Transcript PIFC in the Turkish Public Sector

PIFC
in the
Turkish Public Sector
Robert de Koning
European Commission
DG Budget B.3
Ankara
March 30th, 2005
1. Previous developments
• Apr 2000: First contacts with DG BUDG
• Sep 2001: Administrative Co-operatioin Agreement
between MoF and DG BUDG
• Mar 2002: Chapter 28 Training Seminar in Ankara
• Jul 2002: PIFC Policy Paper
• Dec 2004: Turkish involvement in EFCO Contact
Group and recent CHU-workshops
• Jan 2005: PFMC Law enters into force
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2. Turkey’s reply to co-operation
with DG BUDG
• A long policy debate from 2001-2003/4 resulting
in:
– Adoption of a PIFC Strategy Paper
– Adoption of the PFMC Law
• Starting a Transition Period during which:
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Transfer of ex ante control to spending centres
Establishment of decentralised Internal Audit
Establishment of central harmonisation in MoF
Timetable to achieve PIFC in due course
Further development of secondary/tertiary regulations
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3. Chapter 28: Financial Control
• Coverage:
– PIFC
– External Audit (SAIs)
– Fight against Fraud and Protection of EU funds
• Steps for PIFC:
– Conceptualisations (Policy Paper)
– Legislation stages (Framework Law, secondary and
tertiary regulations)
– Organisational reform and Implementation
– Training of all actors involved
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4. PIFC in a nutshell
• Principles:
– Managerial Accountability
– Independent Internal Audit
– Central Harmonisation
• Organisation:
– Financial management and control systems become
responsability of the manager (FMC)
– Decentralised Internal Audit and seperate Internal
Audit from management and Financial nspection
– CHU in the Ministry of Finance to co-ordinate and
harmonise the PIFC system
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5. Why PIFC?
• Questionnaire Chapter 28:
– Assessments made by DG Budget
• Old inspection systems versus new requirements
(introduction of policy objectives, risk management, etc.)
• New developments in corporate governance (leading to
government governance)
• Many different players in the field and opinions: confusion in
CCs leading to many
• Requests from CCs to DG BUDG to give indications for a
comprehensive, unified and ideal model that could be
followed and implemented.
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6. Standards for PIFC
• 1. COSO framework (IIA) (1991 and 2004)
for Internal Control the private sector
• 2. INTOSAI Guidelines for Internal Control
in the public sector (2004)
• 3. SIGMA of OECD, independent experts
in public administrative financial reform in
the new MS and new CCs;
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7. IC Components
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1. Control environment (overall quality of IC)
2. Risk assessment (by management)
3. Control activities (strategy to mitigate risks)
4. Information and Communication (vital to run
operations and control activities)
• 5. Monitoring (to help ensure that IC remains
tuned to objectives, environment, resources and
risks)
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8. Monitoring?
• INTOSAI (Guidelines) distinguishes
– Ongoing/routine monitoring (management)
– Seperate evaluations (based on RAM) by
• Self-assessment (management)
• Internal audit (therefore IC includes IA)
• External audit (SAI’s and private audit firms)
• Monitoring ensures that audit findings and
recommendations are adequately followed-up
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9. Internal Audit
• IA examines and contributes to the three e’s in
the IC system through evaluations/assessments
and recommendations. IA is functionally
independent from management and cannot
therefore share management’s responsibilities
for designing, implementing, maintaining and
documenting internal control (e.g. Audit trails)
• Important: make management aware,
understanding and appreciative of additional
value of IA!!!
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10. Internal Audit and Inspection
• Oct 2001: Contact Group Tallinn discussion
– Inspection:
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Transaction and complaint oriented
Aiming at sanctions / investigations
Ex post financial control (management)
Centralised (fraud or serious irregularities)
– Internal audit:
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Does not assume management responsibilities
Does not ensure legality/regularity
Is not responsible for financial mismanagement
Does not ensure absence of fraud
Only assesses IC systems
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11. Questions to solve
• 1. Make the PIFC system so reliable that fraud
or serious irregularities (fsi) are minimised.
• 2. Develop Internal Audit as a management tool
that will in the final end act as prevention of fsi
and, hopefully, diminish the Financial Inspection
repressive functions and help it focus on more
specific and essential investigation tasks.
• 3. Develop Financial Inspection into central fsi
investigation service and decentralise monitoring
tasks to management (like ex post financial
control).
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12. Open issues in PFMC Law?
• Some FMC issues in the PFMC Law for further
consideration:
– management responsibilities
• Minister is not included in delegation chain (HPA –
authorising officers and further sub-delegation); is this wise
and does that protect the minister from fsi?
• Transitional arrangements for decentralising ex ante control
to financial services: are there benchmarkers for measuring
progress?
• Are there adequate procedures in case of visa refusal?
(passer outre, information to IA)?
• Lack of organisational status of the CHU-FMC?
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13. Open issues in PFMC Law?
• Some IA issues in the PFMC Law for further
consideration:
• Are there still areas in the act that mix specific
managerial and audit tasks, e.g. in the area of
monitoring?
• The tasks of the CHU/ACB for Internal Audit:
– Should it be involved in audit planning?
– Should it develop audit trails?
– Should it deal with measures to eliminate fraud and
irregularities?
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14. Audit Co-op Board or CHU?
• A CHU should be:
– Engine of propagation of PIFC principles
– Centre of excellence for questions from management
and auditors on daily basis
– Networker and upgrader of IA standing
– Quality raiser of IA profession
– Promotor of visibility in the entire public sector
– Assessor of training needs for all PIFC actors
– Stimulator of co-operation with SAI, IIA, EC etc.
• Can the ACB function as a proper day-to-day
CHU organisation?
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15. Experience in New MS
• The Compendium of PIFC IA Legislation in the new MS
and CCs (september 2004) provides info on the
achievements in new MS and CC’s to date.
– Experience shows that main issues remain:
• Overall implementation delays (cultural changes take much time)
• Unsatisfactory levels of management awareness and support for IA
• Mixing responsibilities of internal audit with management or
between internal audit and inspection
• Status of the CHU’s in administration sometimes not optimal
• insufficiently trained staff or lack of suitable staff
– DG BUDG organises annual meetings for all national CHUs to
provide for general platform to discuss PIFC progress and
outstanding matters
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16. Further Actions
• Turkish/French twinning project for PIFC
• Turkish/UK twinning project for SAI
• Another project for the Board of Treasury
Controllers (EU funds)
• Close DG BUDG monitoring in framework of the
ACA between MoF and DG BUDG of:
– Secondary legislation
– Tertiary regulation (IA Charter, IA Code of Ethics,
Standard and Practice Advisories, etc...)
– Implementation and Training in accordance to time
tables
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17. Information sources
• All of the previously discussed material can be
found on our FccWebsite:
• http://forum.europa.eu.int/Members/irc/budg/Ho
me/main
• And on the websites of INTOSAI, IIA, SIGMA.
Çok teşekkűrler ve
çalısmalarınızda başarılar!
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