Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 1

VI. EUROSAI Training EventBetter Auditing of Public Aids and Subsidies

Auditing of State Aids and Subsidies

Czech Experiences and Views

Václav Peřich, Supreme Audit Office

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 2

The Czech SAO Mandate (a)Section 3 of the Supreme Audit Office Act

No. 166/1993 Coll.(1) The Office shall audit:

(a) the management of state property and financial resources collected under the law for the benefit of legal persons, with the exception of resources collected by municipalities or regions under their independent jurisdiction,

(b) the state final account of the Czech Republic,(c) the implementation of the State Budget of the Czech

Republic,(d) the management of financial resources provided to the

Czech Republic from abroad and offinancial resources for which the State has assumed guarantees,

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 3

The Czech SAO Mandate (b)Section 4 of Act No. 166/1993 Coll.

(1) When carrying out audits, the Office shall examine whether the audited operations conform to legal regulations,shall review whether they are substantively and formally correct, and shall judge whether they are effective and economical.

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 4

State Aids in Europe

• States and territoriesStates and territories– 43 traditional states (3 also in Asia)43 traditional states (3 also in Asia)– 10 semi-independent territories 10 semi-independent territories – 3 Caucasian states3 Caucasian states

• Trade blocs Trade blocs – European Union 25 states, articles 87-89 of the TreatyEuropean Union 25 states, articles 87-89 of the Treaty– European Free Trade Association 4 states, similar European Free Trade Association 4 states, similar – European Economic Area (EU+EFTA-Switzerland)European Economic Area (EU+EFTA-Switzerland)– Commonwealth of Independent States 12, full-fledged free trade zone Commonwealth of Independent States 12, full-fledged free trade zone

(WTO criteria)(WTO criteria)– Central European Free Trade Agreement 9 (3+U+K)Central European Free Trade Agreement 9 (3+U+K)

--

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 5

State Aids in Czechia

2000 2001 2002 2003

EU (15 countries) 0.60 0.61 0.66 0.58

Euro area 0.69 0.70 0.76 0.64

Euro area (12 countries) 0.69 0.70 0.76 0.64

Czech Republic 2.42 1.93 3.94 2.47

Figures indicate % of GDP

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 6

State policy of employment

Figures in million CZK from the Closing Account of State Budget

State Budget

2003 2004 2005

active employment policy – This includes: - investment incentives

- other tools: This includes: re-qualification public works new selected jobs disables employment practice of graduates

3 191804

2 387406685692224331

3 938859

3 079481833

1 031251418

4 172793

3 034408839

1 184310145

Employers of disables > 50% 524 649 737

Social impact (of restructuralization) 2 207 2 381 3 391

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 7

Central Subsidies Register (CEDR)

• 1998• Non-investment

subsidies• Search by name,

subject, budgetary chapter, beneficiary etc.

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 8

Examples of Audit Results

Auditing Operation Main subject

Volume of funds

Audited Irregularities

03/30 Investment Incentives

4 790 4 505 > 100

04/34   2 135   > 700

03/35 Employment of People with Disabilities

fuzzy total 125  

05/17   1 900 1 534  

04/31 Accompanying Social Programme of Transformation

950 557 > 11

Figures in million CZK

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 9

Subsidies and loans for firms

Figures in million CZK from the Closing Account of State Budget

State Budget

2003 2004 2005

Total of subsidies – This includes: - Labour and Social

- Industry and Trade - Transport - Agriculture - GAT*

*General Administration of Treasury

52 0431 1816 9299 5618 6726 380

49 1941 6247 0506 3748 493

24 364

23 3052 6337 1873 8052 4135 948

Non-investment loansThis includes: - Labour and Social

- GAT

3 607840

2 750

1 269869387

231×

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 10

Examples of Audit Results

Auditing Operation Main subject

Volume of funds

Audited Irregularities

03/24 Support of SME 2 749 the lot

05/04 Research and Development (MIT)

4 024  724

05/05 Support of Environmentally Friendly Farming

fuzzy total 831  too large disproportion between M×L

05/07 Monuments‘ flood damages repair 

fuzzy total 515 > 135 

05/08 fuzzy total 2 387Support of Energy Savings and Recoverable Production

Figures in million CZK

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 11

Investment subsidies

Figures in million CZK from the Closing Account of State Budget

State Budget

2003 2004 2005

Total of subsidies – This includes: - Labour and Social

- Education - Transport - Health Services - Czech Army - ICT Systems - Justice (incl. PPTC) - Police

66 024608

5 8887 7075 683

12 2024 6621 8131 199

74 4801 3476 8257 4894 279

11 4225 4392 8561 704

72 084849

6 15815 9622 634

11 8245 6722 6992 463

Investment subsidy for firms × × 4 600(5,9 %)

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 12

ISPROFIN

• Information system on participation of the state budget funds in the assets‘ reproduction financing

• Chapter• Programme• Institution

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 13

Examples of Audit Results

Auditing Operation Main subject

Volume of funds

Audited Irregularities

03/26 Building and Operation of Railway Corridors

4 150 4 150 270prices up to

30%04/20 Measures for

Environment Improvement 

1 700   ~

03/35 Protection against Flood

2 557 2 557  

   

Figures in million CZK

1 700

~

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 14

Disposal of environmental burden

2 769,73 228,5

2 587,3

4 943,6

7 343,0

2001 2002 2003 2004 2005

Figures in million CZK

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 15

Example

• 05/11  

• Disposal of the old Ecological Burdens

• >14 000

• 10 531

• Lack of good regulations

• Bad co-ordination between ministries involved

Figures in million CZK

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 16

Most Frequent Risks

• Inconsistency in legislation (relationships between laws, government regulations, ministerial decrees, rules of practice)

• Lack of managerial control - losing the ability to control the expense growth

• Neglecting procurement regulations• Failure of expert services• Efficiency and reliability of used technologies - failure of

systems (control, operational, information etc.)• Wasting and abuse of resources, fraud, conflicts of interest• Low quality of emergency management (natural disasters,

accidents caused by the human factor etc.)

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 17

Auditor‘s Tool Kit• A proper grasp of assets

(balanced approach)• Reasonable shifting

between »helicopter–microscope« view

• Information & Communication Technology

• Interface to Substantial Expertise

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 18

1) Audit guidelines, standards, planning and programmes

2) Ongoing operations supervision

3) Sharing and commenting draft documents

4) Collective system of approving

5) Results evaluation

Quality of auditing process MAPA RIZIK

6

2

1

14

4

12

4

2

15

6

17,5

20

1812

4,5

0,5

2

0,5

0,25

1,6

3 4

7

15

3 5

-2

0

2

4

6

8

10

-1 0 1 2 3 4 5

PRAVDĚPODOBNOST

DO

PA

D

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 19

Prospective views

• Expecting a new grade of standards (95, 98, 04)

• Contributing to strengthening of Internal Control

• Understanding to the State Aid Reform

• Applying scale of tools

Prague, 6-8 November 2006 VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 20

Thank you for your kind attention!

More information is available:

www.nku.cz/pages/en/pressrel-2006.htmPersonal contact: vaclav.perich@nku.cz