Apresentação do PowerPoint

Report
Financial Inspection in the Public Sector
Svilena Simeonova
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CONTENTS
1. Overview of the main features of the Financial Inspection function
2. Different views and models of Financial Inspection in the EU Member States
3. Common ground and differences between Financial Inspection, External
Audit and Internal Audit
4. How to keep Financial Inspection compatible with modern PIC?
5. Development of Financial Inspection in Bulgaria
6. Relationship between Financial Inspection, External Audit and Internal Audit
- good practices and challenges
7. Looking ahead
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1. OVERVIEW OF THE MAIN FEATURES OF THE FINANCIAL INSPECTION
FUNCTION
 Centralized independent institution: external to the inspected entity
 Usually carries out compliance control for legality
 Ex post activity
 The main goals are to detect, investigate and penalize the responsible
persons and institutions
 Mainly operates on the basis of complaints or signal from the public,
requests from public institutions
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2. DIFFERENT VIEWS AND MODELS OF FINANCIAL INSPECTION IN THE EU
MEMBER STATES
Financial Inspection (FI) exists in about half of the EU Member States.
 In the majority of the 13 newest Member States – Bulgaria, Croatia,
Hungary, Poland, Romania, Slovak Republic
FI is established separately from Internal Audit. FI is deemed necessary
until decentralized internal control and internal audit becomes fully
embedded in administrative culture. FI usually reports to the Minister of
Finance.
 As well as in Belgium, France, Greece, Italy, Portugal and Spain
Financial Inspection is an important part of the control system and
employs many staff. Where the supreme audit institution is organized as a
Court of Accounts with judicial powers, Financial Inspection also has to
report any detected irregularities to that Court.
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2. DIFFERENT VIEWS AND MODELS OF FINANCIAL INSPECTION IN THE EU
MEMBER STATES
Specific characteristics
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Member States
No central Financial Inspection function
Denmark,
Finland, Sweden,
Estonia, Latvia,
Lithuania, Austria,
Germany and UK
Financial Inspection and Internal Audit exist – but
IA is clearly separated
The majority of the 13
newest members of the
EU
Financial Inspection and Internal Audit are under
one roof in one central institution, or the central
unit for coordination of Internal Audit is a part of
the Financial Inspection body
Belgium, France, Spain,
Portugal
FI does not impose sanctions. That is a duty of the
SAI – of the Court type
France, Italy, Portugal
and Spain
3. COMMON GROUND AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
NATIONAL AUDIT OFFICE (1)
SIMILARITIES:
 From outside (External)
 Ex post activities
 Covers all public sector
 Sanctioning power (where exists)
 Mandate to fight fraud and corruption
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3. COMMON GROUND AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
NATIONAL AUDIT OFFICE (2)
DIFFERENCES FINANCIAL INSPECTION
NATIONAL AUDIT OFFICE
Position in the
state
structures and
reporting line
Subordinated to the Minister of
Finance.
Reports to the Minister of Finance
and to the Government
Reports to the Parliament and to the public
Initiation of
the activity
Acts on complaints and requests from
citizens and other institutions
Works according to the Annual plan and requests
from the Parliament
Aims and
scope of work
Focus on legality
Legality, but also Efficiency, Effectiveness and
Economy. Also verification of the financial
statements of the budget organizations
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3. COMMON GROUND AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
NATIONAL AUDIT OFFICE (3)
DIFFERENCES FINANCIAL INSPECTION
NATIONAL AUDIT OFFICE
Approach
Investigations of particular cases of
irregularities, legal violations, fraud
and corruption - inspection
Analysis of implementation of the government
policy as intended
Types of
checks
Inspection: legality check
Financial, compliance and performance audits
Consequences Imposing sanctions, referring cases of
of the activities fraud to the prosecutor's office, giving
mandatory instructions
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Recommendations for improvement
Usually not (with exceptions) sanctions
3. COMMON GROUND AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
INTERNAL AUDIT(4)
SIMILARITIES:
 Generally ex post checks
 Independence
 Full access to information
 Competence to give recommendations as a result of engagement
performed
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3. COMMON GROUND AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
INTERNAL AUDIT (5)
DIFFERENCES:
FINANCIAL INSPECTION
INTERNAL AUDIT
Position and reporting
Outside of the organization
Reports to the Minister of Finance
and the Government
Inside of the organization
Report to the Head of the organization
and to Audit Committee
Initiation/basis for the
activities
Complaints and requests from
citizens and other institutions
Risk-based annual plan
Aims
Detecting violations and corrective
actions
Assessing Internal Control system and
recommending improvements
Assurance and consulting function
Scope
Mostly financial transactions and
procedures: legality
All activities and aspects of the Internal
Control System; legality and
performance
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3. COMMON GROUNDS AND DIFFERENCES BETWEEN FINANCIAL INSPECTION AND
INTERNAL AUDIT (6)
DIFFERENCES:
FINANCIAL INSPECTION
INTERNAL AUDIT
Perspective
Focused on individuals, conclusions
on legal compliance
Focused on the system
Direction of the results
To the past - to find the facts
towards financial and budgetary
discipline
To the future - to help management to
improve the system
Responsibilities in
dedicating and
investigating fraud and
corruption
Detection, investigation, sanctioning
Prevention, detection of indicators
Methodological ground
No generally accepted standards
International standards of the IIA
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4. FINANCIAL INSPECTION AND PIC CONCEPT
Main pillars of the PIC model
• Strengthening decentralized managerial accountability and internal control
• Establishment of independent Internal Audit within public sector
organizations – different practices
• Establishment of Central Harmonization Unit(s) for Internal control and
Internal Audit
• Financial Inspection (as fraud and corruption investigation function) in the
most of the EU countries exists as central separate entity (institution) or
together under the same head with Internal Control or Internal Audit
coordination function
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4. FINANCIAL INSPECTION AND PIC CONCEPT (2)
Challenges where centralized and separated Financial Inspection exists
 Cuts across the managerial accountability of budget holders
 Administrative burden on the entity under inspection/audit
 Possible difference of conclusions and opinions on the subject matter
 Additional resource cost to the public sector
 Possible overlapping and duplication of tasks
 Lack of mutual respect and mistrust based on lack of understanding of
the roles and poor communication
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4. FINANCIAL INSPECTION AND THE PIC CONCEPT (3)
In the case of separate functions and institutions it is important to ensure:
GOOD COMUNICATION AND COOPERATION BY:
 A clear mandate for each function and institution
 Coordinating work programs and findings
 Regular meetings and joint trainings
 Systematic exchange of information
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA
Until 2000 - State Financial Control under the Minister of Finance
Main characteristics:
• 1200 staff in central and local level;
• one and only institution for control and inspection (the NAO has been
established in 1995, Internal Audit does not exist);
• close relations with the prosecution office;
• type of control – ex post inspection;
• rights to investigate and impose administrative and financial sanctions;
• sweeping powers over the central and local administration and the
enterprises.
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA(2)
The system through the time
After 2000 – reforms in two stages:
 2000 – 2006 :
• PIFC Policy Paper
• New legislation
• Introduction of PIFC concept (and COSO elements) and introduction
of Internal Audit function – centralized
• Institutional changes – Public Internal Control Agency (as a model
similar to French and Spanish system)
• Internal Audit function is mixed with imposing sanctions(fines) for
law violation
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (3)
The system through the time
 2006 – to present day
• Three new laws in force – Financial Management and Control in
the Public Sector Act, Internal Audit in the Public Sector Act,
State Financial Inspection Act
• Segregation of Internal Audit and Financial Inspection
• Decentralization of the Internal Audit function (Internal Control
and Internal Audit goes close to the Anglo-Saxon model)
• Establishment of Central Harmonization Units for Internal Control
and Internal Audit in the Ministry of Finance
• Development of national standards, based on the IIA Standards
• Training and certification system for internal auditors
5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (4)
Establishment of State Financial Inspection Agency
 Legal framework - State Financial Inspection Act, Regulation for
implementation of the law, Regulation for the structure of the Agency;
 Status – Agency subordinated to the Minister of Finance;
 Administrative capacity – 190 inspectors and administrative staff
(for comparison -National Audit Office - 520 auditors and administrative
staff, Internal auditors in the public sector - 440 in the 173 organizations);
 Scope of inspected entities – budget organizations – ministries; agencies;
municipalities; state and municipal enterprises; other;
 Types of activities – ex post inspections, checks for compliance with the
laws, focus on assets, expenditures, public procurement procedures;
 Variety of Inspection activities:

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according Annual Plan – only public procurement procedures
5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (5)
 On the requests of the Council of Ministries, Minister of Finance,
Prosecution Office and other public institutions
 Complaints and signals from the citizens
 Responsibility and powers
 Written mandatory instructions
 Recommendations to the competent bodies
 Collecting evidence for the Prosecution Office
 Administrative (fines) and civil sanctions/penalties (the penalized
persons have a right to appeal the sanctions to the court)
 Active communications with other institutions
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (6)
Requests for financial inspections
2013
3 / 0.5%
21 / 3.4%
72 / 11.6%
Signals from citizens and NGOs
Information from NAO and
Public Procurement Agency
86 / 13.9%
Decrees of the Prosecurtor's
office
437 / 70.6%
Requests by the CoM or the
Minister of Finance
Signals from AFCOS - Protection
of the European Union
Financial Interests Directorate
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (7)
Distribution of the 478 financial inspections
according to type of the entities 2013
Municipalities
115
138
State budget spending
units
Municipal budget
spending units
15
State or municipal
commercial companies
Ministries
47
Other
150
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (8)
Inspected 2 484 public procurement procedures and
1 376 identified violations 2013
900
800
800
700
600
471
500
464
434
389
400
308
300
287
206
200
182
138
94
100
18
39
30
0
State
commercial
companies
Municipal
commercial
companies
Others
Municipalities
State budget
spending units
Ministries
Inspected public procurement procedures
Public procurement procedures in which violations are identified
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Other
municipal
budget
spending units
5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (9)
Distribution of the identified amount of violations of
the budget and finance discipline according the type of
entity 2013
Municipalities
Municipal budget spending units
State budget spending units
State commercial companies
Municipal commercial
companies
Others
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5. DEVELOPING OF FINANCIAL INSPECTION IN BULGARIA (10)
Other facts of the Financial inspection Activities in 2013
 Total number of conducted inspections - 478
 Number of conducted procedures concerning public procurement –
2484, number of established violations - 1376
 Number of other violations of the budget discipline
 Number of acts engaging administrative liability – над 2000
 Number of acts engaging civil liability – 18
 Over 1800 findings sent to other competent authorities, a total of 63
written instructions served
 170 reports sent to the prosecution office
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6. RELATIONSHIPS BETWEEN FINANCIAL INSPECTION, EXTERNAL AUDIT
AND INTERNAL AUDIT - GOOD PRACTICES AND CHALLENGES
 Good relationships are necessary for achieving cost-effective Public
Control System as a whole;
 The laws stipulate exchange of information; other types of
communication are outlined in specific agreements or are informal;
 The international standards for Internal and External Audit (IIA and
INTOSAI) also set out models for coordination and using the work of
the other auditors and assurance providers;
 Important part of the communication is a common language and
terminology;
 Challenges – mistrust and even jealousy, immaturity of the systems, no
appropriate methodology, lack of reforms, different opinion on the
same cases, administrative burden on the organizations under control.
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6. RELATIONSHIPS BETWEEN FINANCIAL INSPECTION, EXTERNAL AUDIT
AND INTERNAL AUDIT - GOOD PRACTICES AND DIFFICULTIES(2)

•
•
•
•
Cooperation Agreement
Parties of the agreement 2011
Objectives
Contents
Implementation
 Common Activities
• Analysis of the State Budget execution 2014
 Organization
 Performance
 Reporting
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7. CHALLENGES FOR FUTURE IMPROVEMENT
 Continual improvement of the Public Sector inspection and audit
systems; improving the methodology
 More clear mandate for each function, written procedures for
interaction
 Active position of all parties
 Transparency and publicity of the common activities and the results
 Building a network for common understanding and language – regular
meetings, trainings
 Possibility for reliance to one another’s work and findings
Coordinated, cost-effective and useful Audit and Inspection System in the
Public Sector
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THANK YOU!!!
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