Administration offices of Morava and Ohře river basins only showed profits thanks to subsidies

PRESS RELEASE on Audit No. 14/11 – March 30, 2014

The Supreme Audit Office (SAO) scrutinized the Ohře River Basin Administration and the Morava River Basin Administration and their managements within the period 2011–2013 and also aimed at the Ministry of Agriculture that had established these state enterprises. The state enterprises showed profits in their annual statements but the actual annual profits were very low. The annual profits were only positive owing to subsidies from the Ministry of Agriculture.

During the audited period, the average annual profit of the Morava River Basin Administration was CZK 5.5 million, while at the Ohře River Basin Administration it was CZK 9.5 million. Both state enterprises’ management outcomes were influenced by the regulation of the surface water purchase prices, which did not correspond to the actual costs. The total difference between the regulated prices and real surface water off-take costs exceeded CZK 234 million with both the state enterprises. The loss was balanced by profits from other activities, mostly from power generation.

The SAO auditors revealed that the Morava River Basin Administration did not act economically when hired external agencies to perform easy administrative tasks related to public contracts, in spite the Administration’s own employees could have performed these tasks themselves. The external agencies sometimes charged around CZK 3,000 per one hour of work. For example, their tasks included dealing with common correspondence and summarizing results of procedures for the award of public works contracts.

With public contracts, the audited state enterprises did not act economically and in some cases even violated the Act on Public Contracts. With the contract for removing sediments from the water reservoir in Plumlov, the Morava River Basin Administration wrongfully utilised subsidies from the State budget and thus violated the previously determined conditions. Had the Morava River Basin Administration set more appropriate criteria for assessment of applications, the whole operation could have been cheaper by at least CZK 12.8 million. The Ohře River Basin Administration repeated the selection procedure related to revitalization of the Svitávka Stream in Lindava and failed to inform all tenderers who had applied during the former procedure. As a result, the winning bid exceeded the lowest bid from the previous procedure by CZK 1.8 million.

At the Ohře River Basin Administration, auditors revealed that final prices of public contracts were influenced by the type of awarding procedure. Auditors compared unit prices of similar construction works awarded in open procedures with those awarded as small-scale public contracts. Final prices of small-scale contracts usually equalled the estimated values, while with open procedures the final prices were usually half of the estimated values. It was not possible to make such a comparison at the Morava River Basin Administration, as there was no central evidence of public contracts kept during the audited period.

In 2013, the Ministry of Agriculture provided subsidies in the amount of CZK 40 million to the Morava River Basin Administration for planned reconstruction works and the operation of the anti-flood protection. The Ministry only asked for a statement of honour that the funds were used for anti-flood protection measurements and never examined whether the subsidy conditions were abided by. The Ministry also failed to elaborate a development strategy for small water power stations and thus the state enterprises cannot pursue developments in this area.

Communication Department
Supreme Audit Office

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