1. 9 July 2008Evaluation of audit of PIFC systems1 Workshop on audit/evaluation of Public Internal Financial Control Systems (PIFC) Jurrie Vos

2. 9 July 2008Evaluation of audit of PIFC systems2 Contents of this presentation 1. Netherlands Court of Audit (NCA) 2. Internal control 3. Budget and annual accounts 4. Scope of audit of NCA 5. Backgrounds internal control in 80’s 6. Internal audit 7. Financial audit NCA 8. Typical for Netherlands

3. 9 July 2008Evaluation of audit of PIFC systems3 Netherlands Court of Audit (NCA) Staff: 300 FTE (210 auditors, 90 supporting staff) Board: 3 persons Legal basis: Constitution and specific law Mandate: central government and related organisations Spectrum of audit: performance and financial audit Budget government: 200 billion

4. 9 July 2008Evaluation of audit of PIFC systems4 Reporting NCA Throughout the year: performance audit reports (about 20 reports) Once a year (third Wednesday of May: accountability day): reports with opinion on Annual financial accounts (per budget chapter: ministries and budgetary funds: 26 (including report with overall view)

5. 9 July 2008Evaluation of audit of PIFC systems5 Accountability day

6. 9 July 2008Evaluation of audit of PIFC systems6 Internal control in Netherlands No formal document on internal control in Netherlands Hard controls Soft controls

7. 9 July 2008Evaluation of audit of PIFC systems7 Hard controls Authorization and approval procedures Segregation of duties Controls over access to resources and records Verifications (before paying; ex ante ) Supervision

8. 9 July 2008Evaluation of audit of PIFC systems8 Soft controls (control environment) Personal and professional integrity of staff Tone at the top Organisational structure HRM policies and practises

9. 9 July 2008Evaluation of audit of PIFC systems9 Internal control Managers are responsible to ministers Ministers responsible to Parliament Control activities based on risk assesment on an annual basis Budgets approved by Parliament

10. 9 July 2008Evaluation of audit of PIFC systems10 Budget: 3 questions (ex ante) What are the goals to be achieved? What are the planned actions to achieve the goals? What will be the budget (costs)?

11. 9 July 2008Evaluation of audit of PIFC systems11 Budget execution will result in: Annual accounts (sent to Parliament) on Accounting day Answers on the 3 questions (ex post): 1 Has government achieved the goals set in the budget? 2 Has the government completed the actions planned in the budget? 3 Have costs remained within the limits set in the budget? Declaration on management and control

12. 9 July 2008Evaluation of audit of PIFC systems12 Declaration on management and control Regarding: all operations to achieve goals of minister ‘In control statement’ Reporting of exceptions Exceptions: - weaknesses in internal control - irregularities

13. 9 July 2008Evaluation of audit of PIFC systems13 Scope of NCA: opinions in audit reports regarding annual accounts Opinion on true and fair view Opinion on financial management and internal control Opinion on the way the in control statement has been produced Opinion on the way the performance information has been produced Recommendations

14. 9 July 2008Evaluation of audit of PIFC systems14 Backgrounds internal control In eighties shortcomings in internal control Problems with producing annual accounts (far too late) Not internal audit NCA put problems on agenda of Cabinet and Parliament

15. 9 July 2008Evaluation of audit of PIFC systems15 Coordinated plan in 80’s Government Accounting Reform Operation Objectives: - better accounting information systems - improve internal control - introducing internal audit Central department MoF for coordination (‘CHU’) operation NCA reported on progress

16. 9 July 2008Evaluation of audit of PIFC systems16 Internal audit Audit department within each ministry Main focus: functioning internal control (based on ‘baseline financial management and control’) Opinion on internal control and true and fair view (legal task) Findings on internal control in management letters Total staff: 800 FTE

17. 9 July 2008Evaluation of audit of PIFC systems17 Financial audit of NCA (1) Capacity needed: 30% of staff Main focus: making use of work done by internal audit Review on internal audit departments Goal of review: to assess whether reports of IA are reliable

18. 9 July 2008Evaluation of audit of PIFC systems18 Financial audit of NCA (2) Steps in review IA: - assessing planning - assessing executing - assessing reporting Findings assessments discussed with audit departments

19. 9 July 2008Evaluation of audit of PIFC systems19 Financial audit of NCA (3) Additional investigations (based on risk analyses): - reperformance internal audit - weaknesses internal control - irregularities - answers on three questions

20. 9 July 2008Evaluation of audit of PIFC systems20 Typical for Netherlands (1) Structured system of internal control, internal audit and external audit (NCA) Networks for IAD and Financial departments (monthly meetings of directors) Central coordination on budget and audit: mainly based on network CHU no longer needed (as in 80’s)

21. 9 July 2008Evaluation of audit of PIFC systems21 Typical for Netherlands (2) NCA collaborates with MoF and networks (attends meetings) NCA gives opinion on internal control NCA pays much attention to internal audit NCA pays attention to coordination internal control and internal audit (not an opinion)