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

2. Scope of the presentation What is FMC?Main roles and responsibilitiesThe Polish exampleChallenges and benefits

3. what is FMC?

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

5. 2 levels of Internal Control Centralised Entire control system within the public finance sector and all institutions involved in controlling public funds (Treasury, SAI, etc) Decentralised Approach of Government to ensure that managers of all public entities establish, maintain and monitor their integral management processes.

6. What is FMC? responsibility of heads of public budget entities regular, ethical, economical, effective and efficient achievement of objectives Financial Management and Control is a comprehensive system of decentralised internal 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 efficient manner towards the achievement of objectives.

7. What is new about FMC? FMC - spending resources in efficient and effective way to achieve objectives Traditional financial control systems - compliance with the budget, laws and regulations

8. What is FMC about? requires a different style of public administration with emphasis upon ‘management’ the integration of finance with management and achieving objectives affects legal and organisational arrangements improving the way in which public money is used - real meaning of ‘efficiency and effectiveness’ FMC

9. Key roles and responsibilities

10. Key actors in establishing FMC The Ministry of Finance: - The Central Harmonisation Unit; - The Budget Policy Directorate; - The Treasury. The Ministry (or other institution) responsible for public administration reform Public finance sector entities: - Heads of entities

11. Elements of the FMC Legal basis Budget and basis for accounting Setting objectives Risk management Internal and external audit Managerial accountability

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

13. Requirements for Managerial Accountability Authority for head of public entity to make decisions. Good quality information. Managerial structure within the organisation and delegation of authority to individual managers. Objectives set for each manager, agreed resources, timescales, accountability arrangements, boundaries of the manager’s responsibilities. Action taken when there is management failure.

14. Key actors in establishing and maintaining FMC on the entity level Public finance sector entity: - Head of entity - Operational managers - Financial officer - Assurance providers (eg. Internal audit)

15. planning, programming, budgeting, accounting, controlling, reporting, archiving, monitoring. Establishing and maintaining adequate rules for FMC to carry out the tasks of: The head of entity is responsible for ensuring:

16. Managerial accountability covers: Ongoing monitoring of the management system and its timely updating. Financial effects arising from such operations. Risks associated with such operations. Control activities to be put in place and applied. The manner in which the operations are being managed. Reporting

17. The impact of FMC on role of finance officer The role of the finance officer will be to support the manager The role of the finance officer will be to support the manager and to signal the manager if resources are not being used efficiently and effectively. top level financial adviser 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 Independent and systematic evaluation of the adequacy of existing systems and recommend improvements if necessary; Independent consulting activities. Supporting the head of entity in achieving the objectives

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

23. The Polish experience – the structure The Polish CHU in the MoF for FMC and IA Decentralised FMC system (all entities) Decentralised IA Service (selected) Audit Committies (ministries)

24. FMC in Poland activities undertaken in order to ensure the implementation of objectives 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, effective, economical, economical, and timely manner, and timely manner, compliant with the provisions of law compliant with the provisions of law.

25. The FMC objectives are to ensure in particular: compliance with the provisions of law and internal procedures, efficiency and effectiveness of operation, credibility of reports, protection of resources, observance and promotion of rules of ethical conduct, efficiency and effectiveness of information flow, risk management.

26. 2 interrelated levels of FMC in Poland secondary level of management control the minister in government administration branches, a commune foreman, a mayor, a chairman of the management board of the local government unit primary level of management control the head of the entity

27. New responsibilities Development and publishing on the website: Annual activity plan Annual activity plan - by the end of November each year Report on the plan execution Statement on the condition of management control 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 The Chancellery of the Prime Minister The Treasury Services The Ministry of Administration and Digitalisation CHU The Supreme Audit Office Internal Auditors Associations Independent experts

29. Challenges and benefits

30. Challenges on the strategic level: FMC should be a part of public administration reform, FMC should be a part of public administration reform, including public finance management reform; Legal means should be properly coordinated 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 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 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: Vision about the FMC and its good communication is required. Control: 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: 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: 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: : ensure optimum utilisation of resources, guide operations to achieve objectives, improve quality of the service and products, minimise deviations and risks of irregularities, establish responsibility and facilitate delegations, motivate employees, facilitate co- ordination and information flow between departments, increase efficiency, increase trust and improve image of the public sector.

34. Conclusion: continually improving performance and governance 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. common points of reference within trends in modern management 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