The Impact Of State Auditors' Recommendations On The Increased Efficiency Of Companies Owned By Local And Regional Self-Government Units

In addition to financial audits, efficiency audits are conducted in companies owned by local and regional self-government units. They are conducted by the State Audit Office of the Republic of Croatia. The purpose of audit recommendations is to improve business results. After a certain time, the Office verifies the implementation of recommendations and determines the level of compliance. Hence, the Office produces a report on the compliance and progress achieved. The aim of this paper is to conduct a survey of companies owned by local and regional self-government units. It included companies that underwent the efficiency audit focusing on achieving the results and business objectives, and companies located in counties for which the audit reports determined the lack of satisfactory progress. The paper covers companies owned by the local and regional self-government units in eight counties (Brod-Posavina, Istria, Karlovac, Krapina-Zagorje, Lika-Senj, Sisak-Moslavina, Vukovar-Srijem and Zagreb). The founder grants are significant in the revenue structure, while in the expenditure structure there are significant expenses for employees. This resulted in the assumption that there is a correlation between the founder grants and the expenditures for employees, which is the research topic of this paper. The implementation of recommendations aims to improve efficiency and to achieve better business results, which has an impact on revenues and their structure. Hence, the founder grants in the revenue structure would be less significant and companies would not depend on them as much. The methods of analysis, synthesis and correlation were applied in this research. The assumption that there was a strong correlation between the share of founder grants and the share of expenditures for employees was confirmed. These grants should help companies achieve business results, while the dependence on them ought to be reduced. Expenditures for employees, which are a significant part in the structure of expenditures, should be financed as little as possible from these grants. It is important to implement audit recommendations because they affect the improvement of the company's operations, and also have positive effects on the public sector as a whole.