PEM-PAL - 2nd Internal auditors’ Community of Practice Workshop

1. PEM-PAL - 2nd Internal auditors’ Community of Practice Workshop Chisinau, Moldova, June 20-22 2007 Development and implementation of internal audit strategy in Croatia for the change of public sector Tomislav Mičetić, CPIA, CAE

2. Contents • Strategy • what is it, drafting, inputs, process • Croatia • Development of IA strategy • IA development in brief • Legal framework • Lesson learned • Conclusion

3. Strategy – what is it? • Management plan or method for completing objectives; plan of procedures to be implemented, to do something. (Source: www.answers.com) • IA Strategy – plan to implement IA according the internationally accepted IIA standards in the public environment

4. Strategy drafting - overview PROCESS of drafting strategy INPUTS (staff, IT, informations, equipment, projects) OUTPUT IA strategy Learning

5. Strategy drafting- inputs • Government support • European Union as target • Leader - CHU head • CHU with: • English skilled people – CORE WORKGROUP • External project assistance • Information of other countries examples of strategies • Extended workgroup • SAI, academics, inspection services • Administrative Cooperation Agreement with DG Budget PROCES of drafting strategy INPUTS (staff, IT, informations, equipment, projects) OUTPUT IA strategy Learning

6. Process of drafting strategy PROCESSof drafting strategy PROCESS of drafting strategy INPUTS (staff, IT, informations, equipment, projects) OUTPUT IA strategy NO Check (by workgroup CORE and EXTENDED) Compliant (i.e. DG Budget) Drafting Yes Learning

7. IA development strategy • Part of PIFC (Public Internal Financial Control) Strategy • PIFC = FMC + IA + CHU • FMC – Financial management and control • IA – Internal Audit • CHU – Central Harmonisation Unit PROCESS of drafting strategy INPUTS (staff, IT, informations, equipment, projects) OUTPUT IA strategy Learning

8. Croatia in brief • 4,5 mil. Inhabitants - 7.700 € per capita • 15 bil. € annual budget – central state level • ~3000 budget users

9. Development of PIFC strategy in Croatia + outputs PIFC strategy 2004 Action plan for PIFC until end of 2008 PIFC strategy 2005 • -IA rulebook • -PIFC law • IA manual • Certification system for IA -IA rulebook -FMC training Outputs -IA rulebook

10. Internal audit in PIFC Strategy (2005) – Example of output • Contents: • Existing situation and weaknesses • Organisation of IA on goverment SAB’s • Job title: Internal auditor • Development of Internal Audit • PIFC law finalisation • Criteria for IA establishment • Endorsment of IA Charter • Development of methodology • Development of IA Strategy and Annual plans • Training of internal auditors • See: Croatia PIFC 2005 Strategy: Chapter 4.2.

11. 2003 • MoF department for internal audit and control established – CHU • Assistant minister + 3 civil servants • Budget law • introduction of IA in the public sector • managerial responsibility • budget inspection • Start of EU funded project CARDS 2002 “Development of Public Internal Financial Control and Internal Audit”

12. 2004 • Signed Administrative Cooperation Agreement (ACA) with European Commission - DG Budget in the area of the PIFC - Chapter 32. • Rulebook on budget users IA • PIFC strategy adopted by Government • TAIEX – PIFC presentation for Croatia • 2nd workshop for CHU – Hungary • Start of IA training and certification • Session held by CARDS 2004 project

13. 2005 • Change of MoF organizational decree • Department for harmonization of internal audit and financial control • Internal audit department • FMC department • WB - Country Financial Accountability Assessment (CFAA) - recommended: • Further development of legal documents • Strengthening capacity of CHU • Further promotion of documents • Updated PIFC policy paper – in force • IA training taken over by local trainers-professionals • 1st seminar of Internal auditors • New Rulebook on Budget users internal audit • Criteria for IA establishment

14. 2006 • 3th workshop of CHU- Bled-Slovenia • Start of CARDS 2004 project – “Strengthening of the PIFC structure in the Republic of Croatia“ • Awareness raising seminars for managers and FMC persons • Explanatory and bilateral screening • 2nd IA seminar of IA • PIFC law passed

15. 2007 • FMC modules started for FMC champions • Drafting of PIFC policy for local self - government level • CHU Action plan on development and implementation of PIFC until end of 2008 – continuing the development of IA

16. Croatia - Legal framework for Internal audit State PIFC Law PIFC policy CHU Code of ethics Internal audit standards Rulebook for budget users IA Internal audit manual Decree on organisation of SABs Rulebook for job description of SABs Charter of internal auditors Working procedures of IAD Strategic/annual plan Internal audit programmes/guidelines Internal audit reports/Follow up SABs

17. Lesson learned • Be not to ambitious • Start with good contents • Strategy – good tool for start of IA development • Transparency and marketing • EU – moving target • PIFC – IA – good tool for fight against corruption – preventive measure PROCES of drafting strategy INPUTS (staff, IT, informations, equipment, projects) OUTPUT IA strategy Learning

18. IA - Conclusion • “Change is the law of life. And those who look only to the past or present are certain to miss the future.” • (John F. Kennedy) • HRM – Staff is key of success! • “Success is the result of perfection, hard work, learning from failure, loyalty, and persistence.” • (Colin Powell)

19. For additional info visit: • CHU: http://www.mfin.hr/str/100/#509 • CARDS 2004 and CHU:http://pifc.mfin.hr

20. Abbreviations • CAE- Chief Audit Executive • CFAA- Country Financial Accountability Assessmentt • CHU – Central Harmonisation Unit • CPIA- Certified Public sector Internal Auditor • HRM – Human Resource Management • FMC – Financial management and control • IA – Internal Audit • IAD - Internal Audit Department • MoF – Ministry of Finance • SABs – State Administrative Body • WB- The World Bank