PIFC Taking stock and

looking ahead

Robert Gielisse, CIA,CGAP,

Head of PIFC Department,

DG Budget

European Commission

Croatia

June 2013

PIFC Croatia – It has been a long and windy road

• First PIFC Policy Paper – September 2004

• PIFC law - January 2007

• Accession negotiations June 2007 - June 2011

• Joining the EU – July 2013

Scope of PIFC

• PIFC refers to the execution of the National Budget.

• PIFC does not refer to the management of EU funds (although the same underlying principles apply).

PIFC Implementation – The initial challenges faced

• Lack of understanding of managerial accountability – managers tried to control every detail.

• Lack of (clear) delegation procedures did not allow middle managers to manage.

• Internal Audit was seen as additional layer of control.

• Internal Audit was not sufficiently independent – auditors were scared to tell managers the truth.

PIFC today - a greater foundation for democratic society in Croatia

• At national level - an updated legal basis with transparent mandates for all key internal control actors (Ministry of Finance, External Audit, Central financial inspection).

• At entity level - Managerial accountability for delivering higher quality public services with effective, efficient and economic use of public money.

PIFC - a framework for the defence of public finance and for good governance

Layer 1

Financial Management and Control systems

Layer 2

Internal Audit (IA)

Layer 5

Parliament

Layer 4

SAI

(EA)

Layer 3

Centralised Budget Inspection

(Complaint- driven function to investigate cases of fraud and serious irregularity)

Public Entity Ministry of Finance National

CHU FMC

CHU IA

PIFC and the Supreme Audit Institution – both on the same road to Good Governance

The SAI provides an independent assessment to Parliament of:

− Reliability and accuracy of financial reports

− Value for money in the use of public resources External

AuditPIFC

Good Governance ahead

PIFC and budget inspection – both on the same road to good governance

• Budget inspection will act to investigate cases of financial irregularity

• Budget inspection must not interfere with a manager's responsibility to establish an effective control environment within the organisation Financial

Inspection

PIFC

Good Governance ahead

Croatia is about to join the EU - Is the PIFC road ahead straight?

• Further implementation of the PIFC development plan 2012- 2013

• Overall PFM Strategy 2012-2016,currently being prepared

• Embedding of Fiscal Responsibility law

• Further enhancement of Internal Audit capacity

The challenge for managers

The risks to your organisation will not disappear on 1 July!

•Maintain an organisational culture to support middle-managers in freely admitting to the risks that they face.

•Ensure on-going monitoring to ensure the quality of internal control performance.

•Consider managerial self-assessment tools.

•No "comfort" zone!

Continued European Commission assistance

• Acceding countries benefit from continued assistance under a 3-year transition facility.

• DG Budget will continue to monitor PIFC implementation, particularly through drill-down quality review assessments, at central and local levels, as well as with state-owned enterprises.

After Accession, the State Audit Office will be guardian of the PIFC system

• The SAO is encouraged to play a full role in monitoring the application of the internal control system throughout the Croatian public administration.

• The SAO and the Parliament are encouraged to deepen cooperation; in particular, with consideration to establishing a specific committee to deal with external audit reports.

Internal Control and the EU Member States

• Croatia will become a full member of the EU-27 Public Internal Control Network.

• Regular Conferences and initiatives aimed at sharing best practices and peer learning.

• The CHU will be invited to attend the next full Conference – June 2014 in the Hague.

• The Network is currently steered by a Working Group of 7 Member States.

Congratulations go to the CHU staff

Ljerka Linzbauer 2004-2008

Danijela Stepic 2008-2013

Marela Knezevic Present