Of the Audit of the Komárom District Heating Works Ltd. (16058)

ROUGH TRANSLATION!

SUMMARY

of the Audit of the Komárom District Heating Works Ltd.(16058)

The audit of the Komárom District Heating Works Ltd. has come to an end. The State Audit Office of Hungary (SAO) assessed the regularity of management of public activities of the company for the period 2011-2014. The local government exercised its ownership rights according to the laws and regulations. The asset management of the company complied with the legal requirements despite of minor deficiencies. The audit revealed deficiencies in cost-accounting and pricing. The SAO performs the audits of the municipal public utility companiesaccording to schedule.

The Komárom District Heating Works Ltd., whose sole owner is the Local Government of Komárom Town, provided for the heating and hot water for 2113 homes, 13 institutional and other consumers and 92 small corporations in the town of more than 19 thousand inhabitants, on 4 sites, in 12 own heating centres. The company’s revenues fell by 33,4%, the accounts receivables and outstanding receivables rose in the audited period. The company’s liabilities did not pose a risk on operation and performance of public duties.

The local government had decided on the organisation of district heating public service before the audited period. The organisation of the public service was regular. The obligation of issuing a decree for district heating was fulfilled with the exceptions of determining the connection fees and updating the decree. The notary did not comply with her legal obligations concerning the business regulation. The auditor gave an unqualified opinion on the annual financial statements which included the verification of the exclusion of cross-financing between district heating service and district heating productionwhich is ordered by law.

The company prepared the regulations prescribed by law, which comply with the prescriptions with the exceptions of the chart of accounts and the cost-accounting regulation. The company prepared its cost-accounting regulation prescribed in decree for pricing for the last seven months of the audited period. However, the regulation was not detailed enough for pricing and it was not applied in practise. The fees for public service were not backed by cost-accounting, so the pricing of the company was not regular. The orders for utility costsreduction were properly executed. A person responsible for internal data protection has not been assigned contrary to the law. Data protection regulation was not in place at the company in the audited period.

The assets of the company decreased in the audited period, which was mainly caused by the fact that conservational investments and reconstructions were carried out in lesser amount than the accounted depreciation. The accounting of incomes, expenses and investments were regular. Though the accounting of investments was regular, the local government’s permission for reconstruction was not required in advance in every case.

The SAO has made five recommendations for the executive director of the company, three-three recommendations for the mayor and notary of Komárom Town, for which they need to prepare an action plan within 30 days.

The SAO’s aim is to promotethe substantiation of decisions concerning public utility fees with the detection of operational and financial risks of corporations operating outside the system of public finances but taking part in carrying out public duties, and with the audit of regularity of cost accounting.

Further information, press enquiries:

Bálint Horváth

Head of Department of Communication and Institutional Relations

Telephone: +36 1 484 9145 Mobile: +36 20 238 6939 E-mail:

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