Through eight contract supplements, the MoLSA increased the cost of the new social allowance payment system by CZK 1,500 million
Press Release – September 9, 2013
The Supreme Audit Office (SAO) performed an audit that scrutinized costs and assets related to the Employment Office of the Czech Republic, which was created in April 2011 from the former 77 regional employment offices. Auditors aimed at the new informational system for payments of social allowances, which started its operation in 2012 in relation to centralisation of non-insurance payments by the Employment Office of the Czech Republic.
The Ministry of Labour and Social Affairs still uses the earlier software applications for administration of social welfare allowances. During the audited years 2011 and 2012, the costs of using the earlier applications amounted to CZK 681 million.
To arrange for the new system, the Ministry of Labour and Social Affairs made a general agreement with a licensed provider of Microsoft products. On the basis of the agreement, the Ministry of Interior concluded an implementing contract with the provider on July 15, 2011. According to the contractual clauses, the Ministry of Labour and Social Affairs was obliged to pay CZK 435 million. Over the course of the time, eight supplements to the contract were amended, which increased the original contractual cost to CZK 2,000 million. In the original contract, the services were expected to cost only CZK 107 million. But through the supplements, the cost of services rose to CZK 1,600 million, which made fivefold the amount paid for the licence fees. The implementing contract will expire in the end of 2015. On the basis of the contract, the Ministry of Labour and Social Affairs paid as much as CZK 825 million by the end of 2012.
The Ministry of Labour and Social Affairs underestimated the risks related to changes to the IC technologies used for allowance payments. The agenda applications were put into operation from December 29, 2011, to January 1, 2012. In the agreement, the Ministry failed to define conditions and terms for testing period of the new agenda applications. As a result, the testing took place while the system had already been in operation. In the agreement, the Ministry also failed to mention proper training conditions for new applications users.
Within the first months after the system had started its operation, one allowance request took much longer to be administered than before. During the first eight months since the start of the system’s operation, a lot of up-dates had to be implemented and many errors were corrected. For example, the application “Hmotná nouze” (=Financial Distress) was up-dated once in 5.5 days and errors had to be corrected every other day. The SAO appraised the high work dedication of the employees, who often worked long after hours so that the payment system would not stop working. While in 2011 employees worked 21,000 hours overtime, the amount of overtime hours increased to 232,000 in 2012.
Auditors also scrutinized the development of the Employment Office of the Czech Republic, which was founded in April 2011. Originally, the Ministry of Labour and Social Affairs expected annual budget savings in the amount of CZK 200 million. Some expenses actually decreased in 2011 (by CZK 229 million in total) in comparison with 2010 operating expenses. The SAO auditors see a possible explanation for the savings in governmental saving measurements, in across-the-board cuts of employees’ wages, and elimination of 1 899 systematized job positions. The reasoning report stated that 539 job positions would be eliminated. But in January 2012, the Employment Office took charge of non-insurance payments, which had previously been administered by respective municipalities, and subsequently, 1 953 new systematized job positions had to be created at the Office.
For further details about auditing operation No. 12/35 (in Czech only), see the following link: http://www.nku.cz/assets/media/informace-12-35.pdf.