PIFC development in Moldova Past Future FROM TO Inspection Audit

‘EU aspirations generate support to introducing PIFC’ The EU and the Republic of Moldova Action Plan: contain provisions for the Public Internal Financial Control (PIFC) implementation The Government set up the establishment of PIFC as an objective in various strategies Establishment of PIFC is supported by the Public Financial Management Project, financed by the World Bank

Implementation Phases I. Initial preparation phase (2006-2007) – setting up a CHU, normative and legal framework, methodology, awareness-building, initial training, keeping existing inspection function II. Centralized audit phase (2008-2009) – Reorganization of Financial Control and Revision Service into Centralized Internal Audit Service for replacement of inspection with internal audit, piloting IA in 3 entities. Methodological and practical support and capacity building III .Decentralized phase – after evaluation of pilots – Decentralized Internal Audit will be established in public sector entities

First steps Initial Phase 2005-2006: 15 staff of FCRS were trained by external consultants 6 staff made a one-week study tour on Internal Audit in UK Concept of IC and IA System in the Public Sector was approved by Government Awareness seminars Initial IA Training Initial Phase

Unintended Consequences: 5 decentralized IA units have been established without general legal and methodological basis Challenge: make them as IA pilot units and guide them in following the emerging legal, normative and methodological framework Initial Phase

Advantages PILOT IA UNITS Pilot IA units could be created on basis of those 5 units, they need only methodological and capacity building support No need to convince managers of pilots public sector units in the need for Internal Audit PILOT IA UNITS

Disadvantages PILOT IA UNITS Weak professional skills in IA Vague understanding of new objectives and functions Manager’s confusion regarding ex-post auditor functions with “ex ante controller ” functions and traditional financial inspection functions PILOT IA UNITS

The road ahead STRATEGY The Draft PIFC Strategy contains provisions for 3 areas: Legal Institutional, and Capacity building - training and professional development

1. Legal Actions Drafting and submitting a Draft PIFC Law STRATEGY Drafting and submitting a Draft PIFC Law Developing National Internal Audit Standards (NIAS) and National Internal Control Standards Drafting Code of Ethics Developing methodology

2. Institutional area STRATEGY Strengthening Central Harmonization Unit in the Financial Control and Revision Service Reorganizing Financial Control and Revision Service into Central Internal Audit Service Creating PIFC Council Starting pilot projects in 3 entities

3. Capacity Building: Training and professional development STRATEGY Conducting awareness seminars with ministers and senior managers Designing a program of training and professional development for internal auditors and managers Conducting certification of auditors in accordance with national and international standards

Enabling factors The Government’s desire to change the existing system Action plans posted in government acts Approval of the Concept of IC and IA system in the Public Sector Cooperation with the Court of Accounts on reform agenda Collaboration with the Academy of Public Administration on capacity building CHU established

Reform challenges Weak understanding of the advantages of the PIFC System Weak methodological basis No PIFC experience Low level of management skills To orient the IC and IA to the operational activity of the public entities

Questions 1. What are the major challenges which can anticipated during the implementation of PFIC reforms and how can these be effectively managed? 2. How can the independence of the IA be assured in Moldova? 3. Decentralization: When is the best moment to decentralize? How should IA be organized within small entities, especially at the local level?

Questions (cont.) 4. Standards and certification: To what extent is it necessary and/or desirable to develop separate internal audit standards and certification for the public sector and the private sector? 5. Suggestions on Strategy draft (Handout)