The SAO audited the state property and funds provided to the Forests of the Czech Republic

Press Release – March 19, 2012

The state-owned enterprise Forests of the Czech Republic is entitled to manage state assets and does not possess its own property. The status and legal powers of the Forests of the CR follow the Act on state-owned enterprises.

The auditors scrutinized how the state-owned enterprise managed the state property and the provided state funds. The audit scrutinized how the Forests of the CR fulfilled staple duties corresponding with the state property management. Auditors also scrutinized how the Ministry of Agriculture as the state-owned enterprise’s founder imposed the law and fulfilled its duties. The audit conclusion lists shortcomings that were revealed at the Ministry of Agriculture as well as at the state-owned enterprise.

The audit revealed shortcomings at the Ministry of Agriculture that included following examples:

  • The Ministry failed to define a strategic conception of the enterprise’s future development as required by the Act on state-owned enterprises.
  • The Ministry did not evaluate how the designated board members protected the state interests during the board’s meetings.
  • The Ministry was not informed about the fact that the director general of the state-owned enterprise vice-chaired the board of a joint-stock company that conducted business within the same field as the Forests of the CR, which is prohibited by the Act on state-owned enterprises.

In 2010, the Forests of the CR in collaboration with the Ministry traded lands in the area of 1,000 hectares, which were situated in a protected area, for plots of lands distributed in nine cadastre territories of the Czech Republic. Such a trade was not in compliance with the Programme for uniting forest areas. When trading the Radějov game park, both the Forests of the CR and the Ministry defaulted and favoured a private person’s interests above public interests. The trade was disadvantageous for the state.

The auditors scrutinized 16 public procurements with the total value of CZK 1 milliard. For example, auditors revealed that the Forests of the CR violated the Public Procurement Act in two cases (i. e. the purchase of automobiles for top managers and the auction of dispensable immovable assets).

During the audited period, only one company was contracted to intermediate the business operations. The contract was terminated by the end of 2010 in spite the fact that the SAO had warned of the disadvantageous contractual relation already in 2004.

When auditing the facility leasing contract, auditors revealed that by the end of 2010, the Forests of the CR paid CZK 810 000 for furnishings in spite its value was only CZK 191 000 in total.

Sales of the long-term assets influenced the outcome from economic activities considerably, as the sales gained CZK 521,029 while the annual income of the Forests of the CR totalled to CZK 582,297 in 2009.

During the auditing operation, auditors also scrutinized how the corrective measures suggested in the previous audit operation No. 03/14 had been implemented. The auditors concluded that the Forests of the CR had only implemented some of the corrective measures. Several shortcomings endured, namely at the enterprise’s founder. For example, the Ministry did not succeed to improve the cooperation with the enterprise’s supervisory board. Since 2004, the Ministry has not carried out a public-administration control at the Forests of the CR.

The auditors concluded that the Ministry as well as the Forests of the CR managed the state property like with its own and transferred all risks to the state. The founder did not keep in mind that the state-owned enterprise had to manage the state property as an intermediate.

The auditing operation was performed from November 2010 to July 2011. The audited period was years 2009 and 2010; where relevant, the data from the preceding period and the period until the auditing operation’s completion were also scrutinized. The audited bodies were Ministry of Agriculture and the state-owned enterprise Forests of the Czech Republic. The auditing operation was included into 2010 Audit Plan of the SAO under No. 10/26. Jiří Kalivoda, Member of the SAO Board, managed the operation and prepared the audit conclusion as well.

Communication Department
Supreme Audit Office

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