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Investigation of Fraud and Anti-Corruption in the Czech Republic

Investigation of Fraud and Anti-Corruption in the Czech Republic. Vaclav Perich Supreme Audit Office Prague. THE CZECH REPUBLIC. Area 78,864 sq km (30,450 sq mi) [like S. Carolina] Population 10,284,000 [a little more than Michigan] GDP $ 54,640 bn GDP per capita $ 12,709.

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Investigation of Fraud and Anti-Corruption in the Czech Republic

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  1. Investigation of Fraud and Anti-Corruption in the Czech Republic Vaclav Perich Supreme Audit Office Prague XVI. ICGFM Conference MIAMI FLORIDA

  2. THE CZECH REPUBLIC • Area 78,864 sq km (30,450 sq mi)[like S. Carolina] • Population 10,284,000 [a little more than Michigan] • GDP $ 54,640 bn • GDP per capita $ 12,709 XVI. ICGFM Conference MIAMI FLORIDA

  3. Indicators of Corruption • CPI Index • 1999 – 4,6 39. Order • 2000 – 4,3 42. Order • WBI State Capture Index (1999) 11% • 21 post-communist countries • score of the best is 7%, the worst 42% • Opacity Index • O-Factor - 71; TE - 33%; ORP - 899 XVI. ICGFM Conference MIAMI FLORIDA

  4. A few figures on Fraud and Corruption XVI. ICGFM Conference MIAMI FLORIDA

  5. Corruption Control (WBI) XVI. ICGFM Conference MIAMI FLORIDA

  6. Planned economy in the past • All enterprises had been nationalized • Everything had to be planned in advance and in detail • Accountancy served as a concealment of differences between the plan and the reality • Clever managers‘ falsifying had been appreciated as a valuable ability XVI. ICGFM Conference MIAMI FLORIDA

  7. The Consequences of that • Decision-making process was reduced to playing games about the PLAN • Management control was focused mainly on the PLAN INDICATORS • Gaps between REALITY and the OFFICIAL DATA had to be over-bridged in many ways, including corruption-like ones XVI. ICGFM Conference MIAMI FLORIDA

  8. Irregularities • So called „TUNNELING“ as a slang term for many ways of damaging • Fraud • Program fraud • Contract fraud • Conflicts of interests • Corruption XVI. ICGFM Conference MIAMI FLORIDA

  9. General conditions • Regulatory Framework • Management Control • Inspection & Supervision • Internal Audit • External Audit • Investigation • Judicial System XVI. ICGFM Conference MIAMI FLORIDA

  10. 1. Regulatory Framework • Weaknesses of the Czech Privatisation • value of the assets • capital market • banking system • National Property Fund • Opacity of the Public Sources • state budget & state funds • poor management systems XVI. ICGFM Conference MIAMI FLORIDA

  11. 2. Management Control • too many managers are politically appointed • low level of Corporate Governance • Control Environment • Risk Analysis • Control Activities • Information & Communication • Monitoring XVI. ICGFM Conference MIAMI FLORIDA

  12. 3. Inspection & Supervision • too many inspection authorities (many of them remained on place from the past) • their powers are sometimes overlapping • their procedure rules are too heterogeneous XVI. ICGFM Conference MIAMI FLORIDA

  13. 4. Internal Audit • The Czech Institute of Internal Auditors • was established in 1995 • National Branch of the IIA and ECIIA • Members mainly from the private sector • CIA education & certification program • Financial Control in the Public Administration Act No. 320/2001 Col. • IA units should to be established till July XVI. ICGFM Conference MIAMI FLORIDA

  14. 5. External Audit • The Czech Chamber of Auditors • self-governing institution • established in 1992 • the Czech Auditing Standards comply with the IAS Standards, are modified to the Czech legislation • The Supreme Audit Office • audits the state property and the state budget • Exposure draft of The Public Audit Office • should audit regional offices and municipalities XVI. ICGFM Conference MIAMI FLORIDA

  15. 6. Investigation • Police • National Criminal Service • Anti-Corruption & Important Economic Crime Service • Unit for Fighting against Organized Crime • Forensic Audit • provided by the „Big Five“ • developing at the financial authorities XVI. ICGFM Conference MIAMI FLORIDA

  16. 7. Judicial Authorities • Courts System • Prosecution System • Attorney General (Anti-Fraud Co-ordination) • Upper-, Region- and District Attorneys • Forensic Experts • Institute of Criminology and Social Prevention XVI. ICGFM Conference MIAMI FLORIDA

  17. Detection of Fraud • General provision to announce all of suspicious events • to the management • to the police • various procedures for different positions • Specific role of the SAO services • to recognize „red flags“ • to back up relevant evidence XVI. ICGFM Conference MIAMI FLORIDA

  18. The Problem of Intention XVI. ICGFM Conference MIAMI FLORIDA

  19. The Anti-Corruption Coalition • Transparency International CZ • 10. International Anti-Corruption Conference in Prague, October 2001 • NGO, media, artists, universities and schools, other representatives • National Source Book • Projects like Hot lines, Viva Etica, Open Offices etc. XVI. ICGFM Conference MIAMI FLORIDA

  20. Four steps of over-running Subsequently, brakes are blocked Apparently, no problems, „only“ poor maintanance I. Corruption attemtps ... II. Corruption acts ... We can be lifted, but where is the driver going? Somebody switches traffic lights oddly III. Corruption leads... IV. Corruption controls ... XVI. ICGFM Conference MIAMI FLORIDA

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