Accounting and the financial statements of the Ministry of Regional Development for 2016: errors of billions crowns. The closing account contains errors and is incomplete.

Press release for the audit No 17/08 – 22. 1. 2018

The Supreme Audit Office examined the closing account, accounting, and the financial statement of the Ministry of Regional Development (MoRD) for 2016. The SAO also focused on the data submitted by the MoRD in 2016 to assess the state budget fulfilment. This data is later used to compile the financial statement.

Auditors found out that some parts of the MoRD´s closing account were not complete. For example, the MoRD did not provide an assessment of the economy, efficiency, and effectiveness of expenditures at the chapter level as defined in the decree. Some information in the closing account did not correspond with the data in the accounts or in the financial statement for the year 2016, others were stated incorrectly by the MoRD.

According to the auditors, the MoRD did not have the correct, complete, and conclusive accounting. In the financial statement for 2016, the auditors discovered significant errors of more than CZK 8 billion. According to the SAO, the MoRD's financial statement for 2016 does not give a true and fair view of the subject of accounting.

The most significant errors were caused by the fact that the MoRD showed an increase of CZK 3.5 billion in the statement of cash flow, although in fact it decreased by CZK 2 billion. For example, the MoRD incorrectly assessed the shares in the profits of a public limited company paid out as non-financial dividends, which, moreover, were not accounted for in the final accounting report.

The MoRD did neither report all the funds in its management in the financial statement, nor the claims from the entities for which it provided repayable contributions and loans. Significant errors also occurred in the field of transfers. They occurred because of incorrect accounting for financial settlement and pre-financing costs for transfers. The MoRD did neither show any significant long-term contingent liabilities and claims from concluded contracts in the off-balance sheet accounts, nor did it make any conditional liabilities from the grant decision under the national grant programmes, even though it issued such decisions.

When checking the data submitted for the assessment of fulfilment of the state budget, the auditors found errors exceeding CZK 7 billion. These emerged mainly due to the incorrect classification of subsidies granted to beneficiaries in the Czech Republic. The MoRD reported them incorrectly as international cooperation expenditures for a number of accounting periods.

The audit also drew attention to the fact that the MoRD has not paid all the funds to the state budget for a long time. It has left them outside the budget on special bank accounts instead, which breaches the budgetary rules. As at 31 December 2016, the total amount was CZK 13.7 million.

The auditors also examined the corrections of shortcomings from the previous audit. They found that the MoRD made only less than half of the remedial measures imposed by the government. Still, officials told the Minister that they had followed the government's resolution and that all the measures had taken place as planned.

Communication department
Supreme Audit Office

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