Candidature of The Accounting Chamber of Ukraine for External Auditor of UNIDO October 2013

1. The Accounting Chamber of Ukraine as a candidature for appointment as the External Auditor of the United Nations Industrial Development Organization October, 2013

2. Objectives I. To get support from participating States for the ACU’s position as External Auditor of UNIDO II. To strengthen the international relations of the ACU with the Supreme Audit Institutions

3. What is UNIDO? • The United Nations Industrial Development Organization (UNIDO) is a specialized agency of the United Nations. Its mandate is to promote and accelerate sustainable industrial development in developing countries and economies in transition, and work towards improving living conditions in the world's poorest countries by drawing on its combined global resources and expertise. • UNIDO works with developing countries and economies in transition, where it promotes and accelerates industrialization as a source of economic growth needed to fight poverty. At the same time, it helps protect the environment by supporting clean and sustainable industrial development. • As a technical cooperation agency, it designs and implements programmes focused on three thematic priorities, which directly respond to global development priorities. These priorities are: • Poverty reduction through productive activities • Trade capacity-building • Environment and Energy • Regular annual budget for 2013 is about €238 millions

4. INFORMATION NOTECandidature for the post of the External Auditor of UNIDOWith reference to information note no. 66 of 21 December 2012, entitled appointment of External Auditor, please find attached a communication received on 27 February 2013 fromthe Permanent Mission of Ukraine submitting a candidature for the post of External Auditor.As mentioned in the note verbale, CU 2013/22/ODG/PMO, dated 30 January 2013, Member States interested in providing the services of an External Auditor for a period of two years beginning on 1 July 2014.FatouHaidaraDirectorPolicymaking Organs Secretariat,Advocacy and External Relations Branch Candidature for the post of External Auditor of UNIDO for elections on General Conference, 15th session, Lima, Peru, 2 to 6 December 2013

5. Roman MykolayovychMaguta Chairman of the Accounting Chamber On April 12, 2012 the Verkhovna Rada of Ukraine (Parliament of Ukraine)appointed Mr. Roman Maguta as the Chairman of the Accounting Chamber of Ukraine http://www.ac-rada.gov.ua

6. Why is ACU ?Who else? What differs us? Pro & Contra • Competitors Heads of the Supreme Audit Institutions of: • Norway, • Germany, • Hungary, • Serra Leone, • Ghana, • Thailand (has already withdrawn) • Pro (comparable to Competitors) : • Absence of conflict of interests; • Optimal price of quality audit service (€ 290 thousands); • Fair geographical principle of election (Pakistan predecessor Auditor from G77). • Contra: • Absence of common position among stakeholders; • Political preferences.

7. General information The Accounting Chamber of Ukraine (ACU): • Is the Supreme Audit Institution of Ukraine operating since 1996 • Acts as a constitutional body of the Government’s external financial controlmechanism (article 98) • Is an independent authority acting on behalf of the Parliament of Ukraine • Executes control and supervision over revenues and expenditures of the State Budget • Acts according to the Law of Ukraine “On the Accounting Chamber”, the Budgetary Code of Ukraine and other by-laws http://www.ac-rada.gov.ua

8. the ACU’s main principles

9. the ACU’s activities 1The ACU has been performing financial, performance and compliance audits of the entities, institutions, organizations and Ministries which utilize State Budget funds 2 Including, in particular, quarterly and annual reports on the execution of the State Budget

10. International background • Mexico Declaration on SAI Independence (2007) • Article 6, Point 12, Law of Ukraine on the ACU (1996) • The Lima Declaration of Guidelines on Auditing Precepts (1977) “The Accounting Chamber of Ukraine develops cooperation with Supreme Audit Institutions and international organizations, concludes agreements on cooperation with them”

11. ACU is a member of: International Organization of Supreme Audit Institutions (INTOSAI) since 1998 European Organization of Supreme Audit Institutions (EUROSAI) since 1999 Task Force on the Audit of Funds Allocated to Disasters and Catastrophes1 IT Working Group Professional Standards Committee Capacity Building Committee Working Group on Environmental Auditing Working Group on Public Debt Working Group on Key National Indicators Working Group on Environmental Auditing ACU Membership 1 In November 2006, ACU initiated establishment of the EUROSAI WGEA Special Subgroup on the Audit of Natural, Man-caused Disasters Consequences and Radioactive Wastes Elimination which according to the VII EUROSAI Congress resolution (June 2-5, 2008; Krakow, Poland) was transformed into separate the EUROSAI Task Force on the Audit of Funds Allocated to Disasters and Catastrophes

12. Main Priorities of International Cooperation • Maintaining bilateral and multilateral cooperation with foreign Supreme Audit Institutions (SAIs) • External auditing • Institutional capacity building • Participation in activities of international organizations

13. Priorities of the ACU’s Bilateral Cooperation http://www.ac-rada.gov.ua

14. Bilateral Agreements on Cooperation Republic of Poland (1998) Republic of Belarus (2001) Russian Federation (1998) Socialist Republic of Viet Nam (2010) Republic of Moldova (2001) Republic of Bulgaria (2002) Federal Republic of Germany (2009) Republic of Latvia (2009) Georgia (2002) People's Republic of China (2004) Kingdom of Sweden (2008) Portuguese Republic (2008) Republic of Korea (2004) Kingdom of Norway (2008) Republic of Hungary (2004) Kingdom of Spain (2008) Republic of Armenia (2005) Republic of Slovenia (2007) Republic of Lithuania (2005) Republic of Kazakhstan (2006) Republic of Azerbaijan (2006) Republic of Slovakia (2005) http://www.ac-rada.gov.ua

15. Acknowledges of the ACU “The GRECO was impressed by the achievements of the Accounting Chamber, which provides for external audit of all authorities entitled to funding from the State Budget. The Accounting Chamber has developed into a modern institution, which does full audits, including performance audits. The ACU provides an instructive model on openness and transparency that others would do well to emulate”. GRECO Evaluation Report on Ukraine, Strasburg, March 2007 “The Accounting Chamber as the Supreme Audit Institution of Ukraine has sufficient financial and stable human resources to exercise its duties in an effective manner and given the highest integrity level among state bodies ”. 2011 Transparency International Report: National Integrity System rt http://www.ac-rada.gov.ua

16. Audit approach and audit work • Audit team includes highly professional, educated and experienced auditors in financial, performance and IT spheres; • Audit Strategy elaboration; • Risk-based oriented approach; • Applying appropriate audit procedures and IT software "IDEA“; automated audit process; • Assessing the system of Internal Control and cooperation with management; • Unbiased audit report in accordance with Internationally accepted framework and relevant management letters.

17. FIELD EXPERIENCE IN AUDITING • Full adherence to International Standards for Supreme Audit Institutions with regard to audit arrangements for international institutions • Monitoring and Auditing of International Public Sector Accounting Standards (IPSASalready implemented in UNIDO) implementation in the Organization for Security and Cooperation in Europe (OSCE) • Familiarity with Enterprise Resource Planning systems, including audit (urgency for UNIDO) http://www.ac-rada.gov.ua

18. ACU as External Auditor with the World Bank • Memorandum of Understanding (18.12.2008) • Financial and Performance Audit of projects implemented in Ukraine through the State Budget of Ukraine with the Organization for Security and Cooperation in Europe • appointed from 2009 to 2013 • expressing an opinion on annual financial statements • providinganindependentassessment with respect to the efficiency of financial procedures, accounting system, internal financial controls, administration and management of OSCE http://www.ac-rada.gov.ua

19. OSCE audit achievements • OSCE PC decision concerning allocation of financial resources gathered many years ago by participating states (pS) for new Field Office establishing. • Precise attention for unliquidated obligations in the end of financial year has been attracted to participating States; • Write-off of value added tax (VAT) receivables and assisting in elaboration of the guidelines for the Institutions and the Field Operations • Close cooperation with OSCE management aiming at formulating optimal way of IPSAS standard implementation with minimum cost; • Substantial refinement of the Extra Budgetary funds of the OSCE • Interworking with OSCE Secretariat to improve presentation of financial statements and reporting for users (pS).

20. ACU’s contribution to OSCE “The Audit Committee acknowledges the continued high-quality work performed by the Accounting Chamber of Ukraine as the External Auditor and, in particular, the depth and thoroughness of its observations”. 2011 and 2012 OSCE Audit Committee Annual Report “ Vienna, 12 July 2013 Letter to President of Ukraine Viktor Yanukovych from OSCE Secretary General

21. Modern Challenges for UNIDO. Alarming Audit issues : • Member States are leaving organization (British, France last time); • Reduction for the missing contributions; • Decreasing of operational activity; • Another UN’s Specialized Agencies Functions Duplication (for example Preparatory Commission for the Nuclear-Test-Ban Treaty Organization (CTBTO), United Nations Environment Programme (UNEP) etc.); • Maximal efficiency is gained by • further reducing administrative support posts • deferring the extension of the field network • lowering operating costs, including travel • optimizing costs of Permanent Missions Offices documents • risk-based audit approach for budget biennium • the adequacy and effectiveness of the controls designed and implemented to manage the ERP system Why & what may we do for UNIDO?

22. What can we propose performing of the audit work for UNIDO? • To provide opinions on: • whether the Financial Statements are fairly presents financial position • are prepared in accordance with acceptable financial and reporting framework • To provide assistance in strengthening financial management by: • Control over projects’ execution and project management • Identifying and assessing the risks in financial management • Establishing the criteria and performance indicators • Enhancing and developing the internal control system • Close monitoring of the Payroll system http://www.ac-rada.gov.ua

23. What can we propose for the Enterprise Resource Planning (ERP) system UNIDO? • An ERP system is a way to integrate data and processes of an • organization into one single system with a modular software application. • While auditing the ERP system is considered as not only the source for accounting and management data. Primary purpose of new ERP in UNIDO – whether the selected ERP system is automating business processes in order to increase business efficiency and provide better visibility • ERP as a subject for the audit : • The audit objective is to assess the adequacy and effectiveness of the controls designed and implemented to manage the ERP system, including an assessment of the following components: • Software selection • Quality assurance • Risk management • Reporting • Configuring and debugging the ERP system to support UNIDO’s core business operations http://www.ac-rada.gov.ua

24. Reasons for the election of the ACU as the External Auditor of UNIDO: • INDEPENDENT ENTITY is an independent third-party professional body capable of performing an independent review of the organization's financial accounts. Our responsibility includes evaluation of financial accounting records and other relevant facts related to financial activities and identification of any mistakes, fraud or shortcomings which require improvement; • PROVEN EXPERIENCE in auditing the effectiveness of risk management and internal control systems for the World Bank, OSCE; thus assisting UNIDO to execute its mandate; • COMPETENCYto assess the ERP system’s capability to support all necessary processes required to increase automation and internal control across financial activity as well as remove bags and deadlocks.Recommendations for appropriate measures aimed at regaining financial stability, boosting the operational efficiency and reinforcing the organizational structure.

25. Thank you for attention!