Business State spending watchdog promised new powers

18-02-2014 14:03 | Chris Johnstone

The principle Czech spending watchdog has long suffered a severe deficit in its powers. The new government promises to remedy the situation surrounding the Supreme Audit Office but those sorts of pledges have regularly come and gone in the past without any fundamental changes.

Supreme Audit Office, photo: Tomáš AdamecSupreme Audit Office, photo: Tomáš Adamec A familiar call has rung out from the new government’s programme priorities to reinforce the powers of the state’s main accounting watchdog, the Supreme Audit Office (NKÚ).

Similar moves have been made before over the last decade, and a motion to substantially increase the office’s powers almost passed through parliament under the last centre-right government.

The latest coalition programme pledges to widen the office’s powers so that it can check all public sector budget spending while eliminating supervisory duplication and flaws under the current system. What that means in practice is not so clear. At the moment the Czech watchdog probably is on one of the tightest leashes in the whole of Europe. It can look over the accounts and practices of central government departments, the Czech National Bank, state research bodies, state companies, and the state-controlled insurance company, VZP.

But it can’t probe the activities of local, regional and city councils; universities; public service media, such as the state television broadcaster, radio, or state news agency; and commercial companies where the state or local government bodies have substantial shareholdings.

Thus, on the one hand, the Supreme Audit Office can pore over the accounts of almost the sole state company that had survived the collapse of communism, the brewery Budějovický Budvar, the state rail passenger and rail infrastructure companies, but has no right to examine the doings of almost 70 percent state owned energy company ČEZ because it is a run of the mill shareholder company.

The six biggest state dominated companies escaping the watchdog’s supervision have annual turnover which amounts to more than 60 percent of the annual state budget. ČEZ alone has sales which are almost comparable to one the biggest single government spending department, the Ministry of Labour and Social Services. The annual budget of Prague city council is bigger than many central government ministries.

In neighbouring Germany and Austria, all entities where the state has more than 50 percent control are subject to scrutiny by the accounting watchdog. In Slovakia and Poland, one single share in the hands of the state is enough for it the watchdog to act. Scrutiny of local finances is also established in all neighbouring countries, though under a slightly different framework in Germany.

At the moment, the accounting office publishes around 40 mostly hard hitting and pertinent analyses a year of cases of spending covered under its limited remit. Critics say that they mostly go unheeded.

The office itself begs to differ. The reports and conclusions are subject to Cabinet discussion and, it says, around 80 percent of those discussions call for the minister responsible to take action. One change since the start of the year is that the head of the watchdog himself is brought in to attend these Cabinet meetings. In addition, while the first response of some ministers has been to defend themselves against criticism from the watchdog. They later act on the recommendations and months or years, after the initial uproar has died down, later seek to take credit for the changes that have been pushed through.

In some case, such as the recent police raid and shake-up of the Czech Export Bank (ČEB), the watchdog report was the clear source of initial concern that sparked later action. While the audit office appears to have earned respect, whether it will get its reward and enhanced power is another matter.

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