VI EUROSAI Training Event:
Seminar on “BETTER AUDITING OF PUBLIC AIDS AND SUBSIDIES”

Prague, 6-8 November 2006

PAPER 1

Auditing of State Aids and Subsidies
Public aids and subsidies represent an important part of the economic policy in every state. On one hand, it helps to resolve many social, structural and development problems; on the other hand, it may distort sound competition, as it is the process of rivalry between firms that helps the market function effectively. It is not always easy to recognise how subsidies affect competition on both the national and the international level. However, it is sometimes difficult to control public funds providing itself in order to ensure the sound financial management and economy, efficiency and effectiveness in aiming objectives set up.
 
The EUROSAI community reflects this area very responsively. Auditing of state aids and subsidies comprises a substantial part of the Supreme Audit Institutions’ work. It is thus understandable that this topic occurred between prioritised themes, which were recommended to the EUROSAI Training Committee into the Training Strategy and the Operational Plan. The VI EUROSAI Congress 2005 in Bonn adopted both ETC documents; the ETC prepared in cooperation with the SIGMA-OECD and the Czech Supreme Audit Office this event.

The organisers have been fully aware that the area is very miscellaneous and the EUROSAI approach should be broader than the EU Member States’ experience. It was also one of reasons that justified our survey organized simultaneously with the seminar preparation. Nevertheless, competition control creates an essential part of the EU policy and the European Commission with countries involved have systematically studied such policies for many years and gathered valuable data on that. Furthermore, the European Commission just recently adopted a consultation document ‘STATE AID ACTION PLAN – Less and better targeted state aid: a roadmap for state aid reform 2005-2009’. This document is also closely related to the new European competitiveness initiative known as ‘LISBON AGENDA’ that was revitalized by the European Council last year in Hampton Court; you can read the Commission’s Annual report about it here.
 
In order to at least partly enrich this EU view to state aids we looked through some other sites with documents containing information on state aids and subsidies (such as OECD, UN, IMF etc.). We found a very comprehensive and interesting document on the web page of the Office of Fair Trading of the United Kingdom; its Annex C is particularly interesting for a detailed analysis of the effects of public subsidies on competition.

As far as auditing of state subsidies is concerned, please, read also other documents on this site.

By Vaclav Perich (Supreme Audit Office, Czech Republic)