Act on the State Audit Office

State Audit Office Act
  
 
I. BASIC PROVISIONS
 
Article 1.

 
This Act shall regulate the establishment, organization, jurisdiction, operating methods and other matters pertinent to the work of the State Audit Office.
 

 
The expressions used in this Act which have a gendered meaning shall refer to both male and female individuals.
 

Article 3.
 

(1) The State Audit Office is the Supreme Audit Institution of the Republic of Croatia, which is independent and autonomous in its work.
 

(2) The State Audit Office shall have the status of a legal person.
 

(3) The headquarter of the State Audit Office is in Zagreb.

 

 
(1) The State Audit Office shall be funded from the State Budget of the Republic of Croatia.
 
(2) In compliance with legislation governing budgetary processes, the State Audit Office shall compile a draft financial plan for the coming year and projections for the two subsequent years by 1 June of the current year, and submit these to the Croatian Parliament’s committee in charge of finances and the State Budget and to the Ministry of Finance.
 
(3) The Croatian Government, at the proposal of the Ministry of Finance, shall submit to the Croatian Parliament’s committee in charge of finances and the State Budget an opinion on the draft financial plan specified in paragraph (2) hereof for the coming year and the projections for the two subsequent years.
 
(4) The Croatian Parliament’s committee in charge of finances and the State Budget shall approve the draft financial plan for the coming year and the projections for the two subsequent years and forward them to the Ministry of Finance for their incorporation into the Draft State Budget of the Republic of Croatia for the coming year and projections of the two subsequent years and then deliver them to the State Audit Office.
 
(5) The provisions of this Article governing the procedures to adopt the financial plan of the State Audit Office shall be applied accordingly to the procedures to adopt amendments to the financial plan of the State Audit Office.
 
(6) The State Audit Office shall independently administer and dispose of the funds for its operations allocated in the State Budget of the Republic of Croatia.
 
(7) The State Audit Office may generate its own revenues which may be utilized to enhance the work of the State Audit Office in compliance with an internal by-law of the State Audit Office.
 

II. ORGANIZATION
 
Article 5.

 
(1) The State Audit Office shall consist of the Central Office and the Regional Offices.
 
(2) A more detailed organizational breakdown and operating methods of the State Audit Office shall be regulated by its Statute and other internal by-laws issued by the Auditor General.
 

 
The Central Office and the Regional Offices shall operate in the entire territory of the Republic of Croatia.
 

III. JURISDICTION
 
Article 7.

 
The State Audit Office shall conduct the audits stipulated by this Act.
 

 
(1) In the sense of this Act, an audit shall entail the examination of documents, papers, reports, internal control systems, accounting, financial and other procedures and other records in order to express an opinion as to whether annual financial statements have been compiled in compliance with the mandatory financial reporting and legal framework.
 
(2) An audit shall also entail the procedure to assess whether activities, financial transactions and information comply in every essential sense with the relevant regulations governing the operations of the audited entity.
 
(3) An audit shall also assess whether the programmes, projects, and activities of the audited entity comply with the principles of economy, efficiency and effectiveness and whether they may be improved.
 

 
(1) Revenues and expenditures, assets and liabilities, financial statements, financial transactions and the programmes, projects and activities of audited entities shall be subject to audit.
 
(2) The entities subject to audits are:
 
– state sector units
 
– local and regional governmental units
 
– legal persons financed from the State Budget
 
– legal persons founded by the Republic of Croatia or local and regional self-government units and legal persons owned by the Republic of Croatia or local and regional self-government units
 
– companies and other legal persons in which the Republic of Croatia or local and regional self-government units hold a majority block of shares or stakes and/or exercise a decisive influence on management
 
– legal persons (subsidiaries) established by legal persons of which the founder is the Republic of Croatia or local and regional self-government units
 
– legal persons which secure their operating funds from mandatory contributions, membership fees or other revenues regulated by law
 
– political parties, independent members of the Parliament and members of the representative bodies of local and regional self-government units in the manner stipulated by legislation governing the financing of political activities and election campaign promotion, and
 
– legal persons in the Republic of Croatia that utilize funds from the European Union, international financial mechanisms and other international organizations or institutions to finance public needs.
 
(3) The entities subject to audits specified in paragraph (2) shall include the Croatian National Bank in compliance with the provisions of Chapter IV of this Act.
 
(4) The state sector units shall, in the sense of this Act, mean all bodies of legislative, executive and judicial authority.
 
 
 

 
The State Audit Office shall not be authorized to provide instructions and opinions to the audited entities pertaining to the performance of the operations under their purview outside of the audit procedure.
 

 
(1) Pursuant to the provisions of this Act, the State Audit Office shall be authorized to examine and assess the use of funds by the Croatian National Bank which do not directly pertain to pursuit of the aims and execution of the tasks stipulated by the law governing the operations of the Croatian National Bank and the tasks stipulated by other laws, as well as the tasks which the Croatian National Bank executes in compliance with the Treaty on the Functioning of the European Union and the Statute of the European System of Central Banks (hereinafter: ESCB) and the European Central Bank (hereinafter: ECB).
 
(2) In the sense of paragraph (1) of this Article, an audit of the Croatian National Bank shall encompass:
 
– the procedure to assess whether the activities, financial transactions and information pertaining to operating costs in that area pertaining to administrative operations and the procurement, management and use of real property, movable property and equipment in every essential aspect comply with the relevant regulations governing the operations of the Croatian National Bank, and
 
– the procedure to assess whether the programmes, projects and activities of the Croatian National Bank in that area pertaining to administrative operations and the procurement, management and use of real property, movable property and equipment comply with the principles of efficiency, effectiveness and economy and whether they may be improved.
 
(3) During the conduct of audits of the Croatian National Bank, the State Audit Office shall, in compliance with Article 130 of the Treaty on the Functioning of the European Union, Article 7 of the Statute of the ESCB and ECB and Article 71 of the Croatian National Bank Act (as published in Croatia’s official journal, Narodne novine, no. 75/08 and 54/13), accord all due respect to the independence of the Croatian National Bank.
 
(4) During the conduct of audits of the Croatian National bank, the State Audit Office shall not be authorized to issue direct or indirect instructions to the Croatian National Bank, its bodies or members thereof which may or could impinge upon its independence.
 
(5) In the performance of the tasks under its purview in compliance with paragraph (1) hereof, certified state auditors, the Deputy Auditor General and the Auditor General, as well as other civil servants employed in the State Audit Office, shall be obliged to adhere to the rule governing the secrecy of information, data and documentation encompassed by Article 37 of the Statute of the ESCB and the ECB as though they are employees of the Croatian National Bank, and this obligation shall remain effective even after the cessation of their employment in the State Audit Office.
 
(6) Certified State Auditors, the Deputy Auditor General and the Auditor General may seek from the Croatian National Bank only that information, data and documentation necessary for the execution of their tasks in compliance with this Article.
 

 
(1) The authority of the State Audit Office stipulated in Article 11 of this Act may not bring into question the objectives and tasks of the Croatian National Bank pertaining to the Treaty on the Functioning of the European Union, the Statute of the ESCB and ECB, the law governing the functioning and operations of the Croatian National Bank and the valid regulations of the Republic of Croatia.
 
(2) Pursuant to the provisions of this Act, activities subject to an audit of operations of the Croatian National Bank by an independent external auditor shall not be subject to the audits conducted by the State Audit Office.
 
(3) The State Audit Office shall not be authorized to examine nor assess the fulfilment of the objectives and tasks of the Croatian National Bank stipulated by the law governing the operations of the Croatian National Bank, nor the tasks stipulated by other laws and the tasks which the Croatian National Bank executes in compliance with the Treaty on the Functioning of the European Union and the Statue of the ESCB and ECB.
 

Article 13.
 

(1) After the completion of its audit, the State Audit Office shall submit its draft report, which may contain orders and/or recommendations of the State Audit Office to the Croatian National Bank for its comment.
 
(2) The Governor of the Croatian National Bank shall be entitled to submit his comment on the draft report specified in paragraph (1) of this Article within a period not to exceed 15 days.
 
(3) After receiving the comment of the Governor specified in paragraph (2) of this Article, the State Audit Office shall compile its report incorporating said comment and submit it to the Governor of the Croatian National Bank.
 
(4) The Governor may file a complaint against the report specified in paragraph (3) of this Article within a period not to exceed 15 days, counted from the date of receiving said report, and the Auditor General shall decide on the appeal within a period not to exceed 30 days counted form the date of its receipt.
 
(5) Insofar as the Governor of the Croatian National Bank does not accept an issued orders and/or recommendation, to which he filed an appeal in compliance with paragraph (4) of this Article and which the Auditor General rejected, he shall be obliged to immediately notify the State Audit Office thereof and cite the reasons for non-acceptance.
 
(6) The Croatian National Bank shall be under no obligation to submit to the State Audit Office a plan for implementation of an order and/or recommendation.
 
(7) Insofar as the Croatian National Bank fails to fulfil an issued order and/or recommendation given in the report specified in this Article to which filed an appeal, it shall be obliged to immediately notify the State Audit Office thereof and cite the reasons for refusal to fulfil the issued order and/or recommendation.
 
(8) Certified State Auditors, the Deputy Auditor General and the Auditor General must proceed in compliance with Article 19(4) of this Act in the performance of the tasks specified in Article 11 of this Act.
 

V. MANAGEMENT OF THE STATE AUDIT OFFICE
 
Article 14.

 
(1) The State Audit Office shall be managed by the Auditor General.
 
(2) The Auditor General shall be appointed by the Croatian Parliament at the proposal of the committee in charge of elections and appointments, with an opinion provided by the committee in charge of finances and the State Budget.
 
(3) The Auditor General shall be appointed for a term of eight years, with the possibility of re-appointment.
 
(4) The Auditor General shall enjoy the same legal immunity as members of the Croatian Parliament.
 
(5) At the end of his term, the Auditor General shall be entitled to a pension in compliance with the regulations governing the right to pensions by members of the Croatian Parliament.
 

 
(1) A citizen of the Republic of Croatia who has a university degree and post-graduate degree or integrated undergraduate and graduate degree or specialized graduate degree in economics or law, with fifteen years of work experience in the relevant field and professional experience in business management and who has passed the certified state auditor examination and has an exemplary personal reputation may be appointed to the post of Auditor General.
 
(2) The Auditor General shall notify the parliamentary committee in charge of elections and appointments of the expiry of his term six months prior to that date.
 
(3) The Auditor General shall tender a personal request for resignation from his post to the parliamentary committee in charge of elections and appointments.
 
(4) The Auditor General shall continue to perform his duties until the appointment of a new Auditor General.
 
(5) Six months prior to the end of the term of the Deputy Auditor General, the Auditor General shall be obliged to submit to the Croatian Parliament a proposal for the appointment of the Deputy Auditor General.
 

 
The Auditor General shall:
 
– organize the operations of the State Audit Office
 
– represent and advocate the interests of the State Audit Office
 
– adopt the Statute and other internal by-laws of the State Audit Office
 
– adopt the Strategic Plan of the State Audit Office
 
– adopt the Annual Programme and Work Plan of the State Audit Office
 
– adopt the Draft Annual Financial Plan of the State Audit Office
 
– report to the Croatian Parliament on the work of the State Audit Office
 
– propose the Deputy Auditor General to the Croatian Parliament
 
– decide on employment, dismissal and assignment of staff
 
– oversee enforcement of the State Audit Office Act and other internal by-laws, and
 
– oversee the performance of tasks and undertake measures to ensure the effectiveness of operations of the State Audit Office.
 

 
(1) The Croatian Parliament shall dismiss the Auditor General prior to the end of the term for which he was appointed:
 
– at his request
 
– if he is appointed to another post with his consent
 
– if he is permanently incapacitated
 
– if he is convicted of a criminal act in a legally-binding judgment.
 
(2) Insofar as a lawsuit is filed against the Auditor General for a crime prosecuted on an ex officio basis, and which may carry a prison sentence of five years or even more severe penalties, the Auditor General may no longer perform his duties until the legally-binding conclusion of this matter.
 
(3) The decision on removal from his post shall be made by the Croatian Parliament.
 

 
(1) The Auditor General shall have a deputy who is appointed by the Croatian Parliament at the Auditor General’s proposal, for a term of eight years with the possibility of re-appointment.
 
(2) A citizen of the Republic of Croatia who has a university degree and post-graduate degree or integrated undergraduate and graduate degree or specialized graduate degree in economics or law with ten years of work experience in the relevant field may be appointed to the post of Deputy Auditor General.
 
(3) In case of the inability of the Auditor General to perform his duties, the Deputy Auditor General shall act on his behalf and perform the duties specified for him by the Auditor General.
 
(4) The provisions governing the dismissal and removal from post of the Auditor General in Article 17 hereof shall also apply to the Deputy Auditor General.
 
(5) The Auditor General and Deputy Auditor General are state officials in the State Audit Office.
 

VI. OPERATING METHOD AND REPORTING
 
Article 19.

 
(1) The State Audit Office shall plan and conduct audits to the extent foreseen by the Annual Programme and Plan of Work, and additionally at the request of the Croatian Parliament, insofar as the Auditor General assesses that such request is justified.
 
(2) The audit of the report on State Budget execution shall be conducted every year, and the report on the completed audit shall be submitted to the Croatian Parliament by 15 June of the current year for the preceding year.
 
(3) The scope of the Annual Programme and Plan of Work shall be ascertained pursuant to:
 
– the provisions of this Act
 
– a risk assessment
 
– the financial materiality of audited entities
 
– the results of previous audits
 
– information gathered on the operations of audited entities.
 
(4) Audits shall be conducted in the manner and in compliance with the procedures set forth by the framework of auditing standards of the International Organization of Supreme Audit Institutions (INTOSAI) and the Code of Professional Ethics of State Auditors.
 

 
(1) The legal representative of the audited entity shall be obliged to place at the disposal of a Certified State Auditor all requested documentation and information necessary for the conduct of an audit.
 
(2) The legal representative of the audited entity shall be obliged to allow a Certified State Auditor to view classified documents in order to conduct the audit.
 
(3) The documentation and information obtained from an audited entity and from other sources may be used only for the needs of conducting the audit.
 
(4) By way of exception from paragraph (3) of this Article, the documentation and information used to conduct an audit shall be submitted to judicial bodies and the police by the State Audit Office for the needs of criminal and misdemeanour charges.
 

 
(1) Certified State Auditors shall compile a draft report on a completed audit in compliance with the auditing standards specified in Article 19(4) of this Act.
 
(2) The draft report on a completed audit shall be submitted to the legal representative of the audited entity for an opinion.
 
(3) The legal representative of an audited entity shall be obliged to submit a comment on the facts described in the draft report to the State Audit Office within a period not to exceed 15 days after the date of receipt of the draft report.
 
(4) The report on the completed audit with the incorporated comment or the report on the completed audit to which no comment was submitted shall be delivered to the legal representative of the audited entity.
 
(5) The legal representative of the audited entity may file a complaint against the report on the completed audit with the incorporated comment or the report on the completed audit to which no comment was submitted within a period not to exceed eight days after receipt of said report. The Auditor General shall make a decision on the complaint within a period not to exceed 30 days after receipt of said comment.
 
(6) The final report on the completed audit shall be delivered to the audited entity and the Croatian Parliament and posted on the web-site of the State Audit Office.
 
(7) The final report on the completed audit shall also be delivered to the relevant authorities when any irregularities were ascertained during conduct of the audit which may constitute crimes or misdemeanours.
 
(8) In the sense of this Act, the final report is the report with the incorporated comment against which no complaints were filed or the report compiled after the response to any complaint.
 

 
(1) The legal representative of an audited entity or the legal representative of a subject to which an issued order and/or recommendation pertains shall be obliged to submit to the State Audit Office a plan for implementation of issued orders and recommendations within a period not to exceed 60 days after the date of receipt of the final report on a completed audit.
 
(2) The plan for implementation of orders and recommendations specified in paragraph (1) of this Article shall contain the projected activities for elimination of irregularities and the projected time for their implementation.
 
(3) Within a period not to exceed 30 days after receipt of the plan for implementation of the orders and recommendations, the State Audit Office may submit comments on the submitted plan for implementation of orders and recommendations if it assesses that the planned activities and deadlines are not sufficient for implementation of orders and recommendations.
 
(4) The audited entity shall be obliged to align its plan for implementation of orders and recommendations with the provided comments and submit it to the State Audit Office within a period not to exceed 15 days after receiving the comments thereto.
 
(5) The audited entity shall be obliged to implement the orders and recommendations given in the report on the completed audit within the deadlines and in the manner specified in the plan for implementation of orders and recommendations.
 

 
(1) The audited entity or subject to which an issued order and/or recommendation pertain shall be obliged to notify in writing the State Audit Office of the implementation of an individual order or recommendation within a period not to exceed 30 days after expiry of the planned implementation time.
 
(2) The State Audit Office shall verify implementation of orders and recommendations to the extent foreseen by the Annual Programme and Plan of Work.
 
(3) The report on verification of implementation of orders and recommendation shall be submitted to the legal representative of the audited entity and the Croatian Parliament.
 
(4) The State Audit office shall notify the relevant State Attorney’s Office of the orders and recommendations that have not been implemented and of the failure to deliver a plan for implementation of orders and recommendations within the specified deadline.
 

 
(1) The Auditor General shall report to the Croatian Parliament on the work of the State Audit Office for the preceding year by the end of March of the current year.
 
(2) The Report on the Work of the State Audit Office specified in paragraph (1) of this Article shall be posted on the website of the State Audit Office.
 

 
(1) The State Audit Office shall compile its financial statements in compliance with the law governing budgetary processes and its enabling regulations.
 
(2) The annual financial statements of the State Audit Office shall be subject to an audit conducted in compliance with auditing regulations.
 
(3) The Croatian Parliament’s committee in charge of finances and the State Budget shall appoint an independent external auditor at the proposal of the Auditor General to conduct the audit specified in paragraph (2) of this Article.
 
(4) The auditor’s report on the completed audit of the annual financial statement of the State Audit Office shall be an integral component of the Report on the Work of the State Audit Office specified in Article 24 of this Act.
 

VII. CERTIFIED STATE AUDITORS
 
Article 26.

 
(1) Audits shall be conducted by Certified State Auditors.
 
(2) A certified state auditor shall be an independent professional with a state auditor certificate.
 
(3) In the interest of resolving specific matters, the State Audit Office may contract the services of a specialized expert as an external associate who will be obliged to proceed in compliance with the standards and rules applied by the State Audit Office.
 

 
(1) Candidates for the post of Certified State Auditor shall be hired by the State Audit Office on the basis of a public tender.
 
(2) The candidates specified in paragraph (1) of this Article must fulfil the following criteria, i.e., they must be individuals who:
 
– are citizens of the Republic of Croatia
 
– have a university degree and post-graduate degree or integrated undergraduate and graduate degree or specialized graduate degree in economics, law or other relevant field, and
 
– have no barriers to admittance to the civil service as stipulated by the law governing civil servants.
 

 
(1) Acquisition the vocational title of Certified State Auditor shall be regulated by the internal by-laws of the State Audit Office.
 
(2) The examination for acquiring the vocational title of Certified State Auditor shall be taken before a commission appointed by the Auditor General.
 
(3) The Auditor General shall issue a Certified State Auditor’s Certificate to those individuals who pass the examination.
 

 
(1) A candidate for the Certified State Auditor certification examination must have a minimum of five years of professional work experience, of which a minimum of three years in the field of audit, and such individual must also pass the general section of the civil service examination, unless exempted pursuant to the provisions of the law governing civil servants and governmental employees.
 
(2) A candidate with a minimum of five years of professional experience in a field outside of the State Audit Office may be employed in the State Audit Office and assigned to the post of Certified State Auditor, provided that within a period not to exceed three years after hiring such an individual passes the Certified State Auditor certification examination.
 
(3) An employee assigned to the post of Assistant Auditor in the State Audit Office shall be obliged to pass the Certified State Auditor certification examination within a period of 12 months after fulfilling the stipulated criteria for taking the Certified State Auditor certification examination.
 
(4) An employee who passes the Certified State Auditor certification examination may be assigned to the corresponding post of Certified State Auditor.
 
(5) The civil service of an employee who does not pass the Certified State Auditor certification examination within the period stipulated in paragraphs (2) and (3) of this Article shall cease on the final date of the deadline for passing the examination.
 

 
(1) A Certified State Auditor may not be a member of the supervisory or management bodies of any audited entities.
 
(2) A Certified State Auditor may not conduct an audit:
 
– if he participated in maintaining the books or the preparation of financial statements of the audited entity
 
– if he is a spouse, direct consanguineal relative to the fourth degree or affinal relative to the second degree, guardian, adoptive parent, adopted child or caregiver of one of the legal representatives or members of the supervisory or management bodies of the audited entity, and
 
– if he was a member of the supervisor or management body of the audited entity.
 

 
(1) Certified State Auditors in the State Audit Office shall exercise the right to salaries in compliance with the law governing the salaries of Certified State Auditors.
 
(2) Regulations pertaining to civil servants shall be applied accordingly to the other rights and obligations of Certified State Auditors not regulated by this Act.
 
(3) Employees of the administrative and technical staff and Assistant Auditors in the State Audit Office shall be deemed civil servants and governmental employees.
 

VIII. COOPERATION WITH OTHER BODIES
 
Article 32.

 
In the performance of its tasks, the State Audit Office shall cooperate with other bodies of state authority in a manner that does not compromise its independence and autonomy.
 

 
The State Audit Office may be a member of international organizations and institutions involved in the field of external audit and other fields relevant to the scope of its activities and participate in their work and the work of other international bodies in which it will advocate and protect the interests of the Republic of Croatia.
 

 
In case of conflicts between the provisions of this Act and the provisions of other laws, the provisions of this Act shall be applied.
 

 
(1) A fine of HRK 20,000 to 50,000 shall be imposed against an audited entity or subject to which an issued order and/or recommendation pertains, insofar as they are not exempt from misdemeanour liability by general regulations:
 
– if it fails to provide requested documentation and information for the needs of an audit to a certified state auditor (Article 20(1))
 
– if it fails to submit the plan for implementation of an order or recommendation (Article 22(1))
 
– if it fails to implement an order and recommendation made in a report on a completed audit within the deadlines and in the manner specified in the plan for implementation of the order and recommendation (Article 22(5)).
 
(2) The legal representative of the audited entity or the subject to which an issued order and/or recommendation pertain shall also be liable to a fine of HRK 2,000 to 20,000 for the actions specified in paragraph (1) of this Article.
 

 
(1) The State Audit Office was established pursuant to the State Audit Act (Official Gazette, no. 70/93) and its staff shall continue to work in compliance with the provisions of this Act.
 
(2) The current Auditor General and Deputy Auditor General shall continue to perform their duties until the end of the term for which they were appointed.
 

 
(1) Assistant Auditors who have not passed the Certified State Auditor certification examination as of the date of entry into force of this Act and who have been assigned to the State Audit Office as assistant auditors for more than five years, shall be obliged to pass the examination within a period not to exceed 12 months after the date of entry into force of this Act.
 
(2) The civil service of any Assistant Auditor in the State Audit Office who fails to pass the Certified State Auditor certification examination within the deadline stipulated in paragraph (1) of this Article shall cease on the final day of the deadline for passing the Certified State Auditor certification examination.
 

 
The Auditor General shall adopt the Statute and other internal by-laws specified in this Act within a period not to exceed six months after the entry into force of this Act.
 

 
As of the date of entry into force of this Act, the State Audit Office Act (Official Gazette, no. 80/11) shall become null and void.
 

 
This Act shall enter into force on the eighth day after its publication in the official journal of the Republic of Croatia, Official Gazette.
 
Class.: 022-03/18-01/215
 
Zagreb, 1 March 2019
 
 
 
CROATIAN PARLIAMENT
 
Speaker
 
of the Croatian Parliament
 
Gordan Jandroković (signed)