Press Release – May 28, 2012
The auditing operation scrutinized proceedings of tax administrators, registers of tax revenues, and related costs, revenues, receivables, and liabilities.
The audit aimed at initial settings of accounts, which were designated for records of tax revenues, related receivables and liabilities as well as registrations of transferred tax revenues, receivables, and liabilities. Auditors also scrutinized the accounting system, closing accounts, and inventory related to the audit subject.
On January 1, 2010, new regulations related to accounting of organizational units of the state came into effect as well as the amendment to the Accounting Act. New accounting methods have been adjusted, which implemented the accrual principles, and new account ledgers and sheets have been introduced. Since the beginning of 2010, financial directorates are obliged to keep accounts of costs and revenues.
As required by the Act on Accounting, accounting units must follow the Czech Accounting Standards, but not all standards have been issued to date. The Czech Accounting Standards that have been issued so far fail to cover the whole subject matter defined by the previously applicable accounting standards No. 501–522, which were effective till the end of 2009. For example, costs and revenues accounting issues have not been re-defined yet.
Because of the incomplete system of accounting regulations in 2010, the SAO stated that it was not possible to assess whether the accounts of costs and revenues had been recorded in correct and veritable ways. The auditors could only scrutinize whether the recorded amounts agreed with the data into the tax registers.
The audit revealed that within the period 2008–2010, the Automatic Tax Information System had been set in a way, which made it impossible for the financial directorates to perform direct controls of recorded receivables, liabilities, costs, and revenues and comparisons with data put into the Automatic Tax Information System during the corresponding month. As late as in January 2012 (in connection with the SAO audit operation), the General Financial Directorate added proper evaluation criteria for accounting of tax revenues at the financial authorities and directorates.
The auditing operation revealed shortcomings within the accountings of audited bodies: During the audited period, account No 318 – Tax and customs revenues owed was supposed to record receivables as well as liabilities (e. g. tax overpayments, tax duties paid before the registration date). As the data were left out, the accounts were under-estimated in comparison with the actual amounts – by CZK 12.5 milliard in 2008, by CZK 14.4 milliard in 2009, and by CZK 14.5 milliard in 2010. In violation of the Accounting Act, four financial directorates omitted the required balance sheet supplements in their closing accounts for years 2008 and 2009.
The audit revealed shortcomings within the audited bodies’ inventory records: Financial directorates violated the Accounting Act when failed to record detailed data on documented items, which would specify the items unambiguously. Inventory records omitted receivables and liabilities, and only summarized underpayments and amounts overpaid by individual tax payers by the end of the year. Such inventory records contravened the law as it was not possible to verify that the records of assets and liabilities respond to their actual states.
The auditing operation was performed from July 2011 to March 2012. The audited period extended from 2008 to 2010; where relevant, the preceding period and the period until the completion of the auditing operation were also scrutinized. The audited bodies were the Ministry of Finance, the General Financial Directorate, five selected regional financial directorates, and seven selected district financial authorities. The auditing operation was included into 2011 Audit Plan of the SAO under No. 11/21. Daniel Reisiegel, Member of the SAO Board, managed the auditing operation and prepared the audit conclusion as well.
Supreme Audit Office