Supreme Audit Office: pandemic not entirely to blame for steep increase in state expenditures in 2020

The Covid-19 pandemic has amplified problems in public finance management, but it cannot be entirely blamed for last year’s economic result, which was the worst in the country’s history, the Supreme Audit Office (NKU) says in its annual report.

Nearly half of last year's increase in state budget expenditures was not caused by anti-epidemic measures, but by the growth in state operating expenditures, social expenditures and other items, head of the Supreme Audit Office, Miloslav Kala, says in the introduction to the office’s annual report for last year.

The state budget for 2020 ended with a deficit of CZK 367.4 billion, which was the worst result since the establishment of the Czech Republic in 1993.

According to the report, this was not only due to a fall in budget revenues, absence of austerity measures and expenses related to Covid-19, but also due to a growth in expenditures not related to the pandemic.

Last year, overall state budget expenditures increased by CZK 291 billion compared to 2019. However, at least CZK 147 billion were not related to the covid-19 pandemic, the report says.

According to the Supreme Audit Office, the state budget was not prepared for a slowdown of the economy. It claims the state failed to respond to the slowdown in economic performance with reasonable savings in expenditures.

The report points out that while the number of civil servants has been gradually increasing since 2016, the performance of state administration has not improved. Between the years 2016 to 2019 alone, the volume of money for salaries and other payments increased by CZK 58 billion.

According to the NKU’s annual report, the Czech state has not been sufficiently addressing long-term problems in the social field, such as social exclusion or pension reform. It also doesn’t have information about the benefits of cooperation with international organizations.

According to the inspector’s findings, the Czech Republic in 2018 cooperated with 477 organizations, to which it paid a total of CZK 4.4 billion. However, the benefits of the cooperation for the state have been evaluated only in about half of the organisations.

The Czech Supreme Audit Office is an independent body examining the management of state property and the national budget. Last year, it completed 30 inspections in 152 institutions, inspecting property and finances to the total amount of CZK 108 billion.