity of billed material and work.
Bublava municipality ran up a total debt of CZK 92 million in connection with the building of the waterpark. Even after partial debt clearance was afforded to the municipality, its outstanding commitments as at the day on which the SAO completed its audit amounted to almost CZK 50 million.