Introduction

1. Public Sector Internal Audit ArrangementsAustria15-07-2015Dr. Hannes SCHUHChief Audit Executive

2. Introduction Dr. Hannes Schuh Federal Ministry of Finance HintereZollamtsstraße 2b 1030 Vienna Austria hannes.schuh@bmf.gv.at Chief Audit Executive of the Federal Ministry of Finance Spokesman of the Board of Auditors of the European Patent Organisation Vice-president of the Institute of Internal Auditors Austria (2006 – 6/2015) Lecturer at a University of Applied Sciences Author and editor (accounting, tax auditing and internal audit)

3. Agenda Internal Audit: • Role, function, authority, responsibility • Harmonization / coordination and quality assurance arrangement • Relationship with financial inspection (Investigation) • Internal audit in regional level • Oversight including existence of audit committees

4. Austria /Federal Republic • Code on Federal Ministries

5. Austria /Federal Republic

6. Federal Countries

7. Comparison of Org. Charts

8. Involvment

9. … besides this • 22 Social insurance institutions • 19 national health insurance institutions • 4 national accident insurance institutions • 5 national pension insurance institutions • 1 Central Federation of National Social Insurance Institutions • Chambers: • Chamber of Employees • Chamber of Trade and Commerce • Federation of Industries • Chamber of Lawyers • Chamber of Medical Doctors • Chamber of Architects • (Semi) autonomous public entities • Universities • Outsourced entities • Orientation to market • Orientation to public service

10. Budget • Contributions to national social insurances: 49 bn EUR • Taxes, customs (collected by MoF): 80 bn EUR FISCAL TRANSFER 1st level: revenues 2nd level: grants 3rd level: other

11. Budget / Taxes

12. Role, function, authority, responsibility

13. Position of IAS

14. Ministry of Finance

15. Strategy of Internal Audit Units McNamee / SelimRisk Management: Defining a New Paradigm for Internal Auditors, 1997 The Audit Universe is • a collection of all the processes, programs, projects, and other units of the organization • that are relevant to the strategic plan • and have sufficient importance and/or significance to plan achievement.

16. Strategy of Internal Audit Units • The key point, however, is that government audit functions must be configured appropriately to enable governments and government entities to fullfiltheir duty to be accountable to the citizens, while achieving their objectives effectively, efficiently and ethically. • IIA-Position Paper The Role of Auditing in Public Sector Governance, 2006 Other examples: • Internal Audit Capability Model for the public sector (IIA, 2009) • Three Lines of Defence Model (ECIIA, 2012) • INTOSAIGOV - e.g. 9140, article 1.6 “The role of internal auditing has evolved from an administrative procedure with a focus on compliance, to an important element of good governance.”

17. Strategy of Internal Audit Units • Votesat IAS-Conference 2008 in Brussels

18. IA-Strategy in MoF • The strategic linkages between entity and IAS

19. IA-Strategy in MoF • The balanced scorecard

20. IA-Strategy in MoF The own strategy of the IAS linked to the administration and its dynamic development Strategic dimensions • The IA Staff is prepared to do its work. • The IA processes are standardized and result-oriented. • The IA unit takes care on its environment. • The IA activities lead to improvements. Strategic directions (”strategy map”) • The IAS creates value added for its entity. • The IAS cooperates with the management for the entity´s organisational fit for future. • The IAS is well known for its quality of work. • The IAS improves its maturity.

21. IA-Strategy in MoF • Strategic dimensions of the BSC

22. IA-Strategy in MoF

23. IA-Strategy in MoF

24. Audit universe Audit universe of IA MoF

25. Audit plan 2014 • Strategy, long term perspectives • Long term instruments for HR- and organizational management • Staff administration processes of subordinated offices • IT-instruments for combatting fraud • Advance ruling and horizontal monitoring • Management and steering • Finance Police – internal organisation • Finance Police – effects and results in tax offices • Self-indictments • Tax office Waldviertel (5 subsidies – 1 office) • Management of outstanding money

26. Audit plan 2014 • Quality and effects • Quality assurance in the whole tax administration • Project management of a big IT-project • Prolongation of due tax declarations • In-field-controls of consumption taxes • Administration of taxes on waste • Information Centre Vienna • External Audits • Joint auditswith EO • Certifications

27. Organisational approach • The IAS follows the audit universe and not vice versa! • Audit engagements result from a risk-oriented and comprehensive approach • Therefore is needed: • Positioning directly under the highest management level • Own strategy of the IAS linked to the administration and its dynamic development • Team-oriented organisation • Personnel management including carrier development and knowledge management • Excellent networking, also with the professional – and scientific community • Internal and external quality assurance • Audit marketing • Measures to safeguard the results

28. Harmonization / coordination quality assurance arrangement

29. Basic principles: • Every IAS works for its own • Good cooperation with IIAA • Exchange of experiences organised by Federal Chancellery • Additional requirements in MoF • University degree • (mostly) certified civil servants • 1 year testing phase • Attendance at all IIA-training courses for new auditors • Later: certification in corporate risk management, controlling, etc. • Advanced training for managers • Postgraduate studies : MBA Public Auditing

30. Harmonization / Co-ordination? • Inspections: YES, absolutely ! • Internal Audits: • NO between public bodies (e.g. ministries)! • YES within a public body • Antifraud Audit Unit / Investigation units • Either part of IAS or • E.g. MoF: separate unit, very good co-operation • Co-operation between 2nd and 3rd line of defence? • Yes, IAS is always 3rd line, there is no other unit at 3rd line! • E.g. Quality Assurance is 2nd line.

31. ECIIA

32. Relationship with financial inspection (Investigation)

33. See slide above!

34. Public internal control system in Austria • Budget • Supervisory functions • Parliament • Court of Auditors • Federal Government • Federal Chancellor • Federal Minister of Finance • Budget Institutions • Financial Inspection (see next slides)

35. Budget • Federal budgeting was subject to substantial changes • It was developed in two stages (2009 and 2013) from a cash-based governmental accounting system to a budgeting and accounting system based on accrual principles. • 2009: The federal budget planning is stated for several years and is binding. Incentives are determined for each department, supporting them in using the tax money efficiently. • 2013: Fundamental further development of budgeting with regard to a new budget structure and a results-oriented management of the departments. • The development of the PIC systems is related to the budget law reform, and it essentially includes an extension of the audit universe towards performance orientation

36. Supervisory functions Parliament • The general parliamentary supervisory powers also apply in connection with budgeting (the rights of interpellation, enquiry and resolution). The National Council may request the execution of particular inspections by the Court of Auditors. • If EU funds are involved in the federal budget, the EU Court of Auditors also becomes entitled to exercise supervision of the budgeting institutions.

37. Supervisory functions Court of Auditors • The tasks of the Court of Auditors within the scope of budgeting are essentially related to participation in law making and the associated supervision and accounting.   • This includes the following: • countersigning of deeds, by which financial debts are substantiated, • being informed in the case that budget forecasts are exceeded – generally before the implementation, • participation in adopting significant implementing rules for the Federal Budget Act, • preparing the Federal Statement of Accounts (Bundesrechnungsabschluss) and its submission to the Parliament (National Council) as its own legislative enactment, • From 2013, the Court of Auditors is also given a function within the budget planning process for the first time.

38. Supervisory functions Federal Government • Within the budgeting process, the Federal Government is responsible for the decision-making in respect of the Stability Programme, the Strategic Report, the Federal Budgetary Framework Act drafts and the Federal Finance Act (Bundesfinanzgesetz), etc. It is also competent to approve the expenditure commitments and dispositions on interests in companies proposed by the Minister of Finance. Federal Chancellor • The Federal Chancellor exercises coordination functions in human resource planning and, from 2013, in the performance orientation of the budgeting process.

39. Supervisory functions Federal Minister of Finance • The Federal Minister of Finance exercises particular tasks within the budgeting process in compliance with the Federal Constitution and the Federal Budget Act. • He is responsible for the overall budgeting process; • he is in charge of drawing up the draft Federal Budgetary Framework Act (including the Strategic Report) and the draft Federal Finance Act as well as the Stability Programme; • he enacts implementing rules; • he possesses a number of participation rights in other institutions; • he is responsible for interdepartmental budget controlling; • etc.

40. Supervisory functions Budget institutions • The Federal Budget Act differentiates the institutions involved in the budget process according to the stage of the activities. Correspondingly, it discriminates between regulatory (responsible for planning and decision-making) and executive (responsible for execution and partly for internal control) institutions. The executive institutions include the Accounting Agency, the accounting offices, the paying agencies and the purchasing agencies.

41. Supervisory functions Financial Inspection The bodies intended for financial inspection are: • Court of Auditors • Federal Accounting Agency • Internal audit units at the Ministries • Additionally, at the Federal Ministry of Finance, the Bureau for Internal Affairs, which is responsible for delinquency inspections • Certification functions for EU funds • Inspection functions for EU funds • State inspection bodies  In addition to the indicated bodies, prosecution institutions • Federal Service for Prevention and Fighting against Corruption • Public prosecution services • Central Public Prosecution Service for Fighting against Corruption • Criminal courts

42. Internal audit in regional level

43. A) Central administration, e.g. ministry: • Usually one IAS, also for the subordinated regional offices • B) Policy fields covered by some administrations: • Usually one IAS per administration, informal co-operations • C) Outsourced Entities • Not covered by IAS (except special law) • But: possibility for contracts

44. Oversight including existence of audit committeEs

45. No audit committees ! • Oversight: given to the politician and the top management • Supreme Court of Auditors • No public access to IA files.