The incorporation of Prague State Opera into the National Theatre did not bring expected savings; errors found in the National Theatre’s accounting

PRESS RELEASE on Audit No. 16/15 – March 13, 2017

The Supreme Audit Office (SAO) performed an audit of the National Theatre and its management in the period 2013–2015. Auditors aimed at the process of incorporation of Prague State Opera into the National Theatre and scrutinized whether the planned savings were generated as the Ministry of Culture had expected. Auditors concluded that since the 2012 incorporation, only minor savings of costs had been achieved. Accounting errors were found at the National Theatre, including the areas of the reserve funds’ drawing, costs and revenues from abroad touring, and accounting misstatements.

In 2011, just one year before the planned incorporation occurred, annual expenses of both institutions amounted to CZK 956.5 million in total. After the incorporation, expenses decreased by CZK 8 million (0.87 %) in 2012 and since 2013, there were increases in both total expenses and costs of activities. In 2015, annual expenses amounted to CZK 1,050 million. The National Theatre did not separately account for costs of the transformation processes, which the auditors estimated to have made about CZK 1.4 million.

When auditors scrutinized the National Theatre’s management, no serious systemic errors were revealed. One of the minor errors was related to drawing from the reserve funds. In 2015, instead of the planned amounts CZK 10 million, CZK 2 million more were drawn from reserve funds and used as repayment for expenses, which could not have been covered from the Theatre’s income.

Auditors also criticized that the National Theatre had failed to track the actual costs that incurred in theatrical productions and abroad touring. Accounting related to productions and tours did not include fees, with abroad tours, costs of the transportation or insurance payments were not monitored. Thus, it was not possible to perform any assessment of economic outcomes of these activities, which would be necessary for a high quality financial management.

Errors were also revealed at the asset management. For example, employees of the National Theatre were given two valuable musical instruments (over CZK 600,000 per one instrument) without concluding an agreement on full responsibility for entrusted valuable items. When transferring the unused assets, the Theatre failed to monitor economic benefits of the lease, i .e. whether the lease payments were corresponding to the open market value.

Communication Department
Supreme Audit Office

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