Seminar on Evaluation of Internal Control Systems 1

Seminar on Evaluation of Internal Control Systems 1

The Supreme Chamber of Control • Strategy – Mission and Vision • The SCC Auditing Standards • International auditing standards: INTOSAI, IFAC, European Implementing Guidelines 2

Previous approach • Focused on auditing institutional controls • 1998/1999 Audit of internal audit in place at central government administration agencies • 2001 Audit of the functioning of internal audit at local government units 3

Findings and recommendations 4

Findings • The effectiveness of internal control sections was considerably limited • Only a few audits were conducted following an instruction or initiative of the ministry’s management • Cases of incomplete implementation of post - audit recommendations 5

Recommendations • A normative act to be drafted, specifying internal audit activities at government administration, especially the organization of audit services, the rules of planning. • Tasks to be defined with regard to internal control systems at administration 6

Findings • Improper and unreliable auditing of public procurement in the local government sector • Local government units did not adopt regulations setting out the criteria to guide entities exercising internal audit in selecting auditees or to define the scope and scale of activities subject to audit. 7

Recommendations • The Council of Ministers should take a legislative initiative to eliminate the possibility for combining membership in revision committees at constituting bodies of local government units with participation in the public procurement process at their organizational units. • The Council of Ministers should consider unifying the scope of objects, rules and procedures for exercising control by revision committees at the constituting bodies of local government units. 8

Legal regulations • 1999 – no uniform legal standards regulating comprehensively the functioning of internal audit • January 2002 – the revised law on public finances established the basis for a uniform solution to the organization and functioning of internal audit 9

New approach 2001/2002 Audit of internal financial control of the European Union financial asisstance (PHARE, ISPA) 10

Findings • The financial control system for the EU funds was neither effective nor consistent • Control over spending the EU funds was insufficient • At two implementing units no rules were defined for storing and securing documents related to program implementation and no persons responsible for these tasks were designated. 11

Recommendations • Accelerate work on the development of implementing regulations for the act on public finances with regard to internal audit • Define distribution of responsibilities and the rules of cooperation between the National Authorising Officer and the General Inspector for Treasury Control • Establish functionally independent and strong internal audit divisions 12

Annual audit of the state budget execution • Functioning of internal control procedures with regard to the state budget execution 13

The SCC activities in the area of internal financial control and audit • According to the SCC’s annual work plan for 2003 audit of internal financial control and audit is a compulsory element of every audit of public administration • Evaluation of the process of establishing internal financial control and audit • Analysis of the operational methods of internal audit with a view to assist in establishing efficient and effective internal control procedures 14

2003 audit • Internal control at ministries and other central administration entities • Evaluation of internal control system understood as managerial control 15

Components taken into account • Identification of the internal control system in place • Usefulness of the designed internal control system • Effectiveness of the existing internal control system • Corrective measures undertaken by auditee’s management as a result of the SCC audit findings indicating weaknesses in functioning of the internal control system 16

THANK YOU 17