Sustainability and Control Issues of the Financial Management of Local Governments – Through Hungary’s Example

Abstract The rules and control mechanisms pertaining to the financial management of local governments enhance the sustainability of their budgets, that is, they have an operational risk mitigating effect. This paper presents the Hungarian system of self-government, and its fiscal rules, which have undergone a major reform since 2011, and the system of duties and financing have been aligned. The paper evaluates the reform process that commenced in 2011, and the effectiveness of budgetary regulations. The second half of the paper presents the control system of Hungarian local governments, the strengthening of which also has promoted the sustainability of financial management.