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

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,

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.

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 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) -

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

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 active employment policy – This includes: - investment incentives - other tools: This includes: re-qualification public works new selected jobs disables employment practice of graduates Employers of disables > 50% Social impact (of restructuralization)

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.

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 > / > /35Employment of People with Disabilities fuzzy total125 05/ /31Accompanying Social Programme of Transformation > 11 Figures in million CZK

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 Total of subsidies – This includes: - Labour and Social - Industry and Trade - Transport - Agriculture - GAT* * General Administration of Treasury Non-investment loans This includes: - Labour and Social - GAT ×

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) /05Support of Environmentally Friendly Farming fuzzy total831 too large disproportion between M×L 05/07 Monuments‘ flood damages repair fuzzy total515> /08fuzzy total2 387 Support of Energy Savings and Recoverable Production Figures in million CZK

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 Total of subsidies – This includes: - Labour and Social - Education - Transport - Health Services - Czech Army - ICT Systems - Justice (incl. PPTC) - Police Investment subsidy for firms ××4 600 (5,9 %)

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

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 prices up to 30% 04/20Measures for Environment Improvement ~ 03/35Protection against Flood Figures in million CZK ~

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

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 > Lack of good regulations Bad co-ordination between ministries involved Figures in million CZK

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.)

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

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

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

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: Personal contact: