Some Regulatory and Efficiency Issues of Public Services of Budapest after the 2010 Public Finance Reform

Abstract

The public sector – possessing its regulatory, financial and non-financial instruments by law – is responsible for supplying public goods and services in favour of the sector of households. Both the central governmental and the local governmental level may delegate the role of public supply to their own private enterprises. As a result, the utility companies are managing national wealth, they are supposed to operate in an economical and cost-effective way, and thus to provide continuous service.  Since the economic crisis in 2008, not only for-profit organisations, but also public utility companies and governmental bodies are expected to do budgeting by admitting the accounting principle of ‘going concern’, as their operation directly affects the entire society on a daily basis. The reform of the public sector, which came into effect after 2010, and the more consistent audit system as the result of the above, have a favourable impact on the operation of the public utility companies; therefore the stricter governmental and state control over the public utility companies made their operation more stable and economically viable. In our study we examined the financial reports of the public utility companies owned by central or local governmental bodies,  within the administrative territory of Budapest; and we evaluated them from the perspectives of wealth, finances and profitability. We questioned how the established price affected their operation, and whether the improvement of their budgetary discipline (as requested by the State Audit Office) has outperformed the decrease in net sales revenue due to the official pricing. In our study we examined the annual reports of the public utility companies of those industries which were affected by the official pricing.