1. The EU Model of PIC Raymond Hill Team Leader, PIC Task Force
European Commission
PEMPAL – 24 March 2016

2. Contents Getting the terminology right – PIFC or PIC
PIC and governance - why its important
The importance of Managerial Accountability
Internal audit – friend or foe?
Don’t look to me – look to the CHU!
Challenges and lessons learned

3. PIC or PIFC
PIC – diverse range of Internal Control systems in the EU Member States
PIFC – EU model for the reengineering of national internal control systems

4. EU framework for Internal Control reform in the public sector
COSO model - tailored to the Public sector
Internal Audit
Based on IPPF Standards
Central Harmonisation Unit
Decentralised managerial accountability for stewardship of the organisation
Functionally independent advisory and consulting service
Driving force for managing and monitoring the reform

5. Internal Control and Governance – COSO and ISO
A process, effected by an entity's board of directors, management and other staff, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance in the following categories:
efficiency and effectiveness of operations, safeguarding of assets
reliability of reporting (financial and non-financial, internal and external)
compliance with laws and regulations
The combination of processes and structures implemented by the Board and management to inform, direct, manage and monitor the activities of the organisation towards the achievement of its objectives.

6. Achievement of objectives - Managerial Accountability
Focused on compliance with rules and administrative/legal provisions (input oriented)
Compliance with rules and focussed on the achievement of organisational objectives and efficient, economic and effective use of public money (output oriented)

7. Managerial Accountability
Accountability has "turned into a garbage can filled with good intentions, loosely defined concepts and vague images of good governance."
* Professor Bovens " A framework for the analysis and assessment of accountability arrangements in the public domain"

8. Measures of effective accountability
Accountability for results
Accountability for financial elements of decision- making
Accountability for the management of financial resources

9. Accountability for results
Results can be in terms of outputs produced as well as outcomes achieved
Accountability for achieving outcomes should be to the extent of control over the resources that could influence the outcome
Rules should provide flexibility for achieving results rather than adhering to the letter of the law
Accountability for results presumes a system of Key Performance Indicators

10. Accountability for financial elements of decision making
Decisions to be taken with due regard for probity, prudence and value for money
Conscious analysis of economy and efficiency aspects before a decision is taken

11. Accountability for the management of resources
Delegation of financial authority to be defined clearly and in writing
Delegation of authority does not absolve the delegating officers from their responsibility for the proper spending
Top manager remains accountable for keeping an accurate record of all transactions, with proper audit trails

12. Internal Audit
Internal audit should assess and make appropriate recommendations for improving governance processes.
Internal audit should evaluate the effectiveness of, and contribute to the improvement of, the risk management processes.
Internal audit must evaluate the effectiveness and efficiency of controls and promote continuous improvement.

13. Centralised Financial Inspection
Although not included in the PIFC concept, centralised financial inspection can be critical to the successful implementation of PIFC.
Where existing, centralised financial inspection is to be clearly separated from the internal audit function.
Centralised financial inspection refers to:
Fight against fraud and corruption only.
Operations performed on an ex-post basis only.
Specialised investigations, acting on complaints or request only.

14. Role of the Central Harmonisation Unit
Coordination and harmonisation of IC and IA:
Development and implementation of strategy and legal framework
Development of methodologies and guidelines
Networking and promoting best practice
Overseeing systems development
(Annual) assessment and reporting

15. Change management challenges
Having managers that are 'in control' without them controlling everything
Making Risk Management better understood and more-widely used
Keeping Internal Controls under review to ensure that they remain necessary and fit for purpose
Raising the effectiveness of Internal Audit – especially at local level

16. Some lessons learned
Re-engineering internal control is long-term – political support is mostly short-term
Address resistance to change: get top managers to accept that reform is necessary
Great law – but nobody cares…
CHU to monitor reform progress and reported annually to government
PIFC is not sufficient to drive managerial reforms
High-level coordination function to ensure synergy with PAR and PFM reforms

17. Questions Who should be accountable – individuals or organisations?
How should accountability be demonstrated?
Does being held accountable for your actions make it less likely that I will take any professional risks?
In your organisation, are middle managers objectives directly linked to the budget allocation process?