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State Audit Office of Hungary

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The first independent HungarianAudit Office was set up in 1870. Itoperated until the turning point inpolitics following World War II. Thischange transferred management ofthe public control system to thegovernment instead of the NationalAssembly. This situation lasted forapproximately 40 years.In 1989 after a smooth transitionfree elections were held and a newdemocratic political system wasintroduced in Hungary.Hungarian SAI was established in1989 by an amendment to theConstitution.

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The Constitution states that theSAO is the financial and economiccontrol organisation of theParliament. It is subject only to theParliament and the law.By comparison to other countries,SAO's audit and other mandates(obligations) are particularly broad.

The main task of SAO is to auditand evaluate the operation of thefinancial system of public finances,and to promote its development. Itsremit is also:•to give an opinion on the centralbudget appropriation bill

•to audit the financial management oflocal governments and state ownedenterprises

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INDEPENDENCYThe guarantees for its professional and politicalindependence are as follows:

the President and Vice President of the SAO are electedby the Parliament for twelve years. A two thirds majority isrequired.

the Constitution requires the votes of two thirds of themembers of Parliament present to pass an amendment ofthe Act pursuant to our organization and operating policies;

SAO reports directly to the Parliament (National Assembly)and is independent from all the other branches ofgovernment;

Local Government and Regional Audit Directorate

• Regularity Audit Division

• Regularity andPerformance Audit Division

• Comprehensive Audit Division

Consists of three divisions and 19 regional audit offices

Location of the Metropolitan Department of the State Audit Office in Budapest, and that of the county offices at county towns.

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• Regularity audits: financial and complianceaudit; to assess the legality and compliance withrelevant rules and regulations.

• Performance audits: to establish whether theorganizations have accomplished projects andactivities in an economic, efficient and effectivemanner.

• Comprehensive audits: to evaluate theorganizational frameworks, internal controlsystems and inherent risks. Solutions ofperformance audits are strongly emphasized.

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Audits cover: public finances entrepreneurial andtreasury property of the state financial management ofgovernment organizations,state owned companiescompliance andperformance regarding theusage of EU subsidiesKey figures of the annual auditcapacity of the State Audit Office:approximately 40 thousand auditdayssome 50 State Audit Officereportsabout 2500 audits on site

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Audited organizations

all ministries different institutions responsible

for managing of health insurance and social tasks

education systeminstitution system dealing with

EU Funds final beneficiaries of EU

subsidies (projects)tax officescustoms officespolitical partieslocal governmentsstate owned companies

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Professional background & Training

1/3 of staff holds 2 or 3 BA or MA or MSc degreesMost of the staff has financial, economic, law or engineering degrees with

post-graduate degrees in economyMore than 70 people have certified public accountant degreesAnother 1/3 has state language exam certificates in at least one language

of key importance (English, French, German)

Trainings are provided in the field of:• different audit methodologies (financial, performance audit,compliance

and system audit)• computer skills• language skills• communication skills• presentations about the current modification of acts,

other legal issues• management skills

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International RelationsINTOSAI: XVIII Congress of INTOSAI held in Budapest in 2004, a decisionwas adopted on the long-term strategic objectives and further globalharmonization of auditing.EUROSAI: Participation in WGs like environment protection, EU Funds, ITEU Contact Committee: SAO hosted the last meeting of the professionalcooperation network consisting of the Heads of SAIs of EU Member Statesand the President of the European Court of Auditors in December 2009OECD / SIGMA=Support for Improvement in Governance and ManagementProgramme - aiming at supporting Central and Eastern European Countries in theirgovernment and public management activitiesEuropean Court of Auditors (situated in Luxemburg)- during their auditsin Hungary our auditors are entitled to attendtheir audit visitsThe Commission of the European Union:our auditors escort Commission’s auditorsduring the on the spot visits in HungaryCoordinated and parallel audits in a wide range of topics

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•SAO has full access to all the records and official documents regarding theusage of public funds.

•Reports produced on audit findings are submitted to the NationalAssembly, the audited organization, and the general public.

•Recommendations are taken into account in the control and legislativework of Parliament; at the level of the Government; by the entities subjectedto the audits.

About 30 per cent of these recommendations aim to eliminate typicalerrors in budget management, system failures, contradictions andlegal loopholes, and to propose modifications of legal regulations.•Half of the proposals concern the financial management of localgovernments•SAO exercises a consequent follow-up, a repeated control and analysisof the implementation of its recommendations and informs Parliamenton its experiences in this regard.

Reporting

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Standards The SAO establish audit standards for itself, based on the international

(INTOSAI) standards. The Audit Manual contains all the rules, requirementsauditors have to follow.

The audit standards are prepared on financial, compliance and performanceaudits as well as on comprehensive audits.

Accounting standards and internal control standards are developed byMinistry of Finance in compliance with the Institute of Internal Auditors (IIA)standards.

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Thank you for your attention!Mónika Terbe (Hungary)

For more information log on to www.asz.huReports of the SAO are fully public.

Summaries of reports of the SAO are available in English.