The accounts of the Ministry of Foreign Affairs were affected by a material misstatement of CZK 724 million

Press release on Audit No 21/18 – 19 April 2022

The Supreme Audit Office examined whether the Ministry of Foreign Affairs (MoFA) had correctly drawn up its closing account and how it kept its accounts for the year 2020. The audit also focused on the accuracy of the data submitted by the Ministry for the assessment of the implementation of the state budget. The auditors found irregularities amounting to CZK 775 million in the accounts of the Ministry of Foreign Affairs. In particular, one specific misstatement, amounting to CZK 724 million, had a significant impact on the reliability of the Ministry’s accounts. It was caused by the fact that the MoFA omitted to reduce the value of its contribution to an endowment fund.

The MoFA recorded the share of its contribution to an endowment fund as its fixed assets. However, the endowment fund, in line with its mission, generated long-term losses because it allocated funds to specific projects in a gradual manner. The MoFA should have reflected this fact in its accounts and it also should have accounted for the impairment of the asset in previous financial years. However, the Ministry did not account for a reduction in the value of the contribution and thus overestimated the amount of its fixed assets by CZK 724 million.

The SAO therefore assessed the information in some accounts in the balance sheet and in the profit and loss account as unreliable. However, all the other information stated in the annual accounts give a true and fair view of the object of the accounts, according to the auditors.

The auditors also found that claims and obligations of representative bodies — such as embassies, permanent representations, general consulates and so on — were not accounted for in a regular manner. They were accounted for by the MoFA only once at the end of the financial year or in some cases never at all. Consequently, the liabilities of the various representative bodies amounting to at least CZK 4.7 million were not recognised in the annual accounts of the MoFA. This is a systemic weakness in the management of MoFA’s accounts.

No significant weaknesses were found in the closing account or in the statement for the assessment of the implementation of the State budget on the part of the Ministry of Foreign Affairs.

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