Warsaw, 7 October 2015 New organisational and audit methods adapted to the reform of the local government system State Audit Office of Hungary

2 Reform of the local government subsystem I. The regulations and control systems before 2011 could not prevent the unsustainability of the local government finances New act on the local governments of Hungary In addition: Act CXCIV of 2011 on the economic stability of Hungary.

3 Reform of the local government subsystem II. The aim of the reform was the fundamental and overall renewal of the local government sub- system and strengthening its economic base. Establishing a modern and cost-efficient, task- oriented local government system that (1) provides the opportunity for democratic and efficient operation, (2) Determines strict framework for local government autonomy.

4 Utilisation of our audits Our mission is to support sustainability: (1) reducing public debt (2) economic growth + improving public services

Main areas of local government audit 5 We accomplish the audit of the subsystem based on the three pillars.

Type of local government audits 6 Follow-up audits Audit of establishment and operation of internal control systems and operation of internal audit Audit of financial management situation, regularity Audit of regularity of property management Audit of financial management of minority local governments Audit of public task performance of business associations imajority owned by local governments Built on audits SERIAL AUDITS

7 New methods New audit organisation methods thematic audits chain audits New analytical methods financial analysis with the CLF method holistic analysis

8 Thematic audits several audits are conducted on the basis of a uniform audit programme benefits: provides the possibility of comparative evaluation and analysis Local government 1 Local government 2 Local government x P R O G R A M REPORT M E SUMMARY

9 Chain audits audits performed at one auditee based on different audit pogrammes with the same auditors simultaneously benefits: maximal utilisation of resources Audit 1 Audit 2 REPORT 1 PROGRAMME 1 PROGRAMME 2 REPORT 2 Auditors

CLF analysis CLF Method Operating budget Operating incomes – operating expenditures Investment budget Investment incomes – investment expenditures Balance of operating budget Balance of investment budget - repayment of loans Net operating income GFS financial status (without financing operations) +/- Balance of financing operations Yearly financial status

11 Holistic approach registering itemised findings for each auditee Analysis of answers given to focus questions on the level of the subsystem Outlook on the possible future tendencies and the related necessary tasks AUDIT ANALYSIS STUDY

12 Thank you for your kind attention!