SAO audited administration of payments for the breach of budgetary discipline

Press Release – February 14, 2011

From April 2010 to January 2011, auditors from the Supreme Audit Office (SAO) were performing auditing operation No. 10/08, which aimed at 26 selected financial authorities and administration procedures related to claims and mitigated payments within the auditing period 2006–2009. The audit conclusion reads that the payments and penalties were administered sufficiently, though the claiming processes lacked effectiveness.

“Within the audited period, the audited financial authorities claimed more than CZK 34.5 milliard of payments and penalties and remitted over CZK 31 milliard of claims. The costs of these administration procedures reached over CZK 1.2 milliard, which implies the conclusion that the system lacks effectiveness. Numerous administration processes ended in remissions of the penalties“, said president of the SAO František Dohnal.

From January 1 to May 19, 2006, the Ministry of Finance deliberately remitted payments because the remission process had not been specified by law. On May 19, 2006, the Ministry issued an internal directive for judging various types of budgetary breaches and mitigation rates. In spite the Act on Budgetary Discipline, effective from March 1, 2008, stated that the reason for remission of claims should be “of unusual concerns“, the Ministry continued to follow the said directive and remitted claims according to the sorts of budgetary discipline breaches. The Ministry did not analyze the “unusual concerns” or considered a specification of the term.

“Criteria for remissions were defined by an internal decree of the Ministry, which was unavailable to the suppliants. By issuing the said decree, the Ministry failed to ensure fair conditions for all involved subjects. The Ministry itself failed to follow the internal decree when deciding in several cases. A routine that would ensure fair conditions of all tax subjects and transparent procedures is essential“, said Dohnal.

Auditors also concluded that the Ministry had performed assessments of the remission appeals in violation of the Act No. 337/1992 Sb., on administration of taxes and payments. The financial authorities also violated law when settling the respite appeals.

“The law states that even little violations of budgetary regulations request hard sanctions, which may put the beneficiaries in risks. Thus, the Ministry does not make the beneficiaries obey the law. On the other hand, the sanctions cannot be eased by decisions that do not comply with the law“, said Dohnal.

During the audited period, the law on budgetary regulations was amended 17 times. Auditors recommend that the Ministry suggests a due revision procedure and unifies the administration processes so that only severe violations of regulations are sanctioned.

The auditing operation was included into 2010 Audit Plan of the SAO. Zdeňka Profeldová, Member of the SAO Board, controlled the operation and prepared the audit conclusion as well.

Communication Department
Supreme Audit Office

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