Management of the State Budget Funds Spent for Providing of Investment Incentives and Investment Aids on the Basis of ‘Memorandum of Understandi
Press release on completion of the auditing operation No. 05/33
The auditing operation was included in the Annual Audit Plan of the Supreme Audit Office (hereinafter referred to as “SAO”) for the year 2005 under No. 05/33. The auditing operation was managed and the audit conclusion drawn up by Mrs. Zdenka Profeldová, the Member of the SAO.
The audit aim was to examine management of the State Budget funds spent for providing investment incentives and investment aids by ex-post audit method. Concurrently, it should be examined fulfilment of conditions determined for their provision in the ‘Memorandum of understanding declaring common intention’ between the Czech authorities in question and business companies using investment incentives.
The auditing operation covered the period from the second quarterly 1998 to the end of 2005. The audited bodies were the Ministry of Finance (hereinafter referred to as “MF”), the Ministry of Labour and Social Affairs (hereinafter referred to as “MLSA”) and selected recipients of the investment incentives provided.
The process of investment incentives provision on the basis of the government resolution No. 298 has not been concluded yet it is still going on. The investment projects supported by incentives reached total amount of CZK 21438 million by the end 2005, i.e. by CZK 12232 million more than it was total of determined minimal values in all Memoranda. In total, 4810 new jobs were created and 2481 employees were re-qualified. The investment incentives were provided in form of tax allowances, new jobs subsidies, and re-qualification of employees according to Memoranda. The total state expenditures for them amounted to CZK 5349 million by the end of 2005.
Legal regulations for tax respite and following tax allowance should have been changed but it did not succeed. On the one hand, this fact caused the loss for the state budget amounting to CZK 1465 million; on the other hand, it brought some benefit to regional and municipal budgets.
Specific subsidies in form of legal entity income tax allowance amounted to in total CZK 5102 million; from this one case represented a loss of CZK 99 million because the foreign investor using allowance went after that bankrupt.
The state received from companies with completed five-year cycle of targeted legal entity income tax allowances by CZK 878 million more than it spent for those allowances.
Expenditures for new jobs creation in amount of CZK 169 million were evaluated as effectively spent. A part of this in amount of CZK 90 million was spent with better efficiency than expected because more new jobs were established than were quoted in Memoranda.
Expenditures for re-qualification of employees in amount of CZK 78 were evaluated with questionable results because some training courses with costs amounting to 78% of CZK 60 million were held for employees already working on posts, for which they were trained.
The investment subsidy for the sector of strategic services was provided by the wholly non-standard procedure. An investor failed to fulfil all incentives related obligations in time. The Czech authorities postponed dead line after the elapsed term unless they increased an extent of these obligations in spite of the investor offered to admit such an increase.
The State Budget funds provided for training and re-qualification of employees in amount to CZK 70 million were available for an investor in the strategic services sector for longer than four years unless funds met purpose, for which they were provided.
Some audited companies made unauthorised use of funds provided for legal entities income tax allowances in amount of CZK 367 thousand and for training and re-qualification in amount of CZK 431 thousand.