Any administrative supervision of local authorities may only be exercised according to such procedures and in such cases as are provided for by the constitution or by statute.
The Venice Commission has voiced its concern over the lack of precision of Article 32.5 of the Fundamental Law relating to supervision of local authorities. The new Constitution empowers the governmental offices of the capital and of the counties to issue municipal decrees, by court decision, where a local authority fails to fulfil its “obligation to legislate imposed on it by law” (Article 32.5). Individual decisions can also be taken in this way, after the court has empowered the governmental office to do so.
At present, it is the government which ensures that local authorities comply with the law in their activities; it may respond to any shortcomings by prosecuting the authority in question. Articles 137 to140 of the Local Government Act regulate the procedure. Other procedural rules are determined by the law on the administration of justice.
The delegation shares the view of the Venice Commission and reiterates its recommendation made in the opinion 261/2011 at paragraph 118 “that the subsequent local self-government legislation provides clarity in this respect. In particular, a clear distinction should be established between, on the one hand, the local authorities’ own competences and those delegated by the central government and, on the other hand, between the control of the local authorities’ activities’ legality and supervision of their decisions’ expediency”.
The Venice Commission report also highlights Article 35.5 of the Fundamental Law, which stipulates that Parliament may dissolve an elected body on the ground of a violation of the Constitution, after seeking the opinion of the Constitutional Court. When questioned on this point, the Constitutional Court’s representatives told the delegation that its opinion would be binding on Parliament, meaning that the country’s political authority would not be the only authority involved in this procedure. However, in legal terms, the opinion of the Constitutional Court is not binding either on the Government, or on the Parliament, as the Fundamental Law and the other relevant laws provide that the Government has to consult the Constitutional Court before conveying its proposal to the Parliament (for a dissolution).
According to the information provided by the Ministry for Public Administration and Justice, Article 17(3) of the Fundamental Law states that the Government’s regional administrative bodies with general competence should be the metropolitan and county government offices. Based on Article 34(4) of the Fundamental Law, the Government should perform the legal supervision of local governments through the metropolitan and county government offices. In accordance with Section 12 subsection b) of the Government Decree 212/2010 (VII.1) on the tasks and responsibilities of the Minister of State for the Prime Minister’s Office, since July 2010, the Minister of Public Administration and Justice is responsible for the legal supervision of local governments.
The Ministry for Public Administration and Justice has further pointed out that the Government office of the capital Budapest and the Government Offices of the 19 counties were – previously – entitled to perform the legislative control and legal supervision of the local governments which is now based on their territorial jurisdiction. However, local authority decisions may be annulled only on decision of the judicial authority.
The Fundamental Law provides for compulsory transmission of local authority decrees to the supervision office in the capital and the county (Article 32.4) which, where applicable, may take them to court with a request for their revision.1 There is a procedure for issuing a deficiency report in the event of failure to execute a legal obligation.
Cardinal Act CLXXXIX on Local Government sets out the arrangements for supervision of the acts of local authorities by the government (Chapter VII, Articles 125 and following), as well as the means of appeal against those acts. As the rapporteurs were informed by the Ministry for Public Administration and Justice, Article 132 of the Cardinal Act on Local Governments and the Government Decree 119/2012 (VI.26.) provide for a definition corresponding to Article 8 paragraph 3 of the Charter.
Hungarian local and regional authorities are also subject to financial supervision by the State Audit Office, provided for in Article 34 of the Fundamental Law, and also in Article 119 of the Cardinal Act CLXXXIX on Local Government.
This supervision has been radically overhauled in recent years with a view to making a correct assessment of the state of local finances and providing local elected representatives with effective means of monitoring and evaluating risks. The points on which the audit was carried out were negotiated with local authority associations.
A vast programme of supervision of the management of municipalities and councils has been introduced, operating via desk-checks and on-the-spot checks: local government entities accounting for 80% of total local government debt have been checked using one of these two means.
The Audit Office, in compliance with international practices, does not content itself with a purely financial check focusing on the correct state of accounts and the viability of budgets. It also checks on the efficiency of spending and whether it is commensurate with the aims pursued. It attaches great importance to the internal control and audit mechanisms established by local and regional authorities, and guides them in the introduction of control mechanisms.
The audit report is public. The entity audited must produce an action plan to remedy any shortcomings found. This plan is evaluated by the audit office and, if it is found to be inadequate, may give rise to legal action.
If the Audit Office finds an irregularity, it makes no judgement itself, as it does not have the necessary judicial competence, but it may refer the matter to an ordinary court judge.
The new auditing system functions satisfactorily, and the rate of non-execution of the Audit Office’s observations has markedly decreased. The Office issues an annual report on the execution of its observations.
Beyond the immediate consequences of publishing audit reports, the evaluation and auditing approach has a beneficial influence on the entire system, through the dissemination of good practices, its potential inspiration for the legislature and the overall spirit of making leaders responsible that underpins it.
The introduction of modern auditing methods makes it possible to identify weak points in the system. Firstly, training for local government leaders needs to be improved. The rules are increasingly complex and demand a higher level of professional expertise from those responsible for local finances.
Secondly, the Hungarian rules on public accounting are not suited to modern management, as they are very arbitrary and not geared to reporting the real state of finances, particularly indebtedness. A reform incorporating analytical accounting is desirable. Along similar lines, the audit reports could integrate consolidated balance sheets compliant with International Financial Reporting Standards. Nonetheless, the delegation notes with satisfaction the progress made with regard to the auditing approach in the supervision of local authority management.
The undeniable progress represented by the introduction of an auditing approach cannot, however, overshadow the widely-held doubts about the financial autonomy of Hungarian local authorities. The Rapporteurs shares the concern expressed by the Venice Commission about the lack of precision of Art. 32.5 of the Fundamental law which concerns the supervision of local authorities and recommend the control of legality to be furthermore privileged.