SAO audited financing operations and state budget funds under the heading "State debt"
Press Release – April 18, 2010
From May 2010 to January 2011, auditors from the Supreme Audit Office (SAO) were performing audit operation No. 10/11, which aimed at Ministry of Finance and its activities related to the budget heading “State debt” within the audited period 2008–2009. The State budget heading consists of in- and outcomes related to administration and redeeming of the state debt. The Ministry of Finance provides the state debt’s management, administration, and redeeming as well as the State Treasury’s liquidity. Among the specific activities are: issuing and redeeming of state bonds, trading securities at the secondary market, and implementing financial mechanisms to avoid risks of issuing foreign exchange state bonds, and other transactions carried out within the Ministry’s bank accounts.
The costs of the state debt administration rose in connection with the increase of state debt. During the audited period, the administration costs were negatively influenced because of the fact that the ratio of short-term debt fluctuated under the pre-set limit of 20 % – the ratio made 17.7 % by the end of 2008 and 14.7 % by the end of 2009.
The audit findings showed that the Ministry had failed to proceed in compliance with the law or its internal regulations:
- The Ministry failed to follow the budgetary regulations and did not ensure so that the National Fund accounts were included into the summarizing account of the State Treasure. During 2010, these accounts comprised of foreign currencies worth over CZK 40 milliard.
- When issuing foreign exchange state bonds, the Ministry failed to perform adequate evaluations of the possible effects. The Ministry did not evaluate costs of reserve currencies, in spite the difference between planned and real state of reserve currencies made almost CZK 61 milliard in 2008.
- Before 2008, the Ministry did not keep accounts of the heading “State debt”. The balance statement for the year 2008 was not faultless as the Ministry failed to record the found inventory discrepancies amounting to nearly CZK 44.5 milliard in the accounting period of 2008. In some cases, the Ministry used accounting procedures different from those stipulated by relevant rules and regulations without explaining such methods in the supplements of 2008 and 2009 balance statements.
- The internal auditing system was arranged insufficiently. (The main accountant was not defined and the correctness of bookkeeping documents was not confirmed by the originator.) Such internal auditing system was not in accordance with the Act on Public Finance Auditing.
- The Ministry did not comply with proper proceedings and principles set in the Act on Public Orders when ordering juridical services worth CZK 8.2 million in total.
The auditing operation was included into 2010 Audit Plan of the SAO under No. 10/11. Eliška Kadaňová, Member of the SAO Board, managed the operation and prepared the audit conclusion as well.
Communication Department
Supreme Audit Office