Public sector and non-profit audit
What this domain tests
Accounting and audit in entities funded from public budgets and in non-profits - where the framework, the reporting channel and the appointing body all differ from the private sector.
Core rules
- Selected accounting units (vybrané účetní jednotky) apply Act No. 563/1991 Coll. with Decree No. 410/2009 Coll., and submit monthly and annual statements to the central system CSÚIS, including the budget performance statement (FIN 2-12 M).
- Budget rules: Act No. 218/2000 Coll. (state budget) and Act No. 250/2000 Coll. (territorial budgets); municipalities and regions must have their economy reviewed under Act No. 420/2004 Coll. - the přezkum hospodaření, a compliance-focused engagement distinct from an ISA audit.
- The Supreme Audit Office (NKÚ, Act No. 166/1993 Coll.) audits state property and budget management; it is not the entity's statutory auditor.
- Non-profits: associations (spolky), foundations (nadace), institutes (ústavy) and public benefit corporations (o.p.s.). Statutory audit arises when two of three Accounting Act thresholds are met in consecutive periods (assets CZK 40m, net turnover CZK 80m, 50 employees) or when a funder requires it.
- Grant income is recognised on an accrual basis and matched to the related expenditure, not when cash arrives.
Worked example
A municipality receives a CZK 30m grant for a wastewater plant and spends CZK 10m in year one. Under Decree No. 410/2009 the grant stays a liability until the conditions are met, then transfers to revenue in line with the expenses or depreciation. The přezkum hospodaření tests budget compliance, procurement and the accuracy of the closing statements; the auditor reports to the council and the report is published. Reasoning: applying IFRS grant logic or recognising the whole grant on receipt misstates both the balance sheet and the budget statement.
Traps
Applying IFRS to a public-sector entity; treating NKÚ findings as an audit opinion; recognising grant income on a cash basis; assuming a non-profit needs no audit because it has no shareholders; missing the double reporting to CSÚIS and to the founder.