Errors in the Ministry of Finance’s off-balance sheet records amounted to CZK 31,000 million; some problems were caused by unclear rules
PRESS RELEASE on Audit No. 16/03 – April 24, 2017
The Supreme Audit Office (SAO) performed an audit at the Ministry of Finance and scrutinized its accounts, financial statements of State budget chapters managed by the Ministry, and the data submitted for the evaluation of the budget implementation in 2015. Auditors found errors in the Ministry’s accounting records, namely in the off-balance sheets, which exceeded CZK 31,000 million in total. Auditors also revealed system risks and a lack of clear rules for reporting about some data, which can have serious impact on the State final account figures.
Auditors revealed some cases, when the Ministry of Finance had failed to report about accounting events correctly or had not reported about them at all as well as incorrect data in the annex to the Ministry’s financial statements. The biggest volume of errors was found in the annex. Errors in the off-balance sheet exceeded CZK 31,000 million, while the errors found in the Ministry’s additional information to the financial statements exceeded CZK 108,000 million, these included reports of guarantees. For example, the Ministry was supposed to enter in their accounts the amount of CZK 83,000 million, but only CZK 83 million were put in the records. In one case, the Ministry posted a provided guarantee exceeding CZK 19,000 million in such a way, which did not clearly state that such guarantee was actually provided.
Auditors also found that the Ministry of Finance failed to create accounting reserves and reduce the value of some assets (in some cases the difference made tens of thousands of millions CKZ), as required under amended accounting legislation from 2010. Unless the Ministry remedies these shortcomings, the incorrect figures will influence the compiling of accounting reports of the Czech Republic.
Systemic risks were also revealed. There are unclear rules for reporting about some data in the final accounts of the State budget chapters. This leads to distorting of data on the state of its assets and obligations. The SAO recommends that the Ministry of Finance ensures clear stipulations of rules for reporting about financial assets and debts in the financial statements of the State budget chapters as well as in the State final accounts, which should make the data both comparable and controllable.
Auditors also revealed risks in the system of keeping accounts, namely in data recorded in the off-balance sheets. The risks involve unclear explanatory values of the information about contingent assets and liabilities, which were caused by various interpretations of their measuring methods.
Auditors also gave an example of the impact of various interpretations of accounting rules given: In case the Ministry of Finance strictly uses only their interpretation of the valuation of some accounting events, which are to be reported about in the off-balance sheets, data in the Ministry’s reports would be different from the annual account for the year 2015 by more than CZK 100,000 million. The SAO recommended that the Ministry laid down clear rules for reporting assets and liabilities in the State final accounts so that it would be easier to compare and check the reported data.
Communication Department
Supreme Audit Office