Legal Framework and Structure

Public Internal Financial Control Strategy ( ) focuses on three activities Institution of a Centralized Harmonization Unit (CHU), responsible for implementation of a public internal financial control system in compliance with international standards Internal audit Financial management and control based on managerial accountability

CHU 2010 – CHU was set up – Directorate for Methodology of Public Internal Financial Control and Public Procurement within the Ministry of Finance of Armenia; the Directorate is responsible for coordination and monitoring of implementation of financial management, control and internal audit mechanisms developed in conformity with the international standards.

Legal Framework

Reporting line before the RA Law On Internal Audit was passed Head of public entity Head of administration - Chief financier Internal audit

Reporting line after the RA Law On Internal Audit was passed Head of public entity Internal audit unit Administration of public entity

Legal framework (1) RA Law On Internal Audit – Professional standards of internal audit and rules of conduct of internal auditors Methodological instructions on application of professional standards of internal audit in Armenia Instructions for development of internal audit guidelines and Regulations ( կանոնակարգ ) of internal audit service in public sector of Armenia Templates for internal audit units, internal auditors and regulations ( կանոնակարգ ) for internal audit units and how to keep them Major requirements to Internal Audit Unit and Internal Audit Committee

Legal Framework (2) Regulations for definition of internal audit space and functions in public sector entities A template for Regulations of Internal Audit and details for its elaboration Procedures for internal audit assessment for the purposes of quality assurance, as well as procedures for cooperation of internal audit with inspection authorities and external audit Draft procedures for certification of internal auditors and main requirements to entities regarding public sector internal audit

Public sector organizations Public entities Local authorities, municipalities Public and municipal non-commercial entities Commercial entities with public or municipal share of over 50 %

Internal audit scheme Internal audit unit Administration of public entity Non-commercial entities outsource Commercial entities with public or municipal share of over 50 % outsource

Outsource who is entitled? Subject to a decision by senior management, it can be practiced by Commercial entities with public or municipal share of over 50 %, with a turnover or gross income of up to 2 billion Armenian Drams in the previous year. Public and municipal non-commercial entities with a turnover or gross income of up to 2 billion Armenian Drams in the previous year. Outsourcing is allowed only to entities with at least 3 certified internal auditors with at least 3 years of professional experience in internal audit

Head of internal audit unit must have at least 3 years of professional exeprience in internal audit 1 year of relevant experience = 1 year of experience in internal audit 2 years of relevant experience = 1 year of experience in internal audit Experience in internal audit, control and revision (including Court of Accounts, President, Government, public entities, CB, commercial banks) Other activities in civil or public service Experience of members of revision committees in joint stock companies with public or municipal share Experience of certified auditors in external audit

Internal Audit Committee Internal Audit Committee must have at least 3 members A member of the Internal Audit Committee must have at least 3 years of professional experience in internal audit

Timeframe for Implementation of Internal Audit System in Organizations г.- Public institutions г.- Public and municipal non-commercial entities and commercial entities with public or municipal share of over 50 %, with a turnover or gross income of over 500 million Drams in г.- City municipalities, Public and municipal non-commercial entities, as well as commercial entities with public or municipal share of over 50 %, with a turnover or gross income of up to 500 million Drams in г.- Rural authorities

Presence of internal audit 52 public institutions (President’s Office, Government, People’s Assembly, ministries, commissions, committees, etc.) already have internal audit units 48 city municipalities

Retraining and certification of internal auditors According to Art. 15 item 2 of RA Law On Internal Audit, internal auditors in public sector who were active before became certified internal auditors after a retraining organized by the authorized agency (RA Ministry of Finance) So far, 188 internal auditors have been retrained In 2013, continuous professional training have been organized for internal auditors In 2014, certification of internal auditors

Thank you for attention! Gayane Stepanyan