The SAO audited funds provided from the financial mechanisms of the European Economic Area and Norway
Press Release – December 13, 2011
The auditors scrutinized funds in the amount of EUR 37.5 million (which is about CZK 903 million with the exchange rate 1 € = CZK 24.095) provided from financial mechanisms of the European Economic Area and Norway and from the state budget. When the audit began, the whole allocation of the Czech Republic had been authorized for implementation of individual projects, programmes, and grants. The audit aimed at the Ministry of Finance as the national contact authority, at administrative activities of the intermediaries of the programmes and grants, and scrutinized the Ministry of Culture, which funded projects implemented by allowance organizations. Auditors also scrutinized how the beneficiaries abided by the grant conditions and terms.
The results indicated an increased degree of shortcomings that pertain in particular to reimbursement of non-eligible expenditure, including unexecuted work and supplies, public procurement, application administration, projects selection, and setup of monitoring mechanisms. Shortcomings were also identified in management, methodology and evaluation.
The audit revealed errors in how public administration reviews had been set up. The Ministry of Finance did not require that the contact points rigorously fulfilled their obligations when involved in the process of selecting recommended projects. The general setup of public administration reviews performed by the Ministry also showed shortcomings. For example, in one project, which was recommended for implementation, the Ministry failed to discover a conflict of interest of the evaluation committee members when it conducted a preliminary public administration review prior to the establishment of a commitment. By releasing funds as a result of such error, the Ministry breached budgetary discipline by almost CZK 16 million.
The Ministry of Culture, as the intermediary, approved the reimbursement of expenditure to one beneficiary based on agreements, despite having recommended that such agreement be terminated for the reason of doubts in the selection of suppliers. By doing so, it also breached budgetary discipline in the amount of CZK 6.2 million. As a result of the absence of legal regulations on the enforcement of funds, the Ministry of Finance committed unauthorised enforcement of funds in a number of cases which concerned a discrepancy but not a breach of budgetary discipline. The SAO called attention to insufficient legislation in this area.
Shortcomings were also ascertained with respect to fund beneficiaries, most often in the area of public procurement. A breach that appeared again and again was the division of below-threshold public contracts into separate minor contracts.
The audit revealed that the beneficiaries had inadequately applied the Act No. 320/2001 Sb., on financial control.
The auditing operation was performed from November 2010 to October 2011. The audited period extended from 2007 to 2010; where relevant, the preceding period and the period until the completion of the auditing operation were also scrutinized. Among the audited bodies were Ministry of Finance, Ministry of Culture and 29 selected beneficiaries. The auditing operation was included into 2010 Audit Plan of the SAO under No. 10/23. Marie Hošková, Member of the SAO Board, managed the operation and prepared the audit conclusion as well.
Communication Department
Supreme Audit Office