Warsaw, 7 October 2015

New organisational and audit methods adapted to the reform of

the local government systemState Audit Office of Hungary

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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.

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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.

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Utilisation of our audits

Our mission is to supportsustainability:

(1) reducing public debt(2) economic growth

+ improving public services

Main areas of local government audit

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We accomplish the audit of the subsystem based on the three pillars.

Type of local government audits

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Follow-up audits

Audit of establishment and operation of internal

control systems and operation of internal audit

Audit of financial management

situation, regularityAudit 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 government

s

Built on audits

SERIAL AUDITS

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New methods

New audit organisation methods• thematic audits• chain audits

New analytical methods• financial analysis with the

CLF method• holistic analysis

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Thematic audits

several audits are conducted on the basis of a uniform audit programmebenefits: provides the possibility of comparative

evaluation and analysis

Local government 1

Local government 2

Local government x

PROGRAM

REPORT

REPORT

REPORTME

SUM

MARY

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Chain audits

audits performed at one auditee based on different audit pogrammes with the same auditors simultaneouslybenefits: maximal utilisation of resources

Audit 1

Audit 2

REPORT 1PROGRAMME 1

PROGRAMME 2 REPORT 2Audi

tors

CLF analysisCLF Method

Operating budgetOperating incomes – operating expenditures

Investment budgetInvestment 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

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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

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Thank you for your kind attention!