1. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Internal Audit Strategy and Practices in Slovenia Nataša Prah, Director of the Budget Supervision Office Brussels, 03. 10. 2011

2. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Introduction Relevant Public Sector Information Organization of Internal Audit Role of the Central Harmonization Unit Strategies on Public Internal Financial Control Strategy on Public Internal Financial Control 2011 – 2015 Conclusions 2

3. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Relevant Information Budget for 2010: 9.874.155.345 2905 Budget Spending Centers (BSC): –121 financed from Direct State Budget –1249 financed from Direct Local Government Budget –1535 Public Institution and other providers of public services Over 160.000 employees 47 Internal Audit Services 73 Internal Auditors working in IAS 3

4. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Internal Audit in Public Sector In-House IAS (obligation for the ministries): 37 Joint IAS (recommended for smaller BSCs): 10 Buy-In of IA Services: 63 providers, 832 BSC 4 Chartered Auditors

5. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Internal Audit in Public Sector 5

6. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Role of the CHU 6 Director (1) Councel (2) Secretariat (1) Administrative services (3) EAGGF Audit (7) Cohesion and StructuralFunds Audit (11) Budget Inspection (6) Public Internal Financial Control (5) AFCOS (1) Director (1) Counsel (1)(1) Secretariat (1) Administrative services (3) EAGGF Audit (9)(9) Cohesion and StructuralFunds Audit (21) Budget Inspection (6) Public Internal Financial Control (6)(6) AFCOS (1)

7. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Role of the CHU 1.Professional guidance (on IA and FMC: issuing Guidelines, Continuing Professional Education and Training) 2.Compliance assessments (on IA performance) 3.Reporting on PIFC to the government and SAI (on the basis of Statement on internal Control, CHU own contribution and IA annual reports) 4.Further development proposals (five years strategies, adopted by the government) 7

8. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategies on PIFC Strategy 2005 – 2009: 4 main objectives: Implementation of Results Based Budgeting Improvement of Public Accounting System Further introduction of Risk management in Public sector Reinforcement of Internal Audit 8

9. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategies on PIFC 9 Achievements: Reinforcement of Internal Audit IA Training Programe CHU and IA Experiences and Contribution Co-operation with the SAI Introduction of Risk management in Public sector Risk register Statement on Internal Controls

10. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategies on PIFC Weaknesses: Political-Managerial Responsibility influences Accountability and Governance comprehension Risk management is not generally accepted as a Good Practice Internal Auditing is not available to all the BSCs IASs remain understaffed, IA salaries are inadequate,.. 10

11. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 Two main objectives: 1.Further development of internal audit function 4 sub objectives 2.Strengthening management responsibility and accountability 2 sub objectives Objectives related to Public Accounting and Budgeting are included in the Strategy of the Ministry of Finance. 11

12. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 I. Further development of internal audit function 1.Assuring quality of internal auditing : Continuing Professional Development - introduction of working license. Why? Following IAS (documenting CPD) Being up to date (almost 400 state internal auditors, less than half of them working as auditors) 12

13. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 How? After acquiring professional title State Internal Auditor or Verified State Internal Auditor (foreseen for the Heads of IAS) continuous professional development in the period of 5 years should be proven 2.Internal Audit Availability Reorganization of the internal audit function - 13

14. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 Why? More than a half of BSC have not assured internal audit function Getting better overview related to the public spending How? Introducing consortiums under the responsibility of ministries: each ministry is responsible to assure internal audit function in the business area it covers 14

15. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 3.IT support to internal audit Project e-audit Why? Contributing to efficiency Availability of the information for CHU How? Inter-institutional group under the leadership of CHU should prepare a project covering all stages of internal audit process. 15

16. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 After the implementation of the project IT support will be available to all IAS in public sector 4.Internal audit incentives Salaries comparable with SAI Why? Similar education for acquiring the title, similar work,… How? Adding bonuse for state internal auditors in the single payroll system 16

17. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 II. Strengthening management responsibility and accountability: 1.Raising awareness of the management Seminars for the highest management: Why? Risk management is not yet generally accepted as a way to contribute to sound financial management 17

18. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 How? CHU has to organize seminars for the highest management in the public sector to remind them on their duties to contribute to the implementation of sound financial management 2.Replacing Statement on Internal Controls with Statement of Assurance Statement on Internal Controls should be replaced with the Statement of Assurance: 18

19. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Strategy on PIFC 2011 – 2015 Why? To strengthen the responsibilities of the management SAI recommendation How? Methodology should be prepared by CHU by 2015 19

20. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Conclusions Why strategies at the state level? To define the common framework of further development To use the process of preparation, discussion within and adoption by the government as a continuous »raising of the awareness«, involvement and responsibility To use reporting on implementation to the government as a tool for continuous support and progress. 20

21. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Conclusions What are the main achievements? Declared support by the Government confronted with budget restrictions Further professionalization and recognition of Internal Audit Profession demonstrating value added and Acceptance of Risk Management (FM/C) rather as a good practice than obligation formalized in the annual declaration. 21

22. REPUBLIC OF SLOVENIA MINISTRY OF FINANCE BUDGET SUPERVISION OFFICE OF THE REPUBLIC OF SLOVENIA Thank you for your attention! Nataša Prah, Director BSO Ms Nataša Prah, Director BSO Email: natasa.prah@mf-rs.si natasa.prah@mf-rs.si Website Ministry of Finance: http://www.unp.gov.si/si/notranji_nadzor/letna_poro cila/ 22