Renewal of Public Management – Contributions of State Audit Office of Hungary to enhance corporate governance of state-owned enterprises

Abstract

One of the key areas of public management is the corporate management of state- and local government-owned enterprises, in brief state-owned enterprises. By reviewing the relevant international literature we identified the key factors of well-managed state-owned enterprises. A legal analysis of effective Hungarian laws concerning the corporate governance of state-owned enterprises showed that the legislations provide management frameworks that are in line with international recommendations. However, a comparative analysis describing the audit experiences of 113 audit reports of state- and local government-owned enterprises released by the State Audit Office of Hungary in the period 2011–2015 revealed fundamental and recurring management problems, such as lack or deficiency of performance requirements, planning, prime cost calculation and proprietary control that have lead to serious consequences in the management of public funds. To remedy the systemic problems we proposed detailed recommendations for those exercising the proprietary rights, the supervisory boards and the managements of state-owned enterprises.