Chapter VII: Integritás Hatóság (Integrity Authority)

Overview

Chapter VII funds the Integritás Hatóság — the Hungarian Integrity Authority, an autonomous administrative body whose statutory mandate is to detect, analyse, and report on fraud, conflicts of interest, and corruption affecting the management of European Union budget funds in Hungary. Total expenditure is 14,238.2 millió Ft; the chapter reports no revenue, so the balance is a deficit equal to the full envelope (-14,238.2 millió Ft). The chapter is structured as a single title — the Integritás Hatóság itself — divided into an operating budget (8,864.0 millió Ft: personnel, employer contributions, material costs) and a capital budget (5,374.2 millió Ft: investments).

The Authority is a recent creation. It was established by Act XXVII of 2022 on the control of the use of European Union budgetary funds and began operating in November 2022.¹ Its creation was not the outcome of a domestic decision that Hungary needed a new anti-corruption body. It was a condition. The European Commission, through the rule-of-law conditionality mechanism, withheld access to a large tranche of EU funds and named the establishment of an independent integrity authority among the remedial measures Hungary had to deliver to unblock them.² The Authority is, in the most literal institutional sense, an organ created to satisfy an external paymaster.

This origin is not a side note. It determines the analysis. An oversight body is best understood by asking what underlying arrangement made it necessary — and whether the honest classification is to address that arrangement rather than to entrench the body that polices its symptoms. Chapter VII is the clearest specimen of that question in the budget: an entire institution whose existence is evidence of a problem the institution does not, and structurally cannot, solve.

Expenditure Analysis

Integritás Hatóság — Személyi juttatások (Personnel Expenditures)

• Current allocation: 4,534.8 millió Ft

• Classification: Phase-Out (5 years)

• Rationale: This line funds the salaries of the Authority’s staff — a body of approximately 100–120 employees (headcount per the Authority’s published integrity reports),³ comprising analysts, integrity-risk assessors, lawyers, and administrative staff. The classification question is not whether these are capable people doing diligent work; the Authority’s annual analytical reports suggest they are. The question is what the line is for, and the answer is supplied by the Authority’s own founding logic.

  The Integrity Authority exists to monitor the integrity of state spending of EU funds. Set that against the framework. There is no rights-protection function here: the Authority does not enforce contracts, secure property, or adjudicate disputes between citizens — prosecution of corruption remains, as the Authority’s own leadership has noted, outside its mandate and with the ordinary prosecution service.³ There is no constitutional precondition: nothing in the rule-of-law order requires that a dedicated standing authority audit one particular funding stream. And there is no protective response to irreversible involuntary harm. What there is, instead, is an oversight body whose entire workload is generated by a prior arrangement — the discretionary state allocation of a very large pool of grant money through public tenders.

  Follow the chain. EU structural and cohesion funds arrive as a pool of money allocated by political and administrative officeholders to recipients chosen through state procurement and grant procedures. Wherever a large pool of money is allocated by discretion rather than by the priced choices of the people whose money it is, the allocation generates rent: the recipient who secures the grant captures a benefit that was not competed away in an open market, and the contest to secure it consumes real resources — relationships, proximity to the decision, the apparatus of qualifying and disqualifying bids. The Integrity Authority is the institutional response to the visible symptoms of that rent. It is not the cure for the rent, because the rent is produced by the discretionary-allocation mechanism itself, not by any deficiency of monitoring. A cleaner tender, more scrupulously policed, redirects the same rent to a better-credentialed recipient; it does not eliminate the rent. The supervisor’s existence is evidence that the state allocates too much by discretion, and the honest classification follows the underlying activity, not the symptom.

  The seen is a 109-person anti-corruption authority — a sympathetic, reform-coded institution that few will defend cutting. The unseen is the structure that makes it necessary and the structure of who pays for it. A working household in Hungary funds this 14,238.2 millió Ft chapter through the same payroll wedge and consumption taxes that fund every chapter: out of every 100 Ft of total employer cost, roughly 37 Ft reaches the state before the worker spends anything — 13 Ft of employer social-contribution tax, 15 Ft of personal income tax, 18.5 Ft of employee social-insurance contribution on the gross wage⁴ — and ÁFA at 27% on what is then spent removes a further 13-14 Ft of the original 100.⁵ Excise on fuel and energy lifts the cumulative state take on a typical working household toward 55-60%. Some slice of that take funds an authority whose job is to watch other officeholders spend a pool of grant money the same household also funded. The household is taxed twice over by the arrangement: once to fill the discretionary grant pool, and again to police it. The reform proposed here does not remove the watching while leaving the spending; it shrinks the discretionary spending so the watching is no longer needed.

  The honest destination is therefore to wind the Authority down in parallel with the reduction of the discretionary EU-funds-allocation apparatus it monitors — not to abolish it abruptly. Two reliance facts push this to a phase-out rather than an immediate cut. First, the Authority employs roughly 109 people on permanent contracts who organised their working lives around the institution. Second, the Authority discharges, for the current EU programming period, a monitoring function that is contractually entangled with Hungary’s access to in-flight EU funds: removing it mid-period, before the associated funding streams and conditionality commitments have run their course, would itself be a breach with fiscal consequences. The realistic horizon is the remaining length of the 2021-2027 EU programming period and its closure and audit tail — a five-year transition from the 2026 budget, by which point the programming-period obligations have run off and the discretionary-allocation reform that removes the underlying workload can be substantially complete.

  The protected party for the personnel line is the staff. The appropriate bridge is severance-with-overlap: affected employees retain their full state salary for a 24-month transition window and may take private-sector employment during it, keeping both incomes. Integrity analysts, compliance lawyers, and risk assessors hold exactly the transferable skills that private-sector audit, compliance, and legal functions hire — the re-employment path is real, not notional. The overlap turns the staff from defenders of the institution into participants in its wind-down.

• Transition mechanism: Phase-Out over 5 years, severance-with-overlap on the payroll. The 4,534.8 millió Ft personnel line is the payroll component in full; the 24-month overlap carries it through years 1 and 2, after which the line is saved entirely. The wind-down is sequenced to the closure of the 2021-2027 EU programming period and to the parallel reform that reduces the discretionary-allocation workload — as state grant-tendering shrinks toward rules-based or formula-allocated transfers, the monitoring workload falls and the headcount is not replaced as it attrites. By year 5 the residual programming-period audit obligations have run off.

• Affected groups: Approximately 109 permanent-contract employees of the Integritás Hatóság — analysts, lawyers, and administrative staff on professional public-sector salary grades, with skills that transfer directly to private-sector compliance, audit, and legal roles. The 24-month severance-with-overlap bridge gives each a funded window to re-establish a household income. After the bridge, the household-level disruption that remains is the ordinary one of a professional changing employer — not destitution, and not the loss of an accrued entitlement.

Integritás Hatóság — Munkaadókat terhelő járulékok és szociális hozzájárulási adó (Employer Contributions and Social Contribution Tax)

• Current allocation: 662.0 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: This is the employer-side payroll charge — social contribution tax and related employer levies — on the personnel line above. It is a mechanical companion to the salary line and follows its classification and its schedule. Where the salaries are carried as severance-with-overlap, the employer charges on those salaries are carried with them: an employee on the bridge is still an employee, and the employer levies are still due. The line is part of the payroll component for the purpose of the severance computation.
• Transition mechanism: Phase-Out over 5 years on the same severance-with-overlap schedule as the personnel line; the employer contributions are paid through the 24-month overlap alongside the salaries and cease with them.
• Affected groups: As for the personnel line — the Authority’s permanent staff. No separate group is affected.

Integritás Hatóság — Dologi kiadások (Material and Operating Expenditures)

• Current allocation: 3,667.2 millió Ft
• Classification: Phase-Out (5 years)
• Rationale: The operating costs of the Authority — premises, utilities, IT systems and data subscriptions, professional services, external analytical and audit support, communications. At 3,667.2 millió Ft this is a substantial operating line, roughly 81% of the size of the personnel line, which is consistent with a body whose output is data-intensive analytical work supported by external systems and contracted expertise. These are not payroll costs and they are not protected by the severance mechanism: contract counterparties on the Authority’s service and supply contracts are protected by contract run-off — their agreements are honoured to their terms — not by employee transition. As those contracts reach their natural expiry across the transition window they are not renewed, and the non-payroll operating cost falls toward zero as the Authority’s workload winds down with the programming period.
• Transition mechanism: Phase-Out over 5 years, linear glide on the non-payroll operating cost. Existing service and supply contracts run to their terms and are not renewed; premises and systems are released as the headcount attrites; the line declines from 3,667.2 millió Ft to zero across the five-year window. There is no severance component — the protected interest here is contractual, honoured through run-off, not through employee bridges.
• Affected groups: The Authority’s service contractors and suppliers — IT and data providers, professional-services firms, landlords. Each is protected by the run-off of its existing contract to term; none holds a right to renewal. No employee livelihood is at stake in this line.

Integritás Hatóság — Beruházások (Capital Investments)

• Current allocation: 5,374.2 millió Ft

• Classification: Immediate Cut

• Rationale: This is the capital line — the felhalmozási (accumulation) budget for investments. At 5,374.2 millió Ft it is the single largest line in the chapter, larger than the personnel line and 38% of the entire chapter envelope. A capital allocation of this scale for a four-year-old analytical authority of roughly 109 staff is conspicuous: it is not a routine maintenance-grade replacement line of the kind a settled institution carries, but a discretionary build-out — new systems, fit-out, equipment, or accumulation of assets.

  Capital investment is forward-looking by definition: it commits real resources now in order to expand or upgrade an institution’s capacity for future years. Committing 5,374.2 millió Ft of new capital to an authority that the framework classifies for a five-year wind-down is to spend a large sum building capacity that will be stranded before it is depreciated. The line should not be classified as a phased reduction, because there is no protected party in a capital line that has not yet been spent: no employee’s livelihood, no counterparty’s contractual right, no recipient’s accrued entitlement attaches to a prospective 2026 investment appropriation. Where any portion is already contractually committed — a signed equipment or construction contract — that specific commitment is honoured through contract run-off, exactly as the operating-line counterparties are; but the unspent, uncommitted balance of a forward-looking capital line for an institution slated for closure is the textbook immediate cut. The resources are returned to the taxpayers who would otherwise have funded an asset build-out for a body in run-off.

• Transition mechanism: Eliminate the appropriation in the 2026 budget cycle. Any portion under a signed contract as of the budget date is honoured to the contract’s terms and settled; the uncommitted balance — the great majority of a prospective annual capital line — is not appropriated. No new capital projects are initiated for an institution scheduled to wind down.

• Affected groups: Prospective equipment, construction, and systems suppliers who would have bid for 2026 capital contracts — no contractual right is extinguished, because uncommitted appropriations create no counterparty rights. Any supplier already under signed contract is paid in full to term.

Revenue Items

The chapter reports no revenue. The summary lines state it explicitly: domestic operating revenue 0.0, domestic capital revenue 0.0, EU development revenue 0.0; total Chapter VII revenue 0.0 millió Ft. This is expected — the Integrity Authority is an analytical and oversight body, not a fee-charging or service-selling institution, and it generates no own-source income. Every forint of the 14,238.2 millió Ft envelope is financed from general central-government revenue, which is why the chapter balance equals the full expenditure as a deficit (-14,238.2 millió Ft). There are no fee or charge lines whose yield would be affected by the expenditure changes proposed above.

It is worth naming one point about the financing that the chapter table does not show. The Authority exists to monitor the spending of EU funds, but the Authority itself is funded from the domestic budget — the “Hazai” operating and capital lines. The cost of policing the EU-funds channel is borne by the Hungarian taxpayer directly, on top of the national co-financing the EU funds themselves require. The monitoring is not free even where the monitored money is partly external.

Chapter Summary

Year-1 net saving across the chapter: the full 5,374.2 millió Ft from the immediate cut of the capital line, plus the year-1 net saving on the three phase-out lines. The two payroll lines (personnel plus employer contributions, 5,196.8 millió Ft combined) are carried in full through the 24-month severance-with-overlap window, so they yield no net saving in years 1 and 2. The Dologi kiadások line glides down linearly from 3,667.2 millió Ft over five years, saving 733.4 millió Ft in year 1. Year-1 total net saving is therefore 5,374.2 + 733.4 = 6,107.6 millió Ft. From year 3, with severance complete, the payroll lines are saved in full and the operating line continues its glide; from year 6 onward the entire 14,238.2 millió Ft chapter envelope is saved annually. The recurring saving is the whole chapter — there is no Keep residual, because the body’s function does not survive the reform of the arrangement that generates its workload.

Key Observations

• The chapter funds a body whose existence is evidence of a problem, not a solution to it. The Integrity Authority was created in 2022 to monitor the integrity of EU-funds spending, as a condition imposed through the EU’s rule-of-law conditionality mechanism. The framework’s treatment of oversight bodies applies directly: the Authority polices the symptoms of a prior arrangement — the discretionary state allocation of a large grant pool through public tenders — and the honest classification is to wind it down in parallel with the reform of that underlying arrangement, not to entrench it as a permanent fixture.

• Discretionary allocation generates rent regardless of who watches it. This chapter is the budget’s clearest illustration of a mechanism the analysis returns to elsewhere: where a large pool of money is allocated by the discretion of officeholders rather than by the priced choices of the people whose money it is, the allocation produces rent — a benefit to the chosen recipient that an open market would have competed away. A monitoring authority can make the contest for that rent cleaner and better-documented; it cannot make the rent disappear, because the rent is produced by the discretionary mechanism itself. A more scrupulously policed tender redirects the same rent to a better-credentialed recipient. The reform that actually removes the rent reduces the discretionary allocation — and once that is done, the monitoring workload, and the body that carries it, fall away with it.

• The Hungarian taxpayer pays twice. The 14,238.2 millió Ft is financed entirely from the domestic budget. The working household funds the discretionary grant pool through general taxation, and then funds — separately, on top — the authority that watches the pool being spent. The reform proposed here does not leave the watching in place while removing nothing else; it shrinks the discretionary spending so that the second layer of cost is no longer incurred.

• The capital line is the sharpest single item. At 5,374.2 millió Ft the Beruházások line is 38% of the chapter and larger than the Authority’s entire payroll. Committing new capital on this scale to a four-year-old, 109-person analytical body builds capacity that a wind-down strands before it depreciates. With no protected party attaching to an unspent prospective appropriation, the uncommitted balance is an immediate cut; only already-signed contracts are honoured to term.

• The transition is honest about reliance and about the EU entanglement. The five-year horizon is not arbitrary. It is set by two real constraints: the roughly 109 permanent staff who are protected by a 24-month severance-with-overlap bridge into a genuine private-sector re-employment market, and the in-flight 2021-2027 EU programming-period commitments with which the Authority’s monitoring function is contractually entangled. Removing the body before the programming period and its audit tail have run off would itself carry a fiscal cost. The Authority is not a legitimate permanent state function — it polices the symptoms of a discretionary-allocation arrangement rather than discharging a protective or adjudicative role — while the transition path respects the contractual and employment reliance the rule-of-law method requires.

Sources