SAO: Significant misstatement affecting the State Department’s accounts worth CZK 724 million

Milan Malíček

The Supreme Audit Office (SAO) found irregularities worth CZK 775 million in the Ministry of Foreign Affairs (MFA) accounting for the year 2020. The material misstatement worth CZK 724 million consisted of a failure to impair the value of a contribution to an endowment fund, the auditors, said in a press release.

On the other hand, according to the auditors, there were no significant errors in the final accounts or the statement for assessing the state budget implementation. CTK is investigating the ministry’s response.

The ministry reported its share of the contribution to the endowment fund as fixed assets. However, according to the SAO, the endowment fund, following its mission, generated long-term losses due to the gradual provision of funds, especially for specific projects.

“This should have been reflected by the MoFA in its accounting and should have been accounted for as an impairment of this asset in previous accounting periods. The MoFA did not account for the impairment of the deposit, thereby overstating the number of fixed assets by CZK 724 million,” the auditors said.

The SAO, therefore, assessed the information in some accounts on the balance sheet and profit and loss statement as unreliable. The auditors believe that other information in the financial statements gives an accurate and fair view of the subject matter of the accounts.

The auditors also found that the accounts receivable and payable of embassies—such as embassies, permanent missions, and consulates-general—were not accounted for on an ongoing basis by the Department.

According to the SAO, the Ministry accounted for them only once, at the end of the accounting period, or not at all. As a result, at least CZK 4.7 million in liabilities of embassies were not reported in the financial statements.

This is a systemic deficiency in the Ministry of Foreign Affairs accounting. The auditors concluded that there were no significant deficiencies in the final accounts or the statement for assessing the implementation of the state budget.