Army spas were used rather for commercial purposes; errors found in accounting and in public contracts
PRESS RELEASE on Audit No. 15/38 – October 10, 2016
The Supreme Audit Office (SAO) audited an allowance organization Military Spa and Recreation Facilities, which was established by the Ministry of Defence to manage military spas and recreational facilities. Auditors scrutinized the management of state assets and funds utilised within the period from 2012 to 2015. The main focus of the Military Spa and Recreation Facilities is to provide health care, spa, rehabilitation, and recreational services to soldiers and employees of the Ministry. Auditors found out that the proclaimed 82 % occupancy of these facilities had resulted from the combination of services provided to soldiers and employees of the Ministry and offering the unused capacity for commercial purposes. Thus, the State assets were not used for their primal purposes. Moreover, the Ministry did not separately monitor and evaluate the use of their capacity for the main and other purposes. The allowance organization also failed to keep proper accounting and violated the budgetary discipline when spent CZK 60 million for purposes other than for which pursued. Errors were also found in public contracts concerning construction works.
The allowance organisation Military Spa and Recreation Facilities manage recreational and spa facilities, including military hospitals, spas, the Military Rehabilitation Facility in Slapy, and the War Veterans Home in Karlovy Vary. The total capacity of the health, spa and recreational facilities of the organisation should be fully used for situations linked with securing the state's defence. From 2012 to 2015, soldiers and the Ministry's employees used only 36 percent of the capacity of these facilities and 46 percent served for commercial activities, while the rest stayed unused. Moreover, the Ministry did not monitor and evaluate separately the use of the capacity for the main purpose and other purposes. As a result, it was impossible to ascertain whether the premises were used for their main purpose, i. e. provision of recreational services to soldiers and employees of the Ministry.
Auditors also found errors in accounting of revenues and creation of reserves in the year 2012. The shortcomings in accounting have influenced the bottom line from the main activity which was thus not reliable. Despite that, the Ministry approved it and based on the approved results, the allowance organisation Military Spa and Recreation Facilities employees were receiving bonuses. The Organisation breached the budgetary discipline when spent almost CZK 60 million designated on wages and other personnel costs related to the main economic activity for wage costs arising from other activities.
Auditors also found shortcomings in accounting and awarded public contracts concerning construction works. For example, the reconstruction of halls and rooms of the Vranov Hotel was divided into four steps, with each phase separately awarded as small scale contracts to the same supplier without an open competition. The total expenses of the reconstruction works amounted to CZK 23 million (VAT not included), which significantly exceeded the limit stipulated by the Act on Public Contracts. By separating those reconstruction works into different contracts, the organisation reduced the values of the said individual public contracts below the stipulated limit, which is in contradiction with the law.