Presentation of Czech SAO

							      SUPREME AUDIT OFFICE
         CZECH REPUBLIC


REPORT FROM DISCUSSION GROUP 3
       AUDIT ISSUES FOR
  PUBLIC PRIVATE PARTNERSHIP


           VI EUROSAI Training Event
   Better Auditing of Public Aids and Subsidies
             Prague, 6-8 November
           Leadership of Discussion Group:

                           National Audit Office (Richard Wade)

           Presentations and case studies:

                           Netherlands Court of Audit (Harry Kramer)

                           State Audit Office of Hungary (Gusztáv Báger)

                           Alsace Accounting Chamber (Jean François Forestier)




VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies    6-8 November 2006   2
                        Netherlands Court of Audit
                             (Harry Kramer)

           • Introduction into PPP in Netherlands
           • High Speed Train project from Rotterdam
             to Belgium – why this project?
           • Public Sector Comparator and Public
             Private comparator issues
           • Audit findings
           • Very hard to stop the PPP process

VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   3
                        Netherlands Court of Audit
                             (Harry Kramer)
           Conclusions:

           • If decision is meant to have a financial
             basis – the calculation should be checked
           • If decision is made on policy grounds – the
             implementation should be checked
           • A look at risk allocation recommended



VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   4
                    State Audit Office of Hungary
                          (Gusztáv Báger)

           • Informed on general situation of PPP in H.
           • 4 major groups of projects (road
             infrastructure, large sport facility projects,
             educational/cultural investments, prisons
           • Problems identified – risk allocation,
             contracting, financing




VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   5
                    State Audit Office of Hungary
                          (Gusztáv Báger)

           Some of recommendations:
           • Need to balance short term savings in publicly
             funded investment with long term efficiency
           • Need for capacity building (applies to more
             countries)
           • Guidelines for planning ahead
           • The impact of PPP (cap at 2% annual budget
             expenditure)


VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   6
                      Alsace Accounting Chamber
                       (Jean François Forestier)
           Presentation on Water Provision Management Audits

           General information:
           •     almost 37 thousand communes (often very small on population)
           •     Various types of management – private or run by communes
           •     Communes are audited every 4 to 6 years and water provision
                 contracts are always included
           •     Presentation gave overview on audit procedures, control of contract‘s
                 provisions, execution and final recommendation

           Some of key findings:
           •     Unbalanced contract negotiations with big contractors from the start
           •     Unadjusted revision provisions
           •     Private sector looking for demand risk „upside“ only with protection
                 from any fall in water consumption
           •     Special fees paid by companies


VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies    6-8 November 2006   7
                      Alsace Accounting Chamber
                       (Jean François Forestier)
           Some of key findings (continued):

           • Undue direct costs - scope of work not always relevant to the
             paying water consumer
           • Unallocated costs
           • Replacement costs – inadequate maintenance and renewal –
             leading to unjustified profits

           Recommendations:

           • Amend contracts (audit every 4-6 years in average 12 year
             contract)
           • Start right (inventory of water service first, performance
             indicators)


VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   8
           Shortly on key note presentations from morning sessions:


                           National Audit Office (Richard Wade)

                           PPP Centrum Czech Republic (Libor Cupal)




VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   9
                                    National Audit Office
                                      (Richard Wade)

           • UK experience to date
           • Major audit issues – financial and
             performance
           • The dangers of off balance sheet
             accounting
           • A comprehensive audit approach



VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   10
                    PPP Centrum Czech Republic
                          (Libor Cupal)

           •     Market development summary
           •     Standard Project Agreement
           •     Pilot projects
           •     Framework / institutional capacity
           •     Control process
           •     Conclusions : be realistic, be pragmatic,
                 look for best practice, diversified focus
                 important, systematic approach

VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   11
                                                     Conclusions

           PPP audit can have real impact!!!
           • Netherlands – reexamination of model
           • France- recommendations to protect local
             communities from unbalanced contracts
           • Hungary – budget planning for the extent
             of PPP
           • UK – influence on government guidance
           • Czech Rep. – a central body to provide
             expertise before audit starts


VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies   6-8 November 2006   12
                    Thank you for your attention

                                                       Radek Majer
                                                      radek.majer@nku.cz




                                                              www.nku.cz

VI EUROSAI Training Event: Better Auditing of Public Aids and Subsidies    6-8 November 2006   13