The MoF disclosed non-existent receivables linked to European funds. On the other hand, the reporting of provisions for ecological burden remediation is positive.
Press release to audit No 18/05 – 18 March 2019
The Supreme Audit Office (SAO) examined the accounting of the Ministry of Finance (MoF) for 2017. The audit focused on selected accounting areas — such as the National Fund’s operations and balances linked to flows of EU funds to the Czech Republic, national transfers, or cash flow statements and changes in equity. Auditors found weaknesses mainly in the accounting of the National Fund, others related to the recording of cash flows from the operational activities of the MoF.
Within the accounting of the National Fund, the MoF showed non-existent receivables for the 2004-2006 programming period for the European Commission, amounting to approximately CZK 600 million. However, the risk of incorrect declaration of receivables for the European Commission in relation to the 2004-2006 programming period is higher — it covers the entire balance sheet of a claim amounting to almost CZK 5.7 billion. In this context, the SAO also draws attention to the real risk that if the MoF does not change the existing procedures, it will continue to present non-existent receivables of European funds in the 2018 financial statements for the 2007-2013 programming period.
Furthermore, in the 2017 financial statements, the MoF reported on-balance sheet liabilities owed to entities to whom expenditure was pre-financed, amounting to more than CZK 5.6 billion. For these commitments, it is uncertain whether they will be reimbursed in full.
Finally, in the cash flow statement of the MoF, an operation of over CZK 71 billion from operational activities related to the change in long-term liabilities has been reported incorrectly by the Ministry of Finance. In addition, the operation was not linked to any cash flow. Such a misstatement significantly distorts the explanatory value of this statement and, therefore, also the ability to understand the structure and scope of different types of cash flow from the activities of the MoF.
The SAO recommends the MoF, as a central government agency for accounting, to adjust the accounting rules. For example, the way in which the content of certain items of the cash flow statement is, according to the SAO, not clearly regulated, so the reported figures may provide information differing from the reality.
On the contrary, the Ministry of Finance, on the basis of a recommendation from the previous audit performed by the SAO1, started to make provisions for ecological burden remediation in 2017. The MoF recorded these provisions of almost CZK 83 billion in the financial statements and, thus, reflected a significant predictable risk into the accounting, thereby making the view of the state liabilities more precise.
Supreme Audit Office
1] SAO audit No 16/03, see https://www.nku.cz/scripts/rka-en/detail.asp?cisloakce=16/03.