Auditing operation No. 03/17
Resources of the State Fund for Housing Development
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2003 under No. 03/17. The auditing operation was managed and audit conclusion drawn up by Mr. Josef Pohl, the Member of the SAO.
The aim of the audit was to examine the management of the State Fund for Housing Development resources in the fulfilment of the basic tasks associated with housing support and assess the effectiveness and economy of their use.
The audited period covered the years 2000 to 2003.
The audited bodies were the Ministry for Regional Development (hereinafter referred to as “MRD”), the State Fund for Housing Development (hereinafter referred to as “SFHD”) with seat in Olomouc, and selected beneficiaries.
The SAO audit was focussed, in particular, on two instruments for housing support from the SFHD resources. These were the provision of subsidies for support of the rental housing construction and the provision of loans to cover the costs associated with the construction of housing for persons less than 36 years of age.
The audit revealed:
- Deficiencies in the management and methodology functioning of the SFHD, particularly in the subsidy provision for the construction of rental accommodation.
- The criteria set by the SFHD for evaluation of the request for subsidy do not take into account whether a municipality requires a subsidy as a priority, whether it has the finances to co-finance the construction and other related factors such as, for example, the financial and social situation of the municipality, poor state of repair of the housing stock etc.
- The methodology documents issued by the SFHD do not entirely fulfil their function – they were issued late or the subsidy recipients were not obliged to observe them despite the fact that they set out issues with a fundamental influence on the effectiveness, the economy and the efficiency of the subsidies use.
- The SFHD did not thoroughly examine the information stated in the municipalities’ applications, which were decisive for the approval of subsidies. This information concerned, in particular, documentary evidence of the municipalities funds to complete the financing of constructions.
- The contracts on the subsidy provision were drafted insufficiently, despite being amended and supplemented.
- The SFHD did not ensure that the apartments constructed with the financial participation of the SFHD had purely a rental character with the exclusion of the financial participation of citizens. In fact there were constructed the apartments in which citizens had a significant financial participation. This refers to a latent form of ownership or co-operative housing;
- Deficiencies consisting of the unclear and insufficient legal regulation setting out the status of the SFHD and its relationship with the MRD.
- The status of the SFHD is not in accordance with the Act on Budget Regulations, as there has not yet been assigned by law the body into which’s competence this state fund belongs. The uncertain legal regulation thus prevents the clear statement and securing of objectives in the area of the development of housing construction.
- With the establishment of the SFHD, there now exist in the Czech Republic two entities active in the area of housing policy. The SFHD thus undertakes activities performed also by the MRD.
- Act No. 211/2000 Sb., by which the SFHD was established, does not determine a permanent source of income. During its existence to date the SFHD has been entirely dependent on subsidies from the National Property Fund. In the years 2000 to 2003 the National Property Fund provided the SFHD with over CZK 30 billion whilst other sources of income are in the order of a few hundred million crowns up to a maximum of one billion crowns.
- The existing legal regulation and the current trend regarding income does not provide sufficient guarantee for the self-financing of the SFHD or for the creation of long-term sources of financing of subsidy programmes without a strong dependence on income from the state.
- Binding and fixed rules are not set out for the provision of subsidies provided from the SFHD similar to the regime of programme financing;
- Persisting deficiencies in the area of the implementation of constructions financed from public budgets for the area of housing. Despite the fact that these deficiencies were highlighted in the SAO auditing operation No. 00/23 „State Budget funds earmarked for the support of the housing construction and housing“, performed in 2000 and 2001, the fundamental principles for providing housing support subsidies were not changed.
The existing legal regulation does not sufficiently and clearly define the conditions for the provision of subsidies in the area of rental housing and does not create the conditions for ensuring purely rental housing stock in the ownership of municipalities.
The results of the audit substantiated that the existing system of support for the construction of rental housing does not, for those on low incomes and from low social groups, represent a reasonable and financially beneficial form of obtaining housing. The creation of equal conditions and opportunities for citizens of all income levels in obtaining housing and the improvement of measures to support housing development from public budgets will necessitate:
- To shift of the responsibility for the provision of direct subsidies to the competence of a single body, namely the MRD, and the ensuring of conditions for the economic, effective and efficient provision of state support being subject to the regime of the programme financing;
- To focus the future field of activity of the SFHD on the provision of primarily returnable funds. This form of activity together with contributions from the State Budget would ensure its self-financing and exploit the main advantages of financial management of the SFHD, i.e. the unrestricted ability to carry saved finances forward to future fiscal years;
- To provide the primarily returnable financial assistance from public funds for the expansion of the rental housing stock of municipalities, on condition that the municipality has the funds to ensure the completion of the construction;
- To assist legalisation of the financial participation of future tenants in the construction of housing and multi-source financing using mortgages, by the adoption of a legal regulation concerning support for the construction of co-operative housing.
The SFHD functioning to date and its programmes have not become an efficient instrument for influencing the development of rental housing.
Of the total amount of the audited funds approximately 34%, e.g. around CZK 355 million, were used in contradiction to the legal regulations.