Kick-offHorizontal Audit FMC Republic of Macedonia PIFC Department SIGMA

1. Kick-offHorizontal Audit FMC Republic of Macedonia PIFC Department SIGMA Skopje, February 2016

2. Agenda • FMC in Macedonia (developments) • FMC goodpracticesfrom EU memberstates • Audit Scope (proposal) 13:00 lunch • AuditMethodology (workshop) • FinalConclusion/Agreements

3. AuditObjective Horizontal Audit: Strengthening the FMC System (ManagerialAccountability) in public institutions in the Republic of Macedonia IndividualAudit: Assess the FMC system of the institution and giverecommendationsonhow to strenghten FMC/the managerialaccountability

4. Horizontal Audit Horizontal audit: • One overall objective • One overall conclusion and recommendation Individualaudit: • Uniform AuditObjective • Uniform Audit Scope • Uniform AuditApproach • InstitutionSpecificAudit Report • Uniform Report to PIFC Department

5. FMC: aboutachievingobjectiveswithclearresponsibilities • Delivering on strategic objectives of their competent ministries • Each entity is responsible for arranging the FMC system at their level • Cooperation with their subordinate budget users gets organised through FMC • Budgets link financial resources with individual programmes and projects, with a clear specification of the responsibilities individual managers have

6. ManagerialAccountability • Managerial accountability means keeping things in check without controlling just about everything. • Making all decision and signing all documents does not ensure control of organisational activities. In fact, is quite the opposite!

7. Decentralisationauthorities and responsibilities Head Strategic issues Policies Focus Reports onresults and money spent implementation Delegation Managers Objectives, programmes undertheir scope of competence Focus

8. 5 Components

9. Source: www.coso.org 17 Principles Control Environment Demonstrates commitment to integrity and ethical values Exercises oversight responsibility Establishes structure, authority and responsibility Demonstrates commitment to competence Enforces accountability Risk Assessment Specifies suitable objectives Identifies and analyzes risk Assesses fraud risk Identifies and analyzes significant change Control Activities Selects and develops control activities 11. Selects and develops general controls over technology Deploys through policies and procedures Information & Communication Uses relevant information Communicates internally Communicates externally Monitoring Activities Conducts ongoing and/or separate evaluations Evaluates and communicates deficiencies

10. AuditScoping (1) If a budget user does not have a sound control environment, the FMC activities will be just a formality to meet the requirements instead of being applied in practice • Ethical Values, Integrity and Competence of Staff • Leadership and management style • Planned approach to operations • Organisational structure, definition of authorities and responsibilities, reporting lines

11. How to Audit the Control Environment? • Deskresearch • Interviews • Sample • Observation • Survey • ….

12. Strategic Planning Programmes Budget

13. Risk Assessment • Risks are related to Objectives • Risks are identified before decisions are made • Focus on the most important risks (10-15) • Management and staff are involved • Risk Register is regularly updated

14. ControlActivities • Cost-effective • Appliedconsistently • Documented In detail: - Procedure “Strategic plan production, execution and monitoring”

15. Information and Communication • Accounting System • Treasury System • Documentation • Within the institution and ‘outside’

16. Monitoring To enable evaluation, making timely updates and identify measures for continuous development • On-going (‘part of the daily job’) • Self-Assessment • InternalAudit • ExternalAudit

17. Conclusion / Agreement ? • Audit Report Institution ≠ Report to PIFC Dpt • From PIFC Dpt to IAU’s (deadline 26 February): • FMC Audit Matrix for all IAU’s • Templatefor Report to PIFC Department • Availability of PIFC Dptstaff and SIGMA colleaguesforquestions • Filled in templatesfor Report to PIFC Department (deadline ??) • Overall report preparedby PIFC and sharedwith all IAU’s and institutions (deadline ??)

18. FMC in Croatia

19. Regulatory framework • Integratedapproach: • PIC - Internal control systems in the public sector Law • BUDGET - Budget Law • FISCAL RESPONSIBILITY- Fiscal Responsibility Act • STRATEGIC PLANNING AND RISK ASSESSMENT - Guideline for strategic planning (first level)

20. PIC - Internal control system in the public sector Act(2015) • Regulates the system of internal controls in the public sector: • responsibilities, • relationships and responsibilities in the development of the internal control • internal audit

21. PIC • Regulations and documents related to the internal control system: • Rules on the implementation of financial management and control in the public sector • Manual for Financial Management and Control • Guidelines for the management responsibility

22. PIC • Guidelines for cost and management accounting • Guidelines for carrying out controls on the spot in recipients of transfers from the budget • Forms for carrying out controls on the spot

23. PIC • Self-assessment ofICS • Questionnaire on fiscal responsibility - self-evaluation of the system in areas: • Planning (planning, programming, development and implementation of the financial plan) • Execution (Internalsystemandorganizational prerequisites for the system of internal control, status and role of organizational units for finance) • Public procurement (publicprocurementandcontracting), • accounting and reporting (system of records and reporting accounting systems)

24. BUDGET • Functions: • showingthe most important country's aims in a fiscal year • instrument for influences ineconomic condition • control system • determination of strategic planning • control is mentioned in the context of EU funds - only

25. FISCAL RESPONSIBILITY- Fiscal Responsibility Act • Statement of fiscal responsibility on: • Legality, regularityand compliancewithaims • Effective and efficient functioning of management and control system

26. FISCAL RESPONSIBILITY- Fiscal Responsibility Act • Head‘s annual statement of fiscal responsibility on: • Legality, regularityand compliancewithaims • Effective and efficient functioning of management and control system

27. FISCAL RESPONSIBILITY • Regulation on the compilation and submission of statements on fiscal responsibility and report on the implementation of fiscal rules • prescribes: • look and content of statements, • procedure and terms of preparation and submission of statements • manner and deadlines for reporting on irregularities

28. STRATEGIC PLANNING AND RISK ASSESSMENT • First level entities and the highest management • define priorities and goals, and ways which enable to achieve • threeyear period • contain vision, mission, strategic goals and objectives • measures for result assessment • monitoringsystem

29. STRATEGIC PLANNING AND RISK ASSESSMENT • not a substitute for the existing strategic documents • link between the existing strategic documents and the budget • Guideline for strategic planning