Financial Management and Control Arrangements in Practice

1. Financial Management and Control Arrangements in Practice Monika Kos, Ministry of Finance, the Republic of Poland

2. Scope of the presentation

3. what is FMC?

4. Financial Management and Control (FMC) – conceptual meaning PIFC

5. 2 levels of Internal Control

6. What is FMC? Financial Management and Control is a comprehensive system of decentralisedinternal control put in place by and under the responsibility of heads of public budget entities to provide reasonable assurance that budget and other resources will be used in a regular, ethical, economical, effective and efficientmanner towards the achievement of objectives.

7. What is newaboutFMC?

8. What is FMC about?

9. Key roles and responsibilities

10. Key actors in establishing FMC

11. Elements of the FMC Managerial accountability

12. Managerial accountability • Managers of all levels public finance sector entities must be accountable for the activities they carry out in operationalpolicies, including financial management and control policies. • The manager is responsible for achieving objectives within budget, on time, efficiently and effectively.

13. Requirements for Managerial Accountability

14. Key actors in establishing and maintaining FMC on the entity level

15. The head of entity is responsible forensuring:

16. Managerial accountability covers:

17. The impact of FMC on role of finance officer The role of the finance officer will be to support the manager and to signal the manager if resources are not being usedefficiently and effectively. The finance officer becomes a top level financial adviser to management – at all levels.

18. The tasks of the finance officer The finance officer becomes responsible for: • Providing the manager (at whatever level) with the financial information he/she requires to enable the manager to achieve efficiency and effectiveness; • Ensuring that the internal financial control standards are properly met throughout the organisation; • Developing strategic financial plans for the organisation; • Liaising with the MoF over budget preparation/financial reporting; • Ensuring that managers pay full attention to management risks related with budget spending process.

19. Role of internal audit

20. FMC and COSO model FMC is founded upon five interrelated components of internal controls (COSO):

21. The Polish experience

22. The Polish experience – key regulation • Key regulations included in • the Public Finance Act • were introduced in 2002. • The PFA was updated 3 times • (2005, 2006 and 2009) • the last came into force • in January 2010 The PFA

23. The Polish experience – the structure AuditCommitties (ministries)

24. FMC in Poland The FMC is called Management Control, which comprises a general set of activities undertaken in order to ensure the implementation of objectives and tasks in an: • effective, • economical, • and timely manner, • compliant with the provisions of law.

25. The FMC objectives are to ensure in particular:

26. 2 interrelated levels of FMC in Poland

27. New responsibilities Development and publishing on the website: Annual activity plan - by the end of November each year Report on the plan execution and Statement on the condition of management control - by the end of April each year The Minister in charge of the branch – mandatory; Supervised entities – up to the minister’s decision; Local government – up to decision of the head of entity or supervisory body.

28. Cooperation

29. Challenges and benefits

30. Challenges on the strategic level: FMC should be a part of public administration reform, including public finance management reform; Legal means that are needed to implement FMC should be properly coordinated with all other relevant laws. Development of FMC is not only a role of the CHU and the Ministry of Finance; there should be close cooperation with other institutions involved in public reform process. The law is just a first not the final step in the reform, there should be a strategy for its implementation and maintaining.

31. Challenges on the coordination level Vision:Vision about the FMC and its good communication is required. Control: Understanding that the FMC is not a new type of control activities but a management system, involving all levels of management and staff. Monitoring by CHU: Not to focus on the existence of bureaucratic processes but promote a new management style based on planning, risk management and measuring achievements of objectives. Timetable: Assuring time and support to the head of entities for building new approach within entity.

32. Challenges on the operational level: Raising management awareness and professionalism by: providing seminars, conferences and training; introducing pilots programmes; sharing good practice examples. Creating management tools: standards, guidelines, methodology; professional internal audit service; tools for self-assessment, etc.

33. The sound FMC should help public entities to::

34. Conclusion: Developing FMC is thus an iterative process that involves continually improving performance and governance, rather than introducing a new, extra system. The existing management system shall be structured, formalised and improved in accordance with identified needs and cost considerations.   Internationally-recognised or national standards and frameworks offer common points of reference within trends in modern management and provide a comprehensive, structured approach to internal control.

35. questions