1. 1 Audit and control Financial management of projects

2. 2 TRAINING‘S OBJECTIVE The participants will have acquired the basic principles of The internal control system of the BTCThe internal control system of the BTC The usefulness and the course of the different types of audit

3. 3 CONTENTS 1.Theory: audit and control 2.Internal control system at BTC 3.Internal audit 4.External audit 5.Local external audit 6.Follow-up of recommendations 7.Other control body

4. 4 1THEORY Independent contracted parties Information for the stakeholders and shareholders Financial statements = exact image of the past events Independent from the direction Informations for the AC and Direction Committee Futures events /internal control system evaluation Properties protection / information quality Directives and performance improvements. Internal Audit External Audit Internal Control System Processes / Procedures / Tools BTC

5. 5 1THEORY Different types of internal or external audits: Financial (certification or not) System (operational, organizational,…) Combined (Financial + System) Conformity Fraud (forensic) Etc.

6. 6 2BTC’S INTERNAL CONTROL SYSTEMS Internal control IS: A managerial technique aiming at mastering the activities Internal control is NOT: An additional layer of « control » « to control » = to master « internal » = integrated into the management

7. 7 2 BTC’S INTERNAL CONTROL SYSTEMS Traditional approach, Is the responsibility of the controller/inspector Mechanical The stress is put on the accounting systems The controls are added to the systems, activities Less strucutre and formalisation Our approach,  From the « brake » to the management support tool … MASTERY  To a true MASTERY

8. 8 2BTC’S INTERNAL CONTROL SYSTEMS The BTC ICS aims at mastering the financial risks through: Guidelines for projects financial mangement = DIRECTIVES RACI= IMPLEMENTATION Financial tools (FIT, Navision) = TOOLS Implemention/application control = EVALUATION 3 fundamental levels PROJECT REPRESENTATION HEADQUATER

9. 9 2 BTC’S INTERNAL CONTROL SYSTEMS PROJECT – TAProcedure manual Do we apply the rules?Checklist Comply RR – LAFField mission Are the rules respected?Training Support and advices HQ – RCField mission Is the system under control?Coaching of LAF Development of new tools and rules

10. 10 2 BTC’S INTERNAL CONTROL SYSTEMS Some principles Tasks/functions separation Decision Execution Management Control Project procedure manual Processes (RACI) / job description  A project is not a black box

11. 11 2 BTC’S INTERNAL CONTROL SYSTEMS DomainRisk Strategy 200 projects and 18 RR that work differently Human Resources Competence management Accounting Reliability of the financial information Fraud Treasury Liquidity of projects Opportunity cost

12. 12 2 BTC’S INTERNAL CONTROL SYSTEMS DomainRisk Budget Overspending Eligibility and efficiency of the expenses Legal Expenses after convention Rules linked to public contracts Management contract Partner country rules and legislation (HR, tax system,…)

13. 13 3INTERNAL AUDIT BTC 3.1 Mission To give an independent and objective assurance to BTC on its operations, to improve them and contribute to add value How? By bringing a systematic, disciplined approach to evaluate the effectiveness of risk management, control, and governance processes and to improve them To ultimately report to the Audit Committee of BTC

14. 14 3INTERNAL AUDIT BTC 3.2 In practice Once a year a risk-based audit plan is established (covering a period of 3 years) to determine the priorities of the internal audit activity Coordination with external auditors on engagements and planning of the engagements Approval or amendment of the audit plan by the Audit Committee

15. 15 4EXTERNAL AUDIT BTC Based on legal requirements Public limited company (law on commercial enterprises) A board (law that creates the BTC) consisting of 2 external auditors 2 auditors of the auditor’s office (Public law company)

16. 16 4 EXTERNAL AUDIT BTC 4.1 Mission Certify the annual accounts Control the application of rules Legal, fiscal, social and accounting Concerning public contracts Verify the respect of the management contract Control the regularity of the financial information

17. 17 4 EXTERNAL AUDIT BTC 4.2 Timing Annually at BTC HQ Selection of projects to be audited based on a sample and a risk analysis Selection criteria: Every country: every three years (except countries with a very large budget: yearly) Significant coverage of the intervention sectors (health, education, governance…) Coverage of all types of costs (financial aid, projects’ investments, subcontractors, consultancy, technical assistants …)

18. 18 4 EXTERNAL AUDIT BTC 4.3 Contents Existence and respect of processes: public contracts, purchases, approvals… Accounting checks: consistency of the bookkeeping with the supporting documents Administrative organization: filing system, fleet of vehicles, separation of functions…  Via interviews, tests, samples,…

19. 19 4 EXTERNAL AUDIT BTC Mandates Social legislation Missions, per diem, … Physical inventory Contracts and engagements Etc. Follow-up of previous audits’ recommendations

20. 20 4 EXTERNAL AUDIT BTC 4.4 Preparation Checklist Administrative information: « permanent file » = data of the project, organization chart, internal organization, Quick scan, administrative and financial checklist Payroll: contracts, salary schemes, days-off follow-up, … Public contracts: call for tenders, offers, minutes opening and awarding…

21. 21 4 EXTERNAL AUDIT BTC 4.5 Course Realization of the audit HQ informs the representation about the projects that will be audited At the end of the audit mission: debriefing with representation (closing meeting) Report draft transferred to the representation for comments Final report handed over to audit committee Transmission of final report with recommendations to HQ who gives it to the representation

22. 22 5 LOCAL EXTERNAL AUDIT At request of the project direction, the SMCL for specific purposes or demanded in the Specific Convention Different contents: e.g. organization of processes and procedures, conformity of the bookkeeping…

23. 23 5 LOCAL EXTERNAL AUDIT Terms of reference drafted by the project’s direction with Steering Committee approval (with compulsory support from ResRep / Controlling)  There are templates for the formulation of ToR. Offices that meets the International Standards of Auditing (IAS) All the final local audit reports (approved by SMCL) have to be available at HQ (follow-up table and planning)

24. 24 6FOLLOW-UP OF RECOMMENDATIONS Audits = presented to Audit Committee Audits = opportunity to improve our management Drafting of the action plan: Driven by Controlling Contribution from HQ – RR – Project Forwarded to financial director before Audit Committee Follow-up of results during following Audit Committees

25. 25 7GOVERNMENT COMMISSIONERS 2 commissioners that come under the: Ministery of Cooperation Ministery of Budget Part: control the respect of The law The status The management contract The awarding conventions and tasks of public services

26. 26 8EXAMPLES Documents attached to the presentation External audit report of a project Action plan of recommendations follow-up Templates TOR Follow-up table of local audits Procedures management of local audits