The state reserves of some basic foods are below the limit, crude oil reserves are sufficient only thanks to the economy slowdown
Press release on audit No 21/04 – 13 December 2021
The Supreme Audit Office (SAO) scrutinised the management of the State Material Reserves Administration (SMRA) with state property and funds between the years 2016 and 2021. The auditors focused, for example, on the state of emergency stocks of crude oil and petroleum products, as well as state material reserves of basic foodstuff. They also looked into public procurement, property management, and contracting. The audit revealed that stocks of certain commodities were below the required limit, which could reduce the preparedness of the Czech Republic for possible crises.
According to the European Union, the Czech Republic should have stocks of crude oil and petroleum products of at least 90 days of so-called average daily net imports. However, from April 2017 to June 2021, stocks were below this threshold. Thus, the Czech Republic may face EU sanctions. Since mid-2021, stocks of crude oil and petroleum products have risen above the required 90-day threshold, but this is due to the slowdown of the economy, the actual volume of the stocks remains the same. If stocks are not replenished, they will fall below the required levels once the economy recovers.
The SMRA acquires material reserves on the basis of the requirements of the crisis plans of central government authorities. It then processes these requirements into plans that it submits for approval to the Czech government. The plans for the years 2019-2022 were not approved by the government. Further proposals by the SMRA for the replenishment of stocks of crude oil and petroleum products from 2017 to 2020 were either not decided upon by the government or were not submitted to the government by the Ministry of Industry and Trade.
Between 2010 and 2017, the SMRA stored diesel reserves at a private company in Germany, which became insolvent in 2014. The insolvency administrator questioned the Czech Republic’s ownership rights of the stocks. Although the diesel reserves were transferred back to the Czech Republic, the litigation continued at the time of the audit. So far, the SMRA has paid CZK 124 million for the transfer of the stocks back to the Czech Republic and for the overall resolution of this issue. This expenditure is expected to increase.
The auditors further focused on basic food reserves. Stocks of five out of nine basic foods were below the limit set by the Ministry of Agriculture. The SMRA justified the non-compliance with the limits for certain food by the lack of market interest. The SAO found that in the years 2016-2020 the SMRA announced a total of 78 public procurement contracts for food acquisition and protection, of which 60 % had to be cancelled because no bids were submitted. In addition, in 2020, the SMRA prepared an amendment to the Act that would allow the acquisition of material reserves not only for state property but also through a reservation with the owner. This could increase the interest of suppliers. However, the Czech government had not discussed this amendment by the end of the audit.
The SAO also examined how the SMRA acquired personal protective and medical equipment in connection with the COVID-19 pandemic. The administration purchased this equipment below the limit prices proposed by the government. For example, the FFP3 respirator was purchased for a price ranging between CZK 69 and CZK 142. The government limit was set to CZK 144. Protective suits were bought for a price between CZK 172 and CZK 179, the limit was CZK 250. The SMRA purchased protective gloves for CZK 2.9, that is, at half price of the set limit.