Auditing operation No. 04/04
Recoverable financial assistances (interest-free loans) provided for the development of the agri-food complex
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. 04/04. The auditing operation was managed and audit conclusion drawn up by Ms. Eliška Kadaňová, the Member of the SAO.
The aims of the auditing operation were to examine the administration of the recoverable financial assistances (interest-free loans) and their recoverability, the handling with the respective claims of the state, and the verification of the evaluation of the contributions achieved by this form of support.
The audited period covered the years 1991 to 2004.
The audited bodies were the Ministry of Finance (hereinafter referred to as “MF”), the Ministry of Agriculture (hereinafter referred to as “MA”), selected Financial Directorates and selected beneficiaries.
During the years from 1991 to 1995 a total amount CZK 22,582,000 thousand was released from the State Budget as the subsidies to the agri-food complex, this included CZK 7,315,114 thousand as the recoverable financial assistances (hereinafter referred to as “RFA”).
The RFA were not separately reported and monitored in the State Budget and in the State Final Account, but incorporated into the total amount of the subsidies to the agri-food complex.
It was possible to estimate from the MA register by 19 August 2004 that as the RFA still should be recoverable into the State Budget approximately CZK 3.5 billion. The above-mentioned amount is continually decreasing by the granting of so-called bonus. During the time of the granting of the RFA it was expected that they should be returned by 2008. On the basis of the audited documentation it was detected that in some cases the repayments will be paid up to the year 2019.
The provider of the RFA was the MA. The MA concluded the contracts with the applicants. In the contracts the MA bound the applicants with the keeping the set conditions. The amendments to the contracts were adopted. These amendments entitled the beneficiaries to obtain some reliefs (postponement of the payments, extensions of the payments, so-called bonus).
The beneficiaries in the beginning were paying the RFA through the Tax Offices, which accepted those payments in line with the instructions of the ministries but beyond their scope defined by the law. The MF gives notice about this fact and demands that the provider of the RFA (e.g. the MA) should administer the relevant accounts receivable, and also should provide the needed sources for the overpayments returning from the MA budget chapter.
There were not and still are not kept the accounting reports on the receivables related to the RFA. The data on payments register the Tax Offices in automated informational system (ADIS). The Tax Offices do not unfold the particular data referring to the duty of reticence keeping. The MA keeps its own imprecise and incomplete records about the beneficiaries. There exist two records keeping systems, which do not relate and do not provide exact data on the RFA.
The audit detected that the management with budget funds, which’s recoverability into the State Budget should have been properly monitored and secured, shows imperfections and hard to solve problems at all participating authorities.
The existing situation is primarily the result of the fact that the ministries permitted a procedure in contradiction with existing legislation concerning the management of budget funds including the Tax Offices transactions, which they were not empowered to by law. The parts of the payments of the RFA were non-tax revenues. The Tax Offices included the payments into the tax revenues, which meant the breach of the budgetary discipline. The revenues acquired within the bankruptcy procedure were put into the State Budget through the chapter of the MA.
The MA as the provider of the RFA does only some operations, for instance it is making the decisions about the bonuses, but it does not fulfil all duties of the provider.
The MF and the MA are still changing the conditions for the payments of the RFA. The alleviations are provided regardless whether the beneficiaries always followed the budgetary discipline, e.g. did payments properly, or not.
Special and financially very important alleviation (20% – 70%) is providing so-called bonus. The relevant law does not stipulate the term “bonus”, it is not also possible to impose similar legal regulations, and furthermore the MA and the MF do not have identical opinion concerting the content of this term and even the opinion concerning the provisioning of this support. On the basis of the MF statement the Tax Offices in some cases stopped paying of so-called overpayments from the year 2002. But the MA is still recognizing the bonuses without any restriction.
The field of the RFA has not yet been solved. There has not been reached the agreement at level of ministries since the year 2002 by the audit completion. On one hand the beneficiaries have not yet paid the due amounts – the payments of the RFA, on the other hand due to the granted bonuses there have arisen the overpayments, which have not been in some cases returned to the beneficiaries.
Demoralizing in light of budgetary discipline is the fact that the beneficiaries who paid back the RFA are often handicapped through the fact of duly fulfilling the conditions of the contract.