1. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 1 VI. EUROSAI Training Event Better Auditing of Public Aids and Subsidies Auditing of State Aids and Subsidies Czech Experiences and Views Václav Peřich, Supreme Audit Office

2. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 2 The Czech SAO Mandate (a) Section 3 of the Supreme Audit Office Act No. 166/1993 Coll. (1) The Office shall audit: (a) the management of state property and financial resources collected under the law for the benefit of legal persons, with the exception of resources collected by municipalities or regions under their independent jurisdiction, (b) the state final account of the Czech Republic, (c) the implementation of the State Budget of the Czech Republic, (d) the management of financial resources provided to the Czech Republic from abroad and of financial resources for which the State has assumed guarantees,

3. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 3 The Czech SAO Mandate (b) Section 4 of Act No. 166/1993 Coll. (1) When carrying out audits, the Office shall examine whether the audited operations conform to legal regulations, shall review whether they are substantively and formally correct, and shall judge whether they are effective and economical.

4. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 4 State Aids in Europe States and territoriesStates and territories –43 traditional states (3 also in Asia) –10 semi-independent territories –3 Caucasian states Trade blocsTrade blocs –European Union 25 states, articles 87-89 of the Treaty –European Free Trade Association 4 states, similar –European Economic Area (EU+EFTA-Switzerland) –Commonwealth of Independent States 12, full-fledged free trade zone (WTO criteria) –Central European Free Trade Agreement 9 (3+U+K) -

5. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 5 State Aids in Czechia 2000200120022003 EU (15 countries) 0.600.610.660.58 Euro area 0.690.700.760.64 Euro area (12 countries) 0.690.700.760.64 Czech Republic 2.421.933.942.47 Figures indicate % of GDP

6. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 6 State policy of employment Figures in million CZK from the Closing Account of State Budget State Budget 200320042005 active employment policy – This includes: - investment incentives - other tools: This includes: re-qualification public works new selected jobs disables employment practice of graduates 3 191 804 2 387 406 685 692 224 331 3 938 859 3 079 481 833 1 031 251 418 4 172 793 3 034 408 839 1 184 310 145 Employers of disables > 50%524649737 Social impact (of restructuralization) 2 2072 3813 391

7. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 7 Central Subsidies Register (CEDR) 1998 Non-investment subsidies Search by name, subject, budgetary chapter, beneficiary etc.

8. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 8 Examples of Audit Results Auditing Operation Main subject Volume of funds AuditedIrregularities 03/30 Investment Incentives 4 7904 505> 100 04/34 2 135 > 700 03/35Employment of People with Disabilities fuzzy total125 05/17 1 9001 534 04/31Accompanying Social Programme of Transformation 950557> 11 Figures in million CZK

9. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 9 Subsidies and loans for firms Figures in million CZK from the Closing Account of State Budget State Budget 200320042005 Total of subsidies – This includes: - Labour and Social - Industry and Trade - Transport - Agriculture - GAT* * General Administration of Treasury 52 043 1 181 6 929 9 561 8 672 6 380 49 194 1 624 7 050 6 374 8 493 24 364 23 305 2 633 7 187 3 805 2 413 5 948 Non-investment loans This includes: - Labour and Social - GAT 3 607 840 2 750 1 269 869 387 23 1 ×

10. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 10 Examples of Audit Results Auditing Operation Main subject Volume of funds AuditedIrregularities 03/24 Support of SME 2 749the lot 05/04 Research and Development (MIT) 4 024 724 05/05Support of Environmentally Friendly Farming fuzzy total831 too large disproportion between M×L 05/07 Monuments‘ flood damages repair fuzzy total515> 135 05/08fuzzy total2 387 Support of Energy Savings and Recoverable Production Figures in million CZK

11. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 11 Investment subsidies Figures in million CZK from the Closing Account of State Budget State Budget 200320042005 Total of subsidies – This includes: - Labour and Social - Education - Transport - Health Services - Czech Army - ICT Systems - Justice (incl. PPTC) - Police 66 024 608 5 888 7 707 5 683 12 202 4 662 1 813 1 199 74 480 1 347 6 825 7 489 4 279 11 422 5 439 2 856 1 704 72 084 849 6 158 15 962 2 634 11 824 5 672 2 699 2 463 Investment subsidy for firms ××4 600 (5,9 %)

12. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 12 ISPROFIN Information system on participation of the state budget funds in the assets‘ reproduction financing Chapter Programme Institution

13. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 13 Examples of Audit Results Auditing Operation Main subject Volume of funds AuditedIrregularities 03/26Building and Operation of Railway Corridors 4 150 270 prices up to 30% 04/20Measures for Environment Improvement 1 700 ~ 03/35Protection against Flood 2 557 Figures in million CZK 1 700 ~

14. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 14 Disposal of environmental burden Figures in million CZK

15. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 15 Example 05/11 Disposal of the old Ecological Burdens >14 000 10 531 Lack of good regulations Bad co-ordination between ministries involved Figures in million CZK

16. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 16 Most Frequent Risks Inconsistency in legislation (relationships between laws, government regulations, ministerial decrees, rules of practice) Lack of managerial control - losing the ability to control the expense growth Neglecting procurement regulations Failure of expert services Efficiency and reliability of used technologies - failure of systems (control, operational, information etc.) Wasting and abuse of resources, fraud, conflicts of interest Low quality of emergency management (natural disasters, accidents caused by the human factor etc.)

17. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 17 Auditor‘s Tool Kit A proper grasp of assets (balanced approach) Reasonable shifting between »helicopter–microscope« view Information & Communication Technology Interface to Substantial Expertise

18. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 18 1)Audit guidelines, standards, planning and programmes 2)Ongoing operations supervision 3)Sharing and commenting draft documents 4)Collective system of approving 5)Results evaluation Quality of auditing process

19. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 19 Prospective views Expecting a new grade of standards (95, 98, 04) Contributing to strengthening of Internal Control Understanding to the State Aid Reform Applying scale of tools

20. Prague, 6-8 November 2006VI. EUROSAI Training Event: Better Auditing of Public Aids and Subsidies 20 Thank you for your kind attention! More information is available: www.nku.cz/pages/en/pressrel-2006.htm Personal contact: vaclav.perich@nku.cz