PUBLIC SECTOR FINANCIAL CONTROL OF THE REPUBLIC OF LITHUANIA By Ms Daina Vaivadienė Chief Specialist of the Internal Audit and Financial Control Methodology and Monitoring Division Internal Audit and Financial Control Methodology Department Ministry of Finance of the Republic of Lithuania Vilnius, 27-28 May 2014

Contents Internal control and financial control as part of it; Legal requirements for public sector internal control and financial control; Competence of the head of the public legal entity in internal control and financial control.

Internal control and financial control as a part of it (1) The Republic of Lithuania Law on Internal Audit and Internal Control (10 December 2002) establishes: The basic legal framework and objectives of internal control, including financial control and internal audit function in the public legal entity that owns, uses state and municipal assets and disposes of it; Competence of the head of the public legal entity ensuring operation of internal control regulated by this Law.

Internal control and financial control as a part of it (2) Internal control is the entire set of controls established by the head of the public legal entity which enables: Legitimacy, economy, efficiency, effectiveness, transparency of the activity; Implementation of the strategic and other activity plans; Protection of assets, reliability and completeness of information and reports; Compliance with contractual and other liabilities to third parties; Management of risk factors in all the aforementioned fields.

Internal control and financial control as a part of it (3) The internal control system in a public legal entity shall be set up and maintained having regard to: The characteristics of activities of the public legal entity; Legal acts and other documents regulating the activities of the public legal entity; The objective of internal control; Existing activity risks; Consistency and costs of internal control; Accounting and information system; The state of protection of assets and other criteria of internal control.

Internal control and financial control as a part of it (4) Financial control is a part of the internal control system of the public legal entity which enables: Assurance of legality of economic activities; Assurance of compliance with the principles of sound financial management (economy, efficiency, effectiveness, transparency).

Internal control and financial control as a part of it (5) There are three types of financial control: Ex-ante financial control is a type of control carried out in adoption or rejection of decisions related to the use of state and municipal assets, liabilities to third parties before they are approved by the head of the public legal entity. It ought to be separated from the initiation and implementation of the decisions; On-going financial control is a type of control designed to assure that the implementation of the decisions of the public legal entity on the use of state and municipal assets and liabilities to third parties is carried out appropriately and timely.

Internal control and financial control as a part of it (6) Ex-post financial control is a type of control carried out after the implementation of the decisions of the public legal entity on the use of state and municipal assets and liabilities to third parties during which the checking of how actions are undertaken is performed. It provides for the measures for removal of weaknesses detected during its performance. Ex-post financial control cannot be carried out by civil servants or employees who are responsible for performance of the ex-ante financial control.

Legal requirements for public sector internal control and financial control (1) Legal requirements for public sector internal control and financial control are based on the Guidelines for Internal Control Standards for the Public Sector officially authorised and endorsed by the International Organisation of Supreme Audit Institutions (INTOSAI) and are established in: The Republic of Lithuania Law on Internal Control and Internal Audit (10 December 2002); Government of the Republic of Lithuania Resolution No. 470 on the Implementation of the Republic of Lithuania Law on Internal Control and Internal Audit and the Implementation of the Model Regulations of the Internal Audit Service (14 April 2003);

Legal requirements for public sector internal control and financial control (2) Minister of Finance Order No. 1K-123 on the Approval of the Minimum Requirements for Financial Control (8 May 2003); Minister of Finance Order No. 1K-021 on the Approval of the Form of the Report on the Financial Control Condition (27 January 2011); Rules on Financial Control of the Public Sector Entity.

Competence of the head of the public legal entity in internal control and financial control (1) The head of the public legal entity is responsible for: The establishment, maintenance of the internal control system and financial control system as a part of it and monitoring their functioning in the public legal entity; The approval of the Rules on Financial Control of the public legal entity in accordance with the Minimum Requirements for Financial Control (approved by Minister of Finance Order No. 1K-123); The presentation of the Report on the Financial Control Condition in accordance with Government of the Republic of Lithuania Resolution No. 470.

THANK YOU E-mail: d.vaivadiene@finmin.lt