Introduction

The Commission was concerned about the eligibility of the project Multifunctional Congress Centre Stork Nest farm, financed from the Regional Operation Programme Central Bohemia. National Audit Authority was requested to carry out ad hoc verification on the eligibility of the beneficiary, the Stork Nest farm. Audit Authority carried out the audit engagement and in engagement results concluded that all costs of the project is eligible.

The official audit report of Audit Authority has recently leaked to Czech newspapers. Apolitical Think Thank Good Governance made the quality review of the audit report.

Executive Summary of the Quality Review

The audit report contains errors and distortions. Audit engagement was not conducted in conformance with the International Standards for auditing.

1. Audit Authority provided false assurance that all costs of the project are eligible.

The audit results are unfaithful to the underlying fact. Audit Authority verified only the eligibility of the beneficiary not the whole operation. Moreover, the beneficiary was unable to prove that he was SME when he applied for the grant. The only document of ownership was a declaration of honor that can be easily faked. The auditors did not exercise due professional care and did not alert risk of fraud. They ignored missing audit trail and claimed the project eligible despite they did not identify or document sufficient and reliable information to achieve the engagement’s objectives.

According to investigative journalists there is sufficient evidence that the project Stork Nest farm did not meet OP selection economic criteria (the project was designed as private luxury farm without economic sustainability). Audit Authority did not verify whether the project met OP selection economic criteria. Despite this fact Audit Authority claimed the project eligible.

2. Audit Authority was in conflict of interest that impaired Audit Authority’s ability to perform its duties and responsibilities independently and objectively.

Independence is the freedom from conditions that threaten the ability of Audit Authority to carry out their responsibilities in an unbiased manner. Objectivity is an unbiased mental attitude that allows auditors to perform engagements in such a manner that no quality compromises are made.

Audit Authority is a unit of the Ministry of Finance. At the time when the audit engagement was performed, Stork Nest farm was owned by the Minister of Finance, Mr. Andrej Babiš. The degree of independence and objectivity necessary to effectively carry out the audit engagement was not achieved. Impairment to objectivity was not disclosed in audit report and the Threats to objectivity were not adequately managed.

Audit engagement results indicate that Auditors subordinated their judgment to their superior – Minister of Finance, Mr. Andrej Babiš.

False assurance in combination with conflict of interest of Audit Authority undermines confidence in Audit Authority activity and the whole implementation structure of the Czech Republic.

The whole project Stork Nest farm is more than year under OLAF investigation whilst no results have been presented yet.