Czech watchdog finds significant discrepancies in ministry accounting

The Czech spending watchdog, the Supreme Audit Office, has submitted a caustic report on the accounting abilities of one of the country’s key ministries, the Ministry of Regional Development. It says cash flows worth billions of crowns was not properly registered in the books.

Ministry of Regional Development, photo: Filip Jandourek

On its own, the Ministry of Regional Development is not one of the biggest spenders in the government. The budget for this year for comes in at 5.6 billion crowns. But in spite of that comparatively small figure, the ministry is a big hitter when it comes to spending and administering cash earmarked for it by other bodies. It has oversight of administering and managing the lion’s share of Czech EU programmes as well as drawing up and spending on its own programmes, such as tourism promotion.

And the current government has earmarked a broader and more crucial role for the ministry as the future focus for strategic investment in spending for example on houses for the elderly and starter flats for young people.

But the Czech spending watchdog, the Supreme Audit Office, has released a highly critical report of the ministry’s ability to keep track and account for its own cash flows saying that billions of crowns under its administration were not properly accounted for in 2016. In total, the watchdog said that around 8.0 billion crowns in spending was not properly accounted for or explained in the closing accounts and significant discrepancies were apparent.

Jana Gabrielová is one of the spokespeople at the office and explained some of the basic flaws that the watchdog says it discovered when it looked over the books from February to August last year:

ʺThe Ministry for Regional Development in its overall review of cash flows, the ministry said that the incoming cash increased by 3.5 billion crowns when in fact there was a cut in funding of 2 billion crowns. The checks also showed for a considerable time the ministry did not declare in the overall state budget all of the funds available. Instead, these funds were put on its own bank account independent of the overall budget.ʺ

These off budget funds came to around 13.7 billion crowns by the end of 2016, according to the spending watchdog.

And it complained that some spending was simply not accounted for at all in the end of year balances. The watchdog added that its past complaints and observation’s about the ministry’s practices had only been partially addressed.

All in all, it concluded that the ministry accounts failed to give a proper picture of what was going on. The minister during the period in question was ANO’s Karla Šlechtová, who is still in the current government but has moved on to the higher spending Ministry of Defense.

The ministry has defended itself saying that some of the criticism stems from its different approach to some accounting issues and as well as other differences of opinion.