The Ministry of Labour and Social Affairs had accounting errors and shortcomings in its internal control system
Press release on Audit No 18/26 - 23 September 2019
The Supreme Audit Office (SAO) has audited the data of the revenue and expenditure account of the Ministry of Labour and Social Affairs (MoLSA), the keeping of accounts and the preparation of the 2018 annual accounts. The auditors have also focused on the data presented by the MoLSA in 2018 which were used for the assessment of state budget execution. There were no significant shortcomings in these data or in the revenue and expenditure account. In the annual accounts, the SAO discovered a misstatement of CZK 12.4 billion in total. The MoLSA also had errors in its internal control system.
Material misstatements identified by the auditors in the annual accounts were related to the balance sheet, the profit and loss account and the notes to the annual accounts. The MoLSA failed to show in its balance sheet advances in the form of a subsidy amounting to almost CZK 7.2 billion. In the notes to the annual accounts, the auditors discovered shortcomings in some off-balance sheet accounts amounting to CZK 2 billion. In the balance sheet and in the profit and loss account, the MoLSA failed to show amounts receivable and related items from the year 2016 amounting to CZK 2.9 billion.
Some material misstatements in the annual accounts were related to the fact that the MoLSA rectified only a part of the shortcomings identified by the SAO during its previous audit. In 2017 and 2018, the Ministry adopted measures to remedy shortcomings in its keeping of accounts, but not to a full extent. Out of a total of 22 actions, 14 were adopted, 7 of the actions were only partial and in one case an action had not been adopted.
Subject to the above material misstatements amounting to more than CZK 12 billion, according to the auditors, the annual accounts for 2018 give a true and fair view of the accounts. During the previous audit, the SAO could not make a statement on the reliability of the 2016 annual accounts due to the inconclusiveness of the accounts. However, significant issues persist in the annual accounts, which is why the SAO did not issue an unqualified opinion on the 2018 annual accounts.
The shortcomings which the MoLSA had in its data for the assessment of the implementation of the State budget and in the revenue and expenditure account were not significant.
In the case of the MoLSA´s internal control system, the SAO has found that some control mechanisms in the keeping of accounts did not function sufficiently well. Particularly, in the area of inventory taking and in obtaining correct and complete information for the reporting of contingent liabilities from concluded contracts and from litigation. For example, in the case of a software license, the MoLSA was unable to document that it was entitled to use the software throughout 2018 and in subsequent years. According to the contract, the MoLSA was entitled to use the software until June 2018 only.
The MoLSA has also failed to observe budgetary discipline when it paid more than CZK 794,000 for orders which were not published in the contract register and had therefore been repealed from the outset.