The Local Government Audit a study of the effects expected from the new legislation Healthy Finances

Abstract

Background and problem: The Swedish municipalities and county councils have from the beginning of the 1990s been burdened with extensive financial problems. As a result of the municipalities and county councils poor financial situation and failure to handle the effects of the deteriorating economical conditions, new firmer rules and regulations were established. As of the fiscal year of 2005 the municipalities are required to not only strive for fiscal balance, but to focus more on the requirement Healthy Finances. The local government auditing is an important part of the democratic system and the authors believe this matter is of high importance and worth studying. Purpose: The purpose of this thesis is to survey what affects the new legislation Healthy Finances will have on the local government auditors’ audit work when it comes to the day-to-day work, the work with budgets and forecasts, the work with annual and interim reports and the role of the local government auditor. Delimitation: In this thesis four municipalities in the western part of Sweden are investigated. Only chairmen and vice chairmen of the auditors in the investigated municipalities are included in the study. Since the study cannot examine every aspect of the legislation, the authors have therefore chosen only to examine the audit work of the local government auditors affected by the legislation. Methodology: This thesis is based on a hermeneutic approach and is a qualitative study based on personal interviews using a questionnaire. Results and conclusion: The local government auditors expect the new legislation to mean a deeper involvement in the day-to-day work, with an increase of the auditing and a need for improved communication. The role of the local government auditor will be strengthened as a result of the new legislation. The new legislation will also increase the involvement in the audit of the annual reports as well as a harmonization of the work process between municipalities regarding the work with interim reports. Suggestions for further research: Suggestions for future studies would be to, in one or two years from now, carry out a research similar to the one carried out by the authors of this thesis. The object would be to investigate the actual effects of the new legislation Healthy Finances and compare them with the expectations surveyed in this thesis.